ArcelorMittal South Africa to Cease Production Due to Unviable Conditions

ArcelorMittal South Africa will halt production of long products in Q2 due to failed negotiations with the government. This cessation will cost around 3,500 jobs and is attributed to high operational costs and poor infrastructure. The company plans to begin shutting down production in March, with complete closure expected by early April, causing concern among dependent industries.

ArcelorMittal South Africa (AMSA) has confirmed that it will cease the production of long products at its South African facilities in the second quarter of the year. This decision follows unsuccessful negotiations with the government regarding a rescue package. Consequently, the production closure will result in approximately 3,500 direct and indirect job losses. Although the initial closure was scheduled for January, AMSA delayed the process to complete pending orders, now targeting a shutdown at the beginning of April.

The company cited various factors contributing to its decision, including inadequate railroad connections, high electricity costs, an influx of inexpensive imports, and government policies that suppress steel scrap prices, negatively impacting competition. Furthermore, AMSA stated, “Regrettably, the parties have not been able to find timely solutions required to defer the winddown.” The situation has worsened, with the country’s main energy provider planning to increase prices by nearly 13% in April, while state-owned transport services are also considering tariff hikes.

AMSA’s Newcastle and Vereeniging Works produce approximately 350,000 to 400,000 tons of steel products annually, which other companies in South Africa are unable to replace. The anticipated closure of these facilities has raised concerns among various enterprises that depend on AMSA for their steel supply. Previously, it was reported that the South African government was exploring a rescue package of up to R1 billion (approximately $53.6 million) to avert the shutdown of AMSA’s plants.

In summary, ArcelorMittal South Africa’s impending cessation of operations underscores critical challenges within the local manufacturing sector, including rising energy costs and ineffective government policies. The closure will not only affect the company but also have far-reaching implications for the South African economy, particularly regarding job losses and supply chain disruptions. Despite attempts at negotiation for a financial rescue package, the situation remains unresolved, threatening the viability of steel production in the region.

Original Source: gmk.center