State and Federal Governments are proposing to add $2.4 billion to the Whyalla Steelworks financial disaster, while the man responsible rides into the sunset. Kim Wingerei with the story.
The South Australian government put the Whyalla Steelworks into administration in February 2025, following years of mismanagement and mounting debts – including unpaid royalties – under the leadership of Sanjeev Gupta.
Despite that, Gupta continues to advocate for the “green steel” dream, a potential nightmare if the South Australian and Federal Governments get their way.
Their rescue plan involves support for transitioning the plant from coal-fired to gas-powered. However, that is only feasible if the Government is prepared to subsidise the gas. At current prices, Australian gas is too expensive.
It is, of course, also not “green”. Natural gas emits less CO2 than coal-burning plants in theory (assuming minimal gas leaks), but for the green steel dream to come to fruition, renewable energy is paramount.
Bluescope to bid?
Bluescope Steel (ASX:BSL) is the preferred bidder, holding a right-of-last-refusal in what the SA Government hopes will be a “competitive bidding process”.
But Bluescope is demanding “multibillion-dollar gas subsidies” if it is to proceed with a bid.
At their AGM this week, outgoing CEO Mark Vassella and CEO-elect, Tania Archibald, were both at pains to reiterate the company’s commitment to Net Zero, but neither made mention of the potential for a Whyalla acquisition.
According to a new report by Climate Energy Finance (CEF), “Gas-based production of iron and steel in SA is entirely uneconomic, with gas prices there some of the highest in the gas-producing world.” And as readers of MWM well know (even if Matt Canavan doesn’t), our high gas prices are caused by the gas oligopoly’s siphoning of gas into export markets.
Gas Empire: how Australians are paying for foreign profiteers
CEF estimates gas supply subsidies for a gas-based Whyalla would exceed $1.7B over a decade, but that may still not be enough to make it competitive.
As the logical supplier of gas to Whyalla, Santos (ASX:STO) would be the principal beneficiary of these subsidies. Over the last ten years, Santos has paid a total of $3.1m in income tax on $42.8B in revenue.
An opportunity missed
CEF’s Matt Pollard told MWM, “The transformation of the Whyalla Steelworks is a generational opportunity, but South Australia stands at a critical juncture. A methane gas-based ‘transition’ would be a grave strategic misstep and misalignment of economic policy with climate objectives, with lasting budgetary and national interest impacts.
Gas is unequivocally not the solution for Whyalla in the interim, nor the long-term.
Green Steel is a massive opportunity for Australia to move up the value chain of steel production while reducing our emissions. South Australia, in particular, is well-positioned with one of the lowest-cost, highest-penetration variable renewable energy grids in the world, with its 72% variable renewable energy penetration.
CEF Director Tim Buckley points out how “global moves to accelerate decarbonisation of global iron and steel supply chains mean Australia faces a massive strategic threat to our top export commodity,” iron ore.
The report’s co-author, The Superpower Institute, led by former ACCC chair Rod Sims and economist Ross Garnaut, echoes those sentiments, “There is an incredible opportunity for Whyalla to become Australia’s first green iron and steelmaking success story. … Government support for a gas option at this point would be a significant misstep.”
As for Sanjeev Gupta, his company, GFG Alliance, gets a $375,000 slap on the wrist by ASIC for late reporting, with the debts he left behind will be paid by taxpayers.
Kim Wingerei is a businessman turned writer and commentator. He is passionate about free speech, human rights, democracy and the politics of change. Originally from Norway, Kim has lived in Australia for 30 years. Author of ‘Why Democracy is Broken – A Blueprint for Change’.