Johannesburg - Evraz Highveld Steel and Vanadium on Tuesday issued employees with restructuring notices that could result in more than 1 000 jobs being cut as the company put its operations in hibernation, hoping for an upturn in the market.
Evraz said it would restructure and curtail its operations and, when market conditions improved and it received adequate funding, it would resume operations on a limited basis.
It confirmed that it had received a number of indicative offers from parties seeking to invest in the company.
The prospective bidders are required to provide the necessary guarantees by Monday to proceed to the next stage of the bidding process.
Evraz chief executive Jean Burger said the company would hold on for a few months, but its biggest concern was the lack of demand for its steel products as its customers had ample steel stock “going up to the rafters”.
The main problem is Chinese steel imports. According to industry players, China produces 800 million tons of steel, with a significantly decreased consumption rate. There are also claims that China’s production is subsidised.
“They have exported significant volumes to the rest of the world”, resulting in lower steel prices, Burger said.
“It is the same in North America and Europe, and many of those countries are applying for tariff protection and (anti-dumping) duties in excess of double digit figures to protect their industries,” he said.
“As we speak, demand for our structural product has dropped off by 70 percent. We should produce between 20 000 and 25 000 tons of steel per month currently, but have orders on the book for only 3 000 tons, so it is in the short term very, very drastic,” he said.
He said if there was an improvement in demand, it would only come in the first few months of next year as the industry was normally quiet towards year-end.
“The problem looking forward is we do not see any drivers of demand, and for that reason we are taking this action (job cuts),” he said.
Evraz was also looking at diversification opportunities, the most attractive of which was the production of vanadium, a by-product in the steel manufacturing process, Burger added.
Consultation
Trade union Solidarity confirmed on Tuesday that Evraz was planning on retrenching up to 1 089 employees.
Deputy general secretary Johan Kruger said Solidarity would participate in the consultation process with the company in order to mitigate the impact on its members.
“Among other things, we will propose that the local manufacturing sector and construction industry should only make use of domestic steel producers in order to support the local steel industry,” he said.
“In addition, we will also propose that the steel industry should be exempted from winter electricity tariffs while the industry is recovering.”
Business Report