Kobus Verster, CEO of loss-making ArcelorMittal South Africa (Amsa), the country’s only primary steel producer, has accused Transnet of abusing its market dominance to set rail tariffs that were unaffordable for his company.
As a result, Amsa had approached competition authorities to intervene as rising rail tariffs were taking a toll on the business. Transnet has denied this.
Amsa reported a R1bn loss for the half-year ended June 2025, saying it had grappled with electricity and rail disruption while steel imports squeezed both its volumes and its margins for the period.
Verster accused the rail operator of “abusing its position to overcharge us”. He said this was the reason ArcelorMittal decided to report Transnet to the Competition Commission.
Rail service and rail performance deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional cost being borne by the group.
— Amsa
Amsa said it had also been hit by major rail service interruptions due to cable theft and locomotive failures.
“Rail service and rail performance deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional cost being borne by the group,” it said.
The company said it had been unable to receive enough iron ore via rail, posing a safety and operational risk at its blast furnaces. This had forced it to secure road transpor, at a high cost.
“On two occasions during the past six months, the risk of uncontrolled blast furnace stops arose due to major rail service interruptions. Additional unplanned road transport had to be deployed, resulting in higher direct, operational, and handling costs of some R317m from R127m in the first half of 2024.”
Transnet Freight Rail said it had held discussions with Amsa on the best solutions to improve rail efficiency and minimise costs. It denied it was overcharging the steelmaker, saying its tariffs were “cost-reflective and applied uniformly to all customers”.
“We do not leverage our market position to impose tariffs arbitrarily. We have endeavoured to keep our tariffs in line with, and often below, the rate of inflation,” the rail provider said.
The Competition Commission told Business Times on Friday it was not contemplating a market inquiry into rail services at this stage. It noted that the department of trade, industry & competition (DTIC) had issued block exemption regulations to address some of the challenges faced in the provision of rail and port services in South Africa.
“Further, in December 2024, the transport department published the Rail Network Statement, which sets out measures to be implemented to address rail challenges, including measures to improve efficiencies and to facilitate access to the rail network.”
The commission said ArcelorMittal had also provided comments on the draft terms of reference for the Steel Market Inquiry, highlighting how the challenges in rail have had an impact on the competitiveness of the steel industry, and proposing that the market inquiry also look into the effects of inefficiencies in the provision of rail.
“Amsa’s comments in this regard will be considered.”
The company’s long steel business remains on a knife-edge, as trading conditions remain tough, despite a R3.5bn loan from the Industrial Development Corporation (IDC) in April. This allowed it to defer the closure of its troubled long steel business to September.
It has warned that in the absence of a sustainable solution for the long steel business, it would proceed with the September winddown.
ArcelorMittal said its strategy for the next five years will focus on enhancing balance sheet resilience, and prioritising the flat steel business. “This will be achieved through targeted improvements in reliability, product quality, cost efficiency, and customer service.”
Depending on what the IDC decides on a further cash injection, it would sell some of its flat steel assets, including Saldanha Steel, the Tubular Mill, the Vereeniging Bar Mill, ArcelorMittal Rail and Structures, and other non-core properties.
“Proceeds will be applied to strengthen the balance sheet and to reduce debt, and will be reinvested into the flats business to support improvements in earnings and cash flow in order to preserve core business continuity.”
Verster said there were interested parties looking at acquiring some of the long steel assets, but the decision on these sales will be made once the IDC had conducted due diligence. “We have interested parties looking at some of the assets, but we have purposefully delayed that in the understanding that we’re trying to find a solution with the IDC.
“Once that is positive, then disposal is not an option. If we can’t get a sustainable solution, then we have to expedite that, and we will have to develop a process to enter the market.”
He said for South Africa to have a vibrant steel industry, steel demand needs to be accessible to local steel producers, and imports have to be dramatically reduced.
Steel imports of primarily hot rolled coil, galvanised sheet, plates and billet increased to 767,000 tons in the first half of 2025, or 37% of South Africa’s steel consumption, the company said.
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