Closure of Australian steelmaker would cause collapse of local construction industry: administrator

The closure of embattled Australian steelmaker Arrium Ltd. would cause the local construction industry to collapse within six months, the company's administrator said Tuesday as the local political rhetoric heightens.

The global steel industry has been combatting with the collapse amid global iron ore and steel prices, which have seen manufacturing plants closed or moved as creditors sour on indebted companies in the market downturn.

Arrium and its 93 subsidiaries were placed in administration in early April with debts exceeding 2.8 billion Australian dollars (2.01 billion U.S. dollars), including over 1 billion Australian dollars (over 718.9 million dollars) in unsecured loans by the nation's "big four" banks.

Administrator KordaMentha on Tuesday said a wind up of Arrium "would be felt far and wide" as the company's long-form structural steel "makes up 70 percent of Australian steel making in infrastructure and construction".

"When you're talking about billion-dollar projects, delivery for steel would be 18 months or more in advance," KordaMentha partner Mark Mentha told local media.

"The impact of not having steel -- you'd have to find alternatives in the global market place."

Arrium's management has said it was the global market place that caused the producer's woes, suggesting it was "essentially a failed market", which initially led to protectionist calls by Australian politicians who claim offshore steel has been entering Australia at predatory prices.

Mentha's public statement could be seen as putting pressure on government authorities as the leaders of major parties enter the third week of an eight-week long election campaign to July 2.

Arrium's Whyalla steel works are located in the politically sensitive South Australia state which has consistently recorded the nation's highest unemployment, registering 7.7 percent compared with 5.7 percent nationally.

The administrators are looking to wind up the sale of the distressed asset by the end of the year, however the South Australian state government are also considering a plan to save the steelworks.

Australia's building industry chief lobby the Master Builders said KordaMentha's claim were overblown, and that the "most dangerous" outcome would be the loss of almost 4,000 jobs in the local Whyalla region.

Arrium's steel division employs 5,500 people, some 1,100 -- excluding contractors -- at the Whyalla plant alone, which would have flow on effects to the local service industry.

"Building and construction won't collapse or be devastated by the closure of Arrium, but it will be hit," chief executive of the body's South Australian chapter, Ian Markos said, adding east coast manufacturer Bluescope Steel could also provide product.

Bluescope on Monday increased its underlying second-half profit forecasts, driven largely by earlier delivery of targeted cost reductions, higher steel and iron ore prices and better than expected Australian sales. Endit