Hendrik van der Bijl turning in his grave

ArcelorMittal South Africa, formerly known as Iscor, will wind down its longs steel business. This is the end of an era for the once world-class company founded by Hendrik van der Bijl.

On Monday, 6 January 2025, ArcelorMittal said it would place its longs steel business into care and maintenance.

Long steel refers to a category of products commonly used in construction, engineering, manufacturing, and transportation.

These products include wire, rod, rail, and bars produced by hot rolling or forging billets, blooms, or pencil ingots into usable shapes or sizes.

ArcelorMittal produced most of these products at its mill in Newcastle, which was Iscor’s third fully integrated steelworks.

The company explained that its significant losses were driven by weak financial performance in the longs business.

Key contributing factors included deteriorating global and local steel markets, unaffordable energy and logistics costs, and surging low-cost steel imports, particularly from China.

ArcelorMittal worked with the government and stakeholders to rescue its long business and prevent job losses.

It asked the government for policy support to address structural constraints affecting South Africa’s steel sector.

Although there has been progress in this department, it has not been enough to turn the struggling business around.

“Persistent high logistics and energy costs, combined with insufficient policy interventions, has left the longs business unsustainable,” ArcelorMittal said.

It said the package of initiatives it sought has not materialised to a level that will change the fundamentals of the struggling longs business.

By the end of 2024, ArcelorMittal had no alternative but to proceed with winding down its longs business, which would result in significant job losses.

“We are disappointed that all our efforts over the last year have not translated into a sustainable solution,” ArcelorMittal South Africa CEO Kobus Verster said.

An end of an era

ArcelorMittal South Africa’s announcement that it is closing its longs business is the end of an era for the company founded as Iscor by Hendrik van der Bijl.

He established the Iron and Steel Corporation of South Africa (Iscor) as a type of public utility and became its chairman in 1925.

At that time, South Africa lacked the skills to manufacture steel. Van der Bijl overcame this obstacle by appointing a committee of international iron and steel experts.

These experts from Britain, America, Germany and Sweden arranged for South Africans to complete BSc degrees in engineering at steelworks in their countries.

Iscor, under the guidance of Hendrik van der Bijl, was a commercial success and provided inexpensive steel for South Africa from 1934 using its Pretoria Works.

In 1943, it commissioned a plate mill at Vanderbijlpark Works mainly to produce heavy plates for ship repairs and manufacturing armoured cars for South Africa’s war effort.

Vanderbijlpark Works developed into a fully-fledged integrated steelworks processing iron ore and other raw materials from mines throughout Southern Africa.

In 1969, the government decided Iscor’s third fully integrated steelworks should be erected in Newcastle, complementing its works in Pretoria and Vanderbijlpark.

It wanted to decentralise industry away from the Witwatersrand complex and promote industrial development in Natal, South Africa’s best-watered province.

Newcastle was also situated on main rail and road routes between Johannesburg and Durban, essential services such as water and electricity were well catered for.

In the 1980s, the government committed to transferring certain state interests to the private sector, including Iscor.

In 1989, Iscor was privatised, and Iscor Limited shares were listed in the Steel and Allied sector of the Johannesburg Stock Exchange (JSE).

In December 2001, Iscor’s steel and mining groups were unbundled into two separately listed mining and steel companies, Kumba Resources and Iscor.

In February 2003, LNM Holdings took control of Iscor through a R1.8-billion partial share buy-out and in August 2004, it was renamed Ispat Iscor.

In December 2004, Ispat International acquired LNM Holdings, the parent company of Ispat Iscor.

After the acquisition, the merged company’s name was changed to Mittal Steel Company. Ispat Iscor commenced trading under the new name Mittal Steel South Africa in March 2005.

After the merger between Mittal Steel and Arcelor Mittal Steel South Africa commenced trading under the new name, ArcelorMittal South Africa, in October 2006.

The company’s share price peaked in June 2008 at R260.50 amidst efficient operations and strong steel demand.

However, over the next seventeen years, the company struggled. Poor management, lacklustre execution, and other problems saw the company’s share price plummet.

Since its peak in June 2008, ArcelorMittal South Africa has lost 99.64% of its value. It has become a small-cap company reserved for punters rather than investors.

The recent announcement that it will close its longs steel business sent the share price down another 30%.

Once a world-class steel producer and mining operator, the company has been reduced to penny stock and closing plants because it cannot compete effectively.

This was not what Hendrik van der Bijl had expected when he created and built one of the world’s most effective steel producers.