The South Australian government has announced a reduction in the anticipated costs for keeping the Whyalla steelworks operational during its administration phase. Initially, a $384 million contingency fund was set aside, but this has now been revised down to $275 million. This adjustment comes as the steelworks, which was placed into administration in February, shows signs of improved financial health.
In February, a $2.4 billion rescue package was unveiled by both state and federal governments, which included a $384 million allocation to maintain operations at the steelworks while preparing it for sale. However, the poor condition of the facility led to rapid expenditure of these funds, prompting administrators KordaMentha to warn earlier this year that the money would be exhausted by August.
Revised Funding and Improved Operations
Today, the state and federal governments announced an additional $275 million allocation, split equally, to continue operations. This second tranche was initially budgeted at $384 million, but the state government was able to revise this figure down due to decreasing operational costs.
“The reason for that is that the business is progressively getting back onto a better footing,” stated Premier Peter Malinauskas. “It’s producing steel, which of course means cash flows are remarkably better now in Whyalla than what was the case back in January, February.”
The Malinauskas government had placed the steelworks into administration on February 19, removing ownership from British industrialist Sanjeev Gupta’s GFG Alliance due to concerns over underinvestment and maintenance neglect. The latest funding brings the total public investment in the steelworks to $659 million.
Challenges and Public Scrutiny
Despite the improved financial outlook, Premier Malinauskas did not rule out the possibility of further funding being required. “While it is true that we’re a lot more confident about Whyalla’s future today than what we were even after the intervention we made, it’s also true though that there’s a lot more work to be done and there are no guarantees throughout this process,” he said.
The additional funding has sparked questions regarding the duration of the administration and the eventual public cost. Daniel Rossetto from the University of Adelaide’s Institute for Sustainability, Energy and Resources emphasized the need for public understanding of the subsidy limits.
“There is a general concern because who’s to say in a few months there won’t be a further announcement about more funding that’s actually needed as well?”
Rossetto also noted the potential precedent set by the intervention, especially in light of challenges faced by other smelting industries in Port Pirie and Hobart. “If you’re a community, a vulnerable community somewhere else in Australia, and you look at this and say, ‘what’s so special about Whyalla, why can’t our community receive that sort of money as well?'” he remarked.
Political Reactions and Future Prospects
Opposition spokesperson for government accountability, Ben Hood, expressed support for the steelmaking package but cautioned against unchecked spending. “South Australian taxpayer money cannot be used as a blank cheque,” he stated, urging the Premier to clarify the timeline and total cost until a buyer is found.
Premier Malinauskas defended the expenditure, asserting the necessity of the intervention. “Because everything we have learned through the administration process since the intervention is this business wasn’t just potentially going to die, it was in the process of dying if not dead already,” he explained.
The sales process for the Whyalla steelworks, managed by KordaMentha, formally began on June 24. The state government reported interest from at least 33 potential buyers, with 60 percent from overseas. The expression of interest process is set to close on August 1, potentially narrowing the field of interested parties.
Next Steps and Long-term Implications
KordaMentha has been utilizing part of the initial $384 million to conduct essential maintenance, aiming to restore the steelworks to a saleable condition. The firm described the facility’s state as “disrepair” upon taking over, with OneSteel Manufacturing, the GFG Alliance subsidiary, reportedly losing $1.5 million daily before entering administration.
The outcome of the sales process and the eventual new ownership will be pivotal in determining the future of the Whyalla steelworks. The ongoing financial support underscores the significant economic and strategic importance of the facility, not only to South Australia but to the broader national steelmaking industry.
