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The Australian government has committed $1.5bn towards saving the South Australia steelworks seized from Sanjeev Gupta’s GFG Alliance this week, in one of the biggest bets of its plan to revive the country’s manufacturing base.
The move to pump funds into Whyalla, a remote rustbelt town nearly 400km north of Adelaide, comes ahead of an election campaign — with a poll due by mid-May at the latest — that will pitch Labor’s industrial plans and renewable energy targets against the opposition Liberal party’s policies to adopt nuclear power and cut public spending.
The South Australia state government amended laws on Wednesday in order to seize control of the GFG Alliance-owned steelworks and put it into administration. It justified the radical move by saying the steelworks’ financial position was “irredeemable” and that GFG had not invested enough in a critical asset for the region.
Anthony Albanese, the Australian prime minister, flew to Whyalla on Thursday to unveil a financial package alongside the state government that would fund the steel mill’s operations during a potentially lengthy administration process. The package would also underpin a transformation of the facility under new ownership to deliver “green steel” that reduces carbon emissions during the manufacturing process.
The steelworks employs 1,100 people directly, with another 2,000 as suppliers, and the funds will protect those roles during the administration process and satisfy overdue debts to small local businesses.
Albanese argued Australia’s economic resilience was reliant on broadening its industrial base and protecting assets such as the Whyalla mill, which supplies 75 per cent of the country’s domestic structural steel needs.
It was a key tenet of his government’s approach to support “blue-collar jobs”, said the prime minister, comparing the steel industry to modern solar panels that contain Australian technology but are predominantly made in China. “We make bugger all here,” he said.
Mark Kenny, an academic with Australian National University’s Australian Studies Institute, said the decisive action taken by the state and federal Labor governments were likely to be viewed positively ahead of the election.
“Social attitudes have changed and we’ve seen this from Trump and other leaders around the world,” he said. “People are looking for governments to do things, to pull levers and to make things happen, not to just let things fail and let jobs go down the gurgler.”
Meanwhile, Gupta said GFG Alliance was taking legal advice after the state government’s “unexpected and unprecedented” move.
“I believe strongly that this is the wrong course of action for Whyalla’s creditors, employees and the wider community who now face a very uncertain future,” the chair said in an internal memo seen by the Financial Times.
GFG had invested A$1.5bn (US$950mn) in Whyalla since it bought the business in 2017, he added, including A$500mn in the past year, and it would now focus on other assets. “We will no longer need to use our resources to cover those losses,” he said.
Gupta said other GFG companies made up the majority of creditors to OneSteel Manufacturing, the company placed into administration, and that other international and Australian assets, including its InfraBuild steel recycling and distribution business, a coal mine in New South Wales and a smelter in Tasmania, were not affected by the move.
