ONESTEEL MANUFACTURING (Whyalla Steelworks)
Onesteel Manufacturing: A lot of work for Administrators (and waiting for creditors)
Onesteel Manufacturing Pty Ltd (Administrators Appointed) owns the Whyalla steelworks and in South Australia, along with iron ore reserves that supply the steelworks. This is an important asset to the state of South Australia, currently employing 1,487 direct employees, with an additional approximate 1,500 contractors on site. The steelworks are the heart of the town of Whyalla, which has a population of 21,000 people. The steelworks are estimated to produce 75% of Australian structural steel used in infrastructure projects and is the only domestic producer of steel long products.
However, the blast furnace (no. 2) at the Whyalla steelworks was first built in 1965. It has been relined a number of times, but there have been multiple outages over the years that have been financially destructive to the relevant owners of the asset. Abbreviated history of ownership follows
· The Whyalla steelworks were opened by BHP in 1941, along with a major shipyard
· The steelworks were spun out of BHP in 2000 as part of the Arrium Group
· The Arrium Group appointed administrators in Apr 2016
· The administration was run by KordaMentha, who oversaw a sale of the steelworks to GFG Alliance, controlled by Sanjeev Gupta, in Aug 2017. GFG Alliance made announcements of intended future upgrades to the Whyalla steelworks, but it is unknown to what extent those announcements were implemented
· Administrators (again KordaMentha) were appointed to Onesteel Manufacturing Pty Ltd in Feb 2025 after the blast furnace was out of service for a number of months in 2024 which set in motion a financial deterioration that caused the South Australian government to lose confidence in the company, passing a piece of legislation to obtain a charge over all the assets and property of the company (Whyalla Steel Works (Charge on Property) Amendment Act 2025), thereby allowing it to appoint Administrators under section 436C of the Corporations Act.
Creditors should expect to settle in for a long wait before expecting any possibility of a return from the insolvency. The administrators received approval from the Federal Court of Australia on 18 Mar, 2025 to extend the date for the second meeting of creditors until 20 Mar, 2026. The administrators stated that they will call the meeting earlier if possible, but it is also not uncommon for administrators to seek additional extensions from the Court in highly complex insolvencies. Onesteel Manufacturing clearly meets the definition of a highly complex insolvency:
· $1.7bn (book value of assets)
· $1.3bn estimated creditor position: $189m in employee entitlements, $321m of secured creditors (incl $144m claimed by associated entities), and $837m of unsecured creditors (incl $426m claimed by associated entities)
· Management accounts for the 7 months to Jan 2025 showed $669m in sales and a $319m loss before income tax
· The South Australian government announced a support package (Sovereign Steel Package’) on 20 Feb, 2025 with a headline value of $2.4bn: $384m to fund the Whyalla steelworks operations during the administration (presumably ranking ahead of existing secured and unsecured creditors); $100m to support the local community (including $50m in creditor assistance payments, available only to South Australian businesses); and $1.9bn to work with a new owner to invest in upgrades to the steelworks and new infrastructure (jointly with the federal government)
· The Administrators were reportedly surprised at the poor states of affairs at the Whyalla steelworks, stating that it will take “months to stabilise the business”, before preparations can be made for a sale or recapitalisation
· Despite the $384m of pledged South Australian government funding, the Administrators expect to run out of funding in approximately six months
The scope of the job in front of the Administrators is immense, with the only advantage being KordaMentha’s relatively recent experience acting as Administrators of the same plant between Apr 2016 and Aug 2017. We expect that the second meeting of creditors may be required to be further extended beyond Mar 2026.
While it is clear that the South Australian government is determined to support the Whyalla steelworks, it will take a strong bid from a buyer to see any return to unsecured creditors (beyond any compensation they receive from the state government’s Sovereign Steel Package). Negotiation with the state and federal government around the conditions of the $1.9bn of promised investment in the Whyalla steelworks may be the determinant of whether a bidder will pay a price that results in any return to unsecured creditors. Additional uncertainty on this issue may be added if there is a change of federal government in 2025.
What’s next?
Contact ClaimCloud today if you have a creditor claim in an insolvency. You can the end the uncertainty regarding both the financial value of your claim and how long it will be until you receive payment.
Any information provided by ClaimCloud is not intended to constitute any financial or investment advice. Before you consider selling any claim you have to ClaimCloud, you should consider obtaining financial, tax and investment advice that takes into account your financial circumstances, objectives and needs. You should also consider any information from or published by the company you have a creditor claim with or any appointed administrators or liquidators that may impact your creditor claim.
+61 484 637 711 +1 808 465 5608 mitch@clmcld.com