Is the time officially ticking for ArcelorMittal South Africa’s (AMSA) long steel business if no interventions are found to resolve the matter? This question arises as AMSA has highlighted its limited time frame, especially given the steel giant’s Longs business suffered a half-a-billion-rand loss in the third quarter.
AMSA’s long steel operations mainly consist of a major facility in Newcastle, alongside a smaller site in Gauteng.
This is South Africa’s only integrated steel production facility, meaning the steel is produced from raw inputs, such as iron ore, as opposed to being produced from scrap. Furthermore, Longs refers to a range of products, including structural steel, which are essential for sectors such as rail, agriculture, mining, and power transmission.
Due to its integrated nature, AMSA’s long steel is of high quality, meeting precise specifications suitable for industries like automotive manufacturing. However, reduced demand in recent years has seen the Newcastle mill operate far below its design capacity of up to 1.8 million tonnes, producing only around 1 million tonnes—the absolute minimum level required for viability. This level of production exceeds the regional demand for high-value products, which stands at around 400,000 tonnes, while the overall demand for all steel is currently declining, with Longs especially impacted by this downturn.
Tami Didiza, Group Manager for Stakeholder Management and Communication at AMSA, commented, “ArcelorMittal South Africa continues to face significant structural and policy-related challenges that are severely impacting the viability of our Long Steel operations.”
These challenges include:
- The Price Preference System (PPS) and Scrap Export Tax Regime: The PPS, along with the scrap export tax regime, provides mini mills with approximately R500 million in monthly subsidies through artificially suppressed scrap metal prices. This market distortion has persisted for over eleven years, creating an unsustainable competitive landscape.
- Negative Impact on the South African Economy: The current scrap metal policies negatively impact the South African economy, affecting manufacturers, mining operations, construction companies, and thousands of informal waste collectors who play a crucial role in the recycling ecosystem. These stakeholders are directly affected by reduced buying prices imposed by scrap recyclers to align with PPS-mandated selling prices.
- Inadequate Protection from Low-Cost Steel Imports: AMSA has expressed concern over insufficient protection against cheap and dumped steel imports.
- Increasing Transport and Infrastructure Costs: Escalating transport costs and related infrastructure inefficiencies are further straining AMSA’s competitiveness.
- High Electricity Costs: AMSA faces substantially higher electricity costs than its international competitors, adding to the challenges of running a sustainable business.
Didiza further added, “Despite the Company’s decision last year to defer the closure of the Longs Business to allow time for collaborative solutions with government stakeholders, we regret to report that limited progress has been made in addressing these critical issues.”
Additionally, AMSA is continuing to seek urgent intervention from government stakeholders to address these structural challenges, especially concerning policies that disadvantage iron ore-based steel production.
“The combination of low domestic demand, driven by minimal infrastructure and construction activity, coupled with an unsustainable cost base and distorted scrap metal market, requires immediate policy intervention to ensure the long-term viability of this strategic industrial asset,” stated Didiza.
Furthermore, Newcastillians will recall that in November 2023, AMSA announced a phased wind-down of its longs business, a decision which would have affected both Newcastle Works and Vereeniging Works, excluding the operational continuity of the coke batteries in Newcastle. With thousands of potential job losses at stake, if the wind-down proceeded, relief swept through Newcastle and South Africa as a whole in July 2024 when the company announced its Longs business would continue to operate while AMSA pursued initiatives aimed at securing its long-term sustainability.
As the company continues to confront these challenges, Didiza concluded by saying, “ArcelorMittal South Africa remains committed to working with all stakeholders to find sustainable solutions that will protect South Africa’s steel manufacturing capabilities and the associated value chain, while ensuring fair market conditions for all industry participants.”
With AMSA actively seeking solutions, it is estimated that just over 3,000 people could be affected if no remedy is found. Considering this, what are your thoughts on this pressing issue? Share your views in the comment section below.
Comments 3
Minister patel initiated all of these nonsense interventions using lies of expedience – to “provide affordable scrap”, “stop infrastructure theft” and other sound bites to provide plausible deniability cover. It was always about forcing the productive parts of the South African economy to subsidize his IDC funded mini mills buddies. The chickens are coming home to roost now though. Ever wondered why he suddenly ‘retired’, at the ‘top of his game’? Keep watching, it will start becoming clear soon enough..
Yes almost a year to the date we are back to square one with AMSA crying foul and playing with people’s lives again closer to the festive season. They are an extremely evil and vindictive organisation. These reprieves they seek will not bear fruit when they operate in an extremely inefficient manner without any operational discipline and a lack of maintenance. The CEO sounds to be only focused on profit
Realy we dont have a life anymore we all stress last year it was the same thing but their are some people that cant go on pensioen because the money is to little but realy guys their must be something that could be done we realy bargain on overtime and now its gone we must eat and pay bills