By David Uren*
Australia has been losing so many sovereign manufacturing capabilities over the past two decades that it is hard to know where to draw the line. The Whyalla steel mill may mark the spot.
The Australian and South Australian governments certainly seem to think so. Prime Minister Anthony Albanese on Thursday said the two governments would spend an immediate $484 million, mainly to keep the works going during the period of administration that the South Australian government initiated on Wednesday (19 February 2025). (The Australian Strategic Policy Institute. The Strategist.)
The machinery of the Whyalla steel works is antique, having started production in 1965, and it supplies, in a good year, only about 15 percent of Australia’s steel needs.
However, it is the only domestic source of long steel products, such as structural steel and rail. The steel billet it sends to Newcastle for rolling is the only domestic source of reinforcement bar for the construction industry.
Bluescope’s Port Kembla steelworks, by contrast, is focussed on coil, which is turned into flat products such as roofing.
Whyalla’s steel is relatively free from impurities, meaning it has strategic importance for military manufacturing, including for the Benalla munitions plant. Electric arc furnaces cannot match the quality of blast furnace steel. In addition to Whyalla, Sanjeev Gupta’s GFG Alliance controls arc-furnace steel operations at Laverton in Melbourne and Rooty Hill in Sydney.
The structural steel and reinforcement bar coming from Whyalla could all be imported—indeed last year a record 3.1 million tonnes of steel product was imported as distributors sought to manage their insecurity over Whyalla’s steel supplies. There is no alternative global producer of Whyalla’s rails, which are made to unique Australian standards.
There was no federal government intervention last year when chemical company Qenos shut down the last two petrochemical plants in Australia capable of making polyethylene, the essential ingredient for most plastic products. The plants are to be demolished to make way for industrial property development.
Australia’s only stainless steel plant was shut in 1996, the only tinplate plant in 2006 and the last aluminium rolling mills in 2014.
The motor industry, which was the most advanced integrated machinery manufacturing operation in the country, was shut down between 2015 and 2017.
Market forces have been allowed to bring the destruction of domestic manufacturing capability, with the standout exception being the Morrison government’s 2022 decision to extend subsidies to ensure the survival of the last two oil refineries, Viva in Geelong and Ampol’s refinery at Lytton in Brisbane. This followed the closure of Exxon’s Melbourne refinery and BP’s Kwinana refinery the previous year.
There was a strategic argument that Australia needed to preserve a domestic capability to make diesel fuel, even though the remaining refineries are only a fraction the size and efficiency of the plants in Singapore, South Korea and China that supply most of Australia’s needs more cheaply.
The government’s Future Made in Australia strategy for reviving Australian manufacturing has two streams: one devoted to sectors that will contribute to lowering carbon emissions, and an ‘economic security and resilience’ stream aimed at supporting sectors vulnerable to supply disruptions and that require support to unlock sufficient private investment.
The second stream looks tailor-made for Whyalla. While the federal government is presenting its rescue as a green-steel initiative, what is most urgently required is a reline of its existing coal-fired blast furnace. The technology for hydrogen-fuelled blast furnaces, which could make green steel, is not yet proven and would not be viable for Whyalla.
While government rescue finance is welcome, the plant needs a corporate saviour. Buying the Whyalla works is probably not what Bluescope Steel has in mind for strategic diversification, although a national purchase would have political appeal. South Korea’s Posco was interested in Whyalla when the plant’s former owner got into financial difficulties eight years ago. The government may be able to use the strength of its relationship with Japan to entice an operator such as Nippon Steel into the fray.
What is disturbing is that the decision to provide support is reactive and ad hoc, as was the case with the decision to save the last two oil refineries. There is no strategy spelling out what manufacturing capabilities Australia possesses that must be preserved in the interests of sovereignty.
The Swiss resources group Glencore said late last year it would shut its Mount Isa copper mine but that its copper smelter in the town and its Townsville copper refinery would keep going with third party supplies. Should those operations become marginal, would an ability to produce refined copper be deemed strategic?
Diesel, steel and cement are arguably the most basic industrial inputs to national security, for which a domestic production capacity should be retained.
There is an interesting story about cement. In the early days of the Covid-19 pandemic, many Chinese businesses faced mandatory shutdowns and China’s exports plunged. Australian quarries providing the stones to turn cement into concrete soon found they could not get the cutting tools they relied upon, raising concerns about their continued ability to operate. There were other manufacturers in Germany, but there was also a rush on their supplies. Chinese cutting products returned, but the episode showed that even concrete is vulnerable to trade disruption.
Whatever the arguments for retaining a domestic ability to make steel, dreams of self-sufficiency or autarky are not realistic.
