Parks Tau, the minister of trade, industry and competition, says the government has not given up on finding a solution that might save ArcelorMittal SA’s (Amsa) long steel business, which is on the verge of being shut down, alongside 3,500 jobs, in a move that would devastate the Newcastle and Vereeniging economies.
The move by Amsa’s will also have serious implications for Transnet, which might be forced to import the steel it needs for the refurbishment of its vast railway infrastructure that has been besieged by theft and vandalism.
Tau, who has not been shy to intervene when he believes the state’s intervention is needed, said in a statement that the door remained open for his department to work with Amsa to “find a workable and lasting situation”.
“The steel industry is critical in the reconstruction and recovery plan for the SA economy, particularly the manufacturing, mining, construction, engineering and transportation sectors, which are at the centre of the industrialisation, localisation and beneficiation programmes of government,” Tau said.
“Whilst the immediate task will be on addressing structural issues affecting Amsa’s longs steel business, the broader focus should also be on addressing productivity improvements and supply chain efficiencies, investments in low-carbon technologies, competitiveness and regaining the market share.
“It is also important that public and private sector entities and companies commit themselves to procure locally manufactured steel products in their projects; undoubtedly, such a commitment will contribute positively to aggregate demand, job creation and economic growth in SA.”
It remains to be seen if the commitment by the department to save the Amsa longs steel business will amount to anything after a year-long engagement between the company, the government and Transnet failed to find a solution, leading to the company announcing the mothballing of the plants on Monday.
Amsa first announced its intention to close its longs steel business in November 2023 and spent the better half of last year engaging stakeholders on how to better put the business on a growth path.
Amsa on Monday indicated the discussions fell short. The company has called for a 25% tariff on imports, saying it is the most appropriate measure to protect the embattled domestic industry.
“Despite extensive consultations with government and stakeholders to find viable solutions to sustain the longs business, progress was insufficient to avert the wind down. The company will now transition the longs business into care and maintenance. Steel production is anticipated to cease by late January 2025, with the wind-down of the remaining production processes completed in the first quarter of 2025.”
Winding down Amsa’s long business will have profound social impacts, affecting its suppliers, communities and local governments in KwaZulu-Natal, Gauteng and Mpumalanga. Newcastle alone accounted for 34% (more than R10bn) of the group’s total procurement in 2023, the company has said.
Long steel products include rebar, wire rod, merchant bars, rails and sections. ArcelorMittal Rail and Structural (Amras) Mill is the sole producer of mainline rail in Sub-Saharan Africa.
Amsa CEO Kobus Verster said the company would help Transnet however they could to procure the steel needed to refurbish its vast rail network.
“Currently, to the extent that Amras, our rail division, does not have feedstock from Newcastle, there is no business case for it at this point in time. So, it is part of the wind-down process ... to the extent that Transnet needs assistance with supply either from supply within the group or elsewhere, we would be happy to look at that.”
Business Day reported on Monday that SA’s railway network, which is on the verge of a shake-up that will introduce third-party access to it, needs about R14bn a year of investment in its six corridors, which have been plagued by theft, vandalism and outdated systems.
Transnet minister Barbara Creecy in December approved the publishing of the Transnet Network Statement, a major step in facilitating open access to the country’s rail network by third-party operators — a move welcomed by the business community and industry players.
The move is also expected to alleviate the pressure on the road network. However, the network statement shows the rail network needs enormous amounts of money for refurbishment, with theft and vandalism of Transnet’s corridors having become a daily occurrence.
The cash-strapped Transnet, which last month reported a R2.2bn interim loss for the six months to end-September, operates the country’s 21,323km of rail infrastructure.
With Michelle Gumede
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