ArcelorMittal fights to stay afloat

An ArcelorMittal steel foundry. File picture: Supplied

An ArcelorMittal steel foundry. File picture: Supplied

Published Jul 24, 2015

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Johannesburg - Africa’s largest steel producer, ArcelorMittal South Africa, said yesterday that it would place its Vereeniging Works in emergency care – the latest signal of an impending implosion in the steel industry.

The slump in the industry follows continuing losses and has been brought to a head because of cheap imports, mainly from China.

ArcelorMittal shares on the JSE closed 0.71 percent lower at R15.31, after falling as much as 5.97 percent.

The proposed closure comes after ArcelorMittal’s rival Evraz Highveld Steel and Vanadium on Monday announced that it planned to temporarily close its steelworks and halve its 2 200-strong workforce.

ArcelorMittal flagged yesterday that it would see bigger losses in the half-year to June on subdued global steel demand and rising costs.

Survival mode

Chief executive Paul O’Flaherty told journalists yesterday that the steel industry was in survival mode and the company had requested protection from the government. He said steel duties of between 10 percent and 15 percent would help shield the local industry.

ArcelorMittal was considering anti-dumping duties in wire rods and long steel products, and had made three applications to the International Trade Administration Commission (Itac) of South Africa for tariff protection on imports, O’Flaherty said.

“If you had to shut the industry it would take 15 years to rebuild it. We are following a process to protect this industry,” he said.

Department of Trade and Industry spokesman, Sidwell Medupe, said the government was concerned by the demise of the steel industry. “The government is committed to resolving the matter,” he said.

O’Flaherty said ArcelorMittal could not allow its Vereeniging Works to continue burning cash. “At the end of August we will decide whether to proceed with a Section 189 process. Under no circumstances is it our intention to close the operation; our priority is to maintain the 1 200 jobs,” he said.

Companies are required to issue Section 189 notices of the Labour Relations Act in the event of retrenchments.

ArcelorMittal indicated that it was consulting its workforce on the review of Vereeniging Works and would consider alternatives, including mothballing some of its plants or closing the entire operation, a process that is expected to be complete by the end of August.

A watershed

He said a third of local steel consumption was imported, and foresaw that of the 4.8 million tons consumed this year, between 1.5 million and 1.6 million tons were imported.

The 102 year-old Vereeniging Works is South Africa’s oldest steelworks.

“For me, this next six months will be a watershed for the steel industry in South Africa. There is a high road and a low road. The low road will require that we produce what makes profit and maximise it,” O’Flaherty said.

Marius Croucamp, Solidarity’s head of the communications industry, deplored the proposed closing of ArcelorMittal’s Vereeniging plant. “According to management, the closing of the Vereeniging steel mill will affect approximately 1 200 employees including contractors.”

Although Solidarity has not yet received any formal notice, the trade union is participating in consultation talks with the steel producer.

The union said it would do everything in its power to minimise the impact of possible retrenchments on its members. “Solidarity maintains that job security should be protected at all costs,” Croucamp said.

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