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In a significant economic upheaval, ArcelorMittal South Africa, the continent's largest steelmaker, has announced the closure of its operations in Newcastle and Vereeniging, starting January 2024. The move puts 3,500 jobs at risk and lays bare the challenges plaguing the country's steel industry.
The CEO of ArcelorMittal South Africa, Kobus Verster, pointed to systemic issues affecting the economy during a press briefing. The company, once profitable, witnessed a staggering swing from a R3-billion profit in H1 2022 to a R448-million loss in the same period this year. The closures, a drastic measure, spotlight the grim reality of South Africa's economic landscape.
Verster highlighted the unreliability of Transnet and Eskom as key contributors to ArcelorMittal's financial woes. Inefficiencies in Transnet's rail network forced the company to resort to road transportation, incurring substantial losses and increasing operational costs. Eskom's blackouts further compounded the challenges, disrupting steel production processes.
The broader context reveals a decline in demand for long steel products over the past seven years, coupled with a lack of large-scale infrastructure projects. South Africa's crude steel manufacturing capacity far exceeds current demand, leaving companies like ArcelorMittal grappling with excess capacity.
Policy blunders by the Department of Trade, Industry, and Competition (DTIC) exacerbated the situation. The introduction of a preferential pricing system for scrap, a 20% export duty, and a ban on scrap exports tilted the playing field, favoring steel production via electric arc furnaces. This further disadvantaged companies relying on iron ore, such as ArcelorMittal.
Industry voices, including the Steel and Engineering Industries Federation of Southern Africa (Seifsa), have called for urgent intervention from President Cyril Ramaphosa to rectify the policy blunders. The repercussions extend beyond the steel industry, affecting related sectors like auto, motor, construction, and mining.
As ArcelorMittal prepares to wind down operations, the CEO expressed openness to talks with the government. However, skepticism prevails about the government's ability to address the complex problems facing the steel industry. steelguru.com
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- [Editor:kangmingfei]
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