AMSA update: Key talks continue plus steel industry overview

As you will recall, in November 2023, the company announced its decision for the phased unwinding of its Longs Business which would impact both its Newcastle and Vereeniging Works.

This was followed by the company deferring its decision for a period of six months, as AMSA looked at initiatives to potentially stop the Longs Business from being shutdown.

To read more on the matter, click here.

As all eyes are on AMSA and the final outcome of the future for Newcastle Works and Vereeniging Works, AMSA’s stakeholder management and communications group manager Tami Didiza explained that the discussions and negotiations were still ongoing, and the company would provide an update when there was more clarity available.

However, as discussions and negotiations continue, a media site visit at the Vanderbijl Plant on Tuesday, 30 April 2024, provided a bird’s eye view of the South African steel industry, as well as the challenges and opportunities facing the national steel industry.

According to the presentation by Franck Wandji, Executive: Group Marketing, Africa at ArcelorMittal, when looking at how much steel is produced globally, the Global crude Steel production was stagnant at about 1.89 billion tonnes in 2023, with 54% supplied from China. The apparent steel consumption was at about 1.76 billion tonnes in 2023 and is projected to grow by 3% towards 2025.

With this said, according to Wandji’s presentation, the challenges and opportunities of the steel industry can be categorised into demand, profitability and investment.

These are as follows:

Challenges:

Demand and revenue:

• Weaker domestic economic growth and delayed infrastructure rollout; and associated pressure on production, inventories and prices.
• Weaker global growth and overcapacity resulting in excessive exports and price pressures.
• Gaps in the regulatory environment towards localisation i.e. trade policies, response to CBAM, public procurement act.
• Domestic supply/demand imbalance resulted from overcapacity built.

Profitability:

• Increasing costs of doing business, such as raw materials, electricity, logistics and labour as threats to the industry vs. China.
• Margins squeeze into pockets of growth and areas of scarcity.
• Regulations resulting in artificial competitive imbalance.

Investment and job creation to cope with industry transition:

• Disadvantaged in the international industry shift to decarbonisation and associated CAPEX (gap in funding & decarb. regulations).
• Limited CAPEX ability towards next Generation products e.g. high performance steels, electrical steels and wide plates for wind towers.
• Jobs and skills losses e.g. declined from 31k in 2016 to ~20k in 2022.

Opportunities:

Demand and revenue:  

• Import replacement:  Approximately 46% of imported products are not manufactured locally. However, requires intensive CAPEX and product development enablement.
• Energy transition likely results in intensified demand for renewable energy and transmission infrastructure.
• Rail transport and Water infrastructure needs revamp / renewal.
• SA positioning as a global hub for Auto manufacturing open-up Steel demand opportunities.
• AFCFTA launch may enable greater access to regional export markets.

Profitability:

• State Owned Entities showing more attention to the industry challenges.

Investment and job creation to cope with industry transition:

SA is well positioned to partake in the global shift to decarbonisation as ArcelorMittal South Africa receives the BRICS decarbonisation awards.

Global engineering and design powerhouse show an appetite for more quality and high-performance steels.

The 4th industrialisation era looks promising towards the development of new skills in the industry.

The company’s strategy is to become the champion of:

• Innovative, export-driven, steel-based industrialisation in South Africa, for Sub-Saharan Africa and other key regions.

This requires a shift of focus:

• Towards localisation and import replacement.
• From local to export markets by investing in technologies to produce specialised products and building an adequately competitive supply chain in South Africa.

The focus sectors for local production for export are:

• Automotive
• Renewable energy and gas
• Mining
• Rail
• Construction and infrastructure

With this said, Wandji noted that AMSA was a formidable force within the steel industry, highlighting the following facts about the company:

• ArcelorMittal South Africa has 100 years of experience.
• AMSA is the largest steel producer in sub-Saharan Africa.
• The company sports six production parks and mines across five provinces in South Africa.
• AMSA has an installed crude steel capacity exceeding 5 million tonnes.
• Local employment base of about 10 000 people.
• Produces the broad spectrum of primary flat and long steel products, in a wide variety of grades and dimensions and with compliance to international specifications.
• AMSA’s products are used across over 27 market segments, predominantly in the African region but also in the USA, Middle East and Asia.
• The company is the regional leader in all major markets including Automotive, Construction, household appliances and packaging.
• AMSA has a technological edge, as well as sizeable captive supplies of raw materials and distribution networks.

With the steel giant determined to remain a leader in its field and continuing its discussions and negotiations to rescue its longs business at both Newcastle Works and Vereeniging Works, what are your thoughts on the above? Share your views in the comment section below.