ArcelorMittal South Africa (Amsa) may reassess some standalone assets within the long steel business with the potential to revive them.
Last month the country’s largest steel manufacturer announced it would be winding down its long-steel plants in Newcastle and Vereeniging, which could result in 3,500 employees losing their jobs and put a further 25,000 jobs in the steel value chain at risk.
The company has delayed the shutdown for a month for further talks with the government, which is mulling options to keep the business going and resuscitate a sector that has been ailing for decades.
ArcelorMittal received a R380m loan from the Industrial Development Corporation (IDC), which has a 6% stake in the company, to enable the fulfilment of the “higher-than-anticipated” outstanding order book — particularly for automotive and seamless tube customers. The IDC has previously injected R950m in the business.
Responding to a question from an analyst on whether there's a potential for speciality longs coming out of one of the plants, Amsa CEO Kobus Verster said “to the extent the wind-down continues, we will reassess some of the standalone assets on a plant-by-plant basis to see where there is life left in assets with a different input mix, and I think Amras Rail is a typical example of that potential”.
Business Times reported recently that the government is working on a R1bn bailout for Amsa. However, Verster said: “I'm not aware of that. There are multilevel discussions around structural issues, recapitalisation, funding of projects ... [but] there's no R1bn bailout discussed.”
The outcome of the discussion with the government is expected to be announced in the second half of February.
Verster said the South African steel industry was at a “critical juncture, facing unprecedented challenges” from global market dynamics and trade practices, as well as domestic policy issues.
“We are actively engaging with the government and key stakeholders to implement urgent interventions needed to address the decline in this strategic sector and reposition it for growth.”
He said electricity and rail tariffs were “too expensive”, the level of safeguard protection versus other countries was “low and not policed adequately, scrap discount given to competitors is unfair and large, and steel demand is too low. We need to find something that collectively addresses the competitive disadvantage of the longs business”.
Actions by the South African government to support the industry and protect it against unfair trade and policy practices are vital
— Kobus Verster, Amsa CEO
Verster said many regions including Brazil, India, the US, the EU and those in Southeast Asia, which regard their steel industries as strategic, have rushed to protect their industries against unfair trade and policy practices. Near-record high China exports at subsidised-enabled low prices continue to be the catalyst for this trend. “South Africa’s response has been slow and insufficient,” he said.
Amsa, which wants to increase focus on the flat-steel plate business, reported a headline loss of R5.1bn for the year to December 2024 and an attributable loss of R5.8bn, reflecting the severe pressures facing the local steel industry. The attributable loss included R1.8bn in extraordinary charges relating to the wind-down and impairment of the longs business.
The company’s sales volumes decreased by 6%, or 136,000 tonnes, to 2.28-million tonnes compared to 2023. Domestic sales were down 8% at 1.75-million tonnes while exports increased 2% to 523,000 tonnes.
Verster said the steel industry was facing its greatest challenge since the financial crisis of 2008/09, as international steel-to-raw material price spreads remain under pressure and countries rush to protect their steel industries against unfair trade and policy practices.
However, he acknowledged that some of the domestic challenges were self-inflicted but are being addressed.
Verster does not anticipate meaningful improvement in the domestic steel market for the next six months. “Consequently, actions by the South African government to support the industry and protect it against unfair trade and policy practices are vital,” he said.
Globally, the World Steel Association expects a 1.2% increase in steel demand in 2025.
ArcelorMittal plans to redevelop its Thabazimbi Iron Ore Mine and resuscitate its Saldanha Works producing green directly reduced iron for export/greener steel.
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