The South African government is nearing a deal to support ArcelorMittal SA’s funding needs, with 500 million rand allocated for worker pay and additional bridge financing sought via the Industrial Development Corporation (IDC). AMSA’s mills in Vereeniging and Newcastle are vital for local economic recovery and automotive production. The company, aiming to secure 3 billion rand for continued operations, is engaging in funding discussions while facing competition from rival mini mills.
ArcelorMittal South Africa (AMSA) is nearing a significant funding agreement to sustain its essential steel mills, which play a pivotal role in the South African economy. The government is poised to provide approximately 500 million rand ($28 million) intended for worker compensation over a span of six to eight months. Additionally, discussions are ongoing regarding further financing from the Industrial Development Corporation (IDC), which is anticipated to increase its stake in AMSA from 8.2%.
The government aims to urge AMSA to evaluate offers for its two mills planned for closure, located in Vereeniging and Newcastle. Although AMSA continues to proceed with the wind-down process, it maintains dialogues regarding funding solutions. The steel producer expressed that without a viable agreement, it would not be feasible to delay the idling of operations. As of now, while some strategic alternatives have been explored, none have manifested into firm offers.
The government views securing a deal to maintain mill operations as crucial, particularly for long products that are currently unique to AMSA in South Africa. This focus aligns with governmental objectives to reinvigorate the economy through infrastructure developments alongside supporting key sectors such as automotive and mining. A decision on the matter may be forthcoming within the week, coinciding with AMSA’s board meetings to deliberate on proposals. AMSA, under the backing of billionaire Lakshmi Mittal, is seeking around 3 billion rand to extend mill operations by an additional year, significantly impacting automakers like Volkswagen AG and Isuzu Motors Ltd.
Previous IDC support has been crucial for AMSA, affirming the institution’s commitment to fostering the steel sector, especially given its investments in a 12 billion-rand automotive plant with Beijing Automotive International Corp. The IDC emphasized the importance of securing consistent long steel supplies, particularly outside commodity products, as part of its strategic goals. Moreover, AMSA faces competition from mini mills that utilize scrap metal and have also received IDC funding, presenting a challenge to AMSA’s operations which rely on more costly iron ore.
Despite a dramatic decline of over 90% in AMSA’s share price since 2005, the company’s stock recently saw a surge of up to 21% before stabilizing at a 6.9% increase, indicating a market reaction to the potential funding deal.
The impending funding agreement for ArcelorMittal South Africa represents a crucial step towards sustaining the operational viability of its steel mills, integral to the national economy. Significant government support, alongside efforts from the IDC, underscores the importance of these facilities. The outcomes of these negotiations will influence AMSA’s capacity to navigate competitive pressures within the steel industry while contributing to broader economic revitalization efforts in South Africa.
Original Source: www.mining.com
