Struggling steel major ArcelorMittal SA (Amsa) has raised concern that the government’s proposed carbon tax increases will hinder its turnaround strategy.
The company said it was facing “debilitating” increases in carbon taxes at a time when SA’s steel sector enjoys “little to no protection from steel imported from countries with no carbon pricing”.
Amsa’s ailing long-steel business has already seen the state making serious concessions to the company’s demands, including rolling out its most extensive review of steel tariffs in more than 20 years.
Business Day reported that the review process may lead to a more protectionist policy framework to shelter SA’s steel industry from cheap imports flooding the market, including the potential introduction of import controls and duty-free imports for inputs needed to produce steel.
Critics, including the National Employers’ Association of SA (Neasa), argue that the state is merely postponing the inevitable and have called into question Amsa’s long-term viability without government support.
Amsa has also received significant support in the form of funding to keep its long-steel business afloat and save about 3,500 jobs in the process, with the department of trade, industry & competition announcing in March it would pick up the unit’s wage bill over the next year.
Added to this are the contributions from shareholders, including a R1.7bn cash injection from the state-owned Industrial Development Corporation.
While it welcomed the lifeline for the longs unit, Amsa said its new strategy is to focus on its flat-steel business, including investing in a 200MW solar plant for this division.
The group’s turnaround strategy includes a 1.5-million tonne electric arc furnace, a new galvanising and Magnelis line, a gas recovery plan to increase electricity self-generation and securing partnerships for the rolling assets under care and maintenance.
In the longer term, it hopes to produce steel with green hydrogen from its Saldanha plant and take part in the new private sector access to Transnet’s rail network.
“I must stress, however, that these landmark investments could be threatened by extremely troubling changes to SA’s carbon tax framework, currently being proposed,” said Amsa CEO Kobus Verster.
The proposed legal framework will entail a “significant” increase in the group’s carbon tax liability over the next two years, Amsa said in its latest results.
I must stress, however, that these landmark investments could be threatened by extremely troubling changes to SA’s carbon tax framework, currently being proposed
— Kobus Verster
Amsa CEO
The group paid R135m in carbon taxes in 2024, up from R104m in 2023, with the carbon tax rate set to increase from R236 per tonne of carbon-dioxide-equivalent emissions to R308 per tonne in 2026.
It further criticised the proposal to reduce tax-free allowances and use more carbon offsets, saying “there is a shortage of eligible offsets and those that do come to the market are often priced at levels higher than the effective tax rate”.
According to Amsa, SA’s steel industry is not equipped to decarbonise at the rate policies are being implemented.
“Excessive carbon tax liabilities that are mismatched with organisations’ readiness to decarbonise could undermine not only investments in new job-creating capacity but the entire viability of the SA steel value chain,” said the company.
One “unintended but extremely damaging consequence” of the “excessively steep increase” in the carbon tax rate in 2026 is that it will deter “vital industrial investments” in the domestic steel sector, said the group.
To fund its turnaround strategy, Verster said the firm would be turning to shareholders to raise more capital in 2025.
He said Amsa had “worked hard on developing a strategy that will return the company to sustainable profitability and ultimately reward our investors”, but that recapitalisation will be required to achieve these goals.
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