Hopes of selling northern Tasmania's Liberty Bell Bay, which has been under administration since March, copped a big blow in June when a key member of a buying consortium pulled out.
On Wednesday, the remaining consortium members told administrators they had ceased pursuing a sale, following troubles with enabling arrangements including operating requirements.
These difficulties were partly driven by broader economic challenges associated with operating the smelter in a volatile global economy, administrators EY said on Thursday.
In the absence of a commercially viable transaction and funding required to continue operations, administrators made the difficult decision to commence the closure of the business, EY said.
The future of the smelter, formerly owned by UK billionaire Sanjeev Gupta's GFG Alliance, had been under a cloud since it stopped production in mid-2025.
The smelter, which produces critical ferroalloys for steel manufacturing, opened in 1962.
"This is an incredibly disappointing outcome for employees, their families and the wider Bell Bay community," administrator Morgan Kelly said.
"Over the past several weeks, all parties worked diligently to pursue a transaction that would preserve the smelter and secure ongoing employment.
"However, the difficulties with key enabling arrangements means there is no viable pathway to complete the proposed transaction or pursue an alternate transaction."
Some of the smelter's 216-strong workforce, whose wages had recently been paid by governments, will be retained to demobilise the site, sell remaining assets, and meet environmental and regulatory obligations.
Information about redundancies will be communicated to employees on Monday and support was being provided to them, EY said.
Liberty Bell Bay was built by BHP before being purchased by Mr Gupta's Liberty Steel Group in 2021.
Mr Gupta has run into trouble elsewhere in Australia - South Australia's Whyalla steelworks was taken out of his company's hands and placed into administration in 2025 because of accumulating debts.
A consortium of Adroit Capital, White Oak Global Advisors and OM Holdings was announced in May as Liberty Bell Bay's preferred bidder, before Adroit Capital pulled out.
The Tasmanian government in January loaned GFG Alliance $20 million to purchase raw manganese ore in the hope of restarting operations.
It was forced to call receivers to seize and manage the stockpile of ore when operations didn't restart.
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