Trouble at the Whyalla steelworks
Whyalla, four hours’ drive north of Adelaide, is a working-class town dominated by steel. The 60-year-old steelworks commands the skyline and underpins the local economy. Just under half of Whyalla’s workforce is dependent on the steelworks and the plant produces three-quarters of Australian structural steel.
Yet the industry is in trouble. Last week, the operation was placed under administration for the second time in less than a decade. British billionaire Sanjeev Gupta’s GFG Alliance, the current owner, owes at least $300 million to creditors, including local contractors and the South Australian government.
The crisis in Whyalla reveals catastrophic failures of the market and of successive governments’ embrace of partnerships with the private sector.
In 2017, GFG purchased the steelworks from its then owner, Arrium. To much fanfare, Gupta marched alongside politicians and union leaders to mark the handover. He promised over $1 billion to expand the plant, decarbonise operations and repair aging infrastructure. Gupta was feted by the corporate press as the “saviour of steel”. Adelaide’s Advertiser predicted “the most exciting time in Whyalla history”.
Gupta returned the plant to profitability, but none of the desperately needed investments materialised. Like Arrium, GFG was unprepared to forego revenue to upgrade the plant. Last year, despite warnings by union members, the blast furnace responsible for smelting was damaged during a botched repair operation. When operations were forced to shut down for many months, GFG responded by axing 56 jobs and slashing wages by 30 percent.
As workers’ pay packets shrunk and contractors were left unpaid, Gupta refused to subject himself to such fiscal restraint. Instead, he announced plans to renovate his $35 million harbourside mansion in Sydney’s Potts Point, including installing a cinema and whiskey tasting room.
Many of the steelworks that comprise Gupta’s debt-ridden global empire are idle, bankrupt or for sale. GFG has pursued a dramatic restructuring program following the collapse of its primary financier, Greensill Capital, in 2021. Falling commodity prices have also hit company profits.
Europe’s IndustriAll trade union federation warns that thousands of steel jobs in Czechia, Poland, Hungary and elsewhere have been lost at plants owned by GFG. Workers in Whyalla and abroad are being asked to pay for a crisis of their bosses’ making.
To guarantee jobs and ensure the long-term viability of manufacturing, the steelworks should immediately be placed in public hands and run to benefit workers. Despite pledging $2.4 billion to help entice a private buyer, Labor has ruled out nationalisation. Such a course of action would mean breaking with corporate interests and the public-private partnerships that have been so devastating for Whyalla’s workers.
Whyalla, the largest of three towns in South Australia’s once-powerful “Iron Triangle”, is in long-term decline. A former industrial centre of steelmaking and shipbuilding, today the region is burdened by high unemployment and economic disadvantage.
In 2016, government support to keep the steelworks open was contingent on cutting wages. A 10 percent pay cut was accepted by union officials, who have been more than ready to go along with the slashing of wages and conditions with no guarantee of job retention in return.
It’s a familiar story. In 2018, Port Pirie’s Nyrstar lead smelter shed more than 100 jobs despite a $291 million state government guarantee. Nor did wage freezes and billions of dollars of public subsidies prevent the automotive industry pulling out of Australia.
While the government’s latest promise of funding has been greeted with understandable relief, many locals are right to remain cynical about their future. With more public money being thrown at private investors ahead of a possible sale of the steelworks, the promise of well-paid, long-term jobs remains elusive.
