Written by: Ned K. on 8 March 2021
In 2017, the owner of Whyalla steel works, Arrium, went belly up. The state and federal governments looked for a corporate "saviour" for the steel works and indeed the future of the 20,000 people in Whyalla. The steel works employed about 1500 directly, but the total employment reliant on the steel works was, and still is, about 7,000.
A "saviour" was found in British based adventure capitalist, Sanjeev Gupta and his GFG Alliance corporation, which was keen to expand its ownership of steel production plants in to Australia.
GFG planned for a $1 billion expansion and modernization of the steel plant at Whyalla, including the closure of the old blast furnace built in 1965 and replacing it with an electric arc furnace. GFG also announced plans for a huge solar power plant to power the upgraded steel works and to provide sustainable electricity for the community.
In 2020 though, stories started to leak out to the daily press that GFG was not paying contractors on time. The $1 billion investment remained in the starting blocks, as did the $50 million that the then Labor SA Government pledged towards the project.
Now in March 2021, the finance sections of the daily papers have revealed that GFG's main financial baker, the German branch of Australian Lex Greenhill’s UK-based Greensill Bank has been closed down by the German Government's financial regulator. Greensill Bank's model was based on most of its loans going to a narrow group of corporations, GFG being one of them. It also speculated in the murky world of derivatives. The German Government regulator "was concerned that 2 billion Euros of the Bank's 3.5 billion Euros loan book was connected to GFG, a 'high level of exposure'". (Australian Financial Review 5 March 2021).
The money loaned to GFG was not being repaid. Where the money went is a mystery, but certainly not to the steel workers!
Greensill's reaction to this was to search the globe for another financier, turning to US private equity giant Apollo Global Management. Other private equity giants from the US were also circling GFG. Gupta said words we have heard before that the fundamentals are sound, the steel works is making money. However, he also revealed that the takeover of Arriums Australian operations also involved Gupta splitting the assets, separating off the steel works from the new blast furnace and separating the steel works at Whyalla from the iron ore in the nearby Middleback Ranges.
Alarms Bells sound for Local Labor MP Eddie Hughes and Whyalla Community.
MP Eddie Hughes, a former steel worker and ship building worker in Whyalla (and who once famously mounted a stage on which Her Maj was speaking, draping a Eureka flag nearly over her shoulder) said that " the full impact for GFG is uncertain" and in a rare show of unity between both Labor and Liberal in SA, said he agreed with Liberal Treasurer Lucas's statement that the $50 million tax payer contribution to the upgrade of the steel works would not occur "until GFG had a detailed fully funded financing" of the $1 billion expansion plan.
Whyalla has been a strong manufacturing-based town in SA since at least the 1950s. Successive changes in ownership from BHP to Arrium and now GFG have seen the closure of the ship yards, and the steel works staggering from one financial crisis to another. Despite this, the Whyalla steel workers are known the world over to produce steel that is equal to the best produced anywhere in the world.
To secure the workers' future, the Whyalla community’s future, the steel works needs to be taken over by the state and/or federal government and they need to be accountable for the running of the steel works to the Australian people.
Australia is a huge exporter of the raw material of steel, iron ore, so there is no shortage of materials to make steel here. For any government that gave even a minute thought about the self-reliance of the country, it should be a no-brainer for Australia to have a strong Australian publicly-owned steel industry.
The experience of collapse of Arrium and the pending collapse(?) of Gupta's GFG empire are evidence yet again that relying on multinational corporation owners (no matter how well intentioned a few may be) is a recipe for disaster for the people. In this case, especially the working people of Whyalla.
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