Steel collapse: workers to pay the biggest price

“The politicians and union leaders couldn’t find us on a map.” It’s a joke you’ll often hear from Whyalla locals. Their town is four and a half hours’ drive from Adelaide and usually far from the national spotlight.

When Whyalla’s major employer, Arrium Steel, entered voluntary administration in the first week of April, that changed. Arrium employs more than 7,000 workers across the country. Around 3,000 jobs in Whyalla depend on Arrium’s steelworks or the mines that supply it with iron ore. The town is facing the prospect of becoming Australia’s largest ghost town.

Mike and Joseph (not their real names), have worked at the Whyalla steelworks for decades. They spoke to Red Flag about the threat of closure. “I probably won’t be able to get another job because of issues with my back”, Joseph said. Mike is worried about how he will pay his mortgage. Both know that they’ll have to leave town if the steelworks close.

Mike and Joseph have worked at the Whyalla steelworks for decades. They spoke to Red Flag about the threat of closure.

Arrium Steel, “spun out” from BHP in 2000, has been hit hard by collapsing global steel and iron ore prices. Its debt-funded reinvestments have not produced returns due to these falling commodity prices. Arrium and other steel companies blame low prices on Chinese producers who are accused of “dumping” cheap steel onto the market.

In fact, Chinese-produced steel is just one part of a massive global overproduction that is putting downward pressure on prices. Workers in the steel industry face job losses and wage cuts because, in the boom time clamour for profits, “too much” steel has been produced. In these calculations, “too much” means more than can be sold at sufficient profit, not more than society needs.

It’s estimated that by 2031, demand for public transport in Australia will increase by 89 percent. That’s a lot of track, trains and trams that need steel. According to the most recent ABS figures, more than 100,000 Australians are homeless. Constructing tens of thousands of housing units would need millions of tonnes of steel. But this all counts for nought if the bosses’ profits can’t be assured. If the right people aren’t making enough money, thousands of workers are cast into unemployment and entire communities are destroyed.

Right now, it’s not only Australian steelworkers being asked to pay for a crisis of the bosses’ making. The Chinese government is planning to slash crude steel production by 100 million tonnes a year, threatening the jobs of more than 400,000 workers there. Meanwhile, in Wales, more than 4,000 jobs are at risk as the Port Talbot steelworks also faces closure.

But you won’t find any Australian politicians or opinion makers decrying the anarchy of the market. Instead, appeals to nationalistic sentiment are used to mask the failure of their system. “Inferior Chinese steel” is blamed for threatening Australian jobs. The Labor premier of South Australia links Australian steel production with Australia’s crimes against refugees: “It’s as fundamental to our sovereignty as protecting our borders”, he said.

Coupled closely with the call to save Australian steel producers is the demand that workers accept cuts to wages and conditions. Both major parties have made clear that any government support to keep the steelworks open will hinge on management proving it can cut production costs.

Industry minister Christopher Pyne said, “Any financial support would need to be a long-term structural reform”. South Australian treasurer Tom Koutsantonis echoed Pyne’s statements. The talk of “structural reform” isn’t new. This is the phrase used whenever government and the bosses want to introduce a change that attacks workers and the poor. The “structural reform” they want at Arrium is the same as that pushed through at Australia’s only other steel producer, BlueScope Steel in Port Kembla.

In October 2015, with the spectre of the steelworks’ closure looming, the AWU brokered a new enterprise agreement with BlueScope that included 500 job losses, a three-year wage freeze and an overhaul of dispute procedures to allow further erosion of working conditions. By February this year, BlueScope had upgraded its half-year profit forecast by $180 million. Commentators applauded the company’s shrewd manoeuvre and noted how quickly the blackmail of its workforce had bolstered its bottom line. Predictably, it has also been pointed out that blackmail is usually a repeat game. A business analyst cited in the Sydney Morning Herald notes that BlueScope “still have a closure option up their sleeve if things get a lot worse”.

Arrium’s management had been trying to emulate this model by mothballing its operations over the past few years. More than 1,000 jobs were cut last year. In February, hundreds of workers at Arrium’s iron ore mines were told they had to accept pay cuts or lose their jobs. The mine workers rejected the company’s ultimatum at a vote in March.

Fresh in their minds might have been the fate of workers in South Australia’s car manufacturing industry. In August 2013, Holden’s Adelaide workforce accepted a three-year wage freeze and drastic cuts to conditions because the company said it was the only way to save their jobs. By December the same year, Holden announced it was pulling out of Australia anyway.

Already, recently installed administrator Korda Mentha has signalled that the BlueScope “restructure” will be the blueprint for the plans at Arrium. Just as BlueScope did, Arrium management has been passing off the company’s crisis as a “community issue”. They pretend that Arrium’s bosses, workers and businesses in Whyalla are in it together.

According to Mike, the bosses claim to be making their fair share of sacrifices but haven’t really done a thing. “We’ve heard a lot of rhetoric about them making sacrifices and helping, but we haven’t seen anything”, he said. Joseph noted that the board took pay rises and bonuses last year, even though the company was collapsing.

Since the job cuts in 2015, more work is being pushed on to the workers who remain. Safety standards are slipping as the company cuts back. “Management have been trying to save money on maintenance and not spend money on important repairs”, Mike said.

According to Mike and Joseph, workers aren’t taking any confidence from the union’s response either. “Some workers have been asked by officials not to take overtime pay”, Mike said. As for a response to the threatened closure, it’s clear that union leaders don’t want the rank and file involved. They distribute information sheets rather than call mass meetings.

Most workers are members of the AWU but the Australian Manufacturing Workers’ Union, the Communications, Electrical and Plumbing Union and the Construction, Forestry, Mining and Energy Union also have some coverage. There are concerns that the AWU leadership is the only legal representative of workers in talks with administrators, with some worried that workers will be sold short.

Workers aren’t buying the response from politicians either. “They’re trying to politically gain from it for the upcoming election; they feel forced to do something to stay in power”, Mike said

An air of cynicism and pessimism hangs over Whyalla. When asked if they thought the steelworks would stay open, Mike and Joseph said they didn’t like the chances. “People are hoping for the best but preparing for the worst”, Joseph said.

From Whyalla to Port Talbot and in the steelworks across China, workers are being told they will be the ones to pay for the failure of the market.