Critical South African industry on a knife’s edge with thousands of jobs at stake

ArcelorMittal South Africa has outlined the severe challenges the country’s steel industry faces, which is why the company is planning to close its local long steel operations.

ArcelorMittal South Africa (AMSA) is the largest steel producer in sub-Saharan Africa, but plans to close its local longs business later this year.

The company released its interim results for the six months ended 30 June 2025 – the first half of its 2025 financial year – on Thursday, 31 July.

The company explained that the first half of its 2025 financial year brought significant challenges with no improvement in market conditions.

This is not only due to local conditions, as the prolonged negative international steel cycle also remained, ensuring that global and domestic steel markets remained under pressure despite some price improvement, notably in China during July.

The company’s realised rand steel prices declined by 7% while the raw material basket (RMB) was down by 12% in rand terms. International spreads averaged $130/t, well below the sustainable $200 to $220/t range.

However, AMSA pointed out that unprecedented changes are taking place internationally that could boost the global steel industry.

“The reality of the strategic nature of the primary steel industry, and its practical irreplaceability should it not be sustained, has been clearly recognised by more and more international actors, especially under current geopolitical and trade conditions,” AMSA said. 

“Internationally, the number of countries implementing strong protections for their primary steel industries against unfair trade and policy practices continues to rise, with Brazil, India, the USA, the EU, now joined by the UK, China, Malaysia, Mexico, Canada, and Australia.” 

These changes come as Chinese steel exports hit a nine-year high of 111 million tonnes in 2024, up 23% from 2023. 

This trend continued into 2025, with high levels of Chinese steel exports of 58 million tonnes in H1 2025 representing an increase of 9.2%, continuing to pressure international markets.

Local challenges

Locally, AMSA said the South African government and key stakeholders in the domestic steel and engineering value chain are also taking key steps to support structural reform.

This includes various duties that have been implemented, and a general review of steel tariffs, which is underway. 

The export tax on scrap and the Preferential Price System (PPS) are also being reviewed. 

“Unfortunately, despite this support and these initiatives, there has been limited progress with implementing interventions that adequately address the constraints identified,” AMSA said.

“Domestically, infrastructure activity remained subdued. While several encouraging government policy signals emerged, implementation delays continued to dampen industrial confidence and constrain volumes across the market.”

The company said South Africa’s weak economic growth has led to an 18% decline in demand for steel over the past seven years. “This emphasises the need to further act decisively to address key priorities.”

This includes stimulating demand through infrastructure roll-out and localisation of steel and the reduction of and protection from the high level of imports at dumped prices.

The government also needs to implement forceful action against illicit trade and correct the export tax on scrap and the PPS, which has created market distortion.

AMSA estimates that this advantage, activated through the PPS, is currently estimated to be in the region of R4.2 billion to R6.4 billion per year.

“The export of billets allows for the export of scrap with minimal beneficiation to the detriment of the economy,” it said. 

AMSA maintained that South Africa can maintain and grow a thriving steel industry. However, it warned that commitments need to translate into real and immediate supportive action. 

It highlighted that the top two priorities must be, firstly, to ensure that there is a vibrant level of steel demand accessible to South African steel producers, and secondly, that the high levels of imports are dramatically reduced.

The company said around 68% or 518,000 tonnes of these steel imports could be manufactured locally. 

“Once these priorities are addressed, the industry will be in a much stronger position to progress with investment to improve localisation levels with the aim of completely replacing imports while turning attention to the issue of decarbonisation,” it said.

However, until then, AMSA said there may be no option but to commence the shutdown of its Blast Furnace in early August to mitigate the risk of exposing the company to adverse earnings and cash flow impacts beyond 30 September 2025.

“In this event, operations would be placed into care and maintenance,” it said. This Blast Furnace forms part of the company’s longs business in South Africa.