Local steel is the backbone for Australia’s rail, road and construction projects. The ability to make our own steel is also critical for major projects in defence.
Australian steel production is concentrated in a handful of major suppliers. Arrium is Australia’s only local producer of the long structural steel products needed for major infrastructure and construction projects. The company is also a major contributor to the South Australian economy and its steelworks at Whyalla is the beating heart of that community, with about one in six of the town’s workers being employed there.
If Australia is to be a country that can make things at home, we cannot lose our ability to produce local steel. Labor believes the industry – and major local suppliers like Arrium – can have a strong future if we act to put the right investments and policies in place.
What’s the problem?
Australia’s local steel industry is now under significant pressure. Low international prices, high-cost raw materials, the dumping of products from overseas and weak domestic demand are all challenging its long-term viability.
Australia’s steel industry is not alone in facing these challenges. Global steel production has doubled since the early 2000s, and the OECD estimates this reached 2.2 billion metric tonnes in 2014. Global demand has been growing at a much slower rate, resulting in oversupply of almost 600 million metric tonnes in that year alone. 
The sustainability of this industry matters because locally-produced steel is a critical input for Australia’s infrastructure, advanced manufacturing industries and other sectors. Whether it is contributing to the local build of major defence projects like the Future Submarines and Future Frigates, supporting the development of big renewable energy projects, or reinforcing domestic construction, access to a high quality, competitive local steel supply underpins many of Australia’s growing industries.
Labor believes Australia must maintain our strategically-significant steel industry and protect the local jobs of those who work within it. That is why we will partner with the South Australian Government to make targeted investments at Arrium which strengthen local steel production at Whyalla and across the state.
A Shorten Labor Government will provide $100 million in grants and financing as part of a joint Steel Reserve with an additional $50 million contribution from the South Australian Government.
The Steel Reserve will support Arrium in making targeted investments that secure its long-term future. Federal Labor will provide up to 50 per cent of our contribution in direct grants, with the remaining 50 per cent to be provided as financing or loan guarantees through the Export Finance and Insurance Corporation (EFIC).
Future investments at Arrium may also be eligible for financing through the Clean Energy Finance Corporation.
Our contribution to the Steel Reserve is provided on the condition that funds are directed to investments which:
- Promote the long-term sustainability of Arrium’s steel business, including through increasing its ability to contribute to major Australian infrastructure projects.
- Secure Arrium’s operations in Australia, and particularly Whyalla.
- Assist the business in permanent cost reductions which do not cost jobs, particularly through increased energy efficiency and productivity gains.
Financing will be made available from the Steel Reserve for specific investment projects that have an agreed business case approved by both the Commonwealth and South Australian Governments. Importantly, the Steel Reserve may not be used to pay down Arrium’s debts or meet regular operating costs.
Federal Labor’s offer of funding will be withdrawn in the event that a future buyer of Arrium does not maintain local steel production and jobs in South Australia.
The Steel Reserve will help modernise Arrium to improve the competitiveness of Australia’s structural steel production.
National Rail Strategy
A Shorten Labor Government will also better coordinate rail procurement in Australia at a national level, to reduce inefficiencies and support a consistent pipeline of work for manufacturers and steel producers, like Arrium and BlueScope.
Currently, there is a pipeline of over $46 billion already committed or planned for rail-based public transport projects throughout the country, including light rail and rolling stock. But because Australia’s state-based public transport sector is fragmented, this leads to a ‘boom and bust’ business cycle with steel producers seeing very high volume years sometimes followed by years where no orders for rail or rolling stock are placed at all.
A Shorten Labor Government will work with the States, industry and unions to implement a National Passenger Rail Procurement Strategy to generate significant improvements in passenger rail and rolling stock manufacturing through coordinated procurement and the harmonisation of standards.
Just as we need a continuous build and procurement strategy to maintain our local shipbuilding capacity, we need a national strategy to secure the pipeline of work for Australia’s strategically-significant local steel industry.
Infrastructure and defence projects
Federal Labor is committed to the development of significant national infrastructure projects in rail such as AdeLINK, Perth Metronet, the duplication of the Port Botany Freight Rail, new rail at Badgerys Creek, Cross River Rail and Melbourne Metro. Labor has also proposed a $10 billion infrastructure financing facility to support the development of a steady and reliable pipeline of public infrastructure works.
Where possible within capability requirements, we will also maximise the use of Australian steel for defence projects now in the pipeline.
Locally-produced steel is the backbone of Australia and the industry supports tens of thousands of local jobs. Labor will not leave the community of Whyalla or steel workers across Australia to battle on their own against the global economic forces now putting this industry under pressure.
Labor stands for local jobs – creating them, protecting them and ensuring they are good quality ones. That’s why, in Government, we put in place the Australian Jobs Act and the $1 billion Plan for Australian Jobs.
This included stronger Australian Industry Participation measures to help more Australian businesses win work on private and public projects. Because of Labor’s strong investment in jobs, Australia weathered the Global Financial Crisis without unemployment ever going over 6 per cent.
From Opposition, Labor has already announced a six-point Plan for Australian Metals Manufacturing and Jobs that will boost not only local steel production, but other major industries like aluminium as well.
As part of this plan we will:
- Ensure Australian standards are upheld in Federal Government funded projects.
- Maximise the use of locally-produced steel in Federal Government funded projects.
- Halve the thresholds for projects required to have an Australian Industry Participation Plan, to $250 million for private projects and $10 million for public ones.
- Double funding for the Australian Industry Participation Authority.
- Ensure Australia’s anti-dumping system has the right powers and penalties in place.
- Create a national Steel Supplier Advocate.
We will start delivering our Plan for Australian Metals Manufacturing and Jobs within 100 days of forming office, with the establishment of the Metals Manufacturing Innovation Council – bringing together representatives from industry, unions and governments.
Labor believes in backing local industries and the Australians they employ.
The Liberal alternative
Malcolm Turnbull has refused to lay out either a short-term plan to deal with the immediate challenges faced by steel producers like Arrium, or a long-term strategy to secure the future of Australia’s metals industry.
In fact, the Prime Minister has washed his hands of Arrium, refusing to even enter discussions with the South Australian Government about how the Commonwealth can help strengthen local steel production.
This is entirely consistent with the Abbott-Turnbull Government’s terrible record on jobs.
They goaded the car industry into leaving Australia, and have refused to secure the future of our defence industry by prevaricating on building submarines in Australia and by sending the contract for supply ships offshore.
They also tried to gut the growing clean energy sector by drastically reducing Australia’s Renewable Energy Target which has seen jobs in that sector fall over the past two years while jobs globally in that sector have increased by over two million.
Only Labor stands for local jobs that will keep Australians working and strong local industries that can sustain us into the future.
Labor’s $50 million upfront contribution to the Steel Reserve will be made available from 2016-17, subject to Arrium’s purchase by a new buyer.
In Government, we will task EFIC to work with the buyer to negotiate specific investments to be funded with the $50 million financing component of our commitment. EFIC is able to deliver a range of financing solutions – including concessional loans and loan guarantees. The most appropriate form of financing will be negotiated with the buyer in the context of nominated investments which meet the criteria of the Steel Reserve.
 OECD, 2015, Excess capacity in the global steel industry and the implications of new investment projects