Trouble at mill but too early to write off Whyalla steelworks

By Peter Roberts

It is amazing how people are always quick to expect the worst about the future of Australia’s steel industry, just as they have in recent days with news of trouble in the financial network that support’s metals entrepreneur Sanjeev Gupta’s GFG Alliance businesses.

People are expecting the worst for his Whyalla steelworks, one of the assets exposed by the collapse of financier Greensill Capital and Gupta’s need to refinance $6 billion in loans.

Perhaps this is because of the history of hostility towards basic industry from Canberra policymakers in the thrall of the type of dry economics that is preached – still – by the likes of the Productivity Commission.

It is following this type of economics which has given Australia a dangerously fragile and unbalanced economy, almost totally reliant on the export of a handful of undifferentiated commodities, and a shrunken manufacturing sector by the standards of other advanced economies.

We have the absurd situation today where more than 40 per cent of our exports are of barely processed iron ore, with most going to a single customer in China.

But attitudes towards manufacturing have changed in the community, in industry itself and in Canberra even if the PC not moved on.

2020 showed us we need a strong, innovative and diverse manufacturing sector to be truly secure as a nation.

(Really, it is way past time the Productivity Commission was reformed. But enough of that.)

Gupta has not asked for state or federal help to support Whyalla because he doesn’t need to.

The steelworks is part way through a modernisation program supported by a $1 billion planned investment in wind, solar and pumped hydro resources to reduce its carbon footprint.

A feasibility study is underway to look at vastly enlarging the works.

GFG itself says legal proceedings against the works would be “vigorously defended”, with the works “performing well and generating positive cash flow” at a time of strong markets for both iron ore and steel.

And in any case Prime Minister Scott Morrison and SA Premier Steven Marshall have discussed contingencies should some sort of intervention be necessary, which just isn’t the case so far.

Should Gupta somehow lose control of Whyalla there are other buyers in the wings including South Korea’s POSCO which was the under-bidder in 2017 when control shifted from administrators to GFG.

At that time Whyalla was not performing well, and the national environment was not what it is today – far more supportive of the idea that industry, especially strategic ones such as steel – must be supported.

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