IDC saves ArcelorMittal days before furnaces switched off

The Industrial Development Corporation of SA (IDC) saved ArcelorMittal’s long steel business just days before its furnaces in Vanderbijlpark and Newcastle would have been switched off.

ArcelorMittal South Africa said on Monday that the previously communicated wind down of its long steel business will be deferred for an initial period of at least 6 months up to 31 August 2025 thanks to a R1 683 million facility provided by the Industrial Development Corporation (IDC).

Kobus Verster, CEO of ArcelorMittal South Africa, said in a media briefing on Tuesday that the process to close down its long steel business had already started.

The process starts by adding less and less iron ore to the furnaces while orders for iron ore, coke, and coal are stopped.

In the next step, a hole is made in the bottom of the furnace to drain the liquid before it is switched off.

The ArcelorMittal furnaces were already at the stage where there was no more stock , and the next step, to drain the liquid, would have started in a few days.

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ArcelorMittal to pay back the IDC loan based on performance

ArcelorMittal will repay the IDC loan according to an agreement and depending on the long steel business’ financial performance, solvency and liquidity.

As part of the agreement, ArcelorMittal committed to the continued operation of the long steel business and retention of jobs during the six-month deferral period.

The company also received a Temporary Employee Relief Scheme (TERS) grant to assist in funding employee costs, which will reduce the drawdown required against the IDC loan facility.

ArcelorMittal said in a SENS announcement last week that it will continue to consider various strategic alternatives. As such, the agreement reached with the IDC includes ArcelorMittal confirming that the IDC may conduct a due diligence exercise during the six-month period.

The deferral also means that the Section 189(3) Labour Relations Act consultation process to retrench the workers in the long steel business will be suspended.

However, certain areas outside the long steel business may still undergo restructuring due to operational reasons.

The Newcastle works blast furnace will continue operating, ensuring customer needs are met during this period.

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Government will address structural problems during ArcelorMittal deferral period

Government will use the deferral period to expeditiously address structural problems for the industry, including the scrap Preferential Pricing System, scrap export tax and tariff measures, including safeguards.

During this time, ArcelorMittal South Africa will focus on implementing further improvements to optimise operations, enhance product offerings and supply chain reliability for customers, and advance its commitment to localisation through continued industry collaboration.

Verster said based on engagements between ArcelorMittal and government, ArcelorMittal understands that a more market-related and less punitive Preferential Pricing System and export tax on scrap dispensation will be implemented soon, with safeguards imminent.

These measures will help to level the playing field in the steel industry to the benefit of the country.

He said that ArcelorMittal appreciates the government’s assistance, particularly trade, industry, and competition minister Parks Tau’s leadership during the engagement; his department, the IDC; and all stakeholders, including customers, suppliers, and organised labour, for their support in continuing this critical industrial capacity.

At the media briefing, Verster said the new minister has a better understanding of policy issues in the steel industry.

“The attitude change is evident in the financial support that we received. There is now a different realisation of what our long steel business means for the country. Scrap metal is not a solution for steel making. Beneficiation is needed to produce the scrap.”

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ArcelorMittal encouraged by demand growth

“ArcelorMittal is encouraged by emerging signs of demand growth in the South African economy, with potential for the steel market due to recent opportunities in sectors such as energy.

“Should this materialise, it will have a positive effect on the high-quality products manufactured and supplied by our long steel business.

“We are pleased to have reached an agreement to enable the deferral of the wind down of our longs steel business and an in-principle understanding on other issues that require resolution to hopefully avert closure entirely.”

Verster said this provides a critical pathway for the operations, the company’s employees and the broader steel industry in South Africa.

“This period will allow all stakeholders time to collaboratively address the negative policies that have led to structural challenges in the regulatory framework for steel, including input material pricing and trade mechanisms, that significantly affected the viability of the only integrated long products operation in South Africa.

“We remain committed to working with government to create an enabling environment where steel manufacturing can now thrive sustainably.

The IDC facility, combined with government’s commitment to address structural challenges in the industry, offers a pathway to potential long-term sustainability for the business.”

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Sustainable profitability remains ultimate objective for ArcelorMittal

According to Verster, ArcelorMittal will work intensively with all stakeholders to enhance operational efficiency, strengthen its supply chain relationships and contribute to the growth of the South African economy during the deferral period.

“We remain cautiously optimistic about the emerging opportunities in various sectors, particularly energy, which could drive increased demand for our high-quality steel products.”

While this arrangement represents a positive development, Verster emphasised that sustainable profitability remains the ultimate objective.

“The next six months will be crucial in determining whether the long steel business can achieve the financial stability required for long-term viability.”

The government is currently reviewing steel tariffs, and Verster called for the review to also include the downstream, as the issue concerns not only primary steel imports but also downstream imports such as wheelbarrows.