The Whyalla steelworks in South Australia has been revealed to be in catastrophic financial condition, with administrators describing the operation as “running on empty” and in a “dangerous” position when they took control in February 2025. The facility, which supports approximately 4,000 direct and indirect jobs, was hemorrhaging money at an alarming rate while critical infrastructure deteriorated under its former owner’s management.
The revelations emerged during the first creditors’ meeting, where KordaMentha administrators painted a grim picture of neglect and financial mismanagement that left one of Australia’s most strategically important industrial assets teetering on the brink of collapse. The steelworks’ precarious state has prompted unprecedented government intervention, with both state and federal authorities committing billions in support to prevent the facility’s closure and protect thousands of jobs in the regional South Australian community.
Financial Hemorrhaging Reaches Crisis Point
The scale of financial losses at Whyalla Steelworks was staggering, with the facility burning through $1.5 million every single day in the seven months leading up to its administration. OneSteel Manufacturing, the entity operating the steelworks under UK billionaire Sanjeev Gupta’s GFG Alliance, recorded a devastating pre-tax loss of $319.1 million during this period, representing a loss margin of 26.7 percent. When administrators arrived at the facility, they discovered just $8 million remaining in the bank accounts – a sum that Sebastian Hams from KordaMentha described as “just crazy” for a business with an annual turnover exceeding $1 billion.
The financial crisis was compounded by severe working capital constraints and operational disruptions. The steelworks had endured two separate blast furnace shutdowns in 2024 that halted steel production for months, contributing significantly to the mounting losses. These shutdowns, combined with shipping restrictions and working capital problems, created a perfect storm that pushed the operation toward financial collapse.
Operational Neglect and Infrastructure Decay
Beyond the financial crisis, administrators uncovered evidence of systematic neglect across the steelworks’ operations. When KordaMentha took control, they found the facility had only three days’ worth of coking coal – a crucial steelmaking material – remaining in stock. This critical shortage highlighted the dangerous position the operation had reached under its previous management.
The extent of underinvestment was so severe that even basic infrastructure had been allowed to deteriorate. Hams noted that minimal repairs, maintenance, and capital works had been conducted over an extended period, with the neglect extending to seemingly minor but telling details like non-functioning traffic lights leading to the steelworks. The administrators emphasized that operations had been sustained primarily through the “resilience and personal capital of employees and subcontractors” working under extremely challenging circumstances.
Massive Debt Burden Revealed
The creditors’ meeting revealed the full extent of the steelworks’ debt crisis, with total liabilities reaching $1.34 billion as of February 19, 2025. This enormous debt burden was distributed across multiple categories of creditors, creating a complex web of financial obligations. The largest single creditor group consisted of entities associated with GFG Alliance itself, which claimed approximately $569 million in debts.
Employee entitlements represented a significant portion of the debt, with $189.7 million owed to the facility’s 1,500 direct employees in outstanding wages, annual leave, and redundancy payments. The South Australian government owed $40.3 million in unpaid mining royalties and water bills. Trade creditors and suppliers, numbering nearly 2,000 entities, were owed $437 million, while $112 million was tied up in prepaid sales arrangements.
Government Intervention and Support Package
The South Australian government’s decision to force the steelworks into administration on February 19, 2025, came after months of deteriorating conditions and broken promises from GFG Alliance. Premier Peter Malinauskas stated that his government had given GFG “every opportunity to make good on its promises and to bring creditors back into terms,” but the company had failed to deliver.
In response to the crisis, both state and federal governments announced a comprehensive $2.4 billion support package designed to stabilize operations and secure the facility’s future. The South Australian government’s contribution of $650 million was allocated across three key areas: $192 million to stabilize operations during administration, $395 million for modernization to ensure future sustainability, and $63 million as an emergency response package.
Uncertain Future Amid Strategic Importance
Despite the financial chaos, the steelworks remain strategically vital to Australia’s industrial capacity as one of only two major integrated steel operations in the country and the sole domestic manufacturer of rail. The facility’s importance extends beyond its immediate economic impact, with federal involvement reflecting concerns about maintaining Australia’s steel production capability amid broader geopolitical considerations.
The administration process is expected to continue for approximately 12 months as KordaMentha works to stabilize operations and identify potential new owners. While GFG Alliance representatives expressed continued belief in Whyalla’s strategic importance and pledged support for a viable long-term solution, their claims as creditors complicate the restructuring process.