ArcelorMittal South Africa Negotiates Funding to Delay Long Steel Closure

ArcelorMittal South Africa is negotiating with the government to defer its planned closure of long steel operations due to funding issues and operational losses. The suspension of closure impacts jobs and key industry sectors, and the company is seeking the removal of an export tax on scrap metal among other measures to improve financial sustainability.

ArcelorMittal South Africa is currently negotiating with the government and other stakeholders regarding potential funding to postpone the impending closure of its long steel operations. The company indicated on February 28 that it would cease production of items such as fencing materials, rails, rods, and bars by April due to unproductive discussions with the government.

In an official statement, ArcelorMittal South Africa noted, “The company is engaging with stakeholders, including government, regarding funding and related matters to enable the deferral of the wind down of the longs business, as well as regarding the interventions previously announced.” The ongoing wind-down processes continue but are being managed to allow for funding discussions.

The company emphasized that the deferral of the wind-down would only be feasible if an agreement on funding and related matters is reached. Alongside these funding efforts, ArcelorMittal has requested the government to eliminate an export tax on scrap metal, arguing that it favors recyclers. Additionally, the steelmaker is seeking import duties and mechanisms to reduce electricity and freight rail costs.

A spokesperson from South Africa’s industry ministry confirmed that discussions are ongoing with ArcelorMittal and other industry representatives, stating, “Government is engaged on saving the jobs.” The planned closure, initiated in November 2023, was attributed to weak demand and ongoing infrastructure challenges, potentially affecting 3,500 direct and indirect jobs and disrupting various sectors.

Notably, ArcelorMittal South Africa’s long steel division recorded a significant operational loss of 1.1 billion rand (approximately $60.56 million) in 2024, up from 600 million rand in 2023. The company also reported a headline loss of 5.1 billion rand for the year concluding on December 31, contrasting with a headline loss of 1.89 billion rand in 2023. These losses stemmed from poor performance in the long steel business and low-cost steel imports, predominantly from China.

In summary, ArcelorMittal South Africa is actively pursuing funding discussions with the government to delay the closure of its long steel operations, originally slated for April. The collaboration aims to mitigate the adverse effects on employment and the supply chain in critical sectors like automotive and mining. However, successful deferral hinges on reaching viable financial agreements, amid rising operational losses due to market challenges and external competition.

Original Source: www.marketscreener.com