ArcelorMittal shutdown: worry about socio-economic catastrophe

There are concerns that ArcelorMittal’s decision to shut down its long steel business will lead to a socio-economic catastrophe. While government is said to have done nothing about the reasons for the shutdown, the department of trade, industry and competition says it still wants to prevent the shutdown.

ArcelorMittal South Africa (AMSA) made a final decision to mothball its long-steel operations at its Newcastle Works and Vereeniging Works, as well as its rail and structural subsidiary, AMRAS.

Employers’ organisation SEIFSA (Steel and Engineering Industries Federation of Southern Africa) warns that the announcement will have a devastating impact on communities, suppliers, contractors and the broader metals and engineering sector.

“SEIFSA repeatedly warned of a socio-economic catastrophe should ArcelorMittal shutter its plants. Some of the most alarming estimates over and above the reported 3 500 direct jobs on the line are the medium-term impact of second round effects in the order of 20 000 to 25 000 jobs and in the longer-term multiples of this.

“The effect of this latest development will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sector of the economy and all who work in it,” Elias Monage, federation president of SEIFSA, says.

ALSO READ: Unions not happy with ArcelorMittal closing long-steel business

ArcelorMittal shutdown a major setback

“This development is a major setback for the base of the industrial sector and industrialisation more broadly. The tragic reality is that the lofty goals set by the Steel Master Plan (SMP) to charter a roadmap to re-energise the sector, expand production and increase demand across the steel and fabrication industry value chain and introduce an industrialisation programme have failed dismally.

“The SMP was meant to deliver a comprehensive industrial policy framework, where a total, inclusive, industry perspective would be taken and complementarities across the value chain enhanced.”

Sadly, Monage notes, we are witnessing the opposite, where policy is implemented in a fragmented manner, with a short-term view and with pockets of industry being pitted against each other.

Monage points out that ArcelorMittal’s year-long plea for help from government has come to naught. “The fact of the matter is that ArcelorMittal never had a prayer and sadly we have seen this play out before with the closure and mothballing of Highveld Steel and Saldanha, all at the feet of a dithering government too slow to react and offering too little too late.

“For South Africa’s economy, ArcelorMittal’s decision means that there will be fewer players in the country producing long-steel products, such as fencing material, reinforcing bars, beams, rails and profiles that are used in the construction, mining and manufacturing sectors.”

ALSO READ: ArcelorMittal SA plunges 27% on Newcastle and Vereeniging plant closures

ArcelorMittal shutdown highlights 3 key tenets of industrial policy

Monage says ultimately the downsizing at ArcelorMittal highlights three key industrial-policy tenets:

• Firstly, if government lacks the capacity to do everything, then it should focus on its core functions, which in the economy means infrastructure, building human and social capacity and maintaining security.
• Secondly, government’s role in industrial policy is to shape an enabling environment that aligns national and business interest. It should not mediate short-term compromises between competing stakeholders.
• Finally, industrial policy should be used to rescue struggling industries or companies, especially where the long-term socio-economic benefits outweigh the costs.

He says the de-industrialisation trajectory observed in the sector can be attributed to the lack of a well-considered and all-encompassing metals sector industrial policy. “The South African steel industry reiterates its commitment to collaborate with government to ensure that policy decisions are made in the best interest of the industry and the nation.

“A holistic approach that protects the diversity and sustainability of the entire steel value chain is essential for the future success of the South African steel industry.”

Monage says a sectoral engagement between minister of trade, industry and competition, Parks Tau and the metals and engineering sector, held on 20 November, was the first formal engagement. Tau wanted to provide a platform where the ministry and Industry could come together and develop a way forward to arrest the rapid decline in the sectors performance.

ALSO READ: ArcelorMittal crisis: Jobs at risk, urgent government intervention needed

Key take-aways of talks about ArcelorMittal shutdown

He says the key take-aways from this session include that:

• urgency is a must;
• we are not operating in a business-as-usual scenario and therefore interventions must be as radical and ambitious as deemed necessary under the circumstances;
• more of the same is likely to produce the same result, with negative consequences for labour, revenue collection and the long-term sustainability of the metals and engineering sector;
• the sector is on the edge of the point of no return and therefore without ambitious action de-industrialisation will continue and only accelerate; and
• if it is delayed it may become harder and more expensive to reverse.

“SEIFSA, representing both the up and downstream value chain, calls on government to urgently prioritise a long-term, inclusive strategy for the steel industry. We need a collaborative approach that considers all stakeholders in securing the future of South Africa’s steel industry and its critical role in economic development.”

Monage says the closure of ArcelorMittal’s long steel business is a profound policy failure. “Nevertheless, steel still has the potential to be the core of the re-industrialisation programme for South Africa.

“What is required on an urgent basis in the face of this crisis now is leadership, a focused character and decisiveness, that until now has been missing and without it we will be doomed to the same results, with negative consequences for the long-term sustainability of the metals and engineering sector.” 

ALSO READ: Steel producers slam ArcelorMittal’s call to end scrap export tax

Government still wants to talk about ArcelorMittal shutdown

Meanwhile, the department of trade, industry and competition said in a statement it notes with “serious concern” the AMSA decision to wind down its longs steel business.

“In fulfilment of its mandate to work with the private sector in growing the local economy, the department remains committed to working with AMSA to find a workable and lasting situation.

“During the course of 2024, AMSA reached out to various government departments and state-owned entities with requests for different concessions for its business. Having taken heed of these requests, the minister decided to form a comprehensive and coordinated approach to resolving the issues raised by AMSA.”

According to the statement, government wants to continue talking until a workable resolution to AMSA’s problems is found.

ALSO READ: ArcelorMittal keeps two plants open, saves 3 500 jobs

Steel industry critical for SA economy

The department says the steel industry is critical in the reconstruction and recovery plan for the South African economy, particularly in manufacturing, mining, construction, engineering and transport, which are at the centre of the industrialisation, localisation and beneficiation programmes of government.

It seems that the department does not realise that AMSA is ready to close at the end of the month, saying while the immediate task will be on addressing structural issues affecting AMSA’s long steel business, the broader focus should also be on addressing productivity improvements and supply chain efficiencies, investments in low-carbon technologies, competitiveness and regaining the market share.

“It is also important that public and private sector entities and companies commit themselves to procure locally manufactured steel products in their projects. Undoubtedly, such a commitment will contribute positively to aggregate demand, job creation and economic growth in South Africa,” the department says.