Arrium closure would cause construction industry “collapse”

The closure of steelmaker Arrium would cause Australia’s construction industry to collapse within six weeks, its administrator says.

Mark Mentha (left) from KordaMentha with colleague Cassandra Mathews. Photo: AAP/Dean Lewins

Mark Mentha (left) from KordaMentha with colleague Cassandra Mathews. Photo: AAP/Dean Lewins

“The impact would be felt far and wide. Arrium long-form structural steel makes up 70 per cent of Australian steelmaking in infrastructure and construction,” KordaMentha’s Mark Mentha said today.

“If Arrium was to be no more then the Australian construction industry would cease within about six weeks.”

But peak industry body Master Builders South Australia said Mentha’s claim was overblown as the industry had access to other domestic steel providers including BlueScope.

Master Builders CEO Ian Markos said the biggest danger from an Arrium closure would be to jobs and confidence.

“Building and construction won’t collapse or be devastated by the closure of Arrium but it will be hit,” he said.

“The most dangerous outcome of the closure of Arrium would be the forecast loss of almost 4000 jobs and the impact on Whyalla – that would have a massive impact on confidence in what is now the country’s slowest economy.

“But building and construction has been around a long time and is an essential part of South Australia. Businesses will look for alternatives to make sure they deliver, and they will succeed.

“They will look overseas for appropriate steel, they will look to use alternative products – this is an industry already embracing significant change, so this would be another issue to be solved.

“But the closure of Arrium would hit South Australia and its economy hard, and that would hurt the third-largest industry, building and construction. We would rather avoid that shock and look forward to a positive outcome for all.”

KordaMentha said this week that Arrium had already attracted interest from “credible local and international parties”.

“The Arrium Group of companies are expected to attract genuine interest from numerous credible local and international parties, many of whom have already contacted KordaMentha to register their interest,” KordaMentha said in a statement.

The recapitalisation/sale process was expected to begin in late July and be completed by the end of the calendar year.

It is now preparing the necessary materials to allow those groups to conduct their due diligence, including audited financial statements and budgets.

“It is anticipated that the recapitalisation (or) sale process will commence in late July 2016 and be largely completed by the end of 2016,” KordaMentha said in a statement on Monday.

Under the proposal to save the Whyalla operations, the SA Government would invest hundreds of millions of dollars, but only with similar support coming from the federal government.

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Premier Jay Weatherill will meet with the Commonwealth and the Opposition in coming days and believes time is of the essence.

“Every month we wait, we think it increases the risk that the steelworks will close,” Weatherill told reporters on Monday.

“It means that potential purchasers who may be interested today may not be interested tomorrow.”

Treasurer Tom Koutsantonis said today that he wouldn’t fall the type, or amount, of State Government support that would be provided to Arrium.

“There are a number of people who are potentially looking at purchasing this plant,” he told 891 ABC radio.

“Depending on who purchases it depends on what the investment looks like, because if it’s one company they have very different technologies that they’ll want invested in it, or if it’s another company they may want some other alterations made.”

Earlier this week, research was released showing the closure of Arrium’s SA operations would cost the state more than $750 million and about 5000 jobs.

In the Whyalla region nearly 4000 jobs or 40 per cent of the workforce would go and the economy would take a $530-million hit, with job losses to flow into other industries.

“This is about more than metal,” Flinders University’s Industrial Transformation Institute director John Spoehr said.

“In some senses Arrium is too big to be allowed to fall, given the impact in Whyalla and to the state as a whole.”

Arrium went into voluntary administration last month after failed talks with its lenders amid a sustained low in commodity prices.

– with AAP

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