As a great deal of uncertainty continues to linger around the future of ArcelorMittal South Africa’s Newcastle Works and Vereeniging Works, there seems to have been some development within the company. This follows the steel giant releasing its annual report.
The company explained that with lacklustre economic growth and steel demand, AMSA’s sustainability has recently been brought into question.
“To remain sustainable, we need to produce and sell products reliably and at prices of a consistent quality that our customers expect. We also need to work hard to ensure our various licences to operate,” stated the company.
With this in mind, AMSA touched on its sales, highlighting that at 1.476 million tonnes, flat steel sales were 11% up on those of 2022; while long steel shipments rose by 13% to reach 936,000 tonnes.
“Most of this growth stemmed from a surge in exports but South African sales were also up 1.4%. The growth in domestic sales of flat products derived largely from the release of products and specifications developed, produced and marketed for specific market segments,” explained AMSA.
Additionally, during the course of 2023, AMSA said it enjoyed considerable success in replacing imported steel products. “Doing so had multiple benefits for ourselves and for the downstream which uses our steels to fabricate end products. Areas of success included the truck-and-trailer segment where, with our downstream partners, we were able to replace as much as half of the products previously imported – in the process safeguarding local jobs and investments,” explained the company.
The steel giant added that it also continued to make progress on obviating the need – which stemmed from post-Covid 19 supply-chain disruptions – for companies to flatten hot rolled coil for components, including angles, by supplying the required elements at scale.
AMSA further pointed out that capacity utilisation and overall plant reliability both improved in 2023, although performance was decidedly mixed quarter by quarter with much work remaining to be done at year-end.
“For the full year, Vanderbijlpark’s capacity utilisation stood at 60% and that of Newcastle at 55%, both up on the 53% and 42%, respectively, of the previous year,” stated the company.
When looking at plant reliability, AMSA explained that the costly interim repair of the blast furnace N5, undertaken in 2022, meant that ironmaking in Newcastle ran at near-optimal levels.
“At both Vanderbijlpark and Newcastle, stripped of the effects of forced shutdowns, blast furnace performance was exceptional, with costs of USD390/tonne being achieved and sustained for considerable periods. Informing this performance were improvements in fuel rates and DRI and sinter availability,” elaborated AMSA.
Despite this, the company said that considerable difficulties were experienced with Newcastle’s billet mill, which depressed throughput. “At year-end, the billet mill was functioning normally after repair expenditure of some R25 million.”
In the third quarter of 2023, AMSA stressed that extremely poor delivery performance by Transnet Freight Rail forced them to idle the blast furnace N5 at Newcastle for five weeks, which resulted in lost production of some 248,000 tonnes of steel.
“Because of a build-up in stocks, market impact was relatively well contained. (Another major influence on Newcastle’s capacity utilisation was market demand, which remained depressed for much of the year,” said AMSA.
When looking at coke production and sales, AMSA explained that in 2023, the company produced 1.144 million tonnes of coke, supported by imported coke amounting to 532,000 tonnes. The total coke production level was 6% higher than 2022, despite the ongoing challenges associated with AMSA’s aged batteries’ asset condition.
“This was achieved through concerted and ongoing short and medium-term restoration and asset care improvement actions, executed at a cost of R312 million in capital expenditure and R58 million in non-capital restoration spending,” said AMSA.
The bulk of the capital expenditure was directed toward oven restoration. This included four ovens at Newcastle at the cost of R100 million as part of a multi-year, 50-oven refurbishment project on battery 3, slated for completion by 2027.
Considerable progress was made on the development of a long-term coke-making strategy that includes the construction of two new batteries in Vanderbijlpark, with a combined capacity of 750,000 tonnes per year. These are scheduled for completion in the final leg of 2027 and the first quarter of 2028.
“As was announced in November 2023, we will continue to produce coke in Newcastle despite the possible winddown of the Longs business. It is envisaged that output from our three batteries at that site will supplement demand from the Vanderbijlpark blast furnaces, with any remaining capacity being directed towards market coke production. To date, we have incurred capital expenditure of R618 million on the Vanderbijlpark coke gas cleaning plant, with civil construction being completed in the year,” explained AMSA.
Furthermore, the company explained that during 2023, AMSA continued to spend elevated amounts on their drive to achieve zero environmental harm. Environmental capital expenditure in the year was R269 million.
Large capital-expenditure items included:
- Upgrading the coke gas-cleaning facility in Vanderbijlpark
- Restoring the Newcastle coke oven batteries
- Newcastle stormwater upgrades
- Extending a disposal site for brine salts in Saldanha
- Relining the oxygen steelmaking slag cooling dam in Vanderbijlpark to prevent leachate water from contaminating groundwater
- Relining Newcastle’s basic oxygen furnace dams. AMSA noted that this undertaking was challenged by the condition of weathered sludge underneath the four dams in question being worse than previously realised; this challenge was successfully addressed in the year.
Spending on legacy environmental projects amounted to R171 million. These projects are included in the provisions for our asset retirement obligations and environmental remediation.
When looking at the company’s air emissions, AMSA explained that Vanderbijlpark’s atmospheric emissions licence (AEL) was renewed this year. Renewals from government departments for Newcastle, Pretoria and Vereeniging were outstanding at the time of reporting, but the renewals are expected during the course of 2024.
“There were no major upset conditions, and site inspections at Vanderbijlpark and Newcastle by the Green Scorpions resulted in no major findings against the company,” said AMSA.
Adding to this, the company explained that in 2020, the National Air Quality Officer granted AMSA a postponement for hydrogen sulphide (H2 S) emissions at each of their four coke batteries in Vanderbijlpark.
“This postponement to 2025 permitted relaxed emissions standards relative to those embodied in air quality legislation. (Independent analysis has confirmed that the standards permitted in the alternative have minimal to no impact on human health.) However, the postponement was subsequently appealed by an environmental non-governmental organisation (NGO),” said AMSA, who added that the Minister of Forestry, Fisheries and the Environment dismissed this appeal in February 2023.
At the time of reporting, AMSA highlighted that the same NGO had served notice of its intention to appeal the minister’s decision under the Promotion of Administrative Justice Act.
“The NGO argues that the entire alternative postponement should be set aside. The process is ongoing. Sulphur dioxide emissions increased due to the quality of input raw materials and 12% higher production, as well as the current state of our coke batteries. Particulate matters rose, by some 17%, largely due to the increase in production and the state of coke batteries, particularly in Newcastle. As was the case with particulates and sulphur dioxide, the coke batteries in Vanderbijlpark and Newcastle were the main contributors to a 30% increase in nitrous oxide emissions,” explained AMSA.
While these projects are aimed at ensuring efficiency and sustainability at AMSA, the future of the longs business at both Newcastle Works and Vereeniging Works remains uncertain.
Chairman of the Board of Directors Bonang Mohale stated, “My fellow directors and I interrogated the work done by management in great detail and at great length, but were unable to come to any conclusion other than that winding down was now, finally, necessary. I can assure you that this was a decision we took with the greatest reluctance and one that we arrived at only after very thoroughly deliberating all possible options. We are acutely aware of the seriously negative consequences this decision would have on employees, suppliers and whole communities. And so we enthusiastically endorsed management’s subsequent view that it would be possible to defer the wind-down decision for up to six months.”
During this time, he said AMSA trusted that all of their partners would grasp this opportunity and work with the company to resolve and achieve outcomes that would have hugely positive socioeconomic benefits.
Furthermore, Mohale added the blame for this decision could not be laid at the door of management of either the company or that of the Longs business.
“Rather, we should look to circumstances over which ArcelorMittal South Africa had little or no control. The extent to which Newcastle’s prospects were undermined by Transnet Freight Rail’s (TRF) performance is now widely understood. We have a public sector that is making it almost impossible for business to work with TFR’s appalling under delivery having a devastating impact on job creation and investment,” explained Mohale.
While stating that he took no pleasure in apportioning blame, Mohale remarked that it was an undeniable fact that much of the responsibility for what has now transpired in AMSA’s Longs business could be laid squarely at the door of the poor management of TFR and that of its political masters.
“At ArcelorMittal South Africa we will continue doing everything possible to ensure that we have a capable state, by among others, deploying considerable resources to help the rail operator keep trains moving; and sharing our engineering expertise with Eskom, just to keep the power flowing,” he elaborated.
With this in mind, what are your thoughts on the above? Share your views in the comment section below.
Comments 2
AMSA are in a financial crisis in all their sites, here , in Europe, and other continents, they cannot meet even the running expenses of these site, as electricity, wages, transport costs, and more are left unpaid, but they are refusing to admit this to all the state governments were they’re operating.
The costs of pride and prejudice
Now reality sets in
Unfortunately the ANC has been destroying progress made in South Africa for some what 30years now. A country which is rich in resources are not rich. Therefore countries are not not rich in their proportion to their natural resources. Countries are only rich if governments who have politicies in which to encourage a central creativity. As to invotive means and to improve enterprise in the desire for man who wants to do better for himself and his family. In essence a Socialism regime is that U to surrender power over own life to the State.. “For the Communist belief is to crush the Bourgeoisie and to grind it between two Millstones of Taxation and Inflation”. Vladimir Lenin…. As the ultimate creation of wealth in any country is through the private Sectors. A creation of jobs infrastructures etc. Therefore the government has to set itself clear limits and boundaries, and to restrain itself from sticking it’s noses in every bodies business, as the government cannot run everything and shouldn’t even try. To recap, Capitalism has a definite moral basis. And the multifold reasons are thus, unless U have Economic Freedom..U will never have freedom at all…as this the only way forward…