Citing a faltering economy, ArcelorMittal South Africa Ltd. plans to close its long steel products division and eliminate up to 3,500 jobs. The business stated in a filing on Tuesday that the unit will be placed under care and maintenance. The factories that would be impacted include the Newcastle Works, the Vereeniging Works, and rolling facilities that use Newcastle material as feedstock, the statement said.
According to ArcelorMittal SA, a challenging trade climate and a sluggish economy have combined to negatively impact the company.
“Due to the low GDP growth in South Africa, the country’s apparent steel consumption has dropped by 20% over the last seven years to a level of about 4 million tonnes. This decline is a result of project delays, limited infrastructure spending, and low market demand in important steel-consuming sectors, which have led to overcapacity in the market and a general decline in business confidence.”
What affected the Company’s Operation?
The introduction of a 20% export duty, a preferential pricing scheme for scrap, and, more recently, a ban on scrap exports have all had an effect on the company’s operations and given steel production via electric arc furnaces an “artificial” competitive advantage over steel manufacturers who beneficiate iron ore to produce steel.
“ArcelorMittal South Africa has no control over these structural market issues, and it doesn’t seem like they can be resolved anytime soon.”
The corporation is beginning the process of closing its lengthy steel business. According to Reuters, this company makes fences, rail, rods, and bars that are utilized in the manufacturing, mining, and construction industries. According to the firm, the wind-down only impacts the Vereeniging and Newcastle works, not the coke batteries in Newcastle, which will continue to function and provide metallurgical coke for the Vanderbijlpark works as well as commercial market coke for the ferroalloy sector.
Up to 3,500 people, both contracted and owned, may be impacted by the reorganization. Kobus Verster, CEO of ArcelorMittal SA, stated:
“The business that remains after the wind-down will have a more stable financial foundation and be capable of allocating the necessary funds towards product development and potential expansion opportunities.”
South Africa’s Employment Shortage
The business stated in a filing on Tuesday that the unit will be placed under care and maintenance. The factories that would be impacted include the Newcastle Works, the Vereeniging Works, and rolling facilities that use Newcastle material as feedstock, the statement said. Due to the inability of state-run logistics and electrical businesses to meet demand, South Africa has been experiencing a severe employment shortage. Employers like as Sibanye Stillwater Ltd. and Anglo American Plc are also letting go of employees. The changes would deal President Cyril Ramaphosa and the ruling African National Congress yet another setback in their electoral chances.