The Steel and Engineering Industries Federation of Southern Africa (Seisfa) says the decision by ArcelorMittal SA (Amsa), to wind down its long steel business could lead to up to 25,000 job losses in the value chain.
SA’s largest steel producer said last week that it would close its long steel plants in Newcastle, Vereeniging and Mpumalanga after a year of talks with the government on possible interventions came to naught.
The move is expected to lead to 3,500 job losses at the company. The group’s rail and structural subsidiary, ArcelorMittal Rail and Structural (Amras), sole producer of mainline rail in Sub-Saharan Africa, faces demise.
Long steel products include rebar, wire rod, merchant bars, rails and sections.
Seisfa president Elias Monage said closing Amsa’s long steel business would have a multiplier effect on the downstream industry, calling it a “profound” policy failure by the state.
“Some of the most alarming estimates over and above the reported 3,500 direct jobs on the line are the medium-term impact of second-round effects in the order of 20,000 to 25,000 jobs and in the longer-term multiples of more than this,” Monage said.
“The effect of this latest development will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining subsector of the economy and all who work in it,” he said.
“This development presents a major setback to the base of the industrial sector and industrialisation more broadly. The tragic reality is that the lofty goals set by the steel master plan to charter a road map to re-energise the sector, expand production and increase demand across the steel and fabrication industry value chain and introduce an industrialisation programme have failed dismally.”
Amsa announced that it intended to close the long steel business at the tail end of 2023, but postponed that as it engaged in talks with the government.
Winding down the long business will have profound effects on suppliers, communities and municipalities in KwaZulu-Natal, Gauteng and Mpumalanga.
Newcastle accounted for 34% (more than R10bn) of total group procurement in 2023, the group has said. Amsa will transition the longs business into care and maintenance. Steel production is expected to cease by late January with the wind-down of the remaining production processes completed in the first quarter.
The JSE-listed group expects to report a bigger loss when it posts 2024 financial results next month. It has called for a 25% tariff on imports, saying that is the most appropriate measure to protect the embattled domestic industry. Monage said Amsa’s decision would lead to fewer players in the country producing long-steel products such as fencing material, reinforcing bars, beams, rails and profiles used in the construction, mining and manufacturing sectors.
Deindustrialisation in the sector “can be attributed to the lack of a well-considered and all-encompassing metals sector industrial policy. The SA steel industry reiterates its commitment to collaborate with government to ensure that policy decisions are made in the best interest of the industry and the nation,” Monage said. “A holistic approach that protects the diversity and sustainability of the entire steel value chain is essential for the future success of the SA steel industry.”
The trade, industry & competition department opened the door for more talks to “find a workable and lasting situation”, saying the steel industry was critical in the reconstruction and recovery plan for the economy, particularly manufacturing, mining, construction, engineering and transport at the centre of government industrialisation, localisation and beneficiation programmes.
The National Employers’ Association of SA called on the International Trade and Administration Commission of SA (Itac) to scrap all protectionist duties on long steel products, with immediate effect.
“Since Amsa will no longer be a competitor in the market, the duties will no longer serve its intended purpose and, if retained, will now simply be a massive windfall for the government and a financial drag on the steel manufacturing sector, in particular the downstream,” it said.
“There is seemingly no logical or reasonable justification for Itac to retain the duties, unless the government views the ‘stuffing of its collective pockets’ as more important than the wellbeing of a pivotal sector of the SA economy,” it said. With Michelle Gumede
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