An end of an era has descended upon ArcelorMittal South Africa. This follows the company’s decision to wind down its steel operations at Saldanha Works.
In a media release issued by ArcelorMittal South Africa, Kobus Verster, Chief Executive Officer of ArcelorMittal South Africa, explains the decision follows Saldanha incurring substantial losses and being unable to compete within the export markets.
Furthermore, ArcelorMittal explains the 2019 downturn in the world steel market has proven to be worse than initially anticipated.
International steel prices falling faster and steeper than raw material prices has resulted in substantial margin erosion. The company adds the global steel industry is also experiencing a challenging time with the global financial crisis.
“Locally, the situation is exacerbated by continued weak economic growth, especially in steel and steel-consuming sectors, with apparent steel consumption at a 10-year low,” the company explains in its statement.
Looking at various options to ensure the longer-term sustainability of the company, the board and management formally announced a strategic asset footprint review in September 2019.
The outcome of the first phase of the review is to wind down Saldanha’s steel operations, thereby curbing any further losses. The process will most likely be complete in the first quarter of 2020.
Due to the importance of Saldanha to the West Coast region, ArcelorMittal South Africa will make the effort to minimise the impact of this decision on its stakeholders, including the approximately 900 own and contractor employees who work at the operation.
The company explains the contractual domestic sales orders from Saldanha, will now be fulfilled from the Vanderbijlpark Works.
“While this has been a very difficult decision, particularly at a time when the country is struggling with unemployment and low growth, we believe that it is an absolutely necessary step to ensure the sustainability of our broader business,” says Verster.
With Saldanha winding down, it seems it isn’t the only plant which is facing difficulties.
According to the statement by ArcelorMittal, progress is being made with the next phase of the strategic asset footprint review.
This will focus on the Newcastle operations and certain of the long steel products rolling facilities with the objective of sustainably improving their structural cost position and service offering. Exploring the benefits of a concentrated operating footprint will be important during this phase of the review.
As Newcastle finds itself in the limelight, Verster assures AcelorMittal will continue to constructively engage with all key stakeholders. He claims the company is committed to working collaboratively with all role players to ensure the sustainability and success of the South African steel industry going forward.
