ArcelorMittal South Africa, the leading steel producer in the country, is facing significant challenges with its long steel business, prompting urgent calls for government intervention. In a voluntary trading update on October 16, 2024, AMSA highlighted that while the government has made commitments to address various issues, such as the removal of the export tax on scrap metal and resetting the price preference system, these measures are not enough to ensure the sustainability of its operations. The company initially announced plans to close the long steel division but later decided to keep it running to explore potential solutions.
The update from AMSA acknowledged the ongoing engagement with key stakeholders, including the government and the State-owned logistics company Transnet. While progress has been made, it has not met AMSA’s expectations, and the company is pressing for faster action. Minister of Trade, Industry, and Competition Parks Tau has recognized the urgency of revitalizing the steel industry, emphasizing its importance for South Africa's industrialization goals. However, AMSA believes that without immediate and effective measures, the future of its long steel business is jeopardized.
AMSA has pointed out specific issues requiring urgent attention, including the reduction of the export tax on scrap metal to zero, proper resetting of the PPS, and the implementation of trade measures. The steel producer is also advocating for lower electricity and logistics costs, which currently exceed global competitors’ rates. These adjustments are crucial not only for AMSA's long steel operations but also for the broader steel industry in South Africa.
The potential closure of AMSA’s long steel business could have severe repercussions for the local economy. The company warns of direct and indirect job losses, a surge in imports, and a significant reduction in local manufacturing capabilities. This scenario would adversely affect communities dependent on AMSA for employment and economic stability. Furthermore, the loss of this division could undermine the government’s goals for industrialization and economic growth.
In the context of South Africa’s economic recovery, a viable primary steel industry is essential. AMSA emphasizes that the long steel business could contribute significantly to national objectives, including job creation and infrastructure development. Moreover, it could play a pivotal role in achieving the government’s decarbonization targets through innovative and greener steel production methods.
Despite these challenges, AMSA’s management is committed to assessing the viability of its long steel operations continually. However, the recent trading update revealed a decline in AMSA's share price by over 12% on the Johannesburg Stock Exchange, reflecting investor concerns about the future of the long steel business. The company’s future earnings trends are likely to be influenced by the government's response to its urgent requests for intervention.
As the situation unfolds, AMSA remains hopeful that collaborative efforts with government and industry stakeholders will yield the necessary support to ensure the survival and sustainability of its long steel operations. The call for swift action highlights the critical role of steel production in South Africa's economy and its broader implications for industrial growth and employment.
