Closing Arrium would cost the economy $770 million and 5000 jobs

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The Arrium steel works and iron ore mine is too big to be allowed to fail, according to analysis by Flinders University.

Shutting down the business could cost three quarters of a billion dollars and around 5000 jobs, says the Australian Industrial Transformation Institute at Flinders.

The Whyalla work force would fall by about 40% with between 3550 and 3940 full-time jobs gone.

Statewide the losses would be between 4760 and 5360 jobs, or about 6% of the 814,000 employed in South Australia.

The analysis calculates Whyalla’s regional economy could shrink between $490 million and $530 million. The impact on South Australia would be between $678 million and $770 million.

Arrium last month went into into voluntary administration, a victim of falling iron ore prices and a steel glut caused by overproduction in China.

The iron ore miner and steel producer couldn’t get a deal with its lenders — the banks and note holders — to restructure debt of more than $2 billion.

Source: Australian Industrial Transformation Institute, Flinders Business School

“Whichever scenario you look at, the outlook is extremely serious,” Professor John Spoehr at Flinders said. “In some senses Arrium is too big to be allowed to fail, given the impact in Whyalla and to the state as a whole.”

At the moment, the steel produced at the Whyalla works costs more to make than it can be sold for on the open market.

“For every three jobs lost directly in region at the steelworks, the mine, and in transport linked to these operations, there will be another one job lost within the Whyalla region in areas such as retail trade, health and education and recreation and personal services.”

The South Australian government is looking at ways to save the steelworks, with investment in the hundred of millions of dollars.

Premier Jay Weatherill says the plan needs federal funding.

“Every month we wait, we think it increases the risk that the steelworks will close,” Weatherill said.

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