Turnbull government to prop up Arrium Mining and Minerals with new steel projects despite cabinet confusion

By @zacrellin on
Arrium ironworks Whyalla
Molten iron flows out of a blast furnace at the Arrium ironworks in Whyalla, South Australia. Creative Commons/UCL Engineering

The government has pledged to support Arrium Mining and Minerals (ASX:ARI), which entered into voluntary administration on Thursday, by fast-tracking infrastructure projects in South Australia.

The plan involves bringing forward the replacement of around 600 kilometres of railway lines by “a few years,” awarded under a $75 billion no-bid contract announced by Prime Minister Malcolm Turnbull.

Minister for Industry, Innovation and Science Christopher Pyne also implied that the government would award steel contracts to Arrium in its upcoming submarine, frigate, and patrol vessel naval projects.

“Our focus is on ensuring, as far as we can, that the steel-making business continues,” the Prime Minister told Melbourne’s 3AW radio station.

He added that Arrium had entered voluntary administration due to its own “poor decisions”.

“The company has had some severe problems, many of them are unrelated to the difficulties in the steel industry,” he said. “It’s very important that both the administrator and the banks provide confidence to the workers at Whyalla, their families, their suppliers, their customers, and so forth.”

Arrium, which had its shares suspended from trading on the Australian Securities Exchange on Wednesday, currently has debt totalling $2.8 billion.

The following day the company entered voluntary administration.

Arrium office The logo of Australian miner Arrium Ltd is displayed in the deserted reception area of their office located in Sydney, Australia, April 7, 2016.  Reuters/David Gray

“There have been many examples in South Australia alone of businesses that have gone into voluntary administration and emerged as profitable businesses,” Pyne told reporters.

“Out of these ashes of Arrium could be a phoenix which will rise and provide the jobs and growth in the economy that we all want to see for the workers of Arrium.”

On the Nine Network’s Today Show, Pyne continued, commenting that “state and territory governments using federal tax payers’ dollars for construction, and any federal government projects, should use Australian steel.”

Opposition Leader Bill Shorten has meanwhile suggested a government bailout to end Arrium’s woes.

“If there is a way in which governments can help the steel industry stay on its feet, through helping them with technology transfer so that we help upgrade our industry, we should," he told Sky News.

Pyne, though not explicitly ruling out a bailout, downplayed suggestions citing fairness for foreign competition.

The government’s plan to support Arrium though new projects comes despite Trade and Investment Minister Steve Ciobo slamming Labor’s proposal to preference Australian steel in future government contracts.

“Bill Shorten's old protectionist policies sound appealing to some, however, his policy would see Australians lose their jobs in Aussie businesses that export to other Governments and public services,” he told the Australian Financial Review.

He also noted Australia has explicit commitments regarding government procurement in six free trade agreements, including those with the United States, Japan and South Korea.

Pyne had instead said that “there will be a whole body of work coming through the pipeline,” implying further government contracts.

US private equity firms Argand Partners and Cerberus Capital Management are both assessing Arrium for potential buyouts.