Business Maverick

STEEL COLLAPSE

ArcelorMittal explores shutting Newcastle, Vereeniging plants, putting 3,500 jobs at risk

ArcelorMittal explores shutting Newcastle, Vereeniging plants, putting 3,500 jobs at risk
(Photo: Dwayne Senior / Bloomberg via Getty Images)

Steel-maker ArcelorMittal said on Tuesday that it was considering the closure of its Newcastle and Vereeniging operations, putting 3,500 jobs on the line. South Africa’s sour economy combined with the fiascos that are Eskom and Transnet have undermined steel demand, accelerating the process of deindustrialisation.

ArcelorMittal revealed this in a Sens announcement, saying that steel demand had collapsed under the weight of a sluggish economy and a failing state. 

“On the back of low GDP growth in South Africa, in the past seven years, the country’s apparent steel consumption (ASC) has reduced by 20%, reaching levels of around 4.0 million tonnes, reflecting low market demand in key steel consuming sectors, limited infrastructure spend and project delays, resulting in overcapacity,” the company said.

It went on to cite “national constraints” beyond its control, including rising transport costs because of logistical failures and South Africa’s electricity challenges.

The company also pointed to changes in scrap policy.

“The introduction of a preferential pricing system for scrap, a 20% export duty, and more recently, a ban on scrap exports has allowed steel products through the electric arc furnaces route an ‘artificial’ competitive advantage when compared with steel manufacturers beneficiating iron ore to produce steel,” the company said.

A collapse of two of the pillars of industrialisation – power supply and logistics – has undermined demand for steel, a key indicator of industrialisation. It all serves to highlight that South Africa is on a path of deindustrialisation. 

“In the circumstances, the ArcelorMittal South Africa Board and Management have had no option but to embark on a process that contemplates the wind down of the Company’s Longs Business, which for now may be placed in care and maintenance. This is subject to a due diligence and a consultative, and iterative process involving key customers, suppliers, organised labour, and other stakeholders,” ArcelorMittal said. 

“Affected plants will be most plants at Newcastle Works, the Vereeniging Works, and rolling facilities which use Newcastle material as feedstock. The coke batteries will remain operative.” 

The company has launched a section 189 process as up to 3,500 jobs may be slashed as a result.

In an economy with an unemployment rate of above 31%, this is worrying. It is also emblematic of South Africa’s wider economic woes: the private sector withering in the face of a withering state. Expect more layoffs in other sectors, especially the industrial ones. DM

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