The Industrial Development Corporation (IDC) yesterday said it was stepping in to facilitate discussions aimed at preventing a significant downturn in the local steel industry as ArcelorMittal South Africa (Amsa) prepares to halt its long-steel operations at the Newcastle and Vereeniging plants, potentially affecting over 3 500 employees.
The IDC, which has a 6% stake in Amsa, last year endowed the struggling steel manufacturer with R1 billion to forestall the closure of the Newcastle plant.
It expressed deep concern over the proposed mothballing of production facilities, particularly the Amras unit, stating that it is committed to exploring all viable options to avert mass retrenchments.
Tshepo Ramodibe, IDC head for corporate affairs, said they were aware of the ongoing challenges within the global and domestic steel industries that have influenced Amsa’s position and operations.
Ramodibe said it was widely acknowledged that the industry was transitioning from blast furnace technologies to electric arc furnaces (EAFs) to decarbonise and enhance cost-effectiveness, thus several global steel companies have decreased production.
“Moreover, there is an estimated overcapacity of 1 million tons per year in Longs production in South Africa, which poses a challenge for producers with inherently higher cost structures to survive in a highly competitive market,” he said.
“Despite the challenges, the Corporation is concerned about the potential job losses and the socioeconomic impact on Newcastle and will engage relevant stakeholders.”
Sources close to the discussions have indicated that a working group comprising of The Presidency, the Department of Trade Industry and Competition, Amsa, the IDC and other stakeholders, was working around the clock to hold off the shuttering of the plants and subsequent job losses.
“I do not think we are there yet. Amsa has made a public statement of its intentions to shut down the plants but all the parties are working to mitigate that. There won’t be immediate closure, there is no finality to this yet,” the source indicated.
“There will have to be a formal announcement after the parties meet, after the government has mulled over all the proposals. The funds that the IDC had provided to the company did not have the intended results and impact, it was a short-term gain and so would any direct cash injection. So now the whole eco-system and value has to be looked at in terms of what is viable and sustainable.”
Amsa on Monday announced its decision to wind up its long-steel business and stated that it would focus its efforts on its flat-steel business and new opportunities such as the restart of operations at its Thabazimbi iron ore mine in Limpopo province.
The IDC said it was actively engaging all relevant stakeholders to explore potential solutions.
Ramodibe said this demonstrated the IDC’s ongoing commitment to the maintenance and expansion of industrial capacity, including in the steel industry.
“When Amsa announced the possibility of closing its Newcastle facility in November 2023, the IDC responded by providing R1bn in June 2024 to help sustain the company’s Longs business,” he said.
“The steel industry remains vital for the SA economy directly and through the sectors it supports. The government and all stakeholders are aware of the same and will likely look at all options to support the industry.”
Amsa in October rejected a R19bn transformation bid by local firm Networth Investments, which had promised to revolutionise the country’s struggling steel industry with green technology and more profitable stainless steel production.
An ArcelorMittal spokesperson said “the correspondence (it had received from Networth Investments) does not reflect a firm or a bona fide offer. There is, therefore, no offer to be considered.”
Ramodibe said the decision to dispose of any portions of the steel manufacturer were left to the company.
“The IDC is not in a position to comment on options that are in the Amsa management purview, engagements are ongoing and all viable options will be considered,” Ramodibe said.
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