Government fails to save important South African company

ArcelorMittal South Africa (AMSA) will officially close its Longs Steel business despite extensive efforts by the government to find a solution.

AMSA’s decision to close its steel business was announced in 2024 amid severe struggles facing the group due to severe losses, but negotiations with stakeholders have delayed the decision.

In February 2025, shareholders were informed that the wind-down of the Longs Business was delayed by roughly one month following an interest-free R380 million loan from the IDC.

This was to ensure that the higher-than-anticipated book outstanding book order was fulfilled. It would also ensure that conversations with the government to find a solution could continue.

However, the parties have not been able to find the timely solutions required to defer winding down the business.

Of the four key reasons, a central issue is related to the scrap advantage over iron ore. The group said that the scrap export tax has not been removed.

It also said that the Preferential Pricing System, which gives steel producers using Electric Arc Furnaces an advantage, remains in place despite research showing the damaging impacts of the system and tax.

The group has also been hurt by port and rail inefficiencies, with Transnet declining to negotiate improved tariffs.

A further application to reduce energy prices could also not be reached, with its application not supported by Eskom, while no further progress has been made.

It also added that duties have not been implemented as anticipated, and the provisional safeguard on Hot Rolled Coil (HRC) has lapsed.

“The structural elements leading to the wind-down of the Longs Steel Business remain unaddressed despite extensive discussions,” said the group.

“Since early 2024, when negotiations began, these conditions have not merely remained static but have worsened. The situation has deteriorated significantly since our discussions began.”

The group said that electricity costs are set to increase by 12.74% from 1 April 2025, which further limits its competitive position in pricing.

The increased logistics costs and the lapsing crucial safeguards on Hot Rolled Coil have also left the industry incredibly vulnerable to the threat of import competition.

Despite the group’s repeated submissions showing the adverse impacts of current policies, there has been no communication from the government over the export tax or Price Preference System.

Thousands of jobs lost

“This continued policy inaction, combined with deteriorating cost structures, has accelerated the decline in operating conditions beyond what was initially assessed earlier this year,” said the group.

The company’s board and management said that the company has no option but to implement the final wind down of the Longs Business.

The final shutdown of the blast furnaces is expected to commence in the first week of March, with the last steel produced in late March/ early April 2025.

The final wind-down into care and maintenance will be fully implemented in the second quarter of 2025.

“The Company is disappointed that all our efforts over the last year have not translated into a
sustainable solution.”

The closures are expected to have severe ripple effects throughout the economy, with the loss of roughly 3,500 direct and indirect jobs.

Estimates show that a further 80,000 to 100,000 jobs could be lost as the speciality steel by the group is essential in other industrial sectors.

The community of Newcastle, KZN, is expected to be detrimentally impacted by the closure. Private school group Curro said that the closures in the steel industry would hurt its schools in its network.

“As difficult as these decisions are, it will allow the Flats Business to be better positioned to achieve sustainability,” said the group.