A forensic investigation into Arrium’s collapse is underway, reconstructing events focussing on the six months prior to the company’s April 7 administration.
Fairfax reports that the two months following the voluntary administration of the iron ore and steel company – which owes around $4 billion – had been around stabilising operations before a sale or recapitalisation.
Administrators KordaMentha said recently that the sale process is expected to begin in late-July and be largely finished by the end of the year.
“The administrators are gathering documentation and focusing on the six months leading up to the appointment of administrators,” a KordMentha spokesperson told Fairfax.
Deutsche Bank has been appointed to sell the profitable Moly-Cop grinding media and steel wire business, which has been estimated as being worth $1.5 to $2 billion.
The future of the loss-making Whyalla steelworks isn’t known. Mark Mentha of KordaMentha has said the steelworks have been “under-invested in for some period of time”.
The entire administration has been called the most complex in Australia’s history, and involves 94 companies.
Looking in the past to assist with an asset sell off will destroy another major Australian business that we cannot afford to lose. Concentrating on the assets at hand and developing a new Arrium business viability plan to secure Arrium as an ongoing Australian entity is now what needs to be done.
It should be also recognised that the Arrium Whyalla operation has actually done much in the last 5 years with energy efficiencies, desalination, wharf loading facilities and rationalising the workforce. Arrium is now a lean, vertically integrated, operation that can compete internationally.
If Arrium can get over the immediate debt hurdle, remain integrated and receive Government and industry support, Arrium will be a real international industrial force to be reckoned with.
Now with final vertically integrated mines and a lower $AUD, Arrium is in a position to compete against US steel on both price and quality. If we lose structural steel manufacturing and Arrium’s vertically integrated industries such as rail, rail wheels and grinding media for our mining industries are sold off or left exposed and become and unviable business entity, we are in serious trouble as a nation.
The business viability plan that the administrator really needs to work on requires Government to act as other nations have done:
• Australian Government to consider complimentary legislation to the US Jones Act. Australia has no equivalent of the Merchant Marine Act of 1920, known as the Jones Act, which requires all vessels used for defence and domestic trade to be American-made with American steel and American-crewed.
• The US FTA needs to be enforced and fair trade options need to be negotiated with the US Government to allow Australian steel and aluminium products to access the US market.
• The ADC to impose additional “countervailing duties” to offset Chinese government subsidies including low-interest loans, cheap land rent, cut-price electricity and tax exemptions. Australia needs to reassess the decade-long recognition of China as a “market economy”.
• Benchmarking of Australian steel to US pricing will allow all Australian fabricators to fairly compete on tenders utilising green stock pricing on Whyalla produced steel – (capital investment will remain in local produced product) by initiating a similar to WTO surrogate country approach using US pricing to arrive at “fair value”.
• Adopt local procurement measures as per the US Government 2010 Buy American made campaign, especially across all State infrastructure projects and introduce a more diversified / complex tax base to improve employment opportunities for Australian based companies, reduce offshore tax lose and re-balance the economy to create a vibrant Australian manufacturing culture with greater career opportunities and economic sustainability for generations going forward.