South African Trade Minister Parks Tau has created a team to work around the clock with ArcelorMittal South Africa (AMSA) to prevent closures since it is needed to recover and reconstruct its economy.
Billionaire-backed ArcelorMittal SA plans to close a century-old South African steel factory, threatening President Cyril Ramaphosa’s dreams of building a $257 billion infrastructure boom.
The leader claimed this project would help to boost slow growth and create more jobs. That plant will provide the builders for the renewed exponential rollout of power transmission towers, rail lines, and new roads.
They also supply specialist steel for the drills used in South Africa’s precious metal mines, which are among the largest in the world and are essential to the jewels of the country’s industrial sector, its auto factories.
Rand York Castings Ltd, one of the biggest steel producers, stated that it may move a unit that produces civil engineering goods for export to India. In South Africa, almost one-third of the people are unemployed, so industry groups believe that 100,000 high-paying jobs may be at risk.
Lucio Trentini, CEO of the Steel and Engineering Industries Federation of South Africa, says it is a devasting blow to South Africa’s industrialization and infrastructural development goals. He hopes that the decision could be delayed or avoided.
Kobus Verster, CEO of ArcelorMittal South Africa Ltd, stated that it is difficult to postpone the decision even though the government is willing to listen.
South African Trade Minister Parks Tau has created a team to work around the clock with ArcelorMittal South Africa (AMSA) to prevent closures since it is needed to recover and reconstruct its economy.
Steel consumers can get basic materials that AMSA offers from nearby local steel mills. However, they will have to import larger and specialty steel, reducing their flexibility and increasing costs.
Automakers must go through a recertification process to get steel products from new sources, a safety requirement drawn-out approval process.
The industries that AMSA supplies are trying to find replacements or prevent the shutdown.
Automakers like Volkswagen AG and Toyota Motor Corp have asked to delay the shutdown by 12 months while they find alternatives since it might threaten the industry, which employs over 116,000 people.
According to AMSA and industry groups, the closure is partially due to the strained relationship between ArcelorMittal and the government. Since AMSA acquired a state-owned steelmaker in 2003, it has been accused of cutting back on capital expenditure and was fined $110 million by local antitrust regulators for anti-competitive activities.
Scrap collectors can export only when no local customer is interested in the material. Plus, domestic customers get a 30% discount on the international scrap price if they want the material. They have to deliver to any country and have to incur extra expenses.
Mark Fine, owner of Fine Trading, a scrap trader in Cape Town, says that this decision involves a lot of paperwork and does not make sense from an economic point of view.
AMSA has rejected many offers for its closed or troubled operations, like the 2020 closure of the Saldanha Steel plant.
According to Commercial Director Mzamo Mjekevu, Scaw, a leading South African steel manufacturer specializing in mining and construction, has made many offers to buy or operate Vereeniging, which supplies vital car industry and now can produce in-house products.
According to Mjekevu, even if Scaw and Cape Gate want to grow and improve their operations, the local market is too inadequate for competing mills to invest in specialized projects.
Labor Minister Nomakhosazana Meth stated that the government was interacting with AMSA and that the issue was urgent, but there was not much time left to find a solution.
The industry does not have enough hope of finding solutions soon.
