The British industrialist Sanjeev Gupta was dubbed the “saviour of steel” for his plans to rescue ailing plants around the world and decarbonise their operations.
But seven years after Gupta’s GFG Alliance bought the struggling Whyalla steelworks, jobs are being lost and promises to invest in the operations remain unfulfilled, eroding hopes of a green steel manufacturing future for the regional South Australian city.
Just how bad is it?
Ageing operations
Whyalla’s mining and steel operations represent the economic foundation of a city relied on by numerous workers along with other businesses, from contractors to cafes.
The plant has been beset by problems due to a series of shutdowns of its coal-fired blast furnace, which lies at the heart of the steelmaking process.
Observers point out the level of disruptions to the crucial smelting process – the furnace has been out of action for about six months this year – is unusual among steelmakers, raising concerns about its operations.
When it is online, the plant produces finished steel used in construction and rail.
While Gupta has pledged to have the furnace restarted promptly, timelines for upgrades, including installation plans for an electric arc furnace to replace the coal-based system, have blown out.
Eddie Hughes, the South Australian Labor MP whose seat covers the Whyalla region, says the community is increasingly sceptical that the plant will be transformed as promised.
“They overpromised and they’ve underdelivered, and they have not delivered at this stage on their promises,” says Hughes, referring to the Gupta-owned operations.
“They created expectations that have to a significant degree been dashed. A lot of the community no longer have confidence in the company to deliver what is essentially a race between an ageing steel plant and the need for a technology transition.”
GFG-owned Liberty Steel recently cut about 50 jobs from the Whyalla operations, reminding locals of the plant’s troubled past. The former owner, Arrium, collapsed in 2016, weighed down by billions of dollars of debt.
The planned decarbonisation of the plant will ultimately require an investment of about $1.5bn to $2bn, according to industry estimates, with renewable energy-produced hydrogen ultimately required for the manufacturing process to make green steel.
Many plants in similar situations around the world are looking to gas as a transition fuel.
Hughes says that while there is public money on the table to assist with the technology transition, it would be provided on a milestone basis after the work is done to avoid any risk the funds are used by other parts of the GFG business.
“That is subject to rigorous criteria, as it should be, because it’s about the technology transition here in Whyalla, it’s not about just propping up GFG,” Hughes says.
“I think it will require a private sector, public sector partnership of some form or the other.”
‘Dire situation’
Pressure at GFG’s Liberty Steel business unit is not confined to Whyalla.
IndustriAll European Trade Union, a Swiss-based global federation of unions, says thousands of workers at Liberty sites are facing an uncertain future with the announced bankruptcy of steelworks in Częstochowa, Poland, which is being appealed.
There are also liquidation proceedings under way at Dunaújváros, Hungary.
The trade union federation says the jobs of Liberty workers in Luxembourg, Belgium and Italy are in doubt because the sites are up for sale.
Judith Kirton-Darling, the industriAll general secretary, says in times of crisis, the global union expects all employers to commit to good industrial relations, with the health and safety and the timely payment of full wages a priority.
“Currently, workers at several Liberty Steel sites are unsure if they will definitely be paid at the end of each month, with some workers receiving salaries days late and some suffering pay cuts of 30%,” Kirton-Darling says.
“We can’t stress enough just how dire the situation is.”
The global union, which has affiliates in 140 countries, says it is working with unions and policymakers to tackle urgent issues including the unfair dumping of steel on the open EU market, an issue cited by steelmakers for some of their financial stress.
Economists have also raised concerns over the impact of a prolonged downturn in China’s property market on steel consumption and prices.
But there are specific challenges to Gupta’s steel empire, such as its prolonged debt restructure sparked by the 2021 collapse of primary financier Greensill Capital.
The UK business register agency is prosecuting more than 70 Gupta-linked companies, including those tied to Liberty Steel operations, for failing to lodge accounts. GFG is also subject to a criminal investigation by the Serious Fraud Office into suspected fraud linked to the collapse of Greensill.
A spokesperson for GFG’s Liberty Steel says the company is working constructively with its suppliers to manage through the market downturn.
“Our operations in Europe are not impacting our Australian business which continues to operate well despite the short-term challenges in Whyalla,” the spokesperson says.
“We remain resolute in our commitment to the green steel transformation which will take time but remains a multigenerational opportunity for Australia to lead the world.”
Green steel
The GFG-owned Whyalla operation is one of two major integrated steel projects in Australia, alongside the larger BlueScope operations in Port Kembla, south of Sydney.
Geoffrey Brooks, the joint Swinburne/CSIRO chair in sustainable mineral processing, says it’s in Australia’s strategic interests to have a thriving and advanced sector and warns that it would be a “technological and economic disaster” for the west to stop making steel.
“Steel production is [historically] an expression of power,” Brooks says.
“It’s strategically important, but it also has to be the sort of steel industry that is prosperous so that we can provide long-term stability of jobs and technological innovation.”
But the global race to upgrade coal-based steel operations is proving difficult.
After years of heavy losses, the Indian owner of a steel plant in the Welsh town of Port Talbot recently shut its last furnace, leading to about 1,900 job losses.
The company, Tata, is planning to build an electric arc furnace on the site, although the transition away from coal is anything but smooth, prompting widespread disruptions to the community.
Part of the upgrade difficulties have been linked to the current high costs of clean hydrogen, prompting governments around the world to partner with private industry to help transform the sector.
“Governments realise they’re going to have to help the industry go green, it’s not going to just happen through private means. Having said that, it’s entirely appropriate to scrutinise how any public money is being spent,” Brooks says.
“The steel industry does well at providing long-term employment. But when it goes wrong, it is a big setback for the local community, there’s no doubt about that.”
