ArcelorMittal South Africa Approaches Funding Deal to Preserve Steel Mills

ArcelorMittal South Africa is nearing a funding agreement with the government to keep its crucial steel mills operational. Initial support of 500 million rand is proposed to aid workers while further financing discussions are taking place through the IDC. AMSA’s board is reviewing offers for two mills planned for closure, as preserving operations is essential for economic recovery.

ArcelorMittal South Africa (AMSA) is approaching a significant funding agreement with the South African government aimed at preserving its essential steel mills. This comes amidst rising stock prices for the unit, as the government proposes an initial funding of approximately 500 million rand (about $28 million) to support steelworkers over the next six to eight months. Additionally, further bridge financing discussions are ongoing through the Industrial Development Corp. (IDC), which intends to increase its stake in AMSA from 8.2%.

The government, collaborating with the state’s trade department and the IDC, is also urging AMSA to evaluate offers regarding the two mills slated for closure, located in Vereeniging and Newcastle. Although AMSA has not halted the shutdown process, it is actively communicating with stakeholders about funding opportunities. The company has indicated that without a financial resolution, it will be impractical to delay the idling of operations.

The preservation of these mills, which produce long steel products not manufactured by local competitors, is vital to the government’s strategy for economic revitalization through extensive infrastructure projects. These mills also play a crucial role for key sectors such as automotive manufacturing and mining, which are principal contributors to the nation’s foreign revenue. A decision regarding the funding deal may be announced imminently, coinciding with AMSA’s board meeting to deliberate on these proposals.

In its efforts to sustain operations, AMSA is requesting around 3 billion rand to keep the mills functional for an additional 12 months and to accumulate inventory for major automotive clients like Volkswagen AG and Isuzu Motors Ltd. The IDC has refrained from commenting on particular bids for AMSA’s plants while confirming ongoing discussions to find a viable solution. Earlier this year, the corporation provided working capital to AMSA to ensure continued operations, marking a repeated instance of support from the IDC, the largest shareholder after AMSA’s parent company.

In a broader context, the IDC is investing 12 billion rand into car manufacturing ventures with Beijing Automotive International Corp., emphasizing the significance of products like spring steel produced by AMSA in boosting manufacturing growth. However, AMSA also faces competition from local mini mills, which utilize discounted scrap metal to produce steel, benefiting from government funding. AMSA’s share prices have previously declined sharply, yet recently witnessed a notable surge of 21%, despite eventual reductions in gains by the end of trading in Johannesburg.

In summary, ArcelorMittal South Africa is on the brink of securing critical funding from the South African government to maintain its steel mills, which are integral to the national economy. The proposed financial support aims to stabilize the workforce and ensure continued operations, especially in light of the ongoing challenges faced by AMSA. The company is also exploring options for its mills, with potential announcements expected soon. This move highlights the government’s commitment to revitalizing the steel industry amidst significant economic pressures.

Original Source: www.mining.com