Businesses in the towns of Newcastle and Vereeniging are reeling over the imminent closure of ArcelorMittal SA’s (Amsa’s) plants in the two towns — a move that is set to devastate the local economies and hurt municipal revenues.
On Monday Amsa, SA’s largest steel producer, shocked its employees by announcing that its production at the Newcastle Works was expected to come to a halt at the end of this month, with the wind-down of the remaining production processes set to be completed in the first quarter of the year.
Morne Seaman, president of the Newcastle Sakekamer (Business Chamber), said the Amsa operations had been an integral part of Newcastle’s economy since 1969 and helped the town rapidly develop into an industrial town.
“In Newcastle, you can stop and speak to almost anyone on the streets, and they will either have worked for AMSA or know someone who has. The most significant impact would primarily affect logistics companies, engineering businesses and downstream companies that rely on the byproducts for manufacturing their products,” Seaman told Business Day.
“Unfortunately, Newcastle lacks large towns or cities nearby where residents could commute for work. Consequently, families may be forced to leave the area in search of better opportunities. This migration will likely trigger a ripple effect, impacting property prices, retail businesses, and the broader local economy,”
“The closure of Amsa Newcastle will have a profound impact on both livelihoods and businesses in Newcastle and the surrounding areas.”
The closure of the two plants, alongside the ArcelorMittal Rail and Structural unit, located at the old Highveld Steel facility, in Mpumalanga will result in 2 200 direct job losses and a further 1 300 indirect jobs affected.
According to Amsa’s latest annual report Newcastle alone accounted for 34% (more than R10bn) of its total procurement in 2023.
KwaZulu-Natal’s MEC for economic development, tourism and environmental affairs, Musa Zondi, has called for urgent intervention in response to Amsa’s decision, which came after several engagements between it, labour, Transnet and the government failed to come to a resolution, despite initial optimism.
Zondi said in the light of Amsa’s importance to Newcastle’s economy, he had written to the minister of trade, industry and competition, Parks Tau, requesting further engagement to address the “impending crisis”.
“The closure will directly affect over 2,000 jobs in Newcastle, posing a severe threat to the livelihoods of workers and the broader local economy. As one of the largest employers in the region, Amsa’s operations have long been a pillar of economic stability, supporting thousands of workers and local suppliers,” Zondi said.
“Furthermore, if this is not resolved, it will have a ripple effect on the broader economy of KwaZulu-Natal, threatening economic stability and growth in the province. We urge the minister to explore all possible solutions to prevent this closure, including further dialogue with Amsa and stakeholders.”
On Monday, Amsa also issued a profit warning ahead of the release of its results next month. Over the years, Amsa has put several measures in place to keep the long steel unit afloat. In 2022, the group launched a long optimisation plan to focus on customer profitability, energy efficiency and footprint rationalisation.
One of the biggest features of the plan was to optimise Newcastle’s output at an efficient volume of about 1-million tonnes per annum (mtpa) and reduce fixed costs and boost productivity.
However, the group said in its 2024 annual report that it had become clear it would be an uphill task to make the long steel business competitive due to several factors, including a 20% drop in steel consumption and low activity in key steel-consuming sectors.
Amsa’s data shows that competitors’ domestic production capacity for long steel is about 2.7 mtpa, whereas local demand now is 1.8 mtpa.
Vereeniging Works has been in operation for more than a century, with local businesses fretting over the closure of the plant.
Jaco Verwey, president of the Golden Triangle Chamber of Commerce, said the closure of the plant would add to SA’s sad tale of deindustrialisation.
Verwey blamed the closure on the lack of political will to save the embattled steel industry, saying the move would devastate the Vaal’s economy.
Trade union Numsa has called on President Cyril Ramaphosa to publicly account forwhy talks between Amsa and government came to naught.
“We need to understand the bigger picture so that we can act to protect this capacity, which in our view cannot be destroyed, as this collapse will not only destroy the down-stream industry in the steel sector, it will destroy the auto sector and the component value chain,” the union said.
“At this stage we do not think there is an appreciation, by the government, of how dangerous it is to allow Amsa to close its plants as listed in its memo.”
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.