Gupta execs in talks with Japanese investors on Whyalla expansion

“We need to fund these very expensive projects and, obviously, we need support in terms of generating the capital.”

He said talks with key players in Japan, where Prime Minister Fumio Kishida’s government is offering subsidies and incentives for companies investing in green energy, were “very well advanced”.

Mr Gupta bought the Whyalla steelworks in South Australia in 2017 after previous owner Arrium went into administration, but Mr Gupta’s own GFG Alliance global business faced difficulties as it refinanced about $5 billion in funding earlier sourced from the Greensill Capital before its collapse.

GFG said in August that refinancing had now been completed. Liberty Primary Metals, which also owns the Tahmoor coal mine south-west of Sydney and an iron ore mine in the Middleback Ranges near Whyalla, posted a net profit of $434 million in the 12 months ended June 30, 2022, compared with $332 million in the year earlier, as commodity prices soared.

When asked if Whyalla steelworks, which employs 1500 people, was profitable Mr Victor said: “Steel plants across the globe, currently with markets where they are, are struggling. The benefit we have is the Whyalla steelworks sits inside a business which includes the iron ore mining. Typically, when steel goes down iron ore goes up. ”

His global entity, GFG Alliance, will spend as much as $500 million on a new electric arc furnace at the Whyalla steelworks in South Australia as it phases out coal-based steel making, in use since the mid-1960s. GFG aims to lift magnetite ore mining from 2.5 million tonnes a year to 15 million tonnes a year by 2026.

Mr Victor said while projects were in place to meet those targets, the “sky is the limit” after that if they can secure the funding to tap into the resource of 4 billion tonnes of magnetite.

“Obviously to do that we need capital, we need partners, we need people,” he said.

Electric arc furnaces make steel from melted scrap metal instead of iron ore. The Whyalla steelworks has used coking coal ovens and a blast furnace since its inception in 1965, when it was owned by BHP. Mr Gupta’s green steel ambitions are being supported by the South Australian government’s funding for a $593 million green hydrogen plant in the Whyalla precinct.

Mr Victor said hydrogen was critical to the steel industry’s move to carbon neutrality, but the transport of hydrogen from Australia to other countries, including Japan, would be challenging in the near term. This is why Liberty was focused on using the hydrogen it produced in Australia to produce green steel before shipping it to Japan. “That will simplify the supply chain of hydrogen.”

He said customers would be willing to pay a premium for steel produced without using coal if they were in regions with regulations which offered tax breaks and other incentives supporting decarbonisation. He said as a first mover, steel from Whyalla would be more expensive initially.

Mr Victor was speaking at a hydrogen industry conference in Tokyo, Japan has pledged to spend $US100 billion ($157 billion) on hydrogen in the next 15 years to boost supply. However, critics say the development of genuine green hydrogen projects has been slow and there is a lot of hype around the resource.

“Hydrogen technology is not maure yet. We need progress … the path to 2050 relies on technology that is not yet ready for widespread uptake. We need more urgent solutions for industries that are hard to decarbonise such as heavy industry,” Ko Sakata, a senior research fellow at Japan’s Institute of Applied Energy, told the conference.

Energy ministers from three Australian states – Queensland, Victoria and Western Australia – used the conference to pitch themselves as the country’s future top hubs for hydrogen production. They gave video presentations rather than attending in person.

Victorian Energy Minister Lily D’Ambrosio last week challenged Japanese investors to prove they can capture the carbon they plan to liberate from La Trobe Valley coal when making hydrogen.