Whyalla Steelworks Royalties and Administration
OneSteel Manufacturing, part of the GFG Alliance previously owned by Sanjeev Gupta, owed $18.5 million in state royalties when the Whyalla steelworks entered administration. The South Australian government initially withheld royalty debt information due to legal constraints but disclosed the amount once the company was in administration.
Debt History and Federal Grant Controversy
Documents obtained by former SA Senator Rex Patrick revealed OneSteel's history of delayed and deferred royalty payments dating back to 2022. In January 2024, more than $9 million in state royalty debt remained unpaid. Despite this, the federal government pledged $63.2 million to upgrade the Whyalla plant for green steel production. OneSteel settled the $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.
Mr. Patrick questioned the allocation of taxpayer funds to a company with significant outstanding debt. SA Treasurer Tom Koutsantonis stated that legal restrictions prevented the state government from sharing debt information with the federal government for grant due diligence. The federal government released $10 million in funding and is now auditing to recover any unspent amounts.
Operational Challenges and Administration
OneSteel attributed payment delays to operational disruptions, low prices, and reduced sales volumes, including a four-month halt in steel production due to blast furnace issues. The SA government refused a payment extension for overdue royalties in February 2024. The company's cumulative royalty issues and eventual failure to meet obligations led to the steelworks being forced into administration in February 2024.
At the time of administration, trade and other creditors were owed over $1 billion, and SA Water was owed approximately $15 million. GFG Alliance maintained that its royalty obligations were managed over time despite business challenges and had requested a moratorium on royalties in late 2024, which was rejected.
Broader GFG Alliance Issues and Future
Mr. Patrick criticized the state government for delaying the administration, citing negative impacts on local businesses and the company's financial position. Mr. Koutsantonis defended the timing, emphasizing the need for comprehensive planning to ensure the steelworks' long-term sustainability and recapitalization.
GFG Alliance has faced financial difficulties following the collapse of its key lender, Greensill Capital, in 2021 and is under investigation by the UK's Serious Fraud Office for suspected fraud, fraudulent trading, and money laundering. GFG denies any wrongdoing. Administrators are actively seeking a new owner for the Whyalla Steelworks, with interested parties including Bluescope, leading an international consortium.