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Category: States and Territories / Government and Politics / Steel

Whyalla steelworks' business model must change: SA Premier

Wednesday, 17 Feb 2016 09:19:59 | Nicola Gage

Whyalla steelworks could be mothballed if it continues to loss money, Arrium has said. (ABC News: Nick Harmsen)

Negotiations between politicians have begun to ensure the Whyalla steelworks survives despite Arrium's warning the site could be mothballed if its financial position does not improve.

Key points:

  • Arrium says Whyalla steelworks uneconomic at current Asian prices
  • Company planning a care and maintenance strategy for the works
  • About 1,000 Arrium jobs at risk

The company said the steelworks was not economic at current Asian steel prices, even after finding $100 million in cost reductions.

It said it needed $60 million to break even and was beginning to plan "care and maintenance" options for all or part of the steelworks, if its financial position did not turn around.

If the steelworks closes, more than 1,000 people will be out of work.

The company also said it was looking at labour as one area it could cut costs.

Arrium reported a half-yearly after-tax net loss of $236 million, including a $43 million at its Whyalla steelworks.

Treasurer Tom Koutsansonis said the South Australian Government was working with Arrium to see how it could help the plant remain open.

But he also called on the Federal Government to do more.

"You can't blame the Commonwealth Government for the fall in iron ore price," he said.

"But you can blame the Commonwealth Government over the last 10 years for allowing cheap imports of steel. We need to act."

Premier Jay Weatherill said falling commodity prices were a real threat to the steelworks at Whyalla.

South Australian Treasurer Tom Koutsantonis and Premier Jay Weatherill. Photo: South Australian Treasurer Tom Koutsantonis and Premier Jay Weatherill say they are committed to the Whyalla site. (ABC News: Angelique Donnellan)

"We're in deep negotiations to provide them with assistance to allow their continued existence," he said.

"We stand ready to support Arrium and Whyalla to get through this very difficult phase."

Mr Weatherill said his focus was keeping the plant open but would not disclose how the Government could support the company.

"We've being asked to provide support. We're in deep discussions about providing that support," he said.

"It's obvious that something has to change with their business model if they're to continue to be viable, that's the basis on which we're having the discussions."

Liberal MP for Grey Rowan Ramsey said it was a tough time for everyone in the steelmaking town.

"It's very important not just for Whyalla and not just for South Australia that these steelworks do survive," he said.

"I think it's a tough time but my money is on it that we are going to get through it one way or another.

"I've been on the phone this morning to the Minister for Industry Christopher Pyne ... I raised the issue last week again with the Prime Minister and with Christopher and I know they are engaged at the highest level.

"I want the Federal Government engaged with the State Government at the strongest level to work out what the best form of assistance, if that's what we call it, is needed."

The company reduced its workforce by 900 last year.

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