Financial speculation threatens Australia’s Whyalla steelworks
The dangers threatening the jobs and livelihoods of workers around the world resulting from rampant speculation in financial markets have been graphically exposed by the recent collapse of two financial firms, Greensill Capital and Archegos Capital.
Both firms, which were heavily backed by some of the world’s
biggest banks, have collapsed with billions of dollars of debts. Now one of
those banks, Credit Suisse, which is estimated to have taken a hit of at least
a $4.7 billion from the demise of the two firms, is seeking to carry out a
liquidation operation that threatens the jobs of tens of thousands of workers.
Its target is the GFG Alliance of Sanjeev Gupta which owns
companies employing workers in metal manufacturing in Britain, Europe and
Australia. Gupta’s operations were financed to a large extent by Greensill
which in turn was in debt to Credit Suisse.
It is claimed that Gupta’s company owes around $5 billion to
Greensill.
This week, following similar action in UK courts, Citibank,
acting on behalf of Credit Suisse filed an insolvency application against GFG’s
OneSteel Manufacturing, which operates the Whyalla steelworks in South
Australia (SA) and GFG’s Tahmoor Coal in New South Wales in the NSW Supreme
Court. Proceedings are expected to begin on May 6.
The legal position is that Credit Suisse has to prove that
the GFG entities are insolvent.
If the liquidation move were successful, it would trigger
the appointment of an administrator who would then have to determine the future
of the operation. Whyalla has a population of 22,000 with around 1,800 directly
employed in the steelworks. Hundreds of small contractors would also be hit.
In a statement issued by GFG Alliance this week, a spokesman
said the Australian Mining and Primary Steel (MPS), which includes OneSteel and
Tahmoor Coal, had received “multiple offers from large investment funds and is
advanced due diligence.” GFG said the current proposals would “provide enough
cash to repay the creditors of MPS.”
However, any statement emanating from Gupta’s company about
its operations needs to be taken with a very large grain of salt.
Earlier this month the Financial Times (FT) reported that
the Greensill administrator in Britain had been unable to verify invoices
supposedly underpinning loans to Gupta. It said the “disputed invoices raise
questions over other transactions underpinning billions of pounds of loans from
Greensill to Gupta.”
The financing of Gupta’s Liberty Commodities trading firm
operated though a facility in which Liberty exchanged bills for customers in
exchange for cash. Greensill would be paid when the customer had settled the
invoice for the goods it had purchased from Liberty.
According to the FT report, however, several companies had
disputed the veracity of the invoices. One company said it had been approached
about an outstanding invoice but had not traded with Gupta’s company. “We know
them, but a trading relation between us does not exist,” its manager said.
Gupta has also maintained that the debt to Greensill is not
due for another three years and none of his steel plants would close.
“I’m committed to all steel plants, especially to
Australia,” he said in an interview this week. “There is nothing that will
happen to this business under my watch.”
Anyone who takes these comments as good coin should consider
the remarks by Lex Greensill in February just three weeks before his company
collapsed under a mountain of debt.
In a speech to staff, which was recorded and has since been
published, he said: “One of the things that is a really important detail for us
to be aware of is just the incredible strength that we’ve built in our supply
chain finance funds.”
He claimed Greensill had “enormous amounts of liquidity that
are available to us for our assets across the spectrum.” Less than a month
later his operation had gone under.
The threat hanging over the Whyalla steelworks has attracted
the attention of both the South Australian and federal governments. The SA
government said it had canvassed the possibility of establishing an emergency
plan to provide bridging finance.
Federal finance minister Simon Birmingham said the Morrison
government was monitoring the situation closely and was “doing the type of
contingency thinking and planning that would be prudent in these sorts of
circumstances.”
He referred to the previous intervention in 2016 when
Arrium, the previous owner, collapsed with debts of $2 billion and the
government arranged financing before it was taken over the Gupta’s company in
2017. The following year it purchased the Tahmoor metallurgical coal mine from
the global mining giant Glencore.
Birmingham said it was a complicated process. “The way the
legal obligations work on administrators is such that they have to be very
cautious about what extra debts they accrue whilst they’re in the process of
paying out the existing liabilities and trying to find new owners.”
He said the government was working closely with the SA
government and was “being mindful of how we could respond if we need to,
depending on how these legal and financing matters proceed.”
These comments are a warning that government is not going to
simply intervene to “save” the Whyalla steelworks and that it will continue as
before if the liquidation of Gupta’s company goes ahead.
As an article in the Australian noted, while the Whyalla
operation might be profitable at the present it “remains an ageing asset that
lacks the scale to compete on the global market without a substantial and
costly reinvestment program, and Tahmoor is a relatively marginal metallurgical
coal operation, otherwise Glencore would still own it.”
In other words, even if there is some kind of bailout it
will be accompanied by a major “restructuring” which, like all such operations
in the past, will have at its centre deep attacks on the jobs and conditions of
workers.
There are indications that Labor leaders are preparing to
mount a nationalist campaign, tied to the development of war industries to save
the plant.
Echoing the remarks of SA Liberal Treasurer Rob Lucas that
steel was clearly important to the “national government and to the nation,”
local Labor MP Eddie Hughes said: “The plant at Whyalla is an important part of
our sovereign manufacturing capacity and is strategically important.”
Whatever the outcome of the immediate crisis, one thing is
clear: steelworkers cannot allow their fate to be determined by speculative and
often outright criminal activities of the financial oligarchy, nor put it in
the hands of governments which serve their interests.
They must begin to develop their own independent response,
which will necessarily be developed in opposition to the trade unions that have
presided over the destruction of vast sections of industry—the closure of the
car industry being only one of the most significant examples.
They need to begin a discussion on the development of
independent rank-and-file committees to prepare for the struggle immediately
ahead. This requires a socialist program to meet the enormous dangers posed by
the ongoing and deepening crisis of global capitalism out of which the threat
to jobs, wages and working conditions arises.
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