ArcelorMittal SA's Dilemma Threatens Steel Industry Survival

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AMSAImage Source: IOL

Synopsis:

The South African steel industry faces a perilous moment as ArcelorMittal contemplates shutting down its long steel plants. The downstream sector, heavily reliant on ArcelorMittal, urges immediate government and company intervention to overcome market challenges and policy constraints threatening thousands of jobs and millions in revenue. The company cites low market demand, logistical hurdles, and uncompetitive policies as reasons for the potential closure., reports IOL\

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Article:

In a critical juncture for the South African steel industry, the looming threat of ArcelorMittal's long steel plant closures has spurred urgent calls for intervention. Facing challenges of low market demand and external constraints beyond its control, ArcelorMittal announced its intent to wind down the long steel business in November. The downstream steel industry, encompassing construction, automotive, mining, and various others, convened in a crisis meeting to strategize and prevent the imminent closure of vital plants.

The downstream operations, constituting a crucial part of South Africa's steel supply chain, are a linchpin for numerous industries. According to estimates from the Steel and Engineering Industries of Southern Africa (SEIFSA), these operations provide direct employment to approximately 270,000 people, accounting for 90% of the total local steel industry employment.

At a summit featuring over 20 industry associations, ArcelorMittal CEO Kobus Verster reiterated the company's plea for a level playing field. He emphasized the need for equal tariffs on energy and transport, along with the removal of policy interventions favoring local scrap-based mini mills, which currently enjoy an unfair advantage.

A key factor contributing to the industry's challenges is the significant over-capacity in local long steel production. With a local demand of only 1.25 million metric tons against a capacity of 4.25 million metric tons, the sector faces imbalance. Mini mills, supported by government funding and exclusively using scrap steel, add to the complexity. The formal downstream industries can only absorb a limited quantity of mini mills' output, impacting the broader market dynamics.

Currently, ArcelorMittal's Newcastle blast furnace is the sole local mill producing long steel from iron ore, with the Vereeniging electric arc furnace idled temporarily. The closure of ArcelorMittal's plants could lead to severe shortages, affecting downstream plants and potentially causing closures in industries heavily reliant on long steel.

Conclusion:

The imminent closure of ArcelorMittal's long steel plants poses a severe threat to South Africa's steel industry. With downstream operations at risk, the potential fallout includes immediate production stoppages, impacting various dependent sub-industries. The automotive industry, a major consumer of ArcelorMittal's long products, could face setbacks in localization programs, job losses, and disruptions in assembly line production. The ripple effect may result in substantial job losses and economic losses for the country. Urgent action is imperative to navigate this critical crossroads and safeguard the future of the South African steel sector.

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