ArcelorMittal SA (Amsa) is limping into its 100th year of existence with its stock down more than two-thirds in the past 12 months and faced with several headwinds, including dwindling local steel demand and Transnet’s efficiency bottlenecks.
The share price is down 70% over the past year, valuing it at R1.15bn. The company’s recent woes were compounded by a loss of R1.9bn in the year to end-December from a profit of R2.6bn in 2022.
The steelmaker is contemplating retrenchments after announcing its decision to close its Newcastle and Vereeniging plants, a move that could result in 3,500 job losses.
The National Union of Metalworkers of SA (Numsa) “will be meeting with Amsa on July 2 for the final sitting of the section 189 consultation process where we will reply formally to the employer about the proposal they have placed on the table”, Numsa spokesperson Phakamile Hlubi-Majola told Business Day on Tuesday.
The closure of both plants has been paused for six months after consultations with the government and other affected stakeholders, during which several short-term interventions were proposed.
Meanwhile, unstable leadership has plagued Amsa, with Siphamandla Mthethwa resigning as CFO last year with immediate effect after a 16-day stint in the position.
Long-term crisis
According to Trade & Industrial Policy Strategies (TIPS), domestic demand for steel has been essentially stagnant for the past three decades as the steel intensity of economic growth dropped steadily.
TIPS researcher Neva Makgetla said Amsa’s threatened closure of its Newcastle plant underscores the long-term structural crisis in the SA steel industry.
“The long-run stagnation in crude steel sales in SA ultimately reflected a persistent decline in the steel intensity of the country’s GDP. In 1976, SA used 38-million tonnes of steel per trillion rand of GDP, in constant 2022 terms. By 2022, that figure had fallen more than two-thirds to 12-million tonnes per trillion rand of GDP,” reads Makgetla’s TIPS analysis.
The decline in steel intensity over the past half century has deep roots both in SA and the Global North. It is primarily attributed to several factors: the diminishing share of goods industries, the increasing reliance on new plastics and metal alloys in production and construction, and the trend of downsizing machinery and appliances, Makgetla writes.
She said steel consumption continued to fall despite the overall GDP recovery that followed the extraordinary downturn brought on by the Covid-19 pandemic in 2020.
Amsa expects to make a final decision on the closing of the two plants by August.
CEO Kobus Verster has previously warned that its turnaround was challenging amid a depressed long-steel market in SA.
Amsa’s share price tumbled the most since late March on Tuesday, down 5.61% to R1.01, a far cry from the lofty heights it once reached at R261.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.