A FUTURE FOR STEEL MAKING IN AUSTRALIA

By Warwick Neilly and Don Sutherland

Introduction

If anyone wondered about the actual abilities  and vision of highly paid private sector executives in Australia one need look no further than the grand scale debacle that Arrium steel has become. Arrium’s operations are essential  to Australia’s manufacturing, jobs in regional Australia, and national security, but you wouldn’t know that from the performance of its owners and managers.

If Arrium’s Australian operations were to be completely shut down, it would mean 3000 direct jobs lost at Whyalla, devastating for the company dependent town, plus over 2000 more redundancies principally in NSW and Queensland company operations. It is not hard to see who finally pays when the global enterprise fantasies of highly paid executives come undone by the real owners of the 21c global economy.

And it would also mean increased dependency on imported steel, sometimes of doubtful quality.

Future development plans for the steel industry must include specific and effective arrangements for workers and their local communtities to help guide the implementation of the plans, including but not just inside the workplaces.

The corporate culture of selfishness and incomeptence

Arrium still describes itself on its website “proudly” as having a “global mining and materials operations spanning Australia, Asia and the Americas” (www.arrium.com).

That pride, if one could ever describe a dysfunctional corporate as having such an attribute, was destroyed on the Australian stock market on 7 April when Arrium went into a trading halt and then forced administration to block USA based vulture private equity investor Blackstone taking control of Arrium.  Blackstone were offering to pay 55 cents for each $1 debt held by Australia’s big four banks.

To stop the prospect of Blackstone taking control, the banks forced the move into administration to protect their investments, effectively executing  the existing Arrium board, threatening the livelihoods of a committed workforce and, may have permanently trashed many small and even big shareholders’ wealth.

Blackstone’s attempt to take control of Arrium followed attempts by two other vulture capital funds – Argand Partners or Cerberus Capital Management- to bid for Arrium’s USA based Moly-Cop mining consumable businesses.  These two vulture investors had offered around $1.0 Billion compared to Arrium board’s price estimate of $1.5 Billion which would have gone towards reducing debt held by the four Australian banks.

The Administrator is now expressing confidence that Arrium can survive following talks between the banks and the Australian Workers Union, the union covering workers at Arrium. The same banks funded Arrium’s ill-fated expansion in iron mining and export in the past which has created the current crisis.

The workers’ response

The AWU, along with the AMWU and CEPU-ETU, is doing its utmost to retain steel manufacturing in Australia and its crucial they be extended community and progressive activists support. Workers employed with Arrium- also known as One Steel across the nation- accepted a reduction in wages in March.  Similarly, BlueScope workers accepted a freeze on wages and job losses last year.

The wage cuts followed 900 Arrium job losses in the past 12 months.

There is high risk in thinking that accepting wage cuts and freezes to can save enterprises like Arrium and BlueScope. Clearly, the crisis in the industry has not been driven by what workers are paid. Neverthless, when workers make  such decisions they have to be respected. The campaign is not over and full success will be measured with a return to previous wage levels and a lifting of a freeze at BlueScope.

The AWU and associated unions have put pressure on both LNP and Labor Party governments and oppositions to be proactive in the current crisis which was precipitated by BlueScope last year with its threat to close steel production in Port Kembla.

Alternatives and trade policy

South Australia’s Labor Treasurer Tom Koutsantonis has appealed to the banks to remember what federal Labor did for them with account guarantees during the GFC.  This followed what was a mild market regulation intervention of imposing a new quality assurance regime on steel used in SA to prevent the importation of low quality steel.  The new regulatory regime has been backed with SA government funding for fabricators and manufacturers to establish quality control systems and they have established an Advocate for the sector.

When PM Turnbull was in SA weeks before Arrium was forced in to administration he promised to buy $80 million of rail line steel from Arrium to replace up to 600 kilometres of ageing railway lines in South Australia under a no-bid contract that would be awarded by at the federal rail agency- Australian Rail Track Corporation.

Bill Shorten then called for a national procurement program for all three tiers of government to save Arrium, after the company went into administration. Minister Pyne came close to this on Q&A on 4 April but then dodged mandated procurement because of competitive pricing issues and his government’s obsession with a free trade stance. Pyne and Trade Minister Ciobo have since become more strident in their defence of free trade and have rejected a national procurement plan. Ciobo’s elevation to Trade Minister followed the resignation of Andrew Robb the most pro-active free trade politician in Australia’s history.

The LNP have bad form when it comes to steel and untrammelled free trade.

AFTINET (the Australian progressive fair trade and investment advocacy organisation) has pointed out (11 April 2016) that when the USA Australia agreement was negotiated under Howard’s rule in 2004, the USA excluded steel after Australia sought to include it. The more recent China Australia agreement saw China do the same to protect national procurement rights.

Our major trading partners can have national procurement in free trade but Australia can’t according to Minister Ciobo!

Even BlueScope’s submission to the senate Inquiry called for “fair trade” measures within free trade agreements.

The LNP are bending over backwards to set up the destruction of steel manufacturing in Australia. Just as they did with the auto industry.

In the Arrium crisis, the Baird NSW government announced imported rail line steel from Spain would be used for Sydney’s North West Metro project being built by an overseas private consortium.

In effect, they told the Whyalla community they could close down.

Baird’s announcement followed the NSW Greens tabling a very reasonable state projects procurement bill in the Legislative Council in March this year that had strong Illawarra unions’ and community support.

The Illawarra Greens made a comprehensive submission to the current Senate Inquiry prior to the committee’s public hearing in the Illawarra on 1 April this year.

Their proposal called for: a mandated 100% structural steel procurement for all projects across all three tiers of government; more effective anti-dumping measures; a stringent quality assurance regime for steel used in all building and construction works-public and private- in Australia  outlined in the Australian Steel Institute’s submission to the Inquiry; and investment, including public sector co-investment, for a transition to technologies in manufacturing; and the use of renewable power supplies to reduce greenhouse gas emissions.

The South Coast Labor Council’s Secretary Arthur Rorris believes that BlueScope hasn’t committed to the latter as they have a board running a global manufacturing enterprise which does not want to commit to maintaining production in Australia.

The Clean Energy Finance Corporation (CEFC) has put in place models of public co-investment that work and can guarantee greenhouse gas reduction and long-term enterprise sustainability and regional community jobs.

The same can be done with steel production by both BlueScope and Arrium. This approach to public sector investment in Australia’s sustainable economic future is what has driven the Abbott and Turnbull government’s ideological drive to shut down the CEFC.

Making the future of steel more democratic

The next phase of determining the future of steel making in Australia is, in the very short term, focussed on Arrium.

The Illawarra Greens have submitted a very reasonable, achievable plan.

There are, though, some additional things that could happen now.

They are:

-An immediate federal government decision, or commitment from Labor if they win government at the coming federal elections, to block any overseas takeover of either company as part of their input to the current Senate Inquiry.

-Insist that the three tiers of government procurement plan include a return to pre-existing wages and conditions at Arrium, an end to the BlueScope wage freeze and re-employment of workers by both companies.

-The unions and workers pursuing the right to establish councils in all Arrium and BlueScope workplaces across Australia to assess all plans that may come forward in consultation with their local communities, express views that are listened and positively responded to by all parties, and to monitor all future co-investments.

-A discussion of full public ownership if co-investment, including on greenhouse gas reduction, is not accepted and either of the companies threaten closure of production in Australia.

These are all reasonable proposals but no be doubt will be met with strident opposition from the anti-worker, anti-union, climate change denying, free trade, pro-private sector LNP.

Authors:

Warwick Neilley

Don Sutherland

13 April 2016