Potential investors are circling the long-steel business of ArcelorMittal South Africa (Amsa) as the company prepares to shut down its plants after attempts to save the operations failed to yield results.
Business Times understands that a group of black businesses interested in acquiring the operations are in the process of putting together a package deal.
However, those privy to the information said the move was still in its infancy. It is understood the Industrial Development Corporation (IDC) could be roped in as a finance and equity partner in any such deal.
Amsa, South Africa's biggest steel producer, said in January it would wind down its long-steel plants in Newcastle and Vereeniging, leading to 3,500 job losses and putting a further 25,000 jobs in the steel value chain at risk.
The company delayed the shutdown for a month for further talks with the government and some stakeholders, to consider options to keep the business going and resuscitate a sector that has been ailing for decades.
Amsa has grappled with low demand, cheap imports — particularly from China — and rising costs in its longs business, which produces products for rail, agriculture and mining.
[ArcelorMittal SA] is deeply disappointed that all our efforts over the last year have not translated into a sustainable solution
— CEO Kobus Verster
The company said in a statement on Friday that despite its “best efforts” the parties had not been able to find solutions to avoid the winding down of the business.
The scrap export tax is still in place and the preferential pricing system for steel producers using electric arc furnaces continued to unfairly advantage them despite evidence from an independent Econometrix study on the damaging impact of the scrap Price Preference System and export tax, it said.
“Despite the company's repeated submissions of evidence demonstrating the adverse impacts of current policies, ArcelorMittal South Africa have received no formal communication from either the DTIC (department of trade, industry & competition) or National Treasury regarding the removal of the export tax or review of the price preference system. This continued policy inaction, combined with deteriorating cost structures, has accelerated the decline in operating conditions beyond what was initially assessed earlier this year,” the statement said.
CEO Kobus Verster said the company “is deeply disappointed that all our efforts over the last year have not translated into a sustainable solution, resulting in a significant negative impact on the economy, the loss of approximately 3,500 direct and indirect jobs and a detrimental impact on the local community in Newcastle”.
Amsa said it had no option but to implement the final winding down of the longs business as structural elements had not been addressed despite extensive discussions.
It said the shutdown of its blast furnace was expected in the first week of March, with the last long steel produced by late March and early April. It said the final wind down into care and maintenance should be fully implemented in the second quarter of 2025.
“Since early 2024 when negotiations began, these conditions have not merely remained static but have worsened. Electricity costs are set to increase by 12.74% from April 1 2025, further undermining ArcelorMittal South Africa's competitive position at a time when energy costs are already prohibitive,” said the statement.
Transnet's proposed tariff increases would add further pressure to logistics costs in a competitive environment, while the lapsing of hot roll coil would leave the industry vulnerable to import competition without “adequate protection,” it said.
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