Banks have been urged to let Arrium trade its way out trouble, after the ailing steelmaker was placed in voluntary administration.
The closure of Arrium would spell the end of the Whyalla steelworks and threaten up to 7000 jobs across Australia.
Banks and US debt holders, who are owed around $2.3 billion, have forced the steel giant into voluntary administration.
However, Arrium and the South Australian government have strongly resisted the move.
At present, it is business as usual, as Arrium staff turn up for work at operations in South Australia.
Industry Minister Christopher Pyne remains hopeful a positive outcome can be achieved.
“This is a difficult time for the workers and families affected, particularly in Whyalla,” the Minister said in a statement.
“The Federal Government stands ready to assist the workers of Whyalla.”
Mr Pyne said the Australian steel industry is facing substantial challenges primarily caused by the significant oversupply of steel.
“The Australian steel industry is not alone in facing these challenges,” Mr Pyne said.
Industry Minister Christopher Pyne urged Arrium’s lenders to give the company a break and said its three main businesses could either break even or be profitable “in the right circumstances”.
“The surest way for the banks to receive their money back from Arrium ... is for Arrium to trade out of its difficulties,” Mr Pyne said.
Grant Thornton has been appointed to handle the job of administrator, Arrium confirmed in a statement to the ASX.
“After considering the available alternatives, in the current circumstances it has become clear to the board of Arrium that it has, unfortunately, been left with no option other than to place the relevant companies into voluntary administration in order to protect the interests of stakeholders,” Arrium said.
Grant Thornton said it would assume executive control immediately and, in conjunction with key stakeholders, conduct an urgent review of the core Australian steel and mining businesses.
“The group will continue to trade on a ‘business as usual’ basis whilst the administrators undertake a comprehensive and thorough review to identify the steps that can and should be taken to stabilise the Australian steel and mining businesses, with a review to restructure,” one of the four voluntary administrators,” Michael McCann, said in a letter to the ASX.
Mr Thornton pledged a “thorough and impartial investigation” of Arrium’s plight and said the first meeting of creditors was scheduled for April 19.
Australian Industry Group Chief Executive, Innes Willox, said Arrium’s move into voluntary administration is a situation with national implications and potential deep impacts for regional Australia involving an essential nation building industry.
“It is a reminder of both the pressures on Australian manufacturing and the critical importance of the steel industry for the country,” Mr Willox said.
“Arrium employees and businesses up and down its supply chain will be justifiably concerned for their future.
“We encourage all stakeholders to do as much as they can to create the conditions for the company to restructure and continue operations for the long term.”