South Africa and ArcelorMittal are negotiating the future of the company’s plants

The government of South Africa is engaged in crisis negotiations with ArcelorMittal South Africa (AMSA) regarding the future of the company’s unprofitable steel mills in the country, reports Bloomberg.

The Ministry of Trade and Industrial Development Corp (IDC) are discussing the possible closure of the Newcastle facility, which produces steel for use in the country’s automotive, mining, and construction industries. A decision may be made in the coming days, as the plant, according to sources, is incurring financial losses. ArcelorMittal has set September 30 as the closure date for this facility, as well as for another asset in Vereeniging.

AMSA first announced its intention to shut down its long products manufacturing facilities in November 2023. This move will impact 3,500 direct jobs and tens of thousands more in related industries. These grades of steel are not produced by local competitors and would need to be imported.

In response to a request from the agency, the Ministry of Trade confirmed that it is holding talks with AMSA regarding the Newcastle asset.

«From the outset of this process, the ministry’s objective has been to preserve the country’s capacity for long products manufacturing», the department stated.

Recently, ArcelorMittal South Africa reiterated that if no solution is found, the plans to wind down operations at the facilities in September will remain in place. The company cites among the reasons for its losses the unfair price discounts on scrap metal granted to local competitors who produce some simpler similar products. The steelmaker also notes high electricity prices, limited protection from Chinese imports, and poor rail connections.

AMSA has twice postponed the closure of its steel mills in Newcastle and near Johannesburg in order to conduct negotiations with the government.

As reported by IOL, the company is awaiting the results of the due diligence process carried out by the IDC, which provided funding to support the long products business through the third quarter of this year.

It should be recalled that in February of this year, the South African government was discussing a rescue package of up to 1 billion rand ($53.6 million) to prevent the closure of ArcelorMittal South Africa’s plants.