The South Australian state government has taken the extraordinary decision to appoint an administrator to the owners of struggling Whyalla Steelworks, effectively seizing control of the company as it seeks a new owner to guarantee the steel city’s future.
In dramatic scenes at state parliament in Adelaide on Wednesday, premier Peter Malinauskas summoned state MPs to a meeting before announcing that Korda Mentha had been appointed administrator of OneSteel Manufacturing, owned by Sanjeev Gupta’s GFG Alliance.
“GFG is no longer running the steelworks,” the government said in a statement, saying that it had “lost confidence” in the ability of the company to secure funding to keep the steel works running.
“During this period of administration, the administrator investigates options including sale of the business, with the ambition of delivering the best outcome for creditors and continued operation of the steelworks,” the government said.
“The administrators will be able to trade on and pay all debts incurred during the period of administration.
This means going forward, workers and contractors will be paid.”
Among the possible buyers of the business are Australian giant Bluescope. The Whyalla steelworks are old, but had been hailed as an opportunity by Gupta to modernise and create “green steel” for an international market hungry for low emission products.
The state government embraced that plan and promised $600 million to fund a 250 MW green hydrogen electrolyser and a 200 MW hydrogen power plant – both among the largest in the world – to support the steelworks, other customers, and the state’s own plans to reach 100 per cent net renewables by 2027.
That Hydrogen Jobs Plan is now likely delayed, and its future uncertain, given the developments around the steelworks. Malinauskas, who has visited Whyalla recently and is reportedly on the way again on Wednesday, has refused to commit to those funds because of the financial uncertainty.
Malinauskas says Whyalla – one of only two Australian steelworks – is critical to sovereign steel and produces 75% of Australian structural steel and is the only domestic producer of steel long products.
“For months, my government has been carefully planning a strategy to address the challenges unfolding at the Whyalla Steelworks,” the premier said in a statement
“Throughout that period, we gave GFG every opportunity to make good on its promises and to bring creditors back into terms. It has failed to do so. So today, we have acted.”
“There is an economic opportunity in the Upper Spencer Gulf that must be realised. We have received advice that the steelworks is being run into ground to the extent that it may become irredeemable.
Malinauskas says the state government would not be a long term owner, but it appears that the federal government may offer some funding, likely through the newly legislated Future Made in Australia fund, treasurer Jim Chalmers indicated on Wednesday.
Tim Buckley, from Climate and Energy Finance, described it is a “brave and critically important move”, particularly in the light of Australia’s green steel ambitions, one of the keys to the country’s hopes of becoming a green energy superpower.
“Whyalla is strategically important for Australia for its manufacturing capacity and highly skilled workforce, so it is imperative that we protect and build upon our sovereign capabilities, and massive investment, employment and export potential to lead the world in shifting to green steel supply chains,” he said in a post on LinkedIn.
State energy minister Tom Koutsantonis said steel sales from Whyalla had totalled $4.8 billion since 2019/20, but large amounts of money had been sent offshore to the settle claims from the collapse of financier Greensill, for intra-company loans and for the purchase of a South Korea business.
“This is not a Whyalla problem – it is a GFG problem,” Koutsantonis said. “And now GFG finds itself in a position where its creditors are not being paid. These businesses simply can’t wait any longer for Mr Gupta. “
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