ArcelorMittal in deep trouble 

ArcelorMittal South Africa (AMSA) expects to report significant losses for its 2024 financial year as the company struggles to overcome challenges in the local steel industry.

In a trading update released on Monday, 3 February, the steel producer informed shareholders that it expects a significant deepening of its losses for the financial year ended 31 December 2024.

The company expects its loss per share to worsen by between 46% and 52%, while its headline loss per share is expected to deepen by between 165% and 174%.

In a trading statement earlier this year, AMSA explained that this worsening of its results is part of the reason why it must shutter its longs business in South Africa.

The plan to wind down AMSA’s long steel business first came up in November 2023, when the company 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 last year, 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, in early January, 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.

Consequently, ArcelorMittal’s expected financial performance for the 2024 financial year against 2023 will be substantially weaker.

“ArcelorMittal South Africa has been working intensively on this issue for over a year,” the company said.

“The company is at a point where any further delay could affect the sustainability of the company, and therefore, a decision cannot be pushed back any further.” 

“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.”

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

This will have devastating 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, 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.

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

“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.

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 ArcelorMittal is the only producer capable of making them.

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.

AMSA is expected to release its 2024 annual results on Thursday, 6 February 2025.