ArcelorMittal CEO, Kobus Verster<\/em><\/figcaption><\/figure><\/div>\n\n\nAccording to Verster, the division\u2019s losses are driven by multiple factors. These include collapsing demand, high electricity costs, steep Transnet rail tariffs, poor rail performance, and the scrap metal policy. <\/p>\n\n\n\n
\u201cCommercially, we cannot support it any longer. We\u2019ve most probably done it for too long already,\u201d he said. <\/p>\n\n\n\n
\u201cDirectly, about 3,500 people would be affected. Indirectly, studies talk about 80,000 people. Downstream companies would close, some mines and quarries would shut, even kindergartens and B&Bs would be affected,\u201d Verster warned. <\/p>\n\n\n\n
\u201cThe government understands this social cost. It\u2019s much more than the cost of trying to resolve Newcastle\u2019s problems.\u201d<\/p>\n\n\n\n
Verster believes there is a way forward if all parties contribute to a fairer deal. He suggested reducing the scrap discount to 10%, cutting Transnet\u2019s iron ore tariff to Newcastle from $28 per tonne to $18, and lowering Eskom\u2019s costs.<\/p>\n\n\n\n
\u201cAll of those things can contribute up to the point where you can break even, and at some point, the volumes will solve the problem,\u201d he said.<\/p>\n\n\n\n
If the plant closes, ArcelorMittal will focus on its flat steel business, which Verster described as \u201csolid, with good product range and growth potential,\u201d and capable of being highly successful if not weighed down by losses in long steel. <\/p>\n\n\n\n
This would involve selling non-core assets, including Saldanha Steel, and investing the proceeds in core operations while cutting debt.<\/p>\n\n\n\n
Despite the challenges, Verster said the company is open to working with the government and the IDC, provided any plan is commercially viable. <\/p>\n\n\n\n
\u201cI represent three parties here: the shareholders, the company, and South Africa. Surely we will find a solution that can satisfy broad stakeholders,\u201d he said. <\/p>\n\n\n\n
\u201cShareholders have been open to looking at anything. They\u2019ve already put R5.5\u202fbillion into ArcelorMittal South Africa.\u201d <\/p>\n\n\n\n
\u201cHowever, we will not carry any further cash losses from Newcastle, because it will put the broader business at severe risk.\u201d<\/p>\n\n\n\n
He stressed that Newcastle\u2019s plight reflects a broader national economic crisis. \u201cThis is not an ArcelorMittal crisis or even a steel crisis. It\u2019s an economic crisis,\u201d he said. <\/p>\n\n\n\n
\u201cSmelters, ferrochrome and ferroalloy producers are shutting down due to electricity costs. We have all the raw materials here, but we can\u2019t produce competitively.\u201d<\/p>\n\n\n\n
Despite this, Verster remained cautiously optimistic about the company\u2019s future beyond the Newcastle plant. <\/p>\n\n\n\n
\u201cIf you can just exclude long steel, our core business can be a very successful growth business. At some point, we may see economic recovery. Medium- to long-term, there are good prospects for our core assets,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
This city could become a ghost town if one of South Africa’s major steel producers follows through with its threat to close the local steel plant.\u00a0<\/p>\n","protected":false},"author":92,"featured_media":834067,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[17543,18849,23297],"class_list":["post-834052","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-arcelormittal-south-africa-amsa","tag-biznews","tag-newcastle"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/834052","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=834052"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/834052\/revisions"}],"predecessor-version":[{"id":834196,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/834052\/revisions\/834196"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/834067"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=834052"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=834052"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=834052"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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