A deal to save steel giant ArcelorMittal South Africa (Amsa) is imminent, according to insiders, though it may be too late to save some companies and jobs in the downstream industry.
Several sources said the state-owned Industrial Development Corp (IDC) and Amsa are poised to announce a transaction at the end of March after months of talks that included Amsa’s Luxembourg-based parent, ArcelorMittal.
Amsa, which narrowed its headline loss for the year to end-December to R3.36bn from R5.1bn the previous year, said in a Sens statement last month that the talks with the IDC would change the company’s outlook for 2026 and beyond if they reached a satisfactory conclusion.
In February 2025 the department of trade, industry & competition (DTIC) lent Amsa R380m that enabled it to postpone the closure of its long-steel business. A month later the IDC injected a further R1.68bn to keep Amsa going.
One Amsa insider said this week that ArcelorMittal group CEO Aditya Mittal had met representatives of the National Treasury, the IDC and the DTIC at the World Economic Forum in Davos, Switzerland last month.
The IDC declined to give details of the talks. Head of corporate affairs Tshepo Ramodibe said: “The IDC is engaged in discussions with government and industry stakeholders, including Amsa, on ways to address the challenges facing the company.”
Amsa spokesperson Tami Didiza said the company could not comment on the discussions. “Once they are finalised, we’ll make a public statement,” he said.
They must not say they want 51% ownership. They need to go get another operator to operate Amsa if they cannot operate it themselves.”
— Amsa source
Another source said Amsa had met its BEE partner, Likamva Resources, this week about the deal, and a follow-up meeting would be held in the coming weeks.
Likamva chair Mikhail Maasdorp said the group would be guided by the Sens notice issued in January.
“Right now, the important thing for Likamva is that we continue to support management to ensure the long-term sustainability of the business, given the headwinds the industry is facing.”
Amsa has rejected an IDC R8.5bn takeover offer, but the sources said the plan now was for the IDC to partner with other companies to run Amsa.
The IDC owns 8% of the company, ArcelorMittal 67% and Likamva 16.7%.
An Amsa source said “a good deal” would be for the government to take “total control ... They must not say they want 51% ownership. They need to go get another operator to operate Amsa if they cannot operate it themselves.”
Lebo Radebe, acting CEO of the South African Manufacturers’ Foundation, said the IDC was likely to buy ArcelorMittal’s stake in Amsa and was looking for a partner with a proven track record of operations.
“I believe with the approach they have taken and where the discussions are now, by the end of February, maybe March, April, everything should be done,” he said. “There are more than nine companies that have come forward with take-off agreements and financial backing.”
The IDC has appointed transactional advisers to assess the company, he said, adding that the IDC itself should avoid getting too deeply involved in Amsa, or it would “become part of the chaos”.
Amsa was brought to its knees by to low demand for steel in a stagnating economy, coupled with rising power costs and cheap imports, especially from China.
Late last year the group announced it would close its long-steel operations in Newcastle and Vereeniging late last year, placing 3,500 jobs at risk. However, the Vereeniging bar-mill plant is set to reopen in mid-year.
In 2020 Amsa pulled the plug on its Saldanha steelworks in the Western Cape.
One firm, Vesuvius SA in Johannesburg, that supplies refractory bricks for furnaces is set to cut staff after the winding down of Amsa’s Newcastle operation.
A source close to the company said orders for refractory bricks, the ceramic material used to line furnaces, had all but dried up. He said the new Chinese steel producer in Nigel, Chung Fung Metal, was part of the problem for local companies.
“One wonders where they are going to procure their refractory products for the furnace — probably not in South Africa,” the source said.
What we really need is duties of 54% on all imports of steel and stainless steel%. That is the only way we can protect stainless steel and steel in South Africa
— Nellis Bester, Ferro Alloy Producers Association chair
“The concern here is that the government is failing miserably to enforce localisation, to minimise the import of cheap products from China and, most importantly, to prevent the landsliding of job opportunities at local suppliers and smelters.”
Vesuvius SA was not available for comment.
Radebe criticised the slow pace of government efforts to help Amsa and said it should be doing more than just providing bailouts.
“The government was meant to intervene early, instead of keeping quiet. I believe when Saldanha was closing down, they should have stepped in to say, ‘How can we help?’”
He said steel imports from China, and now Zimbabwe, were threats for South Africa’s steel industry.
Zimbabwe planned to double its steel production to 1.2Mt.
“The government is playing ignorant and is going to make it easy for these Chinese companies to take over South African steel production.”
Radebe said the biggest killer in manufacturing was the cost of power, which had soared 900% in the past decade.
“Electricity is a big problem. The company that will partner with the IDC needs to come up with a plan on which alternative they take to reduce the cost of power. Electricity prices are crazy.”
Nellis Bester, chair of the Ferro Alloy Producers Association, said safeguards were important for the steel and stainless-steel industry.
“What we really need is duties of 54% on all imports of steel and stainless steel%. That is the only way we can protect stainless steel and steel in South Africa,” he said.
Business Times
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.