Major South African company to cut thousands of jobs

ArcelorMittal South Africa (AMSA) will shutter crucial steel mills in the country after rescue talks with the government failed and the operating environment deteriorated. 

The company known as AMSA will fully idle its long-steel plants in the second quarter, resulting in the loss of about 3,500 direct and indirect jobs, it said in a statement on Friday.

An initial plan to close the facilities by the end of January was postponed by a month to fulfil orders. 

The businesses aren’t viable because of a poor rail service, high electricity tariffs, a flood of low-cost imports and government policy that keeps the price of steel scrap – used as a raw material by AMSA’s smaller rivals – artificially low, the company said.

“Regrettably, the parties have not been able to find timely solutions required to defer the winddown,” it said.

Some conditions “have not merely remained static but have worsened” since talks began, it said, with the country’s main power utility set to raise prices by almost 13% from 1 April, and the state-owned ports and rail utility also proposing higher fees. 

The increases are “further undermining our competitive position at a time when energy costs are already prohibitive,” AMSA said. 

The one-time state steel business bought by billionaire Lakshmi Mittal’s company in 2003 expects to begin shutting down its blast furnaces in the first week of March and cease steel production by early April. 

Kobus Verster, AMSA’s chief executive officer, earlier this month said the Vereeniging and Newcastle mills, which indirectly support more than 100,000 jobs, supply between 350,000 tons and 400,000 tons of steel products that can’t currently be manufactured by any other companies in South Africa. 

The planned shutdown has alarmed other companies that rely on the plants to supply steel to their own operations because imports would be too costly and less reliable. 

AMSA’s shares fell as much as 4.4% and were 1.5% lower at 68 South African cents ($0.04) at 12:11 p.m. in Johannesburg on Friday.