ArcelorMittal long steel business closing for good due to policy inaction

ArcelorMittal has made a final decision to close its long steel business in Newcastle and Vanderbijlpark after postponing it for a month to see if the government could help keep the steel plants afloat and retain 3 500 direct jobs.

The closing of the long steel business was delayed partly to enable ArcelorMittal to fulfil its higher-than-anticipated outstanding order book, prioritising automotive and seamless tube customers. Also to continue discussions with the government on the future of the long steel business with an announcement expected in the second half of this month of February.

According to a statement from ArcelorMittal there had been ongoing engagement with the government and certain stakeholders since then to find solutions to avoid the winding down of the long steel business.

“ArcelorMittal South Africa acknowledges the government’s engagement during this process. Regrettably, despite our best efforts the parties involved have not been able to find timely solutions required to defer the winding down of the long steel business,” ArcelorMittal said in the statement.

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No progress on these key priorities for ArcelorMittal

The steelmaker said progress on these key priorities was limited:

• Scrap advantage over iron ore: The scrap export tax remains in place and the preferential pricing system for steel producers using electric arc furnaces continues to unfairly advantage them, despite evidence from an independent Econometrix study on the damaging impact of the scrap price preference system and export tax.
• Port and rail efficiencies: No further progress was made on improving port and rail efficiencies, while Transnet declined to negotiate improved tariffs.
• Reduction in energy prices: ArcelorMittal’s application for a negotiated pricing agreement with Eskom was not supported and no progress was made in this regard.
• Implementing trade measures: Duties were not implemented as anticipated and a provisional safeguard on hot rolled coil lapsed.

ArcelorMittal said the structural elements leading to the winding down of its longs steel business remained unaddressed despite the extensive discussions.

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Conditions worsened for ArcelorMittal since discussions began last year

“Since early 2024 when negotiations began, these conditions did not merely remain static but worsened. Electricity costs are set to increase by 12.74% from 1 April 2025, further undermining ArcelorMittal South Africa’s competitive position at a time when energy costs are already prohibitive.

“Transnet announced proposed tariff increases across its service portfolio, which would further elevate logistics costs that are already uncompetitive by international standards. On the regulatory front, the crucial safeguards on hot rolled coil lapsed, leaving the industry vulnerable to intensified import competition without adequate protection.”

ArcelorMittal says despite its repeated submissions of evidence demonstrating the adverse impacts of current policies, it received no formal communication from the department of trade, industry and competition and the National Treasury regarding the removal of the export tax or review of the price preference system.

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Continued policy inaction the death knell for ArcelorMittal’s long steel business

“This continued policy inaction, combined with deteriorating cost structures, accelerated the decline in operating conditions beyond what was initially assessed earlier this year.

“Given these circumstances, the board and management of ArcelorMittal South Africa have no option but to implement the final winding down of the long steel business. It is envisaged that the shutdown of the blast furnace will commence in the first week of March with the last steel form produced by late March or early April.”

The final winding down into care and maintenance should be fully implemented in the second quarter of 2025.

Kobus Verster, CEO of ArcelorMittal South Africa, says the company is deeply disappointed that all its efforts over the past year did not translate into a sustainable solution, resulting in a significant negative impact on the economy, the loss of about 3 500 direct jobs and a detrimental impact on the local community in Newcastle and Vanderbijlpark.