As the lifeblood of Newcastle and the surrounding towns, ArcelorMittal South Africa (AMSA) has faced numerous challenges recently.
Nevertheless, the company’s top brass assured a game plan for mitigating these challenges was in effect with numerous investments and developments set to see the various branches step out of their current slump.
In an exclusive interview with AMSA’s CEO, Kobus Verster, and Chief Strategy Officer and Acting Chief Financial Officer, Gavin Griffiths, the future of AMSA still holds great prosperity.
Beginning by discussing the current challenges, Griffiths explained a significant decline in the fourth quarter of 2022, which was indicative of the local steel market bottoming out. This was not forgetting the reality that over 100 million tonnes of steel were still set to leave China’s shores. However, on a positive note, Griffiths mentioned the potential stimulus for the local steel industry due to a steel manufacturing shutdown in China.
Furthermore, while Griffiths expressed hope for an increase in the local steel market, he did affirm that the robust performance of the automotive sector was a consistent winner for AMSA.
When looking at the Chinese steel market, Verster explained that there was a myth that Chinese products were cheaper and of subpar quality.
However, he noted this was not the case. He elaborated, saying that the Chinese steel industry provided products to their clientele’s needs and would provide the exact quality requested, with pricing set at competitive rates.
In combatting this, ArcelorMittal South Africa adhered to its steel master plan, he said, which would ensure that South Africa could comfortably compete with its Asian counterparts. Additionally, Verster emphasised AMSA’s commitment to improving its earnings via various strategies to mitigate challenges laid at the company’s feet such as Eskom‘s load shedding and Transnet‘s rail issues which plagued the company’s productivity.
Yet, when discussing the next six months and beyond, both Verster and Griffiths assured that AMSA and its Newcastle Works were heading in the right direction and the steel giant’s commitment to this could be seen in the sizeable investments being made into the Newcastle Works and its other branches. This could be noted with the company’s half a billion Rand investment in the relining of the blast furnace, extending its lifespan well into the future.
Moreover, despite the difficult economic conditions currently hanging around South Africa’s neck, Verster expressed optimism, saying, “It is a difficult economy, but there is light for Newcastle Works.” Whereby, in support of this, he further stated, “We have positive support from our main shareholder, who instructed me to make sure this place (Newcastle Works) succeeds.”
The CEO assured that while the location of Newcastle Works increased expenses, the company was actively seeking cost-effective measures to implement at the local branch to offset these costs.
Verster further explained that AMSA was conducting extensive research to attract additional investment and enhance its operations while lowering running costs and dealing with challenges like load shedding.
The CEO further mentioned that while Transnet had been an expensive option, AMSA may be heading towards partial privatisation, offering the steel manufacturer the opportunity to seek its choice of rail services, thereby bolstering the company’s logistics and production.
Newcastle Works General Manager Dietmar Schmidtke also pointed out that the company took extensive steps to protect its products when being transported on rail, which included the use of drones.
Addressing concerns about electricity and energy, Verster acknowledged the short-term risks brought about by Eskom’s continuous load shedding. However, he revealed the company’s progress with the 200 MV Solar Energy Plant in Vanderbijlpark, which would reduce AMSA’s grid dependence by 25%. The CEO went on to say that AMSA is also considering the use of wind energy in the Newcastle area as part of its decarbonisation plan, moving away from fossil fuels towards greener alternatives.
While acknowledging that Newcastle Works had work to do in becoming less dependent on state-owned enterprises like Transnet and Eskom, Verster emphasised the company’s determination to ensure smooth business operations and minimise the impact of issues brought about by these companies. However, he did clarify that the risks posed to business operations in Newcastle by both Transnet and Eskom were manageable.
Verster went on to highlight the Longs Optimisation Programme, launched in Newcastle, Vereeniging, Pretoria, and Emalahleni. The program focuses on optimising operations, improving mill efficiencies, enhancing customer profitability, streamlining logistics, and energy utilisation. The program also aims to achieve cost, volume, and mix improvements to attract investments. Notably, the production volumes of the Pretoria small section mill have been transferred to Newcastle Works.
Moreover, Newcastle Works has a strategy in place, where it has until 2026 to secure approximately 1.8 million tonnes of finalised steel products. This is to ensure productivity is enhanced, which will, in turn, have a knock-on effect on the company’s earnings and future growth.
Regarding the company’s continued contribution to the Newcastle community, Verster stated that AMSA provides 2,900 meals daily to less fortunate people and has sent over 700 individuals for training, with around 400 studying to become artisans and production workers.
He further expressed the company’s desire to scale up these training initiatives and mentioned that qualified individuals had a chance to be employed by AMSA, and the steel giant also encouraged its subcontractors to take the newly qualified learners into their fold to acquire further experience.
When taking a closer look at the company’s subcontractors, Verster highlighted that he did not foresee any substantial changes within the short or medium term, as the steel giant aligned itself with subcontractors who excelled in the industry to ensure AMSA could grow from strength to strength.
Looking forward, Verster declared his faith in both AMSA and its Newcastle Works, stating, “Newcastle does not only have a future, but it also has investment potential, and we need to look at ensuring it is not only sustainable but investable as well.”
As AMSA’s CEO and his team have faith in both AMSA and its Newcastle Works, readers are invited to share their thoughts on the matter in the comment section below.
