Nation’s manufacturing at ‘dangerous crossroads’ with more big bailouts to come

Major manufacturers are putting out their hands for more public money to prevent the shutdown of steel and aluminium plants in NSW and Victoria after the Albanese government delivered another taxpayer-funded industrial bailout to an outback Queensland city – its third such move this year.

Industry Minister Tim Ayres announced on Wednesday that Swiss mining giant Glencore would receive a taxpayer-funded package of $600 million, jointly funded with the Queensland government, to continue operating its Mt Isa copper smelter and refinery for at least another three years, securing the jobs of 600 workers across the two sites.

The deal follows a $135 million bailout from the state and federal governments for Nyrstar, which has smelters in Port Pirie and Hobart, and a $2.4 billion package proposed by South Australia and the federal government for a buyer to rescue the Whyalla steelworks.

As the assistance to Glencore was promised, chief executive of Australian steelmaker Bluescope, Mark Vassella, warned domestic manufacturing was at a “dangerous crossroad”.

“If industry and government are smart enough to navigate these conditions, our manufacturing sector will remain viable, and the federal government’s Future Made in Australia economic policy can be a reality. If we can’t, we face a decline in manufacturing, similar to that which we’ve seen in the UK steel industry,” he said.

Vassella said the government must intervene in the market to force gas prices down or risk the loss of further businesses that depend on the fuel to power their factories.

The government is inching towards announcing a gas reservation scheme, potentially before the end of the year, which would force LNG exporters to hold back some of their production to supply to local companies like manufacturers.

Meanwhile, industries that rely on electricity for production, such as aluminium smelters, are also seeking public funding. Federal and state governments are conducting urgent negotiations with Tasmania’s Bell Bay smelter, as well as NSW’s Tomago smelter, which employs more than 1000 workers.

Australian Aluminium Council chief executive, Marghanita Johnson, who represents Tomago and the Portland smelter in Victoria, which is currently benefiting from government-subsidised electricity prices, said gas prices were critical for the industry.

“Access to competitive energy remains the foundation of industrial competitiveness,” Johnson said.

However, independent economist Saul Eslake said he was suspicious of any use of government money to support a private company.

He said if the government believed on national security and economic grounds that Glencore needed support, it should take an equity stake in the company rather than hand over $600 million in taxpayers’ money.

“Rather than money with no strings attached, an equity stake would mean at least there would be a dividend paid back to taxpayers when – or if – the company is back in a position to make a profit by itself,” he told this masthead.

University of Western Australia macroeconomist Jakob Madsen said ultimately the money being pumped into Glencore could be a waste.

“Dying companies are usually due to technological progress that causes creative destruction of dinosaur companies. Dying industries generate technological regress,” he told this masthead.

“Subsidies to Glencore don’t save jobs in the long run – research shows that the unemployment consequences of failing companies are temporary, so the employment argument does not work. Progress is made by good jobs in progressive industries, not by maintaining alienating companies.”

Manufacturing subsidies have been a feature of Australia since the 1940s, but ramped up in the 1980s as the federal government reduced protective tariffs and opened industries to international competition.

Aluminium smelters have received government support, particularly via cheap electricity supply, for more than 40 years. In the 2024-25 budget, the federal government established a $23 billion, 10-year Future Made in Australia fund, to support industries needed for clean energy and low-carbon production, such as critical minerals, green steel and aluminium.

Prime Minister Anthony Albanese said in April 2022, before he formed government at the May election, that Labor’s plans to cut emissions and boost clean energy would deliver “nothing less than a revival of manufacturing”.

On Wednesday, Albanese signalled ongoing support for Glencore and other manufacturing businesses.

“There are third-generation workers at the Mt Isa facility. Our government wants there to be a fourth and fifth generation,” he said.

Industry Minister Tim Ayres said copper was critical to Australia’s energy transition, including for building solar panels and wind turbines needed to achieve the government’s renewable energy goals.

In July, Glencore closed its underground copper mine at Mount Isa, with a loss of almost 500 jobs. It warned then that it was prepared to put the smelter and its Townsville copper refinery into care and maintenance until market conditions improved.

“This agreement provides a short-term lifeline for the copper smelter and refinery,” Glencore Metals Australia interim chief operating officer Troy Wilson said.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.