Interview on 5AA Breakfast
SUBJECT: Arrium Steel
Will Goodings: Industry Minister Chris Pyne has mentioned previously, he’s on the line. Minister good morning.
Christopher Pyne: Good morning Will, good morning David.
David Penberthy: Chris you’ve had a lot of conversations with our Prime Minister Malcolm Turnbull about this issue, he was talking to some of the banks over the weekend, do you think that the banks are going to show some mercy and provide Arrium with some time to work through this and to isolate those parts of the company that are still viable and profitable?
Christopher Pyne: Well David, Iwould hope that the banks wouldn’t see it as showing anyone mercy. It’s in their good interests to get their debt repaid and the only way to get that debt repaid is for the business to trade out other difficulties, and the underlying three businesses of Arrium, which is the steelmaking, steel products and iron ore are all fundamentally good businesses. High quality businesses. The iron ore price is recovering, which means iron ore can be profitable. The steel products business continues to be profitable and steelmaking, which has faced the worst international conditions in terms of a steel glut, without this real burden of a $2.5 billion debt and that’s a whole different issue about how they managed to get into such a ridiculous debt without that huge debt the business itself could be quite successful like the one in Port Kembla at Blue Scope Steel is now working profitably.
So what we have to do the administrators, the Federal Government, the State Government, the workers of Whyalla, the business itself, we need to help this business to trade out of its problem, just like Pasminco at Port Pirie did and became Near Star (*) Harris Scarfe (*) did, Belthers did (*). Going into voluntary administration is not the end of the world, and the administrators said yesterday they had no job losses to announce, it was business as usual, turn up to work and let’s work together as a team to turn it around.
David Penberthy: Is there anything specifically that the state and federal governments can do aside from helping with that restructuring process but is there anything in terms of taxation I mean we’re going to be talking to the State Treasurer Tom Koutsantonis after 7, is there anything that he can do maybe learning from what New South Wales did with Blue Scope Steel at Port Kembla, that could make life a bit easier for the company?
Christopher Pyne: Of course and that’s why as the Minister for Industry and I think we’re probably fortunate in lots of respects that right now a South Australian is the Minister for Industry because this is obviously a very important part of the economy for our state but as the Minister for Industry I’ve worked with Malcolm Turnbull to bring forward the purchase of 72,000 tonnes of steel which wasn’t supposed to be done until the 2020s to this year to rebuild the Tarcoola-Adelaide rail lIne. That’s worth over $80 million to the company, that’s a real shot in the arm in terms of work I’m also using the anti-dumping powers that I’ve got to impose duties on companies from overseas that are deemed to be unfairly competing with Australian businesses and injuring our businesses and of course Malcolm got on the phone himself to the banks over the weekend and early this week to ask them to be good citizens and I think they are trying to be good corporate citizens but also they want to get their money back and I can understand that too so we are doing real things and I know that Tom Koutsantonis has said that the South Australian Government will put money on the table.
In New South Wales they gave Blue Scope Steel a payroll tax holiday but I would have thought if a state government was going to do anything like that they would want some collateral on behalf of the South Australian taxpayers. The days of just handing over taxpayers’ dollars in bailouts are well and truly over and they don’t actually help a company they just paper over short term difficulties, they don’t actually change the business for the better but I’m sure that the State Government will be working night and day to work out a way of not only helping the company but also not losing value for South Australian taxpayer’s dollars.
David Penberthy: Minister you’ve commented in the past that the plummeting steel price is obviously a large component of this, others have commented on the nature of how Arrium had been managed. In the absence of some sort of government support either on the state or federal level, what actually gives you cause to be optimistic that they can trade out of this? I’m just not sure what will change.
Christopher Pyne: Well optimistic probably is putting too generous a characterisation of it. I’m hopeful because we’ve done it before. Pasminco did it at Port Pirie in very similar circumstances, my view and the view of the experts in the industry is that the steel glut created by China is coming to an end over the next few years, there are very good reasons to keep a steel construction industry in Australia into the future, we make- we obviously create a lot of iron ore, it would be- it would seem to be rather counter-intuitive not to also make steel and the Government can use levers to help the business and we are using those levers and so I think the foundations of the business are sound. The problem with Arrium is that they have this $2.4 billion debt and you know the banks- I don’t begrudge the banks wanting to get their debt back. I mean they’ve got shareholders too and you can’t just sort of take out a whole lot of debt and then turn around and say oh we’re just not going to pay it back. I mean nobody can do that in their household budgets to the banks and neither can big businesses.
Will Goodings: Industry Minister Chris Pyne, thank you for joining us this morning. More on that story as the morning does progress.