ArcelorMittal South Africa is axing 3 500 jobs at its Newcastle and Vereening steel manufacturing operations, a development labour union Solidarity described as “shocking” as the steel producer also laid blame on the collapse of key state run infrastructure and services.
The announcement of the closure of ArcelorMittal’s longs steel business yesterday followed on other job losses at Sibanye-Stillwater and at Impala Platinum (Implats) in the past few weeks. Some of the affected operations at Newcastle and Vereening have been under care and maintenance since last year.
“A significant restructuring is being considered, with potentially 3 500 employees being affected and every effort will be made to manage down the number of jobs affected,” said the company in an announcement yesterday.
It said the restructuring exercise of its steel business would entail “the wind down” of its longs steel business.
However, this exercise will not affect the coke batteries at Newcastle, which ArcelorMittal South Africa said would “remain operative, producing metallurgical coke for use at the Vanderbijlpark Works, and for sale of commercial market coke” to the ferro-alloy industry.
Kobus Verster, ArcelorMittal South Africa CEO, said: “The board and management have reached this point after having exhausted all possible options. We have a duty to ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.”
He added that the remaining business, after the winding down of the longs manufacturing operations, will operate on a sustainable financial footing. This would enable ArcelorMittal South Africa to “invest the appropriate capital in product development” and available growth prospects.
The announcement unnerved investors in the company on the JSE where its shares tumbled by 11% to R1.22. ArcelorMittal South Africa’s share price is also down by a massive 71% in the year-to-date comparative.
Labour union Solidarity said the decision by ArcelorMittal South Africa to shut down the longs steel business had come as a “shock”. Solidarity also criticised ArcelorMittal South Africa’s “attitude” as it had not followed through consultation processes involving key affected parties, including labour unions.
ArcelorMittal South Africa placed the Vereeniging electric arc furnace under care and maintenance in October 2022 “as production of long steel exceeded demand”.
While in November last year it had also idled one blast furnace in Vanderbijlpark, It had hoped for further strategic asset footprint optimisation within long steel this year.
But with Eskom and Transnet woes hammering more South African businesses further, the company said, there is little alternative option but to wind down the long steel manufacturing operations.
While Sibanye-Stillwater and Implats have blamed a suppressed metal price environment for their lay-offs, ArcelorMittal has blamed this on a depressed economic and operational environment.
“As a result of South Africa's low GDP growth, the country's apparent steel consumption has decreased by 20% in the last seven years, 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 market overcapacity and overall weaker business confidence,” the company said.
It further explained that high transport and logistics costs, as well as escalating energy prices as well as the country's ongoing electricity challenges were also weighing against sustaining operations.
Moreover, the advantages that scrap metal is having over iron ore coupled with implementation of a preferential pricing system for scrap, including a 20% export duty and a recent ban on scrap exports were working against steel manufacturers.
Nevertheless, these were not new challenges, said Willie Venter, spokesperson for Solidarity. The obstacles cited by ArcelorMittal South Africa were “nothing new or unfamiliar to Solidarity or the other parties that are involved in Amsa”, said Venter.
He laid blame on President Cyril Ramaphosa’s government for running down state parastatals and ruining key infrastructure provision.
“It is also clear how the government’s mismanagement of state enterprises such as Eskom and Transnet, and the government’s inability to promote economic growth, are claiming victims,” added Venter.
For its part, ArcelorMittal said it had “adopted a variety of interventions over the last few years to secure long-term sustainability” of the longs steel business. These included cost-cutting initiatives, increased raw material cost savings, asset footprint modifications, among other schemes.
“At the beginning of 2023, an optimisation programme commenced, which is specifically focused on asset footprint optimisation, mill capacity utilisation and efficiencies, logistics and energy. This extends beyond Newcastle, and includes operations in Vereeniging, Pretoria and Emalahleni,” the company said in its annual report.
The operation at Vereening had annual capacity of 400 000 while capacity utilisation at both Vanderbijlpark and Newcastle sagged to 47% in 2022, lower than the 60% in 2021 and well down on the more than 80% achieved before 2019.
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