Steelmaker ArcelorMittal South Africa (AMSA) said it may close its long products business, which could result in the loss of 3,500 direct and contractor jobs at its Newcastle and Vereeniging sites.
The company, which is listed on the Johannesburg Stock Exchange, said in a statement that the potential resolution was triggered by structural issues beyond its control, including:
- Demand has fallen 20% to 4 million tonnes over the past seven years due to continued sluggish economic growth, limited infrastructure spending and project delays;
- Rising transport and logistics costs are exacerbated by rail traffic disruptions and rising energy prices; and
- The preferential scrap pricing system, the 20% export tariff and the recently implemented scrap export ban have resulted in a general advantage of scrap over iron ore, which gives electric arc furnaces an “artificial” competitive advantage over integrated plants in iron beneficiation. ore.
- Chief executive Kobus Verster said the decision by the board and management to consider winding down the long products business was taken after exhausting “all possible options” and was not “taken lightly” and would continue to move forward with a view to disposing of the remainder. on the track of “sustainable development”. Financial Basics”.
The company also acknowledged the potential negative impact on the regional and local economies where the factories are located, particularly the Newcastle site, which is a major source of economic activity and employment in the KwaZulu-Natal city.
The company said the liquidation will not include the Newcastle coke unit, which will continue to operate, producing metallurgical coke for use at the Vanderbijlpark plant and selling coke on the commercial market to the ferroalloys industry.
Under section 189(3) of the Industrial Relations Act, a consultation process will be initiated with the union and “every effort will be made to reduce the number of jobs affected”.
“The conclusions and number of affected entities will be determined as part of a detailed resolution plan currently being developed.
“Throughout the resolution process, ArcelorMittal South Africa will work with its customers and suppliers through an orderly and considered process to minimize disruption to its business.
“The company continues to work directly with the government.”
Meanwhile, AMSA’s losses for the year to June 30 were R448-million, a sharp deterioration compared with the same period in 2022, when it reported a profit of R3-billion.
The poor performance was due to dramatic load shedding during the period, which not only disrupted the group’s operations as Eskom issued 41 orders to cut electricity demand during the period, but also disrupted downstream demand as manufacturers withdrew production shifts.
The group has also been outspoken about the negative impact of the collapse of Transnet’s freight rail services, which has been particularly felt at the Newcastle plant because it is so far away from the source of raw materials.
