ArcelorMittal South Africa to proceed with rationalisation process

ArcelorMittal South Africa has confirmed that it will commence with the Section 189 consultation process regarding the potential closure of the Vaal Meltshop and the Forge in its Vereeniging Works. In addition, it will undertake an industrial footprint review of Vanderbijlpark Works and a review of Corporate Service departments, which will be completed at the end of October 2015.
The South African market has been particularly impacted by lower steel prices as a result of the global slowdown in demand; significantly lower local steel demand due to a sluggish local economy and the challenge of increased imports of cheaper Chinese flat and long products into the local market.
The company has been engaging extensively with stakeholders, including Government, to receive protection in the form of import tariffs and duties and the localisation of steel for Government infrastructure projects.
“We acknowledge and appreciate the steps taken by Government with regards to the initial approvals of import tariffs. However, these will only assist in the medium to long-term and as trading conditions have continued to worsen since the announcement in July of the footprint study of our long steel business, management has had no option but to make the decision to commence the Section 189 process. Notwithstanding, Government is still actively working with us to implement additional tariff and duty applications across our steel products,” said CEO, Mr Paul O’Flaherty.
With immediate effect, the company will start a consultation process at Vereeniging Works in accordance with the provisions of Section 189 of the Labour Relations Act. All employees and their representative trade unions at Vereeniging Works will shortly receive formal notification of the anticipated process. The possible closure will affect approximately 400 direct employees and contract service employees.
It is envisaged that the operating mills of Vereeniging will be merged with the operations of the Newcastle Works to create one long steel business. It is anticipated that this decision will help optimise the already high and unsustainable fixed costs of the long steel business.
At the same time, like Vereeniging, the Vanderbijlpark Works continues to be unprofitable in the face of the current market conditions. It is for this reason that the company will also be initiating an industrial footprint review of the Vanderbijlpark Works and a review of Corporate Services, with a view to optimising structures and costs. It is envisaged that the review, which will use the services of experts in the field, will be concluded by the end of October, at which time a decision will be announced with regard to any possible further restructuring. The review will include consultations with all employees at Vanderbijlpark Works and Corporate Services, as well as their representative unions, to find viable alternatives to potential job losses.
As South Africa’s leading steel producer, the sustainability of the local steel industry remains a key concern for ArcelorMittal South Africa and the company will continue to engage all stakeholders to find lasting solutions to the challenges faced by the industry.