The Whyalla steelworks, operated by OneSteel Manufacturing, entered administration in February 2024 following cumulative financial challenges, including significant outstanding state royalty payments. The facility, which has a history of financial instability, is now in the final stages of a sale process, with five potential buyers identified, including Australian company BlueScope Steel.
The administration and subsequent sale have drawn attention to the steelworks' financial dealings, the allocation of federal funding, and potential market concentration issues.
Administration and Financial Challenges
OneSteel Manufacturing, part of the GFG Alliance, entered administration in February 2024. At the time, the company faced substantial debts. It owed the South Australian government $18.5 million in state royalties, over $1 billion to trade and other creditors, and approximately $15 million to SA Water. The administration unfortunately resulted in over 100 job losses.
The company's royalty payment issues were not new, dating back to 2022 with a history of delayed and deferred payments. In January 2024, more than $9 million in state royalty debt remained unpaid.
OneSteel eventually settled this $9 million debt by mid-May 2024 after an extension, but accumulated over $6.5 million in new royalty debt by the end of July. The South Australian government declined a payment extension for overdue royalties in February 2024, citing the company's cumulative failures to meet its obligations.
OneSteel attributed these payment delays to significant operational disruptions, including a four-month halt in steel production due to blast furnace issues, as well as low prices and reduced sales volumes. GFG Alliance stated that its royalty obligations were managed over time despite business challenges and had requested a moratorium on royalties in late 2024, which was rejected by the state government.
Federal Funding and Information Disclosure
The federal government had pledged $63.2 million to upgrade the Whyalla plant for green steel production. This allocation of taxpayer funds to a company with significant outstanding debt drew questions from former SA Senator Rex Patrick.
SA Treasurer Tom Koutsantonis stated that legal restrictions prevented the state government from sharing specific debt information with the federal government for grant due diligence purposes. The federal government has since released $10 million of the pledged funding and is auditing to recover any unspent amounts.
Impact and Broader Context
The Whyalla steelworks has experienced periods of financial instability over the past 50 years, marking this as its second closure in under a decade. Mr. Patrick expressed concerns about the timing of the administration, citing potential negative impacts on local businesses. In contrast, Mr. Koutsantonis stated that the timing allowed for comprehensive planning to ensure the steelworks' long-term sustainability and recapitalization.
Beyond the Whyalla facility, GFG Alliance has faced broader financial difficulties following the collapse of its key lender, Greensill Capital, in 2021. The group is currently under investigation by the UK's Serious Fraud Office for suspected fraud, fraudulent trading, and money laundering; GFG denies any wrongdoing.
Sale Process Advances
Twelve months after entering administration, the sale of the Whyalla steelworks, which includes its port and mining assets, has advanced to its final stages. The pool of interested buyers has been significantly reduced from 70 to five.
Among these finalists is BlueScope Steel, an Australian-based company that owns Australia's largest steelworks in Port Kembla, NSW, along with four foreign companies.
Malcolm McLeod, president of the Whyalla Business Chamber, stated that the prospect of Australian ownership provides a sense of hope and confidence for the local community. South Australian Premier Peter Malinauskas has also highlighted the steelworks' contribution to Australia's "sovereign capability."
However, concerns have been raised regarding potential market concentration if BlueScope Steel acquires the Whyalla facility, given that Australia currently has two primary integrated steelworks.
Daniel Rossetto, a global markets expert at the University of Adelaide, suggested that such an acquisition could potentially suppress competition, lead to increased prices, and reduce innovation.
The Australian Competition and Consumer Commission (ACCC) is monitoring the situation and will review any proposed acquisition for monopoly or duopoly concerns. BlueScope Steel recently reported an underlying net profit after tax of $391 million in its latest half-year results and confirmed its commitment to a non-binding expression of interest for the Whyalla steelworks. The finalization of the sale is projected for late 2026.