Embattled steel major ArcelorMittal SA (Amsa) told its employees on Friday that attempts to save its long steel business have failed, with 3,500 workers now set to lose their jobs.
In a memo to employees seen by Business Day, Amsa CEO Kobus Verster said the group would wind down its long steel business at the end of September.
“Unfortunately, efforts to secure funding to operate beyond September 30 2025 have failed. In this light we must now, I regret to say, take further preparatory steps towards the closure of the longs business,” the memo says.
“This is not a decision that anyone wishes to make, but it is a reality that we must responsibly prepare for. We will accordingly be issuing section 189 notices to affected employees in the longs business on a staggered basis as facilities wind down, commencing on September 1 2025,” it reads.
Amsa said in July that the long steel business would only be able to “continue with financial support as the company does not have the ability to bear any further financial risk associated with its continued operations after the deferral period”, calling for urgent action to save the unit.
The Industrial Development Corporation (IDC), a supporter of SA’s embattled steel industry, wrote Amsa a R1.7bn cheque in April to defer the closure of the long steel industry.
The state-owned IDC told Business Day last week that it was still engaged in a due process that might see it take a larger stake in Amsa due to its importance to the country’s steel industry, particularly the automotive sector.
As part of measures to keep Amsa’s long steel business afloat, the government in March also provided more than R400m in wage subsidies for about 12 months.
However, Verster said in the memo that the efforts by the company’s management, the IDC and government had not been enough to salvage the long steel business, which accounts for half of the group’s business. He stressed that the long-standing structural problems remain largely unresolved, including “rising imports, limited tariff protection, very high electricity costs and the worsening performance of the rail system”.
It has been a torrid few years for Amsa’s long steel business, having posted cumulative losses of R1.7bn since 2023.
News of the imminent closure of the long steel business, which will devastate the Newcastle and Vereeniging economies, came just after the IDC told Business Day it believed it had bought vehicle makers sufficient time to look for alternative sources of suppliers for speciality steel produced by Amsa.
However, the IDC said that at the top of its priority list is to deepen domestic supply of speciality steel used as inputs by vehicle makers.
“If you look at our recent interventions, they were to support the downstream industries, in particular the auto sector, with the speciality steel requirements they need as input. Our intervention was to buy time for them to build up stock and to organise alternative sources of those speciality steel,” said the IDC’s acting COO, David Jarvis.
“We believe we have achieved that objective because we have been engaging the auto sector and they have made alternative arrangements once the stockpiles are diminished at the end of December and they have alternative arrangements into 2026,” Jarvis said.
“We are looking at ways of developing domestic supply of that speciality steel, which we believe can be produced by a number of companies in the value chain.”
The importance of ensuring domestic supply of the speciality steel is that it reduces costs for vehicle makers that are already contending with tariffs hikes by the US.
Amsa is a core supplier of speciality steel in the domestic market, providing high-grade materials critical for components in vehicle production lines.
The R1.7bn IDC facility, which deferred the closure of the unit, has not received broad support by stakeholders in the steel industry, with some saying mini-mills and electric steel producers can soften the blow.
Amsa’s smaller rivals, Cape Gate and Scaw, dragged it to the Competition Tribunal last week, accusing it of predatory pricing by slashing prices of long steel products in the wake of the bailout from the IDC and government earlier this year.
Cape Gate and Scaw asked the tribunal to interdict Amsa from charging prices below market rates to kill off competition in the long run. At the heart of the complaint by the two companies is that after receiving R1.7bn from the IDC in April and scoring R417m in wage subsidies from the government, the company began reducing its prices for long steel products.
The companies argue that this was done despite the rest of the industry hiking prices “due to a chronic shortage of scrap metal”.
Amsa is accused of intentionally forgoing profit in the short term “in order to weaken or exclude rivals to secure higher profits in the longer term due to reduced rivalry”.
The National Employers’ Association of SA, which represents 1,800 businesses employing 65,000 workers in the engineering sector, has also accused the government of bending backwards to save Amsa at all costs.
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