British industrialist Sanjeev Gupta has assured the South Australian government that his Whyalla steelworks are in good condition and have enough cash to continue operating despite the bankruptcy of one of its main financiers.
Concerns have been raised over the future of the 1,200 workers at the Whyalla plant, while a similar number of jobs in nearby iron ore operations could also be at risk if the company falters.
But Prime Minister Steven Marshall said the government had been briefed by Mr Gupta on both immediate issues and longer-term challenges.
“We have been assured by Mr Gupta that the immediate need for cash to continue operating here in South Australia is secure,” the Prime Minister said.
“But obviously now there has to be a longer-term restructuring of their debt financing.
“Admittedly, Sanjeev Gupta seemed very optimistic.”
In a statement, Mr Gupta’s company, GFG Alliance, said it remained operationally strong as it benefited from steel prices at a 13-year high and strong markets for aluminum and iron ore.
“Thanks to our global efficiency drive, we improved margins across our operations, with most of our core businesses generating positive cash flow,” the company said.
“Discussions to secure alternative long-term funding are progressing well but will take time to organise.
“During this time, we have instructed all of our businesses to carefully manage their cash flow.”
Workers at Whyalla were also told that “business was business as usual,” said local state Labor MP Eddie Hughes.
Mr Hughes, whose son is employed at the plant, told ABC radio that workers had received an email from Mr Gupta assuring them that operations remained in a strong position despite the difficult situation.
Concerns over the steelworks emerged after the Australian arm of financier Greensill Capital, founded by Bundaberg-born businessman Lex Greensill, was placed in administration after being unable to repay a $140million loan at Credit Suisse.
Mr Gupta’s group, which bought the Whyalla steelworks and nearby iron ore operations in 2017, is considered the most vulnerable to the collapse of Greensill.
The situation has sparked questions about Australia’s steelmaking capacity, with independent South Australian Senator Rex Patrick calling on Prime Minister Scott Morrison to reaffirm the Federal Government’s support for Whyalla and domestic steel production .
“Australian steel production is a vital component of our industrial and manufacturing base,” said Senator Patrick.
“If Whyalla Steelworks were forced to close by external financial factors, it would be a huge blow to Australia’s national self-reliance and resilience.”
Federal labor industry spokesman Ed Husic said workers needed reassurance that the Morrison government was on their side.
“We need to know that the steelworkers will be taken care of, should anything happen,” Husic said.
The Australian Manufacturing Workers Union said it had similar concerns about jobs in steel operations and the wider manufacturing sector.
“It is crucial, as we move towards economic recovery from this global pandemic, that Australian manufacturing is protected and local supply chains are essential to creating secure jobs,” National Secretary Steve Murphy said.
Whyalla operations are believed to have been profitable in recent months, which Whyalla Mayor Clare McLaughlin said was a “major achievement and a sign of their commitment to our town”.
In the meantime, Marshall said the state government will continue to monitor the situation carefully.
Under the previous Labor administration, SA agreed to provide $50 million to help with the longer-term transformation of steel production at Whyalla.
The Prime Minister said the money could not be used to ease short-term cash flow problems, but did not rule out providing other help.
“It’s all on the table. We want to do what we can to support GFG,” he said.
“But at the moment the operation in Whyalla is looking very good.”
Australian Associated Press