ArcelorMittal South Africa will cease long product production by April due to failed negotiations with the government over a rescue package, resulting in approximately 3,500 job losses. Key operational challenges include high energy costs and unfavorable government policies. CEO Kobus Verster has highlighted the significance of the plants to the local industry, prompting concerns about supply disruptions. The South African government had considered a substantial rescue package to mitigate the situation.
ArcelorMittal South Africa (AMSA) has announced the cessation of production of long products within its South African facilities, scheduled for the second quarter of this year, following unsuccessful negotiations with the government regarding a rescue package. This decision, confirmed by Bloomberg, is expected to result in approximately 3,500 job losses, both direct and indirect. The previous plan for closure at the end of January was extended by one month to complete existing orders.
Beginning in the first week of March, AMSA will start to decommission its blast furnaces, with the aim to halt steel production entirely by early April. The company cited various factors detrimental to the viability of its operations, including inadequate railroad connections, soaring electricity tariffs, an influx of inexpensive imports, and government policies adversely impacting the prices of steel scrap for smaller competitors.
AMSA lamented, “Regrettably, the parties have not been able to find timely solutions required to defer the winddown.” The company further noted a deterioration in several conditions since negotiations commenced, specifically mentioning the state energy provider’s plan to increase electricity tariffs by nearly 13% starting April 1, as well as the prospect of escalated fees for state-owned ports and railways.
Kobus Verster, CEO of AMSA, indicated that the Newcastle Works and Vereeniging Works contribute between 350,000 and 400,000 tons of steel products that cannot be replicated by other domestic companies. The potential closure is causing significant concern among other businesses that rely on AMSA’s facilities for their steel supply. Reports from GMK Center previously indicated that the South African government was in discussions regarding a rescue package of up to R1 billion ($53.6 million) to avert the impending shutdown of AMSA’s plants.
In summary, ArcelorMittal South Africa’s decision to halt operations follows unsuccessful negotiations with the government regarding a necessary rescue package, leading to significant job losses and heightened concern among industry stakeholders. The continued increase in operational costs due to external factors has contributed to this crisis, underscoring the urgent need for effective government intervention to sustain the country’s steel production capabilities.
Original Source: gmk.center
