Steelworks was losing $1.5 million per day before collapsing
The total owed to creditors of the Whyalla Steelworks is $1.3 billion, about half of which is to entities associated with Sanjeev Gupta’s GFG Group, administrators of the collapsed company said.
In the seven months leading up to 31 January 2025, the Whyalla Steelworks was losing $1.5 million per day according to recently appointed administrators KordaMentha.
Revealed today by the administrators – appointed by the South Australian government earlier this month after special-purpose legislation gave them the power to remove former owner GFG from the picture – the debts were mounting significantly in the half year.
At the first meeting of creditors held this afternoon in Whyalla, KordaMentha said $1.3 billion was owed to creditors as of 31 January, a significant portion of which was owed to entities associated with the in-administration OneSteel.
Approximately $569 million was owed to 15 associated entities, making Sanjeev Gupta’s companies the largest collective creditor of the collapsed steelmaking and magnetite mining business.
The state government is owed $40.3 million, made up of mining royalties and bills to SA Water.
There is $190 million in employee entitlements owed (mostly redundancy payments), $437 million to trade creditors (the largest group made up of 1968 creditors), and $112 million in prepaid sales.
Of the $1.3 billion, $321.8 million is to secured creditors (the state government, GFG entities and other secured creditors), while $837 million is owed to unsecured creditors.
KordaMentha also revealed the company’s P&L as of 31 January, noting it was unaudited information based on OneSteel’s books when the administrators took over and that the administrators had not reviewed the veracity of the numbers.
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It showed OneSteel had a $319.1 million loss as of 31 January, and a negative gross margin of 26.7 per cent based on $669 million in sales revenue during the period.
KordaMentha said the loss was driven by a combination of factors including blast furnace shutdowns, working capital constraints and shipping restrictions.
The administrators will now investigate the company, including how it got in the position it was in, and will work to ensure it becomes “investable” so that an external buyer will take over the steelworks and continue to operate it.
KordaMentha previously managed the collapse of the former Steelworks owner Arrium, which was sold to Gupta’s GFG.
In an update to creditors KordaMentha said the shutdown of the blast furnace led to reduced production which “materially impacted profitability and cashflow”.
It said that on appointment there was a lack of stock (like critical spares, raw materials, etc). Significantly, the company only had 4000 tonnes of coke; enough to last three days.
Ships in the port were not being loaded too, thus incurring demurrage, and there was a significant amount owed to all of the company’s suppliers from transport providers to contractors, stevedores and more.
Administrator Sebastian Hams said OneSteel was reliant on the personal sacrifices of employees and subcontractors before the company’s collapse.
“Payments were being made on an ‘as needs’ basis,” Hams said.
“What this demonstrates to us is that the Steelworks and the Mines were really relying on the resilience and personal capital of employees and subcontractors to keep operations running in seriously challenging circumstances.
“We can’t talk enough about how much the employees and the contractors have contributed to keep mining and the Steelworks operating.
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KordaMentha also noted that the Steelworks’ largest customer was Gupta-owed InfraBuild.
The administrators will soon send another circular to creditors before writing a report on the company before a second meeting of creditors where the fate of the steelworks will be decided.
Generally, this second meeting is held within 25 business days, but KordaMentha told creditors it intended to apply to the courts for an extension.
KordaMentha administrators also read out a statement from GFG Alliance, which said it was “saddened by the decision by the South Australian Government”.
“Since the appointment of external administrators, we have secured continued supply for InfraBuild, with the first deliveries already received at our Newcastle plant by rail, and bulk ore shipments resuming from the Port of Whyalla,” GFG said.
“GFG Alliance management and entities including InfraBuild, remain committed to working cooperatively with the administrators to ensure the sustainability of Whyalla’s operations and a long-term solution for steel manufacturing in Australia.
“We continue to believe in the strategic importance of Whyalla and will fully support a viable long-term solution for the future of the Whyalla Steelworks.”
The news comes as the state government announced payments under the state and federal government $2.4 billion steelworks package were flowing to Whyalla businesses.
It said applications for the Business Creditor Assistance Scheme opened last week and $4.1 million in funding has been requested through submissions from businesses owed money by OneSteel.
“Money is flowing into the hands of small businesses that were left in the lurch much sooner than would otherwise be achievable through the administration process,” Premier Peter Malinauskas said.
“This means businesses which otherwise would have closed are open. Workers who would have been retrenched are being paid and have confidence about the future.”
Further, Attorney-General Kyam Maher announced the Legal Services Commission would boost its presence in Whyalla via the creation of an emergency legal service.
Comprised of four lawyers, the office will be staffed on Tuesdays, Wednesdays and Thursdays for the coming weeks to help businesses with legal issues.
“We are taking all available to steps to try and help the people of Whyalla through this challenging time,” Maher said.
“Staff of the Legal Services Commission will be available on-site every Tuesday, Wednesday and Thursday to provide advice on a range of issues, including debt recovery, mortgage deferrals, residential tenancies and employment queries.
“The Legal Services Commission will be working with both the broader community and the local legal profession to help raise awareness of this much-needed service.”
