Steel producer ArcelorMittal South Africa (AMSA) has deferred the wind-down of its long-products business by six months amid widespread concern regarding the detrimental impact of the closure on downstream industry and jobs and following consultations with government and other affected stakeholders during which several short-term interventions were agreed.
The deferral announcement was made despite AMSA reporting a R1.89-billion loss for 2023, which represented a dramatic decline from 2022, when earnings of R2.6-billion were reported.
AMSA announced its decision to close the longs business on November 28, citing several structural impediments to sustainable operations, and it again warned that these structural constraints had not been removed by some of the short-term interventions being pursued.
Nevertheless, the deferral was agreed following meetings with Trade, Industry and Competition Minister Ebrahim Patel, as well as Transnet, industry associations, organised labour, affected suppliers, community forums and downstream customers.
AMSA reported that several short-term initiatives were being progressed as a result of these consultations, including:
- engagements with Transnet leadership on improving port and rail service efficiencies to narrow the current cost gap;
- ongoing discussion with government on its scrap policy, which AMSA cited as a key reason for why its integrated mills could no longer compete, with government’s decision not to extend the export ban on steel scrap in December viewed as the first step in addressing what AMSA has described as an artificial cost advantage to lower quality scrap-based steel makers;
- the expediting of demand-side opportunities to improve capacity utilisation in the absence of economic growth, including import replacement as envisaged in the Steel Masterplan;
- ensuring the enforcement of trade protection measures;
- an agreement with key customers to longer-term volume commitments and localisation; and
- working with key suppliers, service providers and organised labour to reduce the cost structure of the longs business.
“The timing of the deferral is subject to these in-principle agreements being commercially and contractually concluded,” CEO Kobus Verster said.
The JSE-listed group was also applying for an additional working capital facility of up to R1-billion which could be used to support continued operations during the deferral period.