ArcelorMittal warns it might close without urgent solution to challenges

The Citizen

a day ago

This means that 3 500 jobs at ArcelorMittal in Newcastle and Vanderbijlpark can be lost again, as well as 293 754 direct and indirect jobs.
ArcelorMittal warns in a Sens announcement that it might have to begin preparing to close down its long steel business long before the end of September if there is no urgent solution to the problems causing the closure.
The steelmaker announced on 31 March that the decision to wind down long steel business has been deferred for at least six months to 30 September 2025 enabled by a facility the Industrial Development Corporation of South Africa (IDC) provided of R1 683 million.
The facility now has been fully drawn, enabling the long business to continue operating and funding its working capital and associated financial needs for the third quarter of 2025. During the deferral period the objectives were to advance the normalisation of structural impediments, improve the sustainability and viability of the longs business, while sustaining jobs and manufacturing supply chains in South Africa.
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Main impediments for ArcelorMittal long steel business
According to the ArcelorMittal Sens statement, the main structural impediments highlighted for several years are:
The structural distortion created by the Preferential Pricing System and export tax on ferrous scrap in favour of scrap-based steelmakers to the disadvantage of integrated steelmakers, such as ArcelorMittal South Africa.
Weak domestic demand and the lack of growth projects for steel.
Insufficient import protection and the continued circumvention of existing tariff protections by local companies without prosecution.
Poor rail service performance and associated high, globally uncompetitive and unaffordable tariffs.
Unaffordable and globally uncompetitive electricity tariffs.
ArcelorMittal says regrettably limited progress was made until now to tackle the major structural impediments, with high imports continuing to flood the domestic market. 'Transnet's rail performance also deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional cost being borne by the company.'
The steelmaker says it has been exploring various strategic options while the IDC simultaneously conducted its due diligence into the company during the deferral period. 'Government has been pursuing structural interventions with significant effort and is still continuing.
'The longs business, as we said before, will only be able to continue with financial support as the company cannot bear any further financial risk associated with its continued operations after the deferral period.
'Therefore, unless a solution is implemented timeously and to ensure the orderly closure of the longs business as soon as possible, ArcelorMittal may have no option but to take certain operational steps to prepare for the wind down process before 30 September 2025.
'However, ArcelorMittal's longs business will continue to trade until the end of September to meet its commitments to its customers.'
ALSO READ: ArcelorMittal closing down long-steel works, cutting about 3 500 jobs
Downturn in steel industry also problem for ArcelorMittal
ArcelorMittal also says the global cyclical downturn in the steel industry has continued for almost two years, which is longer than the norm. 'Compared to the same period in 2024, global crude steel production reduced by 1.3% from January to May 2025, according to World Steel Association.'
In South Africa, gross domestic product (GDP) growth expectations were reduced to no more than 0.7% for 2025, with all sectors except agriculture contributing to the weaker outlook that resulted in tough trading conditions in key steel consuming sectors, such as construction, automotive, mining, fabrication and energy and transport.
Apparent steel consumption in South Africa for the first half of 2025 is expected to be marginally lower year-on-year, with a high share of demand supplied by imports, estimated at around 37% share of local consumption. Sales volumes are expected to be approximately 10% down compared to the first half of 2024.
Apart from lower demand, the sales volumes for flat steel products continue to be affected by the high import levels, while long steel product sales reflected the uncertainty around its continuation.
ArcelorMittal also points out that the risk of uncontrolled blast furnace stops arose twice during the past six months due to major rail service interruptions due to an unprecedent spate of cable theft and locomotive failures. Additional unplanned road transport had to be deployed, resulting in higher direct, operational and handling costs of R317 million for the current period.
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Steel industry expressed disillusionment – ArcelorMittal
The steel and manufacturing industry, represented by various industry associations, appeared before the portfolio committee responsible for trade, industry and competition on 4 June. The industry expressed general disillusionment with policy developments and dissatisfaction with the continued decline of the steel sector, which is creating a challenging business and investment climate in South Africa.
The steelmaker says the rapid increase of imports (notably from China, Indonesia and Vietnam) took the industry by surprise, reaching levels described by the South African Iron and Steel Institute as 'unacceptable'.
Imports now represent more than 35% of apparent steel consumption and significantly undermines domestic supply. The industry called for the urgent imposition of definitive actions from the ongoing tariff reviews, along with amending the ill-conceived and ill-implemented Preferential Pricing System and the associated export tax regime relating to scrap prices.
'Structural demand issues, fragmented policy implementation, ceaseless electricity cost increases and the crippled rail performance, pose significant challenges to the South African steel and manufacturing industry.
'While there has been unprecedented action by governments around the world to protect their industries, with expedited protective tariff implementation and strong localisation programmes, support for the South African steel industry is required and this cannot happen quickly enough.'
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ArcelorMittal believes steel industry can thrive if government acts
ArcelorMittal says South Africa can maintain a thriving steel industry, but government must act decisively to ensure that commitments translate into real supportive action. The immediate two priorities are, firstly, ensuring that the high levels of imports are dramatically reduced and secondly, enabling a vibrant level of steel demand that is accessible to all South African steel producers.
ArcelorMittal says it will provide further updates in its announcement of its financial results for the six months ended 30 June 2025, on 31 July.