JOHANNESBURG - Arcelormittal South Africa (Amsa) has trained its eyes on its Newcastle operations in KwaZulu-Natal to contain its debt.
The steelmaker this week confirmed that the second phase of its strategic asset footprint review would be focus on Newcastle to improve the group's structural cost position and service offering.
"Exploring the benefits of a concentrated operating footprint will be important during this phase of the review," the company said.
Amsa employs nearly 2 000 workers in Newcastle
The review of the operation comes just days after Amsa said that it would wind down its Saldanha plant in the Western Cape in a process that could see 900 jobs culled.
Amsa chief executive Kobus Verster painted a bleak picture of the plant’s short- to medium-term outlook.
Verster the former chief executive at JSE listed construction company Aveng and who has been at the helm of the struggling Amsa since 2018 said that 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,” said Verster.
Trade union Solidarity said it was worried that the Newcastle review could mean further job cuts.
Willie Venter, Solidarity’s Deputy General Secretary for the Metal and Engineering Industry said that the union was aware that company was facing major challenges in Saldanha with high input costs, a declining export market and government's economic policies. "But such a drastic step gives rise to major concerns,” he said, adding the union was concerned of the possibility of further cuts at Newcastle.
"We don't know what the future holds for Newcastle after the strategic review," said Venter.
The closure of Saldanha comes local steel industry is in intensive care having lost thousands of jobs owing to the cheap imports which have been exacerbated by the weak export market and rising input costs.
Trade and Industry Minister Ebrahim Patel has urged Amsa to reconsider its decision citing the government’s efforts to support the steel industry including the introduction of safeguards on imported hot rolled steel.
Patel said the government had designated the industry to ensure that steel procured for infrastructure projects was locally produced.
“The closure of Saldanha Works and retrenchment of workers at Amsa is a harsh blow to industrialisation in the country,” Patel said.