A few years ago a financial scandal rocked the economic stability of one of Australia’s last remaining steel mills at Whyalla. The scandal began when Bundaberg boy, Lex Greensill, established a financial services firm based in London. Greensill capital specialised in “supply chain” finance, effectively providing loans to companies based on future production.
The owner of the Whyalla steel mill, Sanjeev Gupta, was a large customer of Greensill. When Greensill’s business model became unsustainable the future of the steel mill was called also into question.
At the height of the scandal, Mr Gupta seemed to jump from one fantasy to another and began making promises to produce “green” steel. Mr Gupta said that Australia could become “the world’s largest producer of green iron” and that, “A new iron age is back, and this time, not in Europe, not in the ancient world, but right here in Australia. This time it will be the hydrogen iron age.”
Unfortunately, that time has not arrived, and may never arrive. This week, reality caught up and the South Australian Government forced the Whyalla steel mill into administration. But more concerning was Prime Minister Albanese’s decision to double down on failure and offer $2.4 billion (of our money) in another attempt to make green steel work. The PM did not explain how he would succeed where private enterprise has failed.
The PM should tell us what he means by green steel. The United Kingdom has just lost its last steel plant in circumstances similar to our own. Escalating energy prices caused by an obsession with green energy spelled the death knell for steelmaking in the home of the Industrial Revolution.
The UK Government promises to open up a “green” steel plant soon, but this steel mill will be an electric arc furnace. An electric arc melts scrap steel using electricity, which, in theory, can come from green, renewable sources.
But an electric arc furnace cannot make steel from scratch. It can only recycle steel. If we ever do face a greater threat than the Chinese live fire exercises off our coast this week, to make more steel we will be left to commandeer household cutlery, saucepans and old tools in scenes reminiscent of Mao’s Great Leap Forward.
An astounding 10 per cent of the world’s carbon emissions come from steel production. Australia accounts for just 0.3 per cent of this production.
Despite these small emissions, Labor has imposed a carbon tax, or what they call a “safeguard mechanism” on our steel mills, which requires them to reduce their carbon emissions to “net zero” by 2050.
At current carbon prices, of around $35 per tonne, the Whyalla steel mill is facing a $900 million bill to reach net zero by 2050. But all economic modelling of net zero predicts that much higher carbon prices are needed to get there, normally more than $200 per tonne.
At those prices, the carbon tax bill to make Whyalla net zero will be much more than the $2.4 billion of taxpayer’s money that Anthony Albanese has promised. Which raises the point, why don’t we save $2.4 billion and just remove the carbon tax from Whyalla?
The whole sad saga of Whyalla demonstrates that it is not easy being green. This is not the muppets, even if it seems we are run by some.
Steel is needed for almost everything we do including building, driving, mining and even growing food. We should stop the speculative gambles and just concentrate on producing low-cost steel so we can have a strong manufacturing industry to protect Australia’s future.
