ArcelorMittal South Africa Postpones Long-Steel Plant Closure
ArcelorMittal South Africa has announced a one-month delay in the planned closure of its long-steel operations. The company had originally intended to begin winding down these loss-making operations by the end of January but has decided to defer the process until the end of February. This postponement is attributed to ongoing talks with the South African government, which is working with ArcelorMittal to explore potential solutions that might help salvage the struggling business.
Government Discussions and Requested Interventions
In a recent briefing, ArcelorMittal South Africa’s CEO, Kobus Verster, outlined the company’s appeals to the South African government. The steelmaker is seeking urgent measures to address the challenges facing its long-steel division. Key requests include reducing the high costs of electricity and rail logistics, as well as implementing stronger border protection to curb the influx of cheap steel imports, particularly from China. Verster emphasized the urgency of the situation, stating, "We were clear to say we are not going to carry any further losses."
One of the company’s main concerns is the ongoing practice of offering a discount on scrap metal to South African recycling mini-mills. ArcelorMittal argues that this creates an uneven playing field, placing its long-steel operations at a competitive disadvantage compared to smaller mills that benefit from the reduced pricing.
Financial Struggles and Losses in the Long-Steel Division
The long-steel division of ArcelorMittal South Africa has been hit hard by financial losses. In 2024, the division’s operational losses more than doubled, reaching R1.1 billion, compared to R600 million in 2023. The primary factors contributing to these losses include high energy and logistics costs, weak demand in the domestic market, and an increase in low-cost steel imports flooding the South African market, especially from China.
In an effort to stabilize the operations, ArcelorMittal South Africa secured a R380 million loan from the Industrial Development Corporation (IDC) of South Africa. The IDC is the second-largest shareholder in the company, after its parent company, ArcelorMittal. This financial support is intended to provide some breathing room for the troubled long-steel business as the company seeks a path forward.
Wider Financial Losses for ArcelorMittal South Africa
The financial woes of ArcelorMittal South Africa are not limited to the long-steel division. The company reported a headline loss of R5.1 billion for the year ending December 31, 2024, marking a significant increase from the R1.89 billion loss recorded in 2023. This surge in losses is largely attributed to the underperformance of the long-steel operations, which are struggling amid soft domestic demand, elevated energy and logistics costs, and the pressure from cheap steel imports.
Impact on the South African Steel Industry and Economy
The potential shutdown of ArcelorMittal South Africa’s long-steel operations would have far-reaching implications for both the steel industry and the South African economy as a whole. The Newcastle and Vereeniging plants, which form the backbone of these operations, play a crucial role in supplying long-steel products used in construction, infrastructure development, and various industrial sectors. A closure would create a significant gap in the market, potentially disrupting the supply chain for these key sectors.
The South African government has expressed concern about the possible shutdowns, recognizing the importance of maintaining domestic steel production capacity. Trade, Industry, and Competition Minister Ebrahim Patel has been actively involved in discussions with ArcelorMittal to find ways to avoid the closure of the long-steel division, given the sector's importance to the economy.
Next Steps and Anticipated Outcomes
ArcelorMittal South Africa has committed to providing an update on the outcome of its ongoing discussions with the government by the end of February. The company has made it clear that it cannot continue absorbing further losses and is pushing for swift government intervention to address the issues affecting its long-steel operations.
The next steps will be crucial in determining the future of the long-steel division and its role in South Africa’s steel industry. If the government’s interventions are successful, the company may be able to reverse the declining financial trajectory and continue contributing to the domestic steel market. However, without decisive action, ArcelorMittal South Africa may have to move forward with its original plans for the closure of its long-steel plant operations.
