SA’s primary steel producer, ArcelorMittal SA (Amsa), says its long steel product operations, which were previously considered for mothballing, will remain open, saving 3,500 jobs at the firm and as many as 80,000 jobs in the value chain.
CEO Kobus Verster said the progress was thanks to the success of its short-term initiatives, coupled with Transnet’s improved performance, the nonrenewal of the scrap export ban and duties on imports that protected the local manufacturers.
He said progress was also being made on medium- and longer-term interventions.
A Molotov cocktail of subdued demand, historically low prices putting margins under pressure and blast furnace interruptions gripped Amsa in the half year to end-June.
“The board and management are acutely mindful of the impact that the closure of the longs business would have on the beneficiation and manufacturing value chain, and the overall industrialisation in the country, notwithstanding the impact on jobs and the local economy, especially in KwaZulu-Natal,” said Amsa.
It added that the immediate impact on the Unemployment Insurance Fund alone could run into billions of rand.
“Consequently, despite progress being slower than anticipated and with some instances of disappointment, the board and management have decided that the longs business will continue to operate to allow an opportunity for the short-, medium- and longer-term initiatives aimed at securing its sustainability to be fully explored,” the company said.
Verster said 3,500 direct jobs at Amsa would get a reprieve from the deferred closure. Additionally, independent studies had shown about 80,000 jobs in the value chain were also on the line, including at mines, downstream organisations, suppliers and service providers to the various mills, he said.
Amsa also successfully obtained a R1bn working capital facility, which it did not intend to use for longer than 12 months, to support ongoing initiatives and may be called upon to support continued operations.
Long steel products include rebar, wire rods, merchant bars, rails and sections for construction and infrastructure development.
Verster said the steel master plan was not “effective at all” in stimulating economic activity and it needed to be “re-energised”.
SA’s economic activity continued to stagnate in the first quarter. In the period, local primary steel exports increased by 13%, reflective of the 14% increase in crude steel production, all of which could not be consumed domestically given weak demand.
“In SA demand is really depressed. We see the lowest levels of steel consumption probably in the last 10 years,” said the CEO. “Within that, we had issues around the blast furnaces that impacted us in the first six months, so we had two weeks of no sales but largely the cost of restarting the furnaces. We had to spend a lot on energy — coal and coke — to bring the operations back, as well as direct costs to fix the asset and to sustain it.”
The group’s long steel operations were stable in the first half, but the flat steel products business in Vanderbijlpark experienced instability at its blast furnaces in April and May due to chilled hearth conditions.
The steelmaker’s headline loss per share is expected to widen to between 96c and 104c, from a loss of 40c a year ago, when it presents its half-year results in August.
Amsa shares fell sharply on Tuesday, closing 4.84% lower at R1.18.
However, the group was optimistic about the absence of load-shedding, saying it should further contribute to improvements. Moreover, it stands to benefit from the rollout of various government investments in the energy and logistics sectors.
Verster called on the incoming trade, industry & competition minister, Parks Tau, to focus on incentivising and reinvigorating the demand side of SA’s economy and promote localisation more aggressively.
“Even with our blast furnace issues that we’ve experienced in the first half, if we had a normalised domestic market, our financial performance would be something totally different,” he said.
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