ArcelorMittal delays closing of long steel business for a month

Steel company ArcelorMittal has decided to delay closing its long steel business for a month while it talks to the government about keeping it open.

ArcelorMittal, the country’s largest steel producer, announced on Thursday, when it reported its financial results for 2024, that it decided to pause the closure of its long steel business in Vanderbijlpark and Newcastle, which will affect thousands of jobs.

The company announced a month ago that it would close down its long steel business due to sustained challenges, including weak economic growth, high logistics and energy costs and an influx of low-cost steel imports, particularly from China. Various organisations, such as Seifsa and various unions, were not happy with the closure.

In a notable development, the planned wind-down into care and maintenance of the company’s long steel business, initially scheduled to start at the end of January, was delayed by approximately one month.

This extension, supported by a R380 million shareholder loan from the Industrial Development Corporation (IDC), will enable the fulfilment of outstanding orders, particularly for automotive and seamless tube customers. At the same time, discussions continue with government regarding the future of this business division.

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SA steel industry at critical juncture

Kobus Verster, CEO of ArcelorMittal, says the South African steel industry is at a critical juncture, facing unprecedented challenges from global market dynamics and trade practices, as well as domestic policy issues.

“We are actively engaging with government and key stakeholders to implement the urgent interventions needed to address the decline in this strategic sector and reposition it for growth.”

ArcelorMittal’s financial results for the year ended 31 December 2024 reveal some of the most significant challenges the company has faced since the 2008/09 financial crisis.

Verster said steel imports into South Africa reached their highest recorded levels, accounting for 33.6% of the country’s apparent steel consumption. This represents a significant challenge for domestic producers, although import volumes showed some decrease in the second half of 2024, he says.

“The company’s performance was significantly affected by unfavourable international steel-to-raw material price spreads and increased competition from subsidised imports. Total steel sales volumes decreased by 6% to 2.3 million tonnes, while revenue declined by 7% to R38.6 billion compared to the previous year.”

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ArcelorMittal reports headline loss after profit in 2023

ArcelorMittal reported a headline loss of R5.1 billion and an attributable loss of R5.8 billion reflecting the severe pressures facing the South African steel industry, Verster says. The attributable loss included R1.8 billion in extraordinary charges relating to the wind down and impairment of the long steel business.

The earnings before interest taxes and depreciation (EBITDA) loss from operations of R1.8 billion (compared to a R56 million profit in 2023) included a R1.1 billion loss arising from the long steel business and a further R670 million loss which arose from the abnormal chilled hearth conditions with affected the two blast furnaces in the flat business in the second quarter of the year.

Net borrowings prior to the capitalisation of accrued interest and fees (R1.4 billion) payable to the ArcelorMittal group, were flat for the last three quarters at R3.8 billion. After the capitalisation, net borrowings rose to R5.1 billion.

Despite the challenges, the company maintained its commitment to operational improvements through its Value Plan, which delivered R910 million in benefits during 2024. The company also reported improved asset utilisation in its flats business during the second half of 2024, with crude steel production levels increasing by 12%.

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ArcelorMittal continues to advance bankability

Verster said the company continues to advance the bankability of its high-payback investment portfolio, which includes addressing its balance sheet resilience through a potential recapitalisation.

The Company’s strategy for the next five years focuses on four key pillars: safety as the primary priority, strengthening core business operations, executing high-payback projects and positioning for future growth through high-quality products and value-added markets.

Some of the projects included in the high-payback investment portfolio, include a 1.5 million tonne electric arc furnace at Vanderbijlpark, a blast furnace gas recovery plant to increase electricity self-generation, a new galvanizing and Magnelis line to introduce superior coating technology for the Southern African market and Optigal® for organic coated products, targeting import replacement.

These projects are key to localisation, import replacement, cost savings and volume growth in key sectors such as automotive, appliances and renewables.

“While we face significant challenges, we remain committed to implementing our strategic initiatives and working closely with all stakeholders to ensure the long-term sustainability of our operations. The support from our parent company and the IDC demonstrates confidence in our ability to navigate through these challenging times,” Verster said.