ArcelorMittal South Africa (AMSA) has announced the closure of its Longs Business, a decision that will lead to significant job losses and further strain the country’s already struggling steel industry.
The closure, attributed to persistent financial difficulties, is expected to impact around 3,500 direct and indirect jobs. AMSA cited a combination of weak economic conditions, rising energy and logistics costs, and unrelenting competition from low-cost steel imports as the driving forces behind the move.
In November 2023, the company had placed its Longs Business in care and maintenance, indicating the strain caused by ongoing challenges within South Africa’s steel market. Despite efforts to engage with the government and stakeholders for policy reforms aimed at revitalizing the sector, AMSA said that the necessary interventions were insufficient to turn around the business.
“We had hoped for a sustainable solution, but the challenges have proven insurmountable,” said AMSA CEO Kobus Verster. “The high costs of logistics and energy, coupled with ineffective policy interventions, have left the Longs Business unsustainable.”
The closure will affect key facilities including the Newcastle Works, Vereeniging Works, and the AMRAS rail and structures subsidiary. Although Newcastle’s coke-making operations will continue on a reduced scale, other production processes are set to cease by late January 2025, with the full wind-down expected to be completed by the first quarter of the year.
The announcement has raised alarm among stakeholders, particularly in Newcastle, where the plant plays a pivotal role in the local economy. Critics warn that the closure could have long-lasting socio-economic consequences for the region, with many employees and their families facing uncertainty.
As part of the closure process, AMSA is set to initiate formal consultations with unions and affected workers, under Section 189(3) of the Labour Relations Act, to outline the terms of the retrenchments. The company has projected that its severance and wind-down costs will amount to around R2.7 billion.
In its trading statement for 2024, AMSA has warned of a sharp decline in its earnings, with losses per share expected to widen significantly from R3.52 in 2023 to between R5.48 and R6.21 in 2024. Headline earnings per share are also anticipated to drop by more than 100%, from a loss of R1.70 per share to a loss ranging from R4.06 to R4.41 per share.
The company’s decision comes at a time when global steel market conditions are worsening, and AMSA has stated that delaying the closure further could jeopardize its long-term sustainability. While the company acknowledges the support received from the South African government and other stakeholders, Verster expressed regret that the measures introduced were not enough to overcome the fundamental issues facing the business.
“Despite all efforts, unfortunately, the package of initiatives sought has not materialized to a level that will change the fundamentals of the structural problems the company has been experiencing,” Verster said.
AMSA’s decision to close the Longs Business marks a significant turning point for the South African steel industry, which has faced declining profitability and increasing pressure from international competition. The company’s move underscores the challenges facing not only ArcelorMittal but the broader steel sector in the region, as it grapples with structural inefficiencies and a lack of adequate policy support.
As the country faces further job losses and a declining industrial base, the government and stakeholders will be closely monitoring the impact of the closure and seeking ways to mitigate the socio-economic fallout.