S.Africa govt hopes to stop ArcelorMittal plant closure
South Africa’s government is scrambling to prevent the closure of ArcelorMittal South Africa’s long steel business, which potentially threatens tens of thousands of jobs.
The steelmaker last week announced it would shut its long steel business, after a year of talks with the government to turn around the loss-making unit.
With 3,500 jobs on the line, the closure of the business has been met with public outcry. The majority union at AMSA, the Nation Union of Metalworkers of South Africa (NUMSA), said it would oppose the associated retrenchment process and called on the government to account for what it had done to help the longs business.
These challenges include slow economic growth, high power and rail tariffs, surging imports, and a scrap export policy that is driving cheap long steel production from South African mini-mills at the expense of AMSA.
AMSA said it would cease production of long products at the end of the month.
The Department of Trade, Industry and Competition (DTIC) however said it was committed to finding a “workable and lasting” solution.
The Department said the immediate task will be on addressing structural issues affecting AMSA’s longs steel business, but “the broader focus should also be on addressing productivity improvements and supply chain efficiencies, investments in low-carbon technologies, competitiveness and regaining the market share.”
The Department said it was important that public and private sector entities and companies commit themselves to procure locally manufactured steel products in their projects. “Undoubtedly, such a commitment will contribute positively to aggregate demand, job creation and economic growth in South Africa,” the DTIC said.
But AMSA has made it clear it can no longer carry the loss-making division at the expense of the rest of the business, which is also a major producer of flat steel products.
Once the cash burn from the longs is dealt with, AMSA will turn its attention to reinvesting in the flats business and has also indicated it would consider reopening its Thabazimbi iron ore mine.
Elias Monage, president of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), said the closure of AMSA’s long steel business is “a profound policy failure” at the hands of a “dithering government too slow to react and offering too little too late”.
Apart from the direct jobs on the line, the medium-term impact of second round effects is expected to impact up to 25,000 jobs.
“The effect of this latest development will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sector of the economy and all who work in it,” Monage said.
He said the de-industrialisation trajectory of the sector can be attributed to the lack of a well-considered and all-encompassing metals sector industrial policy. SEIFSA has called on government to urgently prioritise a long-term, inclusive strategy for the steel industry.
Opportunity to fill gap
Meanwhile, across the border, the Zimbabwe Institute of Foundries (ZIF) said it believed the newly established Dinson Iron and Steel Company (DISCO) could soon fill any gap left by the closure of the Newcastle plant.
“Dinson has the potential to be a giant supplier of iron and steel in the region,” said Dosman Mangisi, Chief Operations Officer at ZIF, referring to the subsidiary, which started the production of pig iron and billets in Zimbabwe in July 2024.
DISCO, a subsidiary of Tsingshan Holding Group of China that started operating last July, is currently in its first phase with a production capacity of 600,000 t/y of pig iron and billets. In its next phase, it is looking to double that capacity to 1.2 mt/y in phase two and to 3.5 mt/y in phase three.
The South African Iron and Steel Institute (SAISI) told McCloskey that steel imports from Zimbabwe were starting to trickle in.
“From October and November already, we started seeing exports from Zimbabwe at 19,000 t into South Africa. So that is definitely already eating away at a constrained market and we expect that number to grow as the mill (DISCO) expands,” said Lufuno Maliaga, SAISI’s principal analyst.
She noted that, as members of the Southern Africa Development Community, both countries have a free trade agreement which means there is no trade protection against Zimbabwe’s penetration.
“DISCO is funded by quite a large Chinese company, which is subsidised by the government. There are quite a lot of dynamics that give the Zimbabwean mill a huge advantage (which would allow it to) easily target the South African market,” Maliaga said.