S.A. Gov pushes Whyalla steelworks to administration, aims to take control

The South Australian government has pushed through legislation to move the Whyalla Steelworks into administration, allowing the state to take control of the facility.

The embattled GFG Alliance-owned Whyalla has faced mounting debts, including $15 million to SA Water, following two major blast furnace outages last year, and a four month production halt, which pushed the operation to seek refinancing.

Whyalla steelworks seeks refinancing amid financial struggles

“GFG is no longer running the steelworks,” SA Premier Peter Malinauskas said in an announcement today.

“The State has appointed KordaMentha as an administrator of OneSteel Manufacturing Pty Ltd under section 436C of the Corporations Act 2001.”

He said the state government has been planning to address the financing challenges at GFG, giving the group an opportunity to pay its creditors.

“It has failed to do so,” Malinauskas said.

“So today, we have acted.”

He said the government had received advice that the steelworks was “being run into ground to the extent that it may become irredeemable”.

“Without Whyalla steel, Australia would rely on steel from overseas amid a deteriorating strategic environment and a national housing crisis.”

The steelworks was one of only two operating Australian steelworks, and produces 75 per cent of Australian structural steel and is the only domestic producer of long rail products.

“Only an intervention of this nature will protect the steelworks and its creditors.”

SA minister for energy and mining, Tom Koutsantonis, said the GFG Alliance had paid itself before paying its many creditors.

“GFG has reaped significant profits from their facilities here – but despite long-made promises, it has failed to invest back into the steelworks,” Koutsantonis said.

“This is not a situation the State Government has created, but it’s one that is incumbent on us to resolve – for the benefit of GFG’s many unpaid creditors, for the people of Whyalla and for the state as a whole.”

Malinauskas and Koutsantonis will travel to Whyalla tomorrow to outline a funding package to ensure continued operation of the steelworks during the administration period.

This is the second owner of the steelworks to enter administration, after its formed owner, the ASX-listed Arrium, collapsed in 2016. The GFG Alliance acquired the assets in 2017.

Earlier this month, SA Premier Peter Malinauskas urged GFG to pay its debts and reinforced the urgency of the matter.

“The time is now for GFG and [GFG Alliance chairman Sanjeev] Gupta to pay their bills and demonstrate their capacity to invest in the steelworks,” Malinauskas said.

It is believed that tens of millions of dollars are owed to the state and local businesses by the steelworks.

As recently as Sunday, Gupta said with the plant back in operation, and generating between $13 million and $14 million per week, they hoped to reach break-even by mid-year.

They had implemented a “Back to Black” plan to normalise creditor payments and achieve profitability, seeking to finalise a $US100 million debt package to support operations and creditor payments.

GFG Alliance targets break-even for Whyalla by mid-2025

This included reaching a deal to sell its Tahmoor coking coal mine in NSW to fund the debt. GFG had already stood down workers at the mine for four weeks after failing to pay the mine’s suppliers.

However, the pace of debt repayments was not enough for South Australia, which has reportedly passed legislation in both the upper and lower house of its state parliament to control the asset.

Editor’s note: a previous version of the article mentioned Whyalla as the “only domestic producer of steel long products.” This has been updated. Infrabuild, which is also part of GFG, also makes steel long products.