ArcelorMittal Delays Long Steel Business Closure by a Month to Explore Alternatives

ArcelorMittal Delays Long Steel Business Closure

ArcelorMittal South Africa, the country’s largest steel producer, has announced a one-month delay in closing its long steel business as it engages with the government and stakeholders to explore potential solutions. Initially scheduled to shut down at the end of January 2025, the long steel operations in Vanderbijlpark and Newcastle will now continue running until the end of February. This decision provides a temporary reprieve for thousands of employees and industries reliant on its steel products.

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Reasons Behind the Closure Announcement

In late 2024, ArcelorMittal declared its intention to shut down its long steel business due to several persistent challenges, including:

• Weak economic growth – South Africa’s sluggish economy has led to reduced demand for steel.
• Rising energy and logistics costs – High electricity tariffs and transportation expenses have made local steel production less competitive.
• Increased imports from China – A surge in cheaper, subsidized steel imports has pressured domestic steelmakers.
• Declining profitability – The company reported a significant financial loss in 2024, further straining its ability to sustain operations.

Despite these challenges, the temporary delay offers a window for potential interventions that could prevent or minimize the impact of the closure.

Financial Support and Stakeholder Engagement

The Industrial Development Corporation (IDC) has stepped in with a R380 million shareholder loan, allowing ArcelorMittal to continue fulfilling outstanding orders, particularly for key customers in the automotive and seamless tube sectors. This financial support also enables the company to engage in critical discussions with the South African government and trade unions.

Kobus Verster, CEO of ArcelorMittal South Africa, emphasized the importance of these discussions, stating:

“We are actively engaging with government and key stakeholders to implement the urgent interventions needed to address the decline in this strategic sector and reposition it for growth.”

Industry bodies, including the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) and various trade unions, have opposed the closure, citing the devastating impact on employment and the broader economy.

The State of South Africa’s Steel Industry

The South African steel industry is at a crossroads, grappling with global market shifts and domestic policy challenges. According to ArcelorMittal’s financial results for the year ending December 2024, steel imports accounted for 33.6% of the country’s total steel consumption, the highest level ever recorded. While import volumes slightly declined in the second half of 2024, they continue to pose a significant threat to local producers.

Additionally, the company’s revenue dropped 7% to R38.6 billion, and total steel sales volumes declined 6% to 2.3 million tonnes compared to the previous year. These factors contributed to a headline loss of R5.1 billion, with an attributable loss of R5.8 billion, reflecting the severe financial strain on the company.

Operational Challenges and Future Plans

ArcelorMittal’s financial struggles were exacerbated by:

• Price competition – The company faced unfavorable steel-to-raw material price spreads.
• Production setbacks – The flat steel division experienced R670 million in losses due to abnormal chilled hearth conditions affecting two blast furnaces.
• Increased borrowing – Net borrowings rose to R5.1 billion due to capitalized interest and fees owed to the ArcelorMittal Group.

Despite these setbacks, the company remains committed to long-term sustainability through its five-year strategy, focusing on:

1. Safety – Prioritizing worker and operational safety.
2. Strengthening core business – Improving efficiency and competitiveness.
3. High-payback investments – Implementing cost-saving and revenue-generating projects.
4. Market positioning – Expanding high-quality, value-added steel products.

Key investment projects include:

• 1.5 million-tonne electric arc furnace at Vanderbijlpark – Enhancing production efficiency.
• Blast furnace gas recovery plant – Increasing self-generated electricity supply.
• New galvanizing and Magnelis line – Introducing advanced coating technology for local industries.

These initiatives align with the company’s goal of reducing reliance on imports and strengthening South Africa’s steel manufacturing capabilities.

What Lies Ahead for ArcelorMittal and the Steel Sector?

While the delay in shutting down the long steel business provides a temporary lifeline, the future remains uncertain. The government is under pressure to implement policy interventions to protect local steel manufacturers, potentially including:

• Tariffs on imported steel – To reduce unfair competition from cheaper Chinese imports.
• Subsidies and tax incentives – To lower production costs and improve profitability.
• Infrastructure projects – Stimulating local demand for steel through public works initiatives.

Verster remains cautiously optimistic about navigating these challenges, stating:

“While we face significant difficulties, we remain committed to implementing our strategic initiatives and working closely with stakeholders to secure the future of our operations.”

The coming weeks will be crucial in determining whether the long steel business can be saved or if South Africa’s steel industry will continue its downward spiral.

ArcelorMittal’s decision to delay the closure of its long steel business offers a glimmer of hope for the industry, workers, and associated sectors. However, without meaningful government intervention and strategic restructuring, the challenges facing South Africa’s steel sector will persist. As discussions unfold, the fate of thousands of jobs and the future of local steel manufacturing hang in the balance.