GFG mill in Australia enters bankruptcy process

The government of the state of South Australia has placed the GFG Alliance/Liberty Steel Whyalla steel mill “and associated mines” into administration, the Australian equivalent of bankruptcy.

An announcement from South Australia Premier Peter Malinauskas says the action was taken “to secure the long-term future” of the blast furnace/basic oxygen furnace (BOF) steelmaking complex.

“GFG is no longer running the steelworks,” according to the announcement, which adds that the state has appointed Melbourne, Australia-based consulting firm KordaMentha as “administrator of OneSteel Manufacturing Pty. Ltd., under section 436C of the Corporations Act [of] 2001.”

A statement on the InfraBuild website, a separate GFG Alliance business unit that operates electric arc furnace (EAF) steel mills and scrap processing facilities in Australia, says its operations are not part of the bankruptcy proceedings.

“InfraBuild is a separate company from One Steel Manufacturing Pty Ltd (Whyalla steelworks) [and] has its own board and a separate corporate and financing structure,” says the firm. “InfraBuild’s EAFs and rolling mills are operating fully, and continues manufacturing, processing and delivering for its customers.”

The iron ore-based Whyalla complex has been targeted for a conversion to the EAF process by London-based GFG and Liberty Steel, most recently in a 2023 announcement.

It is unclear to what extent any EAF-related investments have been made in Whyalla. In the meantime, according to the Malinauskas administration, KordaMentha “has advised the state government it intends to appoint an experienced special adviser to assist the administration and is engaging with parties, including BlueScope.”

Australia-based BlueScope Steel operates a sizable EAF mill in Ohio and is in the process of converting a blast furnace/BOF mill in New Zealand to operate with EAF technology.

During the administration process, says the state government, KordaMentha will “investigate options including sale of the business, with the ambition of delivering the best outcome for creditors and continued operation of the steelworks.”

On its LinkedIn page, KordaMentha describes itself as “an independent advisory firm providing specialist cybersecurity, financial crime, forensic, performance improvement, real estate and restructuring services.”

As characterized by the state premier’s office, the action was spurred by an inability or unwillingness by Liberty Steel to pay lenders, vendors and subcontractors.

“Throughout that period, we gave GFG every opportunity to make good on its promises and to bring creditors back into terms,” says Malinauskas. “It has failed to do so, so today we have acted.”

According to the government announcement, KordaMentha “will be able to trade on and pay all debts incurred during the period of administration. This means going forward, workers and contractors will be paid.”

“The state government took the decision to place OneSteel in administration, after losing confidence in the financial capability of GFG to pay its bills as and when they fall due,” according to the premier’s office. “The government has equally lost confidence in GFG’s ability to secure funding needed for the ongoing operation of the steelworks.”

The Malinauskas administration says it did not act alone when taking the measure, indicating the action was “facilitated by an urgent and minor change to the Whyalla Steel Works Act [of] 1958, which passed state parliament this morning.”

That legislation also “imposes new transparency obligations” on the mill’s owner, according to the South Australia government.

“We have received advice that the steelworks is being run into ground to the extent that it may become irredeemable,” says Malinauskas. “Importantly, it’s not just the steelworks itself—it’s a vast number of local suppliers, small businesses owned and operated by South Australians, whose debts remain unpaid, whose revenue has evaporated, and whose livelihoods are at stake.”

Comments Tom Koutsantonis, a member of the South Australian House of Assembly representing Whyalla, “This is not a situation the state government has created, but it’s one that is incumbent on us to resolve, for the benefit of GFG’s many unpaid creditors, for the people of Whyalla and for the state as a whole.”

He continues, “GFG has reaped significant profits from their facilities here, but despite long-made promises, it has failed to invest back into the steelworks.”

Koutsantonis says GFG’s assets in Australia have been productive and ties the Whyalla mill’s difficulties to the 2021 collapse of Greensill Capital and Liberty Steel’s former reliance on that company’s “supply chain” (pre-sale of receivables) financing.

Saying GFG iron mines have generated hundreds of billions of Australian dollars in revenue since being owned by the company, Koutsantonis adds, “We have seen nearly $800 million sent offshore, including repayments arising from the Greensill collapse, payments of intercompany loans within the GFG group and funding towards the purchase of the Liberty South Korea business. This is not a Whyalla problem—it is a GFG problem.”

The government of South Australia calls the Whyalla complex “critical to sovereign Australian steel, saying it produces 75 percent of Australian structural steel.

Premier Malinauskas says he is visiting the Whyalla complex late this week, where he may “make further announcements about my government’s steadfast commitment to support the people of Whyalla.

According to the Australian Broadcasting Corp., the first meeting between KordaMentha and GFG creditors in the region will be held on Monday, March 3.