Amsa move to close loss-making Saldanha plant puts 900 jobs at risk
Companies / 12 November 2019, 08:10am / Dineo Faku
JOHANNESBURG – ArcelorMittal South Africa (Amsa), Africa’s largest steel producer, said yesterday that it would wind down its loss-making Saldanha Works on weak exports and the deterioration of the plant’s competitive advantage, placing about 900 jobs at risk.
The Department of Trade and Industry has decried the decision after it made concerted efforts to save the company and jobs, leading to interventions that would net Amsa more than R200million in savings.
Chief executive Kobus Verster said Amsa would today engage organised labour on its decision to place the 21-year-old plant in care and maintenance following the first phase of its strategic asset footprint review.
Verster said that the group expected the shutting down of the plant to be completed during the first quarter of 2020.
Verster said that while the plant was established on low input costs, which gave it a competitive advantage, the costs of electricity, rail and raw material had increased substantially.
“Unfortunately, over the years, that structural cost advantage has been eroded and Saldanha can no longer sustainably and effectively compete in these markets, mainly due to raw material and regulated prices,” said Verster.
“The 2019 downturn in the world steel market has been far worse than could have been anticipated. International steel prices have fallen much faster and steeper than raw material prices, resulting in substantial margin erosion.
“The global steel industry is experiencing the most challenging time since the global financial crisis.
“Locally, the situation is exacerbated by continued weak economic growth, especially in steel and steel-consuming sectors, with apparent steel consumption at a 10-year low,” he said.
Verster said Saldhana was a well-managed operation, but the decision to wind down the plant became absolutely necessary for the sustainability of the broader business.
“As the country’s largest primary steelmaker, we have an obligation to ensure we play our part in ensuring the sustainability of the South African steel industry, and that means that we have to make tough decisions,” Verster said.
He said the next phase of the strategic asset footprint review would focus on the Newcastle operations and certain of the long-steel products rolling facilities.
He said that contractual domestic sales orders from Saldanha would now be fulfilled from the Vanderbijlpark Works.
The Department of Trade and Industry, in a statement last night, said that it was disappointed at Minister Ebrahim Patel, who met with the management of Amsa on several occasions over the last months to save the day.
Spokesperson Sidwell Medupe said that very recently, the department’s competition division, along with Public Enterprises, Eskom and Transnet, engaged with Amsa management on additional support which could be provided by Eskom and Transnet to reduce energy and logistics costs for the company and at Saldanha, in particular.
Medupe said the parties met several times in October and early November, during which time commitment was sought so that Amsa could suspend its retrenchment process completely and keep the Saldanha Works in operation.