Important company cutting thousands of jobs in South Africa starting this week

ArcelorMittal South Africa (AMSA) has confirmed that it will proceed with closing its steel business after talks with the government failed, which means 3,500 South African jobs will be cut starting from the first week of March.

In January, AMSA announced that it had no choice but to wind down its Longs Business amid high energy costs, logistics constraints and an export scrap tax issue.

Although AMSA engaged with stakeholders throughout 2023 to find a solution, it said that the package of initiatives sought would not change the fundamentals of the structural problems.

Hoping to prevent the closure, the government facilitated a temporary reprieve in February through a R380 million loan from the state-owned Industrial Development Corporation, one of AMSA’s shareholders.

This provided a brief delay, allowing additional talks to take place and ensuring ongoing supply to downstream customers who rely on the company’s steel.

However, AMSA ultimately determined that no workable solutions had emerged, and at the end of February, it confirmed the final wind-down of the Longs Business.

“Regrettably, despite our best efforts, the parties involved have not been able to find timely solutions required to defer the wind-down of the Longs Business,” it said in a statement.

AMSA noted that this decision was made because key priorities were not being addressed, including scrap metal export taxes, port and rail inefficiencies, energy prices, and key trade measures.

“The scrap export tax remains in place, and the Preferential Pricing System for steel producers using Electric Arc Furnaces continues to unfairly advantage them.

“This is despite evidence from an independent Econometrix study on the damaging impact of the scrap Price Preference System and export tax,” AMSA said.

“No further progress has been made on improving Port and Rail efficiency. Transnet has declined to negotiate improved tariffs.

“Our application for a negotiated pricing agreement with Eskom has not been supported, and no progress has been made in this regard.

“Duties have not been implemented as anticipated, and provisional safeguards on Hot Rolled Coil have lapsed,” it added.

AMSA also noted that despite the company’s repeated submissions of evidence demonstrating the adverse impacts of current policies, the government has remained quiet.

“ArcelorMittal South Africa has received no formal communication from either the DTIC or National Treasury regarding the removal of the export tax or review of the Price Preference System.

“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 AMSA.

Given these challenges, AMSA’s board and management concluded that there was no alternative but to proceed with the shutdown.

The process will begin with the closure of the blast furnace in the first week of March, with the last steel from the longs business expected to be produced by late March or early April 2025.

The final wind-down into care and maintenance is scheduled for completion in the second quarter of 2025. The group said its decision would affect about 3,500 direct and indirect jobs.

Kobus Verster, AMSA’s chief executive officer, earlier this month said the Vereeniging and Newcastle mills, which indirectly support more than 100,000 jobs, supply between 350,000 tons and 400,000 tons of steel products that can’t currently be manufactured by any other companies in South Africa. 

The planned shutdown has alarmed other companies relying on the plants to supply steel to their operations because imports would be too costly and less reliable.

“The company is deeply disappointed that all our efforts over the last year have not translated into a sustainable solution, resulting in a significant negative impact on the economy,” Verster added.