By Bianke Neethling.
The Department of Trade, Industry and Competition (DTIC) said it will continue to work with ArcelorMittal South Africa (AMSA) to find a solution for challenges in the local steel industry.
This comes after AMSA announced on Monday, 6 January, that it will move forward with its plans to wind down its longs steel business.
In the steel industry, “longs” refer to long steel products, which are primarily used in construction and infrastructure projects. These products are used in key sectors like rail, mining, and energy.
AMSA’s announcement devastated the local steel industry. The wind-down is expected to lead to at least 3,500 job losses and major supply chain disruptions.
AMSA first announced this plan in 2023, citing prolonged weak economic conditions, logistics and energy challenges, and unsustainable competition from low-cost imports.
There was hope that this decision would be reversed when, in 2024, the steel producer said it saw green shoots appearing in the country’s economy, specifically the manufacturing sector.
AMSA said it had been in engagements with the government to find a workable solution for the industry’s challenges and remains steadfast in its plans to save 3,500 direct jobs and 80,000 more across the value chain by keeping its longs business alive.
However, on 6 January, AMSA said these initial signs of recovery in international steel prices were short-lived and that the company’s financial health had worsened.
“ArcelorMittal South Africa has been working intensively on this issue for over a year,” the company said.
“The company is at a point where any further delay could affect the sustainability of the company, and therefore, a decision cannot be pushed back any further.”
Therefore, the company announced that it has no option but to proceed with the wind-down of its longs business. The business will be placed into care and maintenance.
In its announcement, the company confirmed that one of the wind-down’s unfortunate implications is that jobs and enterprises will be negatively impacted.
The final number of retrenchments is not yet certain, but it is envisaged that approximately 3,500 direct and indirect jobs may be affected.
However, Rand York Casting CEO Justin Corbett warned that at least 100,000 jobs in South Africa are at risk in the medium term due to ArcelorMittal’s shutdown of its longs steel business.
Corbett told Newzroom Afrika that 3,500 jobs are just the tip of the iceberg.
“We expect in the short-term to lose an additional 50,000 jobs in South Africa and, in the medium-term, at least 100,000 jobs,” he said.
Government intervention
In a statement released on 8 January, the DTIC said it “notes with serious concern” AMSA’s announcement to wind down its longs steel business.
“In fulfilment of its mandate to work with the private sector in growing the local economy, the DTIC remains committed to working with AMSA to find a workable and lasting situation,” it said.
“During the course of 2024, AMSA had reached out to various government departments and state-owned entities with requests for different concessions for its business.”
“Having taken heed of these requests, the Minister of Trade, Industry and Competition, Parks Tau, took the decision to form a comprehensive and coordinated approach to resolving the issues raised by AMSA.”
The minister set up a technical working group made up of relevant stakeholders, including the DTIC, AMSA, the departments of Electricity and Energy and Transport, Eskom, Transnet, and private sector stakeholders.
The department said this working group held regular engagements until and well into December 2024.
“It has always been, and continues to be, the intention of the government to continue these engagements until a workable resolution to the problems faced by AMSA and the steel industry is reached,” the department said.
It acknowledged the critical role South Africa’s steel industry plays in the reconstruction and recovery plan for the South African economy, particularly the manufacturing, mining, construction, engineering, and transportation sectors.
The DTIC said these sectors are at the centre of the industrialisation, localisation and beneficiation programmes of the government.
“Whilst the immediate task will be on addressing structural issues affecting AMSA’s longs steel business, 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,” it said.
“It is also 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’s statement comes after several industry stakeholders and other experts accused the government of not doing enough to prevent the closure of AMSA’s longs steel business.
Daily Maverick reported that ArcelorMittal CEO Kobus Verster believed the government did not do enough to prevent this.
“The government is willing to listen but not able to take decisions. Could the government have done more? Of course, that is my view,” Verster said.
National Union of Metalworkers of South Africa general secretary Irvin Jim told News24, “At this stage, we do not think there is an appreciation by the government of how dangerous it is to allow AMSA to close its plants”
“It could be potentially catastrophic, and it would spell disaster for manufacturing and industrialisation of our country.”