Axe falls on 3,500 jobs in South Africa

ArcelorMittal South Africa (AMSA) is set to close its Longs Business amid a weak financial performance, with thousands of direct and indirect jobs affected.

In November 2023, the company said that it planned to put its Longs Business into care and maintenance amid prolonged weak economic conditions, logistics and energy challenges.

The group also raised the unsustainable competition from low-cost imports.

However, stakeholders showed concerns about the potential loss of high-quality local steel production and the socioeconomic impacts on Newcastle and its surrounding communities.

The group, while not seeking subsidies, engaged with the government and stakeholders to explore alternatives for sustaining the Longs Business.

The company requested policy support to address structural constraints affecting the steel sector.

Efforts to delay the closure of the Longs Business through targeted short- and longer-term interventions continued during 2024, with operations extended to provide time for securing solutions.

“While the company appreciates the support from government and other stakeholders, and having made some progress with the identified initiatives, these have not been adequate,” said AMSA.

“Persistent high logistics and energy costs, combined with insufficient policy interventions, especially those policy decisions made some time ago (mainly, PPS and Export Scrap tax) has left the Longs Business unsustainable.”

“Despite all efforts, unfortunately, the package of initiatives sought has not materialised to a level that will change the fundamentals of the structural problems the company has been experiencing in the Longs Business.”

The group said that it was faced with no alternative but to proceed with the winding down of
the Longs Business.

With global market conditions for steel worsening in Q4 2024, the group believes that it can no longer delay the winding down of the Longs Business, as this could affect the company’s sustainability.

The wind-down will impact all Long steel plants, such as Newcastle Works, Vereeniging Works, and the rail and structures subsidiary, AMRAS.

That said, Newcastle’s coke-making operations will continue, even if they are scaled back to reflect reduced demand.

Regarding jobs, the company will commence a consultation process under Section 189(3) of the Labour Relations Act.

A notice in terms of the Labour Relations Act will also be issued shortly and a large-scale retrenchment is contemplated.

The group said that the roughly 3,500 direct and indirect jobs may be affected by the closure, but the total number of retrenchments will depend on agreed alternatives and consultation outcomes.

Steel production is set to cease by late January 2025, with the wind-down of the remaining production processes completed in Q1 2025.

Discussions are also underway to re-align the R1 billion working capital facility secured in 2024 to support this transition.

“As a Company, we are disappointed that all our efforts over the last year have not translated into a sustainable solution,” said AMSA CEO Kobus Verster.

“The issues tabled for resolution sought to level the playing field against international and local competitors.”

“The issues raised outlined those factors that could have, and still can, firmly address the structural problems within the South African steel industry, especially for our Longs Business, but also within the Company, the South African steel industry and value chain.”

“We had hoped that matters would not have come to this conclusion, at a time when our country can ill afford job losses and the further erosion of industrial capacity.”

“Nevertheless, we are grateful to all stakeholders who have tried to assist, and we are particularly grateful to our employees who have remained dedicated and supportive during the last year.”

Financials

Due to the wind-down of the Longs Business and the contemplated large-scale retrenchment, the company is set to recognise asset impairment, wind down and severance charges of roughly R2.7 billion.

In a trading statement for the year ended 31 December 2024, the group said that earnings per share and headline earnings per share are set to drop by substantial amounts, despite the group already posting heavy losses in 2023:

• Earnings per share to decline from a loss of R3.52 per share in 2023 to a loss within a range of R5.48 and R6.21 loss per share in 2024 (representing a decrease of between 56% to 76%).

• Headline earnings per share to decline from an R1.70 loss per share in 2023 to a loss within a range of R4.06 and R4.41 loss per share for 2024 (representing a decrease of between 139% to 159%).

Read: Most expensive private schools in South Africa in 2025 – with one over R400,000 a year