08/04/2016 4:25 PM AEST | Updated 15/07/2016 12:51 PM AEST

Government At Odds Over Response To Whyalla Steel Woes

Fairfax Media

The troubles plaguing Arrium's South Australian steel mill are threatening to engulf the government, with fresh claims of disunity in the ranks over possible assistance to be given to the beleaguered manufacturer.

Arrium, which owns the Whyalla steelworks, went into voluntary administration on Thursday, placing a cloud over the future of 1000 workers and jeopardising a large chunk of South Australia's economy. As industry and community pressure to assist the steelmaker mounts, the issue has morphed into a political football -- and may become a wrecking ball -- for the Turnbull government, with senior ministers at crossroads over a potential lifeline for the plant.

Labor leader Bill Shorten called for the government to implement requirements that local infrastructure projects use Australian steel.

"Labor believes that Australian Governments should seek to maximise the use of Australian steel," he told 5AA Radio on Friday, while on Thursday he said at a press conference "what is wrong with requiring Australian content in the steel?"

The suggestions were quickly rubbished by treasurer Scott Morrison and PM Turnbull, but Industry Minister Christopher Pyne -- who hails from South Australia -- hinted that the government may explore such an option in building its much-vaunted and expensive new submarine fleet. The apparent disunity was quickly noticed.

On ABC Radio on Friday morning, Morrison repeatedly shot down the idea of setting mandatory procurement targets for the use of local steel in infrastructure projects.

"You don’t get involved in a knee-jerk reaction the sort of thing that says: let's tear up our trade agreement, let's tear up the jobs in the new economy to go and play politics with an issue in South Australia," he said.

"Mandatory procurement, when put in the way that the Opposition Leader has put it forward, would run at odds with the trade agreements which are actually growing jobs in our economy."

However, over on Channel Nine's Today program, Pyne was seemingly raving about the idea of mandatory procurement as proposed by Shorten, saying he "couldn’t agree more."

"State and territory governments using federal taxpayers’ dollars for construction, and any federal government projects, should use Australian steel," Pyne said.

"Sometimes it’s not always exactly possible — we don’t always make every kind of steel — but where we do, we should be allowed to compete."

The Industry Minister flagged the possibility that Australia's new submarine fleet could be built using local steel, an idea not previously considered by the government and which would help prop up the Whyalla plant.

"Because of the government's commitment to the 12 subs, the nine frigates, the patrol vessels and so on, there will be a whole body of work coming through the pipeline," Pyne said.

"I'm optimistic and the people of Whyalla should not be panicking."

It stands in stark contrast to his statement just a day earlier, when he said "it is clear that the issues being experienced at Arrium are not able to be addressed with further regulatory interventions by government."