Johannesburg - ArcelorMittal SA says it has no choice but to start consulting around possible retrenchments at its Vaal Meltshop and the Forge in the Vereeniging Works.
In a statement to shareholders on Monday, the steel maker said - despite its best efforts to find a solution to its current woes - the outlook for the steel sector will not change for the foreseeable future.
This decision comes despite government agreeing to implement a 10 percent tariff on steel coming into SA. Cheap imported steel, mostly from China, has been a bugbear for the sector for some time.
Cheap imports from China have led to Evraz Highveld Steel and Vanadium moving into business rescue proceedings and ArcelorMittal previously warning it was pondering close a plant that employs 1 200 people.
That decision was due on Monday.
In a statement today, ArcelorMittal says it has engaged with its stakeholders, including organised labour and undertaken an industrial footprint review of its Vereeniging Works with a view to considering alternatives and deciding on whether mothballing some of its plants and placing others under care and maintenance would be a prudent decision.
ArcelorMittal has also welcomed the steps government has taken to protect the sector, which has seen initial approvals for tariffs that will cover two of its products.
On Friday, Trade and Industry minister Rob Davies said he had approved ITAC’s recommendation, and put a 10% tariff on steel, which previously did not attract an ad velroum charge.
The tariff also applies to zinc-coated/galvanised steel, aluminium-zinc coated steel and colour-coated steel.
In a statement, the department says his approval is based on ITAC’s recommendation following its own extensive investigation. The investigation was initiated after an application from the South African Coil Coaters Association on behalf of ArcelorMittal South Africa and Safal Steel.
However, ArcelorMittal says these tariffs will “only assist in the medium to long-term and trading conditions continue to worsen since the announcement in July of the footprint study of our long steel business”.
It notes the state is still working with it to implement additional tariff and duty applications across its steel products.
ArcelorMittal says it will immediately start consulting with staff. It says the possible closure of its works and forge could affect about 400 staff.
“It is envisaged that the operating mills of Vereeniging will be merged with the operations of the Newcastle Works to create one long steel business. We anticipate that this decision will help optimise the already high and unsustainable fixed-costs of the long steel business.”
In addition, it notes, the Vanderbijlpark Works continues to be unprofitable in the face of the current market conditions.
For this reason, the steel company will initiate an industrial footprint review of the Vanderbijlpark Works and a review of corporate services to optimise the structures and costs. This should be done by October.
ArcelorMittal says retrenchments are a last resort.
“As South Africa’s leading steel producer, the sustainability of the local steel industry and the prevention of job losses remains ArcelorMittal South Africa’s primary concern and the company will continue to engage its stakeholders to find lasting solutions to the challenges faced by the industry.”
IOL