Steel industry appeals to have scrap metal policy reversed

ArcelorMittal foundry. Business Report understands that labour unions and government officials will push for ways to avert complete closure of the company’s operations. Photo: Supplied

ArcelorMittal foundry. Business Report understands that labour unions and government officials will push for ways to avert complete closure of the company’s operations. Photo: Supplied

Published Nov 30, 2023


AFTER shutting down its long steel manufacturing at Newcastle and Vereeniging, ArcelorMittal South Africa said yesterday it would grow its flat steel business through import replacement and localisation as Steel and Engineering Industries Federation of Southern Africa (Seifsa) called on President Cyril Ramaphosa to reverse South Africa’s scrap metal policies.

ArcelorMittal South Africa on Tuesday announced that it was axing 3 500 jobs at its long steel businesses, citing weaker economic growth, poor logistics and erratic infrastructure.

Amid widespread concern over the closure of the Vereeniging and Newcastle long steel operations, ArcelorMittal South Africa CEO Kobus Verster insisted yesterday that the issues that had contributed to the winding down of the long steel business were difficult to address in the short term.

Verster told journalists during a virtual press briefing yesterday: “We are quite clear the logic for this is the slow economic growth and hence negative steel demand. These are complex issues that would be difficult to fix in the short term.”

Labour union Solidarity on Tuesday blamed Ramaphosa’s government for the collapse of ArcelorMittal South Africa’s long steel business although it also blamed the company for not following through on procedures before announcing the winding down of the operations.

Business Report understands that unions and government officials will push for ways to avert the complete closure of the company’s operations. This is in addition to lobbying policymakers to create a favourable environment for the steel manufacturing industry in South Africa at a time competition from cheaper imports is growing.

Seifsa said yesterday that the logistics challenges facing South Africa “raise serious questions whether port and rail infrastructure can get products” to the end manufacturers.

Seifsa CEO Lucio Trentini said: “Downstream industries are heavily reliant on the long products that come from these (ArcelorMittal) plants to which a switch-over will not happen overnight. Even where these products can be imported this will result in the exporting of jobs that are desperately needed in South Africa.”

He added that the Department of Trade, Industry and Competition (DTIC) was also failing to “create an enabling environment conducive to growth, stability and job security” in South Africa.

Seifsa, which represents 18 independent employer associations in the metals and engineering industries, has long warned that the decisions relating to the scrap metal policy and its industrial policy consequences would yield casualties across the industry, he added.

Seifsa is now urgently lobbying for policy issues in the metals and engineering sectors to be escalated to the Economic Cluster of Ministries, arguing that the DTIC does not have the capacity nor the grasp of the broader implications of developments affecting the sectors.

Seifsa said: “The matter is now beyond urgent and we urge the president and key Ministers in the Economic Cluster to treat it as such, if we are to avoid a socio-economic catastrophe of gigantic proportions in the metals and engineering industry which will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sectors of the economy and all who work in it.”

ArcelorMittal said that beyond the closure of the Newcastle and Vereeniging long steel operations, it was now planning to “grow our volumes in the flat business through localisation and import” replacement.

Verster said: “Without our long business going forward, we have to find alternatives for products metal of a certain specific size and quality, special profiles, the complete seamless tube range and the heavy section and rail modes, as well as special processing capabilities like hollow drawers, which are only produced in Vereeniging.”

The cash-generating potential of the flat business would now be directed “towards re-establishing ArcelorMittal as the champion of the SA steel-based” industrialisation. The company would also be focusing on implementing its decarbonisation programme.

Verster added ArcelorMittal South Africa was also weighing its options on a large steel plant being built in Zimbabwe. Verster last year visited Zimbabwe and met President Emerson Mnangagwa to explore business opportunities in the neighbouring country which also suffers from poor rail and electricity infrastructure.

“Zimbabwe is busy erecting an integrated facility, almost the same as Newcastle, with coke batteries, blast furnace (and) they have future aspirations to do, you know, rolling facilities, so the part of the business, or parts of long business, can theoretically fit into that. It’s options that we will look at, but has not really progressed far,” said Verster.