Steelmakers’ plans jeopardize South Africa’s infrastructure development

ArcelorMittal South Africa’s (AMSA) plans to close plants in South Africa could hit the country’s infrastructure boom, Bloomberg reports.

The products they produce are needed for the exponential deployment of power poles, rail lines, and new roads – projects that would turn South Africa into a “construction playground.” It is also crucial for the automotive plants operating in the country.

At the beginning of 2025, Arcelor Mittal announced that, after long, fruitless negotiations with the government, it would close its long products plants in Ferning and Newcastle at the end of January, including a rail production facility. The move was prompted by disruptions in rail freight transportation, soaring electricity prices, a weak economy and government policies that artificially keep the price of scrap low, which is used by smaller competitors.

In turn, South African Trade Minister Parks Tau has assembled a team working with ArcelorMittal South Africa to prevent the closures. A spokesperson for the government noted that the steel industry is crucial to the reconstruction and economic recovery plan.

In addition, Rand York Castings, one of the country’s largest steel producers, said it may relocate a unit that manufactures products for civil engineering that are exported worldwide to India.

Lucio Trentini, chief executive officer of the Federation of Steel and Engineering Industries of South Africa, said the plans would be a crushing blow to South Africa’s industrialization and infrastructure development goals. The industry organization hoped that this decision could be avoided or postponed.

Although steel consumers can source the basic materials AMSA supplied from local steel mills operating electric arc furnaces, they will have to import larger steel sections and specialty steels, which limits flexibility and increases costs. Automakers will have to recertify steel products from new suppliers, which is a safety requirement and involves a lengthy approval process.

Currently, the industries to which AMSA is a supplier are trying to either prevent closures or find alternatives.

Organizations representing car manufacturers in the country, including Volkswagen AG and Toyota Motor Corp. and auto component manufacturers, have asked the Minister of Trade and CEO of ArcelorMittal South Africa, Cobus Verster, to halt or postpone the closure for 12 months while they find alternative supplies.

The automotive industry accounts for about 5.3% of South Africa’s GDP, with cars and auto components accounting for 15% of the country’s exports.

Last July, ArcelorMittal South Africa refused to shut down its long products production. The company then focused on developing a plan to ensure business viability.