100,000 jobs at risk in important South African industry

At least 100,000 jobs in South Africa are at risk in the medium term due to ArcelorMittal shutting down its longs steel business.

Rand York Casting CEO Justin Corbett warned that the closure of this business is devastating to the local steel industry and the country as a whole.

Corbett’s comments come after ArcelorMittal South Africa announced on Monday, 6 January, that it plans to wind down its longs steel business due to challenges in the local steel industry.

In November 2023, ArcelorMittal announced its decision to place its longs business into care and maintenance.

The company cited prolonged weak economic conditions, logistics and energy challenges, and unsustainable competition from low-cost imports as reasons for its decision.

However, stakeholders raised concerns about the potential loss of high-quality local steel production and the socioeconomic impacts on Newcastle and its surrounding communities.

Therefore, ArcelorMittal South Africa worked extensively with the government to explore alternatives.

In August 2024, the company said it remains steadfast in its plans to save 3,500 direct jobs and 80,000 more across the value chain by keeping its longs business alive.

The steel producer said it saw green shoots appearing in the country’s economy, specifically the manufacturing sector.

However, on Monday, the company said that initial signs of recovery in international steel prices were short-lived.

In addition, despite implementing significant cost-cutting and cash management measures, the financial outlook for Q4 2024 remained extremely challenging.

“The board and management of ArcelorMittal South Africa have a fiduciary and legal duty to ensure that the overall business remains sustainable in the longer term,” the company said.

Therefore, it announced that it has no option but to proceed with the wind-down of the longs business, which will be placed into care and maintenance.

This will have severe consequences for South Africa’s steel industry, as ArcelorMittal is the largest steel producer on the African continent.

In its announcement, the company confirmed that one of the wind-down’s unfortunate implications is that jobs and enterprises will be negatively impacted.

The final number of retrenchments is not yet certain, but it is envisaged that approximately 3,500 direct and indirect jobs may be affected.

However, Corbett told Newzroom Afrika that 3,500 jobs are just the tip of the iceberg.

“We expect in the short-term to lose an additional 50,000 jobs in South Africa and, in the medium-term, at least 100,000 jobs,” he said. 

He explained that ArcelorMittal is the most complex steel maker in South Africa in terms of its capability.

As much as 32% of the steel produced in South Africa, or approximately 450,000 tonnes of steel, is unique to ArcelorMittal and is not made by other mills in the country.

“We’ve got some mills that are upscaling and upgrading their capability, but right now, companies in South Africa are going to be faced with broken supply chains and a very, very, very difficult situation in terms of continuity,” Corbett said.

“We have some unique products which right now no one has the capability of manufacturing and, therefore, we’re going to have to be dependent on developing this product overseas or importing the product.”

“There are just some products that we simply cannot procure from the alternate mills in South Africa.”

This will have far-reaching consequences for other steel producers in South Africa and affect other industries.

For example, when it comes to the high-tech products required in the mining or automotive sectors, Corbett said the only producer capable of producing them is ArcelorMittal.

This is why the job losses linked the ArcelorMittal’s wind-down are expected to be so high.

Corbett explained that he expects an immediate impact of between 30,000 and 50,000 jobs being lost as various supply chains, subcategories, and divisions of the fabrication companies close down.

In the medium to long term, he expects Original Equipment Manufacturers to discontinue the manufacturing of a particular line.

Alternatively, the impact of the wind-down could be so dramatic that the local content will not be high enough, and companies will choose to relocate elsewhere.

“Collectively, you’re looking at a minimum of 100,000 people that are going to lose their jobs,” he warned.