10 Dec

'Sanjeev Gupta eyes mega steel plant after $600m upgrade' Simon Evans, AFR

British billionaire Sanjeev Gupta's GFG Alliance will invest $600 million on a modernisation of its Whyalla steelworks and has also announced an ambitious feasibility study into potentially building a much larger new generation steelmaking plant nearby which would be more than five times the size.

Mr Gupta said in Whyalla on Monday that the upgrade, which includes a new mill focusing on rail and structural steel products, would take between two to four years. It would lift the annual output of the existing steelworks to 1.8 million tonnes annually. The new mill would be constructed by Italian company, Danieli.

Mr Gupta said it would still be a "fairly modest" plant by world standards but the hi-tech mill would be a state-of-the-art operation enabling an expansion into new product ranges.

Sanjeev Gupta's GFG Alliance is eyeing a potential new 10 million tonnes a year steel plant near Whyalla but will first spend $600m modernising the existing plant. Nic Walker

But a much more ambitious project is on the cards too, with GFG joining forces with China Metallurgical Group Corporation to investigate a potential 10 million tonne-a-year new generation steelmaking plant. It would be powered by a 400 megawatt co-generation power plant. A feasibility study into the bigger project will get underway soon.

Comeback city

Prime Minister Scott Morrison was among the guests at the announcement, as he lauded the revival of the regional town located 380km north of Adelaide, on the coast of the Spencer Gulf.

"This is the comeback city of Australia," Mr Morrison said.

He also praised Mr Gupta for having the vision and deep pockets to take on the turnaround of the steelworks after its parent company Arrium slid into administration in 2016.

"He's defied the critics and he's backed himself," Mr Morrison said. "He's got the toolkit to do it".

Federal Opposition Leader Bill Shorten was also in attendance, and said the projects had bipartisan support. Mr Shorten said it was ironic that it was an outsider like Mr Gupta who had come in and seen a vision for the future of steelmaking in Australia. He said a future Labor government would also toughen anti-dumping laws in the steel industry. "We will not be a soft touch".

The upgrade of the Whyalla steelworks would include a new mill focusing on rail and structural steel products, and would take between two to four years. David Mariuz

Mr Shorten wants Australia to strengthen its industrial manufacturing base, and the GFG plans were an example of that.

"We dig it up here and we manufacture it here and we keep the profits and jobs at home where they belong," Mr Shorten said.

GFG bought out of Arrium

GFG acquired the former Arrium operations in mid-2017 from administrators KordaMentha for about $700 million after a marathon 17-month administration. "I'm quite used to looking for diamonds in the rough," Mr Gupta said on Monday.

Mr Gupta said he was always puzzled about why a country like Australia with such abundant natural resources, and an exporter of 850 million tonnes of iron ore annually, hadn't become an industrial powerhouse.

The Whyalla steelworks and its associated mine are the highest profile operations among the former Arrium assets, but the most profitable parts are the electric arc furnaces and bar and rolling mills in the eastern states.

The buyout of Arrium effectively saved the town of 22,000, which is dependent on the steelworks with major potential political fallout if it were to be closed.The Gupta family is also closely examining partial stockmarket listings in both the United States and Australia but the family intends keeping a majority stake and staying in control of the operations.

GFG listing plans

GFG on December 3 accelerated its expansion plans in the United States with the $US320 million ($435 million) purchase of Keystone Consolidated Industries, which operates an Illinois steel furnace and associated industrial wire and mesh businesses ahead of a potential partial stockmarket float in 2019.

The Keystone acquisition is partly funded through a loan from funds managed by BlackRock Financial Management, the first time the two have undertaken a financial transaction together in a move that will bolster GFG's financial credibility as it examines partial public listings amid question marks raised by some outsiders about the fast pace of acquisitions by GFG and the financing of them.

GFG's United States business Liberty Steel USA will acquire Keystone, which owns the Keystone Steel and Wire firm that operates a 1.1 million-tonne electric arc furnace to make wire rod. The Keystone operations also included the RedBrand agricultural fence products, a steel bar mill and three welded wire reinforcement mesh facilities. It will be folded in with an existing steel plant owned by Liberty since late 2017 in Georgetown, South Carolina to form a business with enough clout to make it a serious candidate for a public listing.

Mr Gupta, who presides over a $17 billion firm which was initially started by his father, wants to keep expanding in the US and is aiming to have overall capacity of 5 million tonnes by 2020 in the US.

Plans are also underway for a smaller-sized listing in Australia of the non-Whyalla steelworks parts of the former Arrium business he acquired last year.

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