Next Steps for Whyalla Steelworks
The Whyalla Steelworks is again under the voluntary administration of KordaMentha, following the South Australian Government’s intervention due to the deteriorating financial position of its owner, GFG Alliance. The state and federal governments have announced a joint $2.4 billion support package to stabilize and modernize the facility while a new buyer is found.
When was the appointment:
KordaMentha was appointed as voluntary administrators of OneSteel Manufacturing Pty Ltd by the South Australian Government on 19 February 2025. KordaMentha was last at the steelworks as voluntary administrators in 2016-17, when previous owner Arrium went into administration. The first meeting of creditors was held on 3 March 2025 Whyalla with a longer-term restructuring transaction not expected for 12 months.
What issues have been identified
GFG Alliance’s financial collapse appears to have been influenced by a range of factors including its highly decentralized debt-dependent structure. Its corporate setup contributed to its downfall in the following ways.
- Decentralized and Opaque Corporate Structure
Unlike traditional conglomerates, GFG Alliance operates as a loose network of companies rather than a formally structured group with a single balance sheet. Each subsidiary has its own finances, making it difficult for creditors to assess overall risk or intervene early. Some subsidiaries have inter-company loans, which created confusion about liabilities when financial troubles hit.
- Overreliance on Greensill Capital’s Supply Chain Financing
GFG funded much of its expansion (including acquisitions in Australia, the UK, and Europe) through supply chain financing provided by Greensill Capital. Greensill’s model advanced payments based on expected future revenues, but when Greensill collapsed in March 2021, GFG lost its primary funding source.
- High Debt Across Multiple Subsidiaries
GFG used debt-funded acquisitions to expand rapidly, acquiring Whyalla Steelworks (Australia), Liberty Steel UK and Europe, Aluminium and energy assets. The group’s total debt was estimated in the billion. Unlike well-capitalized firms, GFG lacked the cash reserves needed to manage financial shocks.
- Unrealised “Green Steel” Vision
GFG promoted itself as a leader in green steel, planning to transition from coal-based steelmaking to hydrogen-powered steel. Whyalla Steelworks was supposed to be a major hub for this transformation. However, funding shortfalls and rising energy costs delayed the green transition, making GFG’s steel operations less competitive.
- Legal and Creditor Pressure
Major lenders, including Credit Suisse, launched legal action to recover debts from GFG entities. Australian operations struggled with unpaid contracts, causing disruptions to Whyalla’s rail and port logistics. Some suppliers stopped working with GFG, further straining cash flow.
- Final Collapse and Administration (2025)
With no refinancing options and mounting debts, the South Australian and Federal Governments stepped in with a rescue package, ensuring Whyalla remains operational while new buyers are found.
What happens next?
Now that KordaMentha has taken control, the first item of business is stabilisation including improving safety, negotiating better deals for gas, electricity and diesel and making sure the plant has enough coking coal stockpiled.
The next step will be capital expenditure, looking at expansion plans at the magnetite mine, and a plan to move towards “green steel” with infrastructure such as an electric arc furnace.
KordaMentha will also be looking for a buyer, a difficult task given the state of the facilities and downward market pressure on prices — something that could get worse further into 2025.
If you have any interest in finding out more about this matter, you are welcome to contact MPH’s experienced restructuring / corporate director Dan Butler or solicitor Tyson Cleghorn on +61 (0) 8 9221-0033 or by email dbutler@mphlawyers.com.au and tcleghorn@mphlawyers.com.au.
We will provide further updates in due course.