ArcelorMittal South Africa’s (Amsa) closure of its longs steel business will affect 3 500 employees who are set to lose jobs and will impact iron ore suppliers such as Afrimat, with further effects on the local local automotive industry that relies on the company for supplies, leaving a serious dent on the country’s industrial sector.
This comes as Amsa in November 2023 announced a decision to suspend operations at its longs steel businesses although it kept the Vereeniging and Newcastle factories operational after widespread stakeholder concerns. This paved the way for engagements and negotiations with the government and other affected parties.
However, Amsa yesterday said there has been no respite or significant improvements to the conditions such as “persistent high logistics and energy costs” as well as “insufficient policy interventions” related to the export scrap tax.
It said these conditions had “left the longs business unsustainable” and threatened to have knock on effects on the rest of the company’s business.
“The board and management has had no option but to take the difficult decision to proceed with the wind down of the Longs Business, which will be placed into care and maintenance. The wind down will impact all long steel plants, including the Newcastle Works, Vereeniging Works, and the rail and structures subsidiary, AMRAS,” said the company.
Kobus Verster, CEO of Amsa said efforts over the past year had not translated into a sustainable solution.
He said although the government was “willing to listen” to the company’s concerns, it could have done more to avoid the current situation of closure of the affected plants. There had also been no government response yet after Amsa tabled its decision to suspend the longs steel business operations on December 21.
“Government is willing to listen (but) they could have done more especially where steel consumption is lower than years ago. We have to make sure the longs business does not drag down the flat business,” Verster told a media roundtable yesterday.
In a statement released by the company earlier in the day, he said “the issues tabled for resolution sought to level the playing field against international and local” competitors.
The issues raised, including policy interventions on tax and addressing of rail and port bottlenecks would have helped to “firmly address the structural problems” within the South African steel industry.
However, the Newcastle coke-making operations will continue although capacity will be scaled back to reflect the reduced demand.
Shares in Amsa plunged by as much as 20% in afternoon trade on the JSE yesterday where it traded around R1.20 per share. This erased the stock’s 11.94% year to date gains.
The suspension of Amsa’s longs steel business will cut market share down to 40% compared to 50% prior to the decision. It will also remove capacity of about 1 million tons as the business unit was already operating at nearly half of its total capacity of 1.8 million tons.
Amsa said as many as 3 500 employees will be affected, with the company set to open negotiations for retrenchments with workers’ unions.
Irvin Jim, secretary general of the National Union of Metalworkers of SA, told Business Report in an interview yesterday that labour will resist the move to retrench workers and called on the government to explain why it has been impossible to address the concerns raised by Amsa.
“As the union we will fight this retrenchments but government led by the dtic and the entire economic cluster must have been involved in finding solutions as this relates also to Eskom, Transnet,” Jim said.
“With this announced decision of a plant closures it means those negotiations have failed and as the union we are demanding from President Cyril Ramaphosa presidency to give us an account as to what is it they cannot agree on the demands that Amsa tabled.”
The closure of Amsa’s longs steel business will also have an impact on a wide array of South African businesses and industries, including iron ore suppliers, the automotive sector and Eskom among others, analysts said.
Market analyst Dave Hazelwood wrote on X yesterday that “various suppliers and customers will be impacted, including iron ore supplier” Afrimat.
Meanwhile, Jim also said the collapse of Amsa’s longs steel business “will not only destroy down stream industry in the steel sector” but it will also “destroy the automotive sector and the component value chain” industries.
“At this stage we don’t think there is an appreciation in government of how dangerous it is to allow Amsa to close these plants. Unless a solution is found, allowing these plants to close is catastrophic and spell disaster for manufacturing and industrialisation of our country,” he added.
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