Latest news with #Amsa
The Citizen
08-05-2025
- Business
- The Citizen
Tariff lifeline for ArcelorMittal means higher prices for customers
'Safeguard' duties of 13% were imposed at the start of May to shield Amsa's hot-rolled steel products from international competition. Itac and the IDC both fall under the dtic. In setting steel tariffs, Itac is accused of cossetting its own portfolio. Picture: Supplied The International Trade Administration Commission of SA (Itac) has announced temporary 'safeguard' duties on some hot-rolled steel products produced by ArcelorMittal SA (Amsa). The 13% safeguard duties kicked off on 2 May for a year, reducing to 11% and 9% over the subsequent two years, and then to zero. The safeguard duty is on top of the 10% customs duty already in place, bringing the import protection to 23% in the first year. The total duties on hot-rolled products fall to 21% from May 2026 and 19% from May 2027. The safeguard duties were gazetted last week and are seen as a lifeline for embattled steel producer Amsa, which has been undercut by low-cost imports from China. 'There's nothing worse than a temporary tariff,' comments Neels van Niekerk, executive chair of International Steel Fabricators. Hot-rolled steel is used in construction, manufacturing, and engineering and is a key input in mining equipment, water tanks, gas cylinders, and truck trailers. ALSO READ: IDC saves ArcelorMittal days before furnaces switched off 'Necessary, not punitive' – Itac 'Safeguard measures are designed to address unforeseen surges in imports that threaten or cause serious injury to a domestic industry,' says Itac. 'While these measures are not punitive, they are necessary to ensure fair trade conditions and protect local industries from being overwhelmed by excessive foreign competition.' Imports now account for about a third of local steel consumption, with Amsa's net realised prices falling to levels last seen in 2015. This, and Amsa's galloping transport and electricity bill – up 14% to R3.2 billion in 2024 – contributed to its decision to wind down its long steel mills in Newcastle and Vereeniging. ALSO READ: Government still talking to ArcelorMittal while Seifsa identifies challenges Perspective 'Effectively, what this means is that customers can expect to pay 13% more for hot-rolled steel products,' says Gerhard Papenfus, CEO of the National Employers Association of SA (Neasa). 'Amsa asked for additional protection and they got it. What South Africa needs right now is steel of the best possible quality, wherever we can get it. 'If we have to import, then so be it. We cannot continue to support industries that cannot compete without more and more protection.' The Industrial Development Corporation (IDC) provided R1 billion in short-term lending to Amsa, alongside another R380 million loan and an additional R1.68 billion shareholders loan in the hopes of extending the life of its longs business. However, that may not be enough to rescue Amsa. 'For Amsa Newcastle to survive, it will require a lot more than money,' says Donald MacKay, CEO of XA Global Trade Advisors. 'If the problems they identified are not addressed, they will burn through the money from the IDC and we will be back here [for more money].' ALSO READ: Concern about SA steel industry: Trump's tariffs and ArcelorMittal closure looming Market distortion The steel market is further distorted by the IDC's R14 billion exposure to mini-mills, which use scrap metal as feedstock and compete with Amsa in certain products. These mills enjoy a substantial pricing advantage through the Preferential Pricing System (PPS), which allows them to secure scrap at 30-50% discounts to market prices. This means scrap can only be exported after being offered to local mills at a 30% discount. This is in effect a ban on scrap exports and a R8.5 billion annual subsidy to mini mills – resulting in an estimated 50 000 scrap collectors in SA being forced out of business. Scrap dealers tell Moneyweb that removing the PPS would allow the 300 000 scrap collectors in SA to earn a decent living rather than transferring this benefit to the mills. This benefit comes on top of a 20% export duty on scrap. Mark Fine, head of the Scrap Recycling Coalition, an informal grouping of 48 scrap metal dealers, says these mills produce billets, which are little more than scrap 2.0 and a way to circumvent export restrictions on scrap. ALSO READ: Did government policy kill SA's steel industry? Mini-mills say even with the PPS in place, there remains a shortage of scrap in SA, though Fine says this is disproven by the fact that these mills exported more than 400 000 tons of recycled scrap in billet form in the first few months of 2025. Itac's steel tariff policy has been criticised as self-serving, given the IDC's massive exposure to these mini-mills, some of which are in business rescue. Itac and the IDC both fall under the Department of Trade, Industry and Competition (dtic). In setting steel tariffs, Itac is accused of cossetting its own portfolio. 'If government demand increases, it will be met by product from the mini mills, because the subsidies give them an ability to keep their prices low. Amsa on the other hand, has to pay back the IDC loan, which will be burnt through even quicker this time, given the steep discount they are providing on long products to simply stay in the game. ALSO READ: Steel producers slam ArcelorMittal's call to end scrap export tax PPS 'a massive scam' Fine says the PPS is a legacy of former trade and industry minister Ebrahim Patel and has been fatal for the industry. 'These mini-mills are mostly foreign-owned and they add very little value in the steel chain. Yet they receive this massive transfer of wealth each year, claiming that without the PPS South Africa would face a shortage of scrap. 'That's an absolute lie. These mini mills produce what I call scrap 2.0 which they can then export and make nice profits for themselves because the export restrictions don't apply. This is a massive scam.' Nampak is reckoned to be losing R115 million a year due to its inability to earn fair market value on its ferrous scrap. ALSO READ: Cheap IDC funding 'placing the complete steel market at risk' And Transnet – the country's largest generator of scrap – is reckoned to lose R40-R50 million a month due to the PPS. That does not count scrap from automotive producers such as VW and Toyota. Tami Didiza, manager for stakeholder management and communications at Amsa, says a number of these companies have been unable to operate successfully and could have closed had the current dtic policies of scrap intervention through the PPS, Scrap Export Tax and an export ban (which lapsed in 2023) not saved them over the last five years. 'The government intervention to allow a deferral of the wind down of the Amsa longs business provides an opportunity for the fundamental structural issues facing the steel industry to be addressed, and to place it on a sustainable path by removing the market distortions that have been created,' says Didiza. This article was republished from Moneyweb. Read the original here.
IOL News
07-05-2025
- Business
- IOL News
Government pushes for Arcelormittal South Africa business sell-off amid R1. 2bn bailout
The government is pushing for the sale of components of Arcelormittal South Africa (Amsa) business to identified buyers following a substantial R1.2 billion bailout from the Industrial Development Corporation (IDC). Image: SUPPLIED Banele Ginidza The Minister of Trade, Industry and Competition (the dtic), Parks Tau, said on Tuesday that the government was pushing for the sale of components of Arcelormittal South Africa (Amsa) business to identified buyers following a substantial R1.2 billion bailout from the Industrial Development Corporation (IDC). Answering an onslaught of questions from members of the portfolio committee on trade and industry in Parliament, Tau explained the scenario facing the automotive sector, which has expressed concerns over Amsa's troubles. Tau said the automotive sector had individually and through the Automotive Business Council (Naamsa) indicated that with Amsa doing defunct, the industry would have to follow suit as importing long steel would not be viable. "We can't as a department, even the IDC as a minority shareholder with 8.2% shareholding, go out to the market and say the company is for sale. It is inappropriate and illegal," Tau said. "We have asked Amsa to test the market appetite for the whole of the company or different components. Sometimes people have different technologies for different parts. At this point, our intervention is to share the information." Despite his recent absence from deliberations over the past two weeks, Tau reassured members that discussions regarding potential sales were ongoing, though no clear announcements can yet be made regarding the path forward for Amsa. In a bid to facilitate the possible divestment of non-core land assets, investment advisors Investec have been enlisted, even as State efforts remain focused on preserving the long steel business, notably ruling out the sale of the pivotal long steel plant in Newcastle. Tau said the option of building separate capacity for long steel products was also ruled out as the required period ranged between 18 to 24 months, which would have still crippled the automotive and other Amsa main clientele. In its briefing on the implementation of the Steel and Metal Fabrication Masterplan, the dtic said there has been a loss of 2 290 jobs from September to December 2024. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ It said the Organisation for Economic Co-operation and Development (OECD's) Clean Energy Finance and Investment Mobilisation (CEFIM) programme was finalising its South Africa Steel Decarbonisation pathways report based on an economic assessment of three selected low carbon technologies related to carbon capture, storage and use. "UNIDO (United Nations Industrial Development Organisation) as part of its Mitigation Action Facility (MAF) is finalising a €25 million fund to be managed by the IDC for the next five years to accelerate steel decarbonisation," said director general Simphiwe Hamilton, adding that a pipeline of projects from interested primary mills is being developed by the IDC. "The second round of assessments has been successful with SA being one of 7 countries selected to progress to the detailed feasibility phase." Addressing broader industry impacts, the Steel and Metal Fabrication Masterplan, which is in motion, anticipates active involvement in transmission development following the National Transmission Company of South Africa's (NTCSA) recent agreements with 19 local firms, valued at approximately R32 billion over eight years. "The process to be appointed to the EPC panel will be opened to the market annually around July each year, to enable other companies to participate. It is a move that reaffirms the country's commitment to improving its transmission grid capacity," Hamilton said. "This collaboration between the public and private sectors, was also through the efforts of the working group on the transmission development plan." The anticipated rise in demand for tower steel and line construction presents an additional avenue for local steel manufacturers, projecting a requirement for approximately 452 175 tons of steel over the next decade. "This would amount to about 3 800 tons per month when smoothed out over 120 months;well within the capacity of local manufacturers," he said. "The steel product demand mix for local transmission towers is approximately 90% light, medium and heavy sections and 10% plate products. Minimills are capable ofsupplying some components; excluding the heavy sections." BUSINESS REPORT
Mail & Guardian
04-05-2025
- Business
- Mail & Guardian
Trade commission protects legacy steel giant from competitive imports
The International Trade Administration Commission of South Africa (Itac) has imposed a 9% tariff on imported hot-rolled steel to protect domestic producers, in particular the legacy steelmaker ArcelorMittal South Africa (Amsa). The decision follows an application by the South African Iron and Steel Institute (Saisi) on behalf of Amsa for remedial action. The tariff applies to all countries except listed developing countries which collectively account for less than 10% of imports. Itac announced the final determination on Friday, citing a 105% surge in steel imports between 2020 and 2023—almost half of which originated from China, 22% from the E.U and 6.7% from the U.S—as the Saisi requested protection against a flood of imports, which Itac agreed to by imposing the annual 9% tariff on hot-rolled steel for the next three years. Hot-rolled steel, which is processed above 972°C for strength and flexibility, is used in mining and earth-moving equipment, pipes, tubes and water tanks. Domestic merchants largely import this product due to pricing for machinery and construction equipment. In its investigation, Itac found that 'unforeseen developments' such as global oversupply had harmed producers in the Southern African Customs Union (Sacu), which comprises South Africa, Namibia, Botswana, Lesotho and Eswatini. While the commission acknowledged that overwhelming competition in itself is not inherently unfair, it concluded there is a clear 'causal link' between the surge in imports and In its submission to the commission, the Botswana government reported that it had conducted a similar analysis between 2020 and 2024, which confirmed that imports had the same impact on its local industry. Critics argue instead that Amsa's outdated production methods and high prices make it uncompetitive in the current global market, thus necessitating protective measures. Once the continent's leading producer of steel products such as rods, bars and rails, Amsa has received three bailouts since 2024 amounting to R3-billion in an effort to stave off downsizing. In addition to the new bailout, the department of trade, industry and competition (dtic) previously imposed a 9% tariff on long steel and a 52% anti-dumping duty on steel imports at the behest of Amsa. Speaking to the Mail & Guardian, Itac commissioner Ayabonga Cawe said domestic production was in crisis and required urgent intervention. However, he added that local demand remains worryingly weak. According to the Steel and Engineering Industries Federation of Southern Africa (Seifsa), the country's per capita steel consumption dropped by 37% — from 92 kilograms in 2013 to just 67 kilograms in 2024 — far below the global average of 230 kilograms. 'We need a hybrid production model that accommodates both traditional iron ore beneficiation and modern electric arc furnaces that use scrap metal,' Cawe said. 'India is scrambling to import scrap, while we sit with both scrap metal and iron ore. There has been an effort to turn the country into a construction site, and we have to be honest it is taking very long to kick off.' National Employers' Association of South Africa chair Gerhard Papenfus said that the government's continued support for Amsa is 'just delaying the inevitable' and 'denying the reality' of the company's inability to compete. 'The bottom line is that the mill is uncompetitive and running on 50% production. That is why they want protection, lowered electricity prices and subsidies on iron ore,' said Papenfus, adding 'Everyone is paying to keep this old mill alive.' Following its announcement to shut down operations at its Newcastle and Vereeniging plants — Amsa maintains that it cannot delay the closures beyond August without further state support, including import duties on foreign steel and an end to subsidised scrap-based steelmaking. In February, Gauteng Premier Panyaza Lesufi announced that a BRICS partner will take over steel production after Amsa's wind down in Vereeniging, already investing R2.5 million to preserve 100 jobs. The International Development Corporation (IDC) and China's Hubei Iron and Steel Group (HBIS) signed a multi-phase R82.7-billion memorandum of understanding in September to establish a local low-cost iron and steel facility. The latest Amsa bailout includes a six-month due diligence review by the IDC, which will determine whether to increase its 7% stake or exit entirely. Asked about the review's objectives, IDC head of corporate affairs Tshepo Ramodibe told the M&G that the corporation 'can't pre-empt outcomes or the next course of action'. 'The due diligence will inform the nature and extent of our support to the business,' he said. 'Transitioning Amsa's processes to scrap-based steel production is one of the questions the review seeks to interrogate.' The company, Dtic spokesperson Yamkela Fanini added that Amsa remains the country's sole producer of hot-rolled and long steel products and that the 'While the government cannot dictate production technologies, decarbonisation and diversification are central to South Africa's industrial policy. This includes decarbonising steel production and promoting green methods for both flat and long steel,' Fanini said. Cawe acknowledged a persistent misalignment between upstream and downstream players in the steel industry — something that the government's While downstream manufacturers want to import cheaper and climate compliant steel to lower input costs, upstream producers such as Amsa want protection from international competition, creating uncertainty across the sector. Despite Amsa's determination to remain a central player, downstream industries increasingly favour competitive imports. In its report Seifsa said the metal industry, which accounts for 25.5% of the manufacturing sector, has not recovered since its 2007 peak. It contracted by 12.2% at the start of the Covid-19 pandemic and declined by a further 1.4% in 2024. The federation states the industry has shed over 200 000 jobs since the global recession from employing 570 000 in 2008 to a little over 360 000 in 2025 and continues to see an annual 0.7% decline in fixed capital investment. It warns that the prolonged weakness in production may become structural. Steel-related goods such as fabricated metals and machinery, accounting for 43% production, experienced a combined 15% decline in output last year. 'Post-Covid deterioration is most notable in capacity utilisation, with all steel subsectors operating below the optimal 85% level,' the federation said. Seifsa also noted a R188-billion trade deficit on steel imports from China, while South Africa's steel exports to China amounted to just R43-billion. On behalf of Amsa the steel institute argued that China's state-subsidised economy creates unfair advantages, flooding the global market and depressing domestic demand in emerging economies. 'Given the nature of the steel industry excess capacity in one region can potentially displace production in other regions, harming producers in those markets,' Saisi said in its submission to Itac. However, the UK government, submitting as a concerned party, expressed doubts about the commission's claim that unforeseen global developments directly harmed local producers. While the UK acknowledged that Chinese subsidies contribute to overcapacity, it said the commission failed to consider the full extent of local preference for cheaper foreign steel. Japan's Mills Steel Corporation also questioned the scope of the investigation, arguing that the data window of 2020 to 2023 shows a misleading increase trend narrative, as imports had declined pre-pandemic and fluctuated during the post-pandemic recovery period. The company argued Amsa The commission stressed that the 9% tariff will remain in place for 200 days to allow domestic producers time to adjust. It is yet to be seen if Amsa will improve its competitiveness and whether the country will ever rebuild its status as a construction hub given the government's continued support for the legacy steel giant.
IOL News
22-04-2025
- Business
- IOL News
ArcelorMittal South Africa defers long steel plant closure with R1.7bn government support
An ArcelorMittal steel foundry. The company is receiving a R1.68 billion bailout from government to keep it operational, pending other industrial protection measures still to be implemented. ArcelorMittal South Africa (Amsa) will defer the closure of its loss-making Long Steel plant to August 31 after getting a R1.68 billion injection from the state-owned Industrial Development Corporation (IDC), which will stave off the retrenchment of 3 500 workers and keep operations running for at least six months. In a statement on Monday, the steelmaker said as part of the agreement, Amsa has committed to the continued operation of the Long Steel business and retention of jobs during the deferral period and had also received a Temporary Employee Relief Scheme (TERS) grant to assist in funding employee costs, which will reduce the drawdown required against the IDC facility. "Based on engagements between the company and government, ArcelorMittal South Africa understands that a more market-related and less punitive Preferential Pricing System and export tax on scrap dispensation will be implemented soon, with safeguards imminent. These measures will help level the playing field in the steel industry to the benefit of the country," the company said. The company had asked for lower electricity and freight rail tariffs, the imposition of import duties, and the removal of a scrap metal export tax it says gives its competitors - recycling mini-mills - an unfair advantage. The closure of the long-steel operations, which produce fencing material, rail, rods, and bars used in the construction, mining, and manufacturing sectors, has been expected since November 2023. Amsa CEO Kobus Venter said while this arrangement represents a positive development, he emphasised that sustainable profitability remains the ultimate objective. "The next six months will be crucial in determining whether the Long Steel business can achieve the financial stability required for long-term viability. We are dedicated to this process and appreciate the support of all our partners in this endeavour," Venter said. The National Employers Association of South Africa (Neasa) said it was opposed to the Amsa bailout by the IDC as the company was not sustainable, with old mills. However, CEO Gerhard Papenfus said the continuing propping up of Amsa was at the expense of the downstream industry and taxpayers. "Amsa has received several bailouts in recent months. None of this is good for the downstream industry; it will only drive prices higher. There will be a time when AMSA exists with government funding, but has no customers because the downstream industry is crumbling," he said. Steel and Engineering Federation of Southern Africa (Seifsa) CEO, Lucio Trentini, said the move was welcome, though it was merely kicking the can down the road for a further six months. "This is a bit of light at the end of the tunnel but there is still a long road ahead. We can only be optimistic that the temporary reprieve will lead to a lasting solution," Trentini said. He said part of the gains were that some sectors, including auto manufacturing, had a six-month period to seek alternatives. "We cannot afford to lose Amsa; it is important, but it has to be viable and competitive. We cannot have a primary steel producer disappear, but a more positive outcome will have to be found," he said.
The Citizen
22-04-2025
- Business
- The Citizen
ArcelorMittal SA's perfect storm of woes
Surging electricity and transport costs, cheap imports, and state subsidies for competitors threaten the steel producer's longer-term future. The ArcelorMittal SA factory in Vanderbijlpark, Gauteng. Amsa also has a steel plant in Newcastle KZN. Picture: ArcelorMittal The decision by ArcelorMittal South Africa (Amsa) to wind down its long steel business in the face of cut-price imports from China has blown a R1.1 billion hole in its balance sheet, contributing to the R5.1 billion headline loss for the 2024 financial year. The R1.1 billion operating loss in its long steel business is nearly double the R600 million reported in 2023. Another blow to the income statement was the 209 000 tonnes in lost production due to blast furnaces being out of operation for several weeks. Amsa's troubles were aggravated by its crippling reliance on state-owned suppliers of energy and transport. It spent R3.2 billion buying electricity from Eskom in 2024, up 14% on 2023. Over the past decade, energy tariffs paid by Amsa have gone up 835%, while poor performance by Transnet Freight Rail resulted in lost production and sales, with rail tariffs outstripping inflation over the last three years. ALSO READ: IDC saves ArcelorMittal days before furnaces switched off Read more IDC saves ArcelorMittal days before furnaces switched off 'We continued to pay state-owned enterprises (SOEs) what we maintain are excessively high tariffs for rail and electricity,' says Amsa's annual report. Source: Amsa 2024 Annual Report Amsa hit the panic button last year when the scale of imports from China began to threaten the viability of its long business. It called on government to raise tariffs on steel imports to save SA's domestic steel production, and to review its subsidisation of scrap-based steel makers that compete with it. ALSO READ: Government still talking to ArcelorMittal while Seifsa identifies challenges Impairments The group's deteriorating cash position – aggravated by R2.7 billion in impairments in the long business over the last two years – was softened when the parent company increased its shareholder loan in Amsa to R5 billion from R3.7 billion. To further preserve cash, Amsa cut back on its capex by almost a third to R902 million. The Industrial Development Corporation (IDC), which is heavily invested in competing scrap mills, stumped up a R1 billion short-term loan for Amsa, another R380 million loan and an additional R1.68 billion shareholders' loan with the intention of extending the life of its longs business. Amsa has agreed to defer the winding down of its long steel mills, giving the IDC time to conduct due diligence on the best path forward for the company. Meanwhile the International Trade Administration Commission of South Africa (Itac), which monitors SA's tariff regime, is undertaking a massive review of steel tariffs which it expects to complete by June. Amsa will require recapitalisation and refocusing its business around the profitable flat steel markets. Despite the liquidity challenges, there is no threat to its going concern status. ALSO READ: Did government policy kill SA's steel industry? 'In the short term, we are doing everything we can to put our Flats business and market coke operations on a more sustainable footing,' says CEO Kobus Verster. 'It is indeed gratifying that our Longs business will continue to operate for at least a further six months. 'The global trade and tariff environment faces considerable uncertainty in the coming months, likely resulting in a new world trade order,' Verster adds. 'Current trade flows are characterised by large low-cost imports which are being addressed by almost all countries with the imposition of extraordinary measures.' Amsa chair Bonang Mohale says a scaled-down, focused Amsa will be able to make a meaningful contribution to economic growth and redistribution. The company's troubles have been exacerbated by a prolonged period of economic stagnation. 'As much as we have struggled to remain profitable in the recent past, the South African economy has barely limped along, GDP rarely growing by more than 2% per annum [apart from the post-Covid bounce back]. At the same time, the country's population has grown at a rate approximating the paltry increases in GDP. 'In real terms, South Africans' purchasing power has gone backwards and our unemployment rates are worse even than some countries that are at war or facing serious civil strife,' says Mohale. 'In our country, poverty and inequality are only getting worse.' Source: Amsa 2024 Annual Report ALSO READ: Newcastle to lose 37% of its jobs: Devastating consequences of ArcelorMittal closing Amsa's net assets are now R5 billion smaller than in 2022, and there may be further impairments to come. The chart above shows the percentage of apparent steel consumption has fallen about a third since 2000, while imports now account for 33.6% of local consumption. World steel production for 2024 dropped 0.9% on top of declines of 1.7% and 4% in 2023 and 2022. With a surge in exports out of China, net realised prices fell to levels last seen in 2015. This article was republished from Moneyweb. Read the original here.
