A first meeting of Arrium’s creditors is being held today, with the iron and steel business’s administrator saying the future hinges on the Whyalla’s steelworks.

Mark Mentha of insolvency firm KordaMentha said most of the company, which owes around $4 billion, is in good shape, but was exposed to the survival of Whyalla. Arrium, which entered voluntary administration this month, has said it was undertaking studies on the effects of mothballing the loss-making plant.

Turning the steel factory around was vital to both Arrium and the community, Mentha told the ABC.

“It’s the front end of the business where we dig the ore out of the ground and feed that into the mill starts the whole steel process,” he told AM.

“In Whyalla, in particular, many of the businesses in that town are in some way connected to the steel works. So it’s a business that is very much interwoven into the fabric of that community and the state of South Australia.

The creditors meeting is being held in Sydney and streamed to workers in SA.

Meanwhile, the Australian Workers Union has called on the federal government to consider co-investment in the steel facility, with modernising to supply the upcoming offshore patrol vessels a “golden opportunity” for Arrium.

“In the case that Australian steelmaking operations, like the Whyalla steelworks, would require an upgrade to manufacture the grade of steel required, the Government should look to enter into a co-investment arrangement,” AWU national secretary Scott McDine told The Advertiser.

Steel and iron ore business Arrium announced this morning that it has appointed Grant Thornton as administrators.

“After considering the available alternatives, in the current circumstances it has become clear to the board of Arrium that it has, unfortunately, been left with no option than to place the relevant companies into voluntary administration in order to protect the interests of stakeholders,” it said in a statement to the ASX.

The ABC reports that Arrium owes its bankers $2.8 billion, trade creditors $1 billion and employees $500 million in entitlements.

Arrium, which split from BHP Billiton in 2000 as OneSteel, employs 7,000 in Australia, and over 1,000 at its Whyalla steelworks.

The fate of the steelworks has been in question for some time. Arrium announced in February that it was considering putting the plant and the company’s iron ore operations in care and maintenance.

Speculation about the company’s future intensified earlier this week when Arrium’s lending syndicate rejected a recapitalisation plan from vulture fund GSO Capital. This would’ve seen lenders lose 50 cents in the dollar.

It borrowed heavily to expand, buying up iron ore mines near the ore market’s peak

The management has been blamed for the company’s situation, including by industry minister Christopher Pyne.

“If there is anybody that needs to look at themselves, it’s the Arrium management, not the banks,” Business Spectator reports him as saying.

“Arrium has a $2bn debt. That is a problem for Arrium, incurred by Arrium management. It is no fault of the workers of Whyalla and it’s no fault of the state or commonwealth governments.”

The closure of Arrium’s loss-making Whyalla steelworks would have a greater impact on its community than the closure of Holden’s Elizabeth factory next year would, according to Professor John Spoehr.

The academic from Flinders University’s Business School told the ABC that the federal and state governments should formulate an assistance package for the company. 1,100 are employed at the steelworks and a tenth of the workforce in Whyalla – population 22,000 – work at Arrium.

“It’s important that we explore every possible option for keeping the plant in operation in the years to come,” Professor Spoehr told the ABC.

An estimated 4,000 jobs would be at risk due to the factory’s mothballing, which is being examined by the company. Studies on this are due to finish in April, as announced when the company released its half-year profit results last month. A steelworks shutdown would see many in the community relocate.

“It would have a devastating impact on the local economy, because it’s such a significant employer, and in some ways it would have a more detrimental impact than the closure of Holden is going to have in Adelaide, because it represents a much larger proportion of total employers in the area,” said Professor Spoehr.

Global steel output fell last year, the first time this has happened since 2009, according to figures from the World Steel Association released this week.

The report from the WSA states production was down in every region besides Oceania.

The USA’s production was down 10.5 per cent to 78.9 million tonnes, Japan down 5 per cent to 105 million tonnes, and the EU down 1.8 per cent to 166.2 million tonnes.

A standout was India, which managed to up its production 2.6 per cent to 89.6 million tonnes.

Reuters notes that world leader China, which accounts for nearly half of global output of crude steel, cut its annual output for the first time in three decades. This fell 2.3 per cent to 803.8 million million tonnes.

“Many mills including (in) China are pulling production offline in an attempt to support prices — and it is working,” Chris Houlden, research manager at consultancy CRU, told Reuters.

“However, any reversal of production cutbacks in response to price rises will again place steel producers’ margins under extreme pressure.”

In April last year, a leading Australian economist (and former ambassador to China) Ross Garnaut tipped China’s steelmaking output to fall 25 per cent to 2030, reaching around 600 million tonnes.

To see the crude steel output data for 2015 from the WSA, click here.

The owners of the Whyalla Steelworks in South Australia have announced that they will be cutting cost in the aim to save $100 million as they try and improve the viability of the steelworks.

The cuts will affect areas such as, souring and procurement, labour and overheads, site rationalisations, corporate cost and production conversion costs.

Arrium, the owner of the Whyalla Steelworks in South Australia, has announced it has started a two year of cost cutting aiming to save $100 million to improve the viability of steelworks.

Overcapacity of steel meant it needed to improve its cost base to maintain the competitiveness of the Whyalla Steelworks.

Arrium is yet to comment on the number of jobs that will be lost as a result of the cost cutting, saying that they will consult employees, unions, suppliers and the Government.

BHP Billiton’s simplification process continues, with the miner set to shed over 100 jobs from its head office in Melbourne.

BHP said the cuts would occur over the coming years, and will include moving the company’s treasury division to London.

Staff reductions at Melbourne mean BHP’s Singapore office will employee more people.

Under rules handed down in 2001 when BHP merged with Billiton, the company must keep its HQ in Melbourne, and the CEO and CFO and required to spend the majority of their time there.

“The company is in full compliance with its FIRB commitments,” a spokesman said

BHP said it would continue to consult with tis employees about the changes.

BHP has placed a renewed and aggressive emphasis on productivity and efficiency gains across its entire portfolio in an effort to simplify mining operations.

Last year the miner cut a number of jobs in iron ore, coal and nickel in a bid to bring down costs and focus on productivity.

The United States manufacturing sector appears to have slowed to only slight rate of growth, according to the Federal Reserve’s figures.
The Wall Street Journal reports that overall industrial production – around three quarters of which is made up by manufacturing – grew by 0.2 per cent in January.
This was not enough to offset a decline of 0.3 per cent in December.
Reuters noted that the overall 0.2 per cent increase in industrials – including manufacturing, utilities and mining – was “entirely” due to an uptick in utilities.
The results “underscore what we have seen in the past couple of months from the ISM factory index: the manufacturing sector is cooling off after an extraordinarily robust 2014,” offered chief economist for Amherst Pierpont Securities Stephen Stanley in a note to clients.
Capacity utilisation was steady for January at 79.4 per cent, just below the historical average for the years 1972 to 2014.
The result follows similar indications from the ISM survey released at the beginning of the month, which registered the slowest manufacturing performance in a year, influenced by the decline in commodity prices.