The government is pulling out all the stops to keep ArcelorMittal SA’s (Amsa) long steel business afloat with the state-owned Industrial Development Corporation (IDC) coming to the rescue of the unit with a nearly R1.7bn cash injection — making serious concession to the company’s demands.
Amsa, which has lost 87% of its market value in the past three years, said on Monday that the IDC cash injection would defer the closure of its long steel plants in Newcastle, Vereeniging and Mpumalanga, a move that would have led to 3,500 job losses.
“The deferral of the wind-down has accordingly been enabled by a facility provided by the IDC in the amount of R1.68bn. The IDC facility is repayable by agreement between the parties and subject to, inter alia, the financial performance, solvency and liquidity of [the] longs business,” Amsa said.
“Amsa has also made certain undertakings regarding the continued operation of the longs business and retention of jobs for the deferral period,” it said.
“The IDC facility is part of a comprehensive package of intended initiatives aimed at positioning the longs business for future sustainability and profitability.”
Amsa’s announcement will be a relief to the communities of Newcastle, Vereeniging and Mpumalanga.
The closure of the unit would have been particularly devastating to the KwaZulu-Natal town of Newcastle, where Amsa’s long steel facility plays a key role in the local economy and job market. Newcastle alone accounted for 34% (more than R10bn) of Amsa’s procurement in 2023.
The government made its intentions to save Amsa’s long steel business clear last week when it said it would over the next year pick up the wage bill of the embattled unit.
This was after the temporary employee/employer relief scheme “approved funding of nearly R417m to sustain 2,982 employees over the next 12 months”, the department of trade, industry & competition said last week.
One of the conditions of the government’s support is that Amsa participate in the Productivity SA turnaround and recovery programme.
“These interventions are not designed to provide direct financial relief to Amsa but are part of a broader strategy to protect SA’s steel industry and ensure the preservation of its industrial capacity,” the department said.
Amsa thanked trade, industry & competition minister Parks Tau for his support, saying the government had committed to the deferral period “to expeditiously address the structural problems previously identified by the company (scrap Preferential Pricing System [and] export tax [as well as] tariff measures including safeguards, and [other things]) to put the longs business on a sustainable footing”.
The bailout of Amsa’s long steel business coincides with a wide-ranging review of SA’s steel tariff structure, which is likely to lead to a hike in custom duties to protect the local industry — a move some in the sector have said will lead to unintended consequences and eventually plunge the industry into crisis in the long run.
SA is rolling out its most extensive review of steel tariffs in more than 20 years in a process that might lead to an increase in customs duties and stringent import controls to protect the embattled local industry.
Tau has tasked the International Trade Administration Commission (Itac) with re-evaluating the country’s tariff framework.
The review might also lead to the introduction of import controls for certain products and the possible creation of rebate provisions for the duty-free importation of input products used in manufacturing activities.
Itac said emergency action was needed to protect SA’s steel industry from cheap imports flooding the market.
The review will zoom in on more than 600 codes, covering anything from primary to stainless steel.
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