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The Citizen
14-07-2025
- Business
- The Citizen
ArcelorMittal warns it might close without urgent solution to challenges
This means that 3 500 jobs at ArcelorMittal in Newcastle and Vanderbijlpark can be lost again, as well as 293 754 direct and indirect jobs. ArcelorMittal warns in a Sens announcement that it might have to begin preparing to close down its long steel business long before the end of September if there is no urgent solution to the problems causing the closure. The steelmaker announced on 31 March that the decision to wind down long steel business has been deferred for at least six months to 30 September 2025 enabled by a facility the Industrial Development Corporation of South Africa (IDC) provided of R1 683 million. The facility now has been fully drawn, enabling the long business to continue operating and funding its working capital and associated financial needs for the third quarter of 2025. During the deferral period the objectives were to advance the normalisation of structural impediments, improve the sustainability and viability of the longs business, while sustaining jobs and manufacturing supply chains in South Africa. ALSO READ: IDC saves ArcelorMittal days before furnaces switched off Main impediments for ArcelorMittal long steel business According to the ArcelorMittal Sens statement, the main structural impediments highlighted for several years are: The structural distortion created by the Preferential Pricing System and export tax on ferrous scrap in favour of scrap-based steelmakers to the disadvantage of integrated steelmakers, such as ArcelorMittal South Africa. Weak domestic demand and the lack of growth projects for steel. Insufficient import protection and the continued circumvention of existing tariff protections by local companies without prosecution. Poor rail service performance and associated high, globally uncompetitive and unaffordable tariffs. Unaffordable and globally uncompetitive electricity tariffs. ArcelorMittal says regrettably limited progress was made until now to tackle the major structural impediments, with high imports continuing to flood the domestic market. 'Transnet's rail performance also deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional cost being borne by the company.' The steelmaker says it has been exploring various strategic options while the IDC simultaneously conducted its due diligence into the company during the deferral period. 'Government has been pursuing structural interventions with significant effort and is still continuing. 'The longs business, as we said before, will only be able to continue with financial support as the company cannot bear any further financial risk associated with its continued operations after the deferral period. 'Therefore, unless a solution is implemented timeously and to ensure the orderly closure of the longs business as soon as possible, ArcelorMittal may have no option but to take certain operational steps to prepare for the wind down process before 30 September 2025. 'However, ArcelorMittal's longs business will continue to trade until the end of September to meet its commitments to its customers.' ALSO READ: ArcelorMittal closing down long-steel works, cutting about 3 500 jobs Downturn in steel industry also problem for ArcelorMittal ArcelorMittal also says the global cyclical downturn in the steel industry has continued for almost two years, which is longer than the norm. 'Compared to the same period in 2024, global crude steel production reduced by 1.3% from January to May 2025, according to World Steel Association.' In South Africa, gross domestic product (GDP) growth expectations were reduced to no more than 0.7% for 2025, with all sectors except agriculture contributing to the weaker outlook that resulted in tough trading conditions in key steel consuming sectors, such as construction, automotive, mining, fabrication and energy and transport. Apparent steel consumption in South Africa for the first half of 2025 is expected to be marginally lower year-on-year, with a high share of demand supplied by imports, estimated at around 37% share of local consumption. Sales volumes are expected to be approximately 10% down compared to the first half of 2024. Apart from lower demand, the sales volumes for flat steel products continue to be affected by the high import levels, while long steel product sales reflected the uncertainty around its continuation. ArcelorMittal also points out that the risk of uncontrolled blast furnace stops arose twice during the past six months due to major rail service interruptions due to an unprecedent spate of cable theft and locomotive failures. Additional unplanned road transport had to be deployed, resulting in higher direct, operational and handling costs of R317 million for the current period. ALSO READ: Concern about SA steel industry: Trump's tariffs and ArcelorMittal closure looming Steel industry expressed disillusionment – ArcelorMittal The steel and manufacturing industry, represented by various industry associations, appeared before the portfolio committee responsible for trade, industry and competition on 4 June. The industry expressed general disillusionment with policy developments and dissatisfaction with the continued decline of the steel sector, which is creating a challenging business and investment climate in South Africa. The steelmaker says the rapid increase of imports (notably from China, Indonesia and Vietnam) took the industry by surprise, reaching levels described by the South African Iron and Steel Institute as 'unacceptable'. Imports now represent more than 35% of apparent steel consumption and significantly undermines domestic supply. The industry called for the urgent imposition of definitive actions from the ongoing tariff reviews, along with amending the ill-conceived and ill-implemented Preferential Pricing System and the associated export tax regime relating to scrap prices. 'Structural demand issues, fragmented policy implementation, ceaseless electricity cost increases and the crippled rail performance, pose significant challenges to the South African steel and manufacturing industry. 'While there has been unprecedented action by governments around the world to protect their industries, with expedited protective tariff implementation and strong localisation programmes, support for the South African steel industry is required and this cannot happen quickly enough.' ALSO READ: Did government policy kill SA's steel industry? ArcelorMittal believes steel industry can thrive if government acts ArcelorMittal says South Africa can maintain a thriving steel industry, but government must act decisively to ensure that commitments translate into real supportive action. The immediate two priorities are, firstly, ensuring that the high levels of imports are dramatically reduced and secondly, enabling a vibrant level of steel demand that is accessible to all South African steel producers. ArcelorMittal says it will provide further updates in its announcement of its financial results for the six months ended 30 June 2025, on 31 July.
IOL News
14-07-2025
- Business
- IOL News
ArcelorMittal South Africa warns early steps may be required to wind down Longs business
ArcelorMittal South Africa said negotiations to shore up the business environment of its Long Business, principally to address various government infrastructure and policy failures, had come to nought so far through a six-month deferral period before it closes its Long Business. Image: Anamul Rezwan/Pexels ArcelorMittal South Africa (Amsa), which continues to pay heavy prices for government infrastructure and policy failures, may be left with no option but to prepare for the wind down process of its Longs Business, well in advance of September 30, 2025. This announcement, and despite a forecast of slightly reduced headline earnings losses for the six months to June 30, caused the share price to slump 7.89% to 105 cents on the JSE by Monday afternoon - considering that three years ago the price traded above R5 a share. On March 31, Amsa announced its decision to wind down the Long Steel Business had been deferred for at least 6 months to September 30 after it received a R1.68 billion funding facility from the Industrial Development Corporation (IDC). The facility was now fully drawn and would enable the Longs Business to operate through the third quarter. The business would also continue to trade until the end of September, having regard to the commitments made to its customers. However, so far, 'limited' progress was made to redress major structural issues, which was the main aim of the deferral period. 'High imports continue to flood into the domestic market. Transnet's rail performance deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional costs being borne by the company,' Amsa's directors said. Video Player is loading. 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Advertisement Next Stay Close ✕ The challenges that have faced the group over several years include structural distortions created by the Preferential Pricing System (PPS) and export tax on ferrous scrap in favour of scrap-based steel makers to the disadvantage of integrated steel makers, weak domestic demand, and the lack of growth projects for steel. There is also insufficient import protection and continued circumvention of tariff protections by local companies, without prosecution. The rail service performance remained poor with associated, high, globally uncompetitive and unaffordable tariffs. In addition, electricity tariffs were unaffordable and globally uncompetitive, they said. On two occasions in the past six months, the risk of uncontrolled blast furnace stops arose due to major rail service interruptions, on account of an "unprecedented spate of cable theft and locomotive failures." 'Additional unplanned road transport had to be deployed, resulting in higher direct, operational and handling costs of R317 million for the period,' the group's directors said. Since March, Amsa had been exploring options to address these challenges, while the IDC conducted due diligence into the company, and the government had been pursuing structural interventions, all of which were still ongoing, they said. 'Unless a solution is implemented timeously, and to ensure the orderly closure of the Longs Business as soon as possible after the deferral period, ArcelorMittal South Africa may have no option but to take certain operational steps to prepare for the wind down process well in advance of September 30, 2025.' Meanwhile, the group predicted that earnings per share would improve 15% to a loss of between R0.82 and R0.93 a share for the six months to June 30, from a loss of R1.09 per share at the same time last year. The full interim results are expected to be released on July 31. The group said a global cyclical downturn in the steel industry has continued now for almost two years, which is longer than the norm. Global crude steel production fell by 1.3% from January to May 2025, compared to the same period in 2024, according to the World Steel Association. In South Africa, all sectors except agriculture contributed to a weaker annual GDP outlook, with tough trading conditions in key steel-consuming sectors: construction, automotive, mining, fabrication, and energy and transport. First half sales volumes were expected to be about 10% down compared to 2024's first half. Apart from lower demand, sales volumes for flat steel products continued to be affected by high import levels, whilst long steel product sales reflected the uncertainty around its continuation. Net realised prices in rand terms were anticipated to be more than 5% lower, impacted in part by a stronger rand-dollar exchange rate. The steel and manufacturing industry, represented by various industry associations, appeared before the portfolio committee responsible for trade, industry and competition on June 4, 2025. The industry expressed disillusionment with policy developments and dissatisfaction with the continued decline of the steel sector, which is creating a challenging business and investment climate in South Africa. Imports now represented more than 35% of apparent steel consumption and significantly undermined domestic supply. Visit:
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.
