ArcelorMittal South Africa, a subsidiary of the world’s biggest steel producer, is expected to close a section of its Vanderbijlpark plant for between three and four months following the fire that disrupted the operation at the weekend.
The Vanderbijlpark plant is ArcelorMittal SA’s biggest contributor to output. The company warned on Monday that it would not be able to meet contractual obligations after the fire damaged a blast furnace there.
ArcelorMittal SA is expected to source some steel from its Newcastle and Saldanha plants. It would also import steel from the wider group, it said on Monday, although how long it would have to do this would depend on how long the plant was closed.
An executive of a company involved in sourcing and processing steel products said supplies would be curtailed – until imports arrived. Orders might take between six and eight weeks.
“The possibility is that people will hold onto stock, and in so doing prices will increase because of limited tons available to them,” he said.
The Vanderbijlpark plant contributes 3.7 million tons out of ArcelorMittal SA’s annual output of 7.8 million tons.
Among the consequences of the fire were expected to be a reduction of working hours or of the workforce, said Deon Reyneke, the head of Solidarity’s metal and engineering industry.
National Union of Metalworkers of SA spokesman Castro Ngobese said the union had informed the company that workers should not be punished by not being paid.
Ngobese said a “detailed agreement” would be finalised at a meeting today.
A spokesman for ArcelorMittal SA said that about 4 500 employees were continuing to work at the plant. Only the steel-making facility was affected, and other sections remained in operation.
ArcelorMittal SA said it would make provision to source steel from other plants within the group, but the executive at the steel-processing company said that was not enough.
He said his company had informed its customers that ArcelorMittal SA was considering urging the government to reopen its electric arc furnaces, which were shut down last year amid environmental concerns.
However, an ArcelorMittal SA spokesman could not comment yesterday on the application to the government.
The fire is bad news for processors because the Vanderbijlpark plant specialises in the production of galvanised coil and hot rolled coil products.
It will not be the first time that manufacturers have had to import the products, because ArcelorMittal SA’s Newcastle furnace broke down in the fourth quarter of 2011 for three months, resulting in a shortage of reinforcement bars.
ArcelorMittal SA, Africa’s largest steel producer, issued a force majeure to affected customers and suppliers.
ArcelorMittal SA said damage assessment was continuing.
The shares fell 4.41 percent to R31.66 yesterday.