3,500 jobs back on the chopping block in South Africa
ArcelorMittal South Africa (AMSA) warns that government intervention is urgently needed to prevent potentially thousands of job losses in South Africa.
In November 2023, AMSA said that winding down its Longs Business was necessary amid a challenging steel environment characterised by low demand in all markets and pressure on prices.
Steel and Engineering Industries of Southern Africa (SEIFSA) said the closure would result in 3,500 job losses.
However, in early July 2024, the group said that its Long Business would continue to operate – on condition that urgent interventions took place.
“Despite progress being slower than anticipated and with some instances of disappointment, the Board and Management have decided that the Longs Business will continue to operate to allow an opportunity for the short, medium- and longer-term initiatives aimed at securing its sustainability to be fully explored,” said the group in July.
The group said that the key issues that needed to be addressed were removing the export tax on scrap, resetting the Price Preference System (PPS) mechanism at an appropriate level, implementing trade measures, and addressing logistics and energy costs.
The PPS is the export control guideline that applies to the pricing of the export of scape. It effectively applies a 30% discount to international scrap prices.
“We acknowledge that there has been support by the government and stakeholders to progress the issues,” said the group.
“The process to implement trade measures is progressing, although slower than anticipated. There has also been extensive engagement with Transnet in this regard.”
“Government has also engaged with the steel industry associations, notably the SEIFSA, regarding these issues and the steps needed to revive the steel industry and the economy.”
The Minister of Trade, Industry, and Competition Parks Tau has acknowledged the need for effective collaboration and urgent intervention to revive the economy. The steel industry is seen as a strategic sector that enables the national priority of industrialisation.
The group said that there is a need to act quickly, with the following issues needing to be addressed to ensure that the Longs Business can continue operating:
- Reduction of the export tax on scrap to zero.
- Resetting the PPS mechanism.
- Implementing trade measures.
- Addressing circumvention.
- Reduction in electricity prices to address the current over-charge relative to global
competitors.
- Reduction in rail and port prices on the same motivation as detailed for electricity.
The Company said that it has taken steps to avoid the closure of the Longs Business, which it said would have far-reaching effects, including direct and indirect job losses and a profound impact on national and local economies.
“However, if these issues are not addressed as urgent, it will only be a matter of time before the viability of the entire business will be at risk, and the Company will need to take steps to ensure that this does not happen.“
“A viable and sustainable primary steel industry has the potential to make a significant contribution to national priorities, including employment and the 3% economic growth target, infrastructure development, export-led growth with innovative (greener steel) opportunities and significant contribution to Government’s decarbonisation objectives.”
In a voluntary business update, the company also posted an EBITDA loss of R466 million for Q3, compared to a profit of R52 million in Q3 2023.
The group said the EBITDA loss was primarily driven by the Longs Business, which posted a R512 million loss.
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