Latest news with #ArcelorMittalSouthAfrica

IOL News
5 days ago
- Business
- IOL News
ArcelorMittal South Africa warns early steps may be required to wind down Longs business
ArcelorMittal South Africa said negotiations to shore up the business environment of its Long Business, principally to address various government infrastructure and policy failures, had come to nought so far through a six-month deferral period before it closes its Long Business. Image: Anamul Rezwan/Pexels ArcelorMittal South Africa (Amsa), which continues to pay heavy prices for government infrastructure and policy failures, may be left with no option but to prepare for the wind down process of its Longs Business, well in advance of September 30, 2025. This announcement, and despite a forecast of slightly reduced headline earnings losses for the six months to June 30, caused the share price to slump 7.89% to 105 cents on the JSE by Monday afternoon - considering that three years ago the price traded above R5 a share. On March 31, Amsa announced its decision to wind down the Long Steel Business had been deferred for at least 6 months to September 30 after it received a R1.68 billion funding facility from the Industrial Development Corporation (IDC). The facility was now fully drawn and would enable the Longs Business to operate through the third quarter. The business would also continue to trade until the end of September, having regard to the commitments made to its customers. However, so far, 'limited' progress was made to redress major structural issues, which was the main aim of the deferral period. 'High imports continue to flood into the domestic market. Transnet's rail performance deteriorated to its lowest levels ever, resulting in significantly elevated operating risk and unaffordable additional costs being borne by the company,' Amsa's directors said. Video Player is loading. 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Advertisement Next Stay Close ✕ The challenges that have faced the group over several years include structural distortions created by the Preferential Pricing System (PPS) and export tax on ferrous scrap in favour of scrap-based steel makers to the disadvantage of integrated steel makers, weak domestic demand, and the lack of growth projects for steel. There is also insufficient import protection and continued circumvention of tariff protections by local companies, without prosecution. The rail service performance remained poor with associated, high, globally uncompetitive and unaffordable tariffs. In addition, electricity tariffs were unaffordable and globally uncompetitive, they said. On two occasions in the past six months, the risk of uncontrolled blast furnace stops arose due to major rail service interruptions, on account of an "unprecedented 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 period,' the group's directors said. Since March, Amsa had been exploring options to address these challenges, while the IDC conducted due diligence into the company, and the government had been pursuing structural interventions, all of which were still ongoing, they said. 'Unless a solution is implemented timeously, and to ensure the orderly closure of the Longs Business as soon as possible after the deferral period, ArcelorMittal South Africa may have no option but to take certain operational steps to prepare for the wind down process well in advance of September 30, 2025.' Meanwhile, the group predicted that earnings per share would improve 15% to a loss of between R0.82 and R0.93 a share for the six months to June 30, from a loss of R1.09 per share at the same time last year. The full interim results are expected to be released on July 31. The group said a global cyclical downturn in the steel industry has continued now for almost two years, which is longer than the norm. Global crude steel production fell by 1.3% from January to May 2025, compared to the same period in 2024, according to the World Steel Association. In South Africa, all sectors except agriculture contributed to a weaker annual GDP outlook, with tough trading conditions in key steel-consuming sectors: construction, automotive, mining, fabrication, and energy and transport. First half sales volumes were expected to be about 10% down compared to 2024's first half. Apart from lower demand, sales volumes for flat steel products continued to be affected by high import levels, whilst long steel product sales reflected the uncertainty around its continuation. Net realised prices in rand terms were anticipated to be more than 5% lower, impacted in part by a stronger rand-dollar exchange rate. The steel and manufacturing industry, represented by various industry associations, appeared before the portfolio committee responsible for trade, industry and competition on June 4, 2025. The industry expressed 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. Imports now represented more than 35% of apparent steel consumption and significantly undermined domestic supply. Visit:

IOL News
5 days ago
- Business
- IOL News
ArcelorMittal South Africa warns Longs business still under threat of closing
ArcelorMittal still faces closure of its Longs Business. Image: File ArcelorMittal South Africa (AMSA) states that limited progress has been made in addressing the structural challenges affecting its beleaguered Long Steel Business, raising the possibility that it may begin preparing for closure ahead of the end-September deadline. AMSA, in a statement to shareholders, stated that it cannot assume any further financial risks related to the Long Steel Business beyond the next few months, as the recent cash injection has already been fully utilised. Without a timely solution, the company may need to begin preparations for an orderly closure before the end of September, although it will continue to fulfil its commitments to customers until that date. Further updates are expected as part of ArcelorMittal South Africa's financial results for the six months to end-June 2025, which will be published on July 31. The company said at the end of March that it would defer the wind-down of the Longs Business until the end of September 2025. This deferral was made possible through a R1.68 billion facility from the Industrial Development Corporation (IDC), which has since been fully drawn to fund operations and working capital. Despite the efforts of AMSA, the IDC, and the government to stabilise the business and enhance its viability, the steel company has indicated that key structural impediments remain largely unresolved, including export taxes. AMSA also cited ongoing weak domestic demand, a lack of growth projects, insufficient import protection, and the circumvention of existing tariffs without legal consequence. ArcelorMittal South Africa added that the continued deterioration in Transnet's rail service, which it described as the worst performance on record, was a significant issue. It also highlighted high electricity costs, which it said are globally uncompetitive. The company announced the closure of its long steel business, including the Newcastle facility, in January 2025. Should the unit close, it will have wide implications for major industries such as mining, construction and vehicle manufacturing, with Volkswagen and Isuzu depending heavily on its locally produced steel. In a trading statement issued ahead of its half-year results, the company said it expects to report a reduced loss compared to the prior comparative period. It anticipates a loss per share of between 82 cents and 93 cents, compared to a loss of R1.09 in the same period last year. Headline earnings per share are expected to improve from a loss of R1.00 to a loss of between 89 cents and 99 cents. IOL

IOL News
22-04-2025
- Business
- IOL News
ArcelorMittal South Africa faces challenges until government addresses regulatory issues
Large parts of the domestic steel industry were brought to their knees in 2024 due to inertia on the part of government, and regulations should have been more responsive to realities on the ground, said ArcelorMittal South Africa's chairman Bonang Mohale. In February, the country's biggest steelmaker announced plans to close its Longs Business, a move expected to result in the loss of thousands of jobs and severely impact the manufacturing sector. However, intervention by stakeholders including the Industrial Development Corporation (IDC) meant that in March, a decision was taken to operate the Longs business for a further six months. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ In the meantime, the government had committed to addressing structural problems including the Price Preference System (PPS) and scrap export taxes, as well as tariff measures including safeguards and others. Writing in the latest annual report on Thursday, Mohale said a particular burning issue during 2024 was the lack of action on the artificially low scrap pricing. 'Such is the prevailing scrap environment that it had the effect of unfairly subsidising our Longs business's competitors by more than R1 000 per ton, an unfair advantage that is almost certainly without parallel anywhere else in the world,' he said. He said the Chinese economy affected most of the world's steel industry again in 2024 through 'an unrelenting export of primary and finished steel, impacting producers such as ourselves, particularly given our authorities' continuing reluctance to impose meaningful trade remedies.' He said it was clear in 2024 that China had prevailed in the battle for supremacy in the automotive sector, in that it could produce steel-intensive cars for a third of the price that other manufacturers were forced to charge, which had decimated the automotive industries of traditional vehicle makers such as Germany. 'It was indeed gratifying that in March 2025 we were able to announce that additional support from the IDC, coupled with specific government undertakings, allowed us to continue operating Longs for at least a further six months,' he said. He said a scaled-down, focused ArcelorMittal South Africa would be increasingly attuned to the need to deliver a rising tide of growth. 'Moving forward, we as a country need five pieces of the national puzzle to fall into place: we need transformation, ethical leadership, good governance, service delivery, and law and order,' he said, adding that he hoped the new government of national unity would see these goals achieved. CEO Kobus Verster said the manufacturing, steel fabrication, and the machinery and equipment sectors in South Africa, as well as construction, all recorded negative growth last year. In most instances, this was after several preceding years of contracting output. 'Key steel-consuming sectors, agriculture and automotive, returned double-digit negative growth. The economy limped to growth of under one percent while there was little evidence of any large-scale infrastructural investment,' he said. 'For Longs, the highest priority, we argued, should have been given to urgently and decisively reviewing the scrap export tax, the scrap pricing system and its administration (which currently is easily manipulated by unscrupulous participants). Collectively, these aspects have unfairly prejudiced us as the only local company beneficiating our country's wealth of iron ore,' said Verster. He said the surge in global steel exports saw ArcelorMittal South Africa's net realised prices fall to multi-year lows in 2024, last seen (apart from during the Covid-19 pandemic) in 2015/2016. At 1.36 million tons, imports represented 33.6% of local consumption, up 3% from 2023. While flat steel imports increased by 1.5%, long imports rose by 108% to some 193,000 tons. 'Most imports are unfairly subsidised, a reality that has prompted a raft of meaningful trade remedies around the world,' said Verster. The European Union, UK, US, Japan, and most other countries with primary steel industries expanded their tariff regimes, and in 2024 the Southern African Customs Union was left very exposed to injury/dumping. ArcelorMittal SA's management had responded by trying to raise government and market awareness of the damage posed by a surge in subsidised exports, and in response, a provisional safeguard on hot rolled products was introduced in July but lapsed in January 2025. The authorities also announced an anti-dumping duty on heavy sections. Duties on the export of scrap steel and a so-called pricing preference system (PPS) served to keep scrap prices artificially low. These mechanisms favoured electric arc furnace makers of, in particular, long steel, giving them an unfair advantage over integrated steelmakers. 'In 2024, we operated at a disadvantage relative to these producers (many of which are backed by public funding of some R8.5 billion per annum in subsidies). This reality was largely responsible for putting our Longs business at risk,' the group management said. Raw materials made up 46% of cash costs in 2024. The locally sourced negotiated iron ore prices were 11% up relative to those of the previous year, while international coal prices fell by 18.4% in 2024 compared to the previous year. Some R3.2bn was spent on buying electricity from Eskom, up 14% on 2023. Since 2007, electricity tariffs have increased by more than 800%. In 2024, poor performance by Transnet Freight Rail (TFR) resulted in 'considerable lost production and sales." Over the past three years, rail tariff increases had outstripped inflation. 'In 2024, the performance of our Longs business translated into an operational EBITDA drain of R1.67bn (2023: R655 million loss). Process and raw material cost savings, together with stringent cash management and Value Plan savings, made it possible to maintain our net borrowing position at a level similar to that of the previous year,' the group said.


Reuters
06-02-2025
- Business
- Reuters
ArcelorMittal South Africa delays long-steel plant closure amid government talks
Feb 6 (Reuters) - ArcelorMittal South Africa (ACLJ.J), opens new tab said on Thursday it will delay the closure of its long-steel plant operations by a month, as the steelmaker engages in talks with the government to salvage the business. The company had planned to start winding down the loss-making long-steel business by the end of last month, but has delayed it due "continuing discussions with the South African government" as well as higher-than-anticipated orders. The outcome of the talks will be announced before the end of this month, the steelmaker said in a statement. The company stated that a 380 million rand ($20.44 million) loan from the Industrial Development Corporation of South Africa, its second-largest shareholder after parent company ArcelorMittal ( opens new tab, has facilitated the continued operations of its long-steel business. ArcelorMittal South Africa also reported a headline loss of 5.1 billion rand for the year ended December 31, wider than the headline loss of 1.89 billion rand in 2023. The company said the losses were mainly driven by the weak financial performance of its long steel business on the back of soft demand, high energy and logistics costs, as well as the influx of low-cost steel imports, particularly from China. The closure of the long-steel operations, which produce fencing material, rail, rods and bars used in the construction, mining and manufacturing sectors, has been on the cards since November 2023. The shutdown could affect about 3,500 direct and indirect jobs.