From JSE Top 40 darling to penny stock: Amsa limps to its centenary

ArcelorMittal South Africa (Amsa) will in 2028 mark its 100th year of existence — a milestone that any corporation should be proud of.

Certainly, the moment should represent a celebration of the company’s stellar contribution to South Africa’s industrialisation.

However, the group approaches its centenary year limping, bogged down by a broken energy policy, logistics challenges and an unsupportive industrial and trade policy.

The irony is perhaps that the pillars that made the former Iron and Steel Industrial Corporation (Iscor) successful — low-cost electricity from Eskom, cheap iron ore and affordable rail freight — have turned into the greatest risks to its survival.

One has to cast one’s eye to the early development of Iscor to understand what role a supportive energy policy, predicated on low-cost electricity from Eskom, played in the company’s early success.

This advantage has withered away, with the group’s energy costs having surged from R700m in 2007 to a staggering R3.5bn in the 2025 financial year — a 400% increase.

To put this into context, Amsa paid R3.6bn in salaries, wages and benefits in the 2025 financial year.

The group, which used to be one of the top 40 listed shares on the JSE, began raising the red flag on runaway energy costs as early as 2009, when it warned in its annual report that large tariff hikes would “do untold damage” to industry in South Africa.

Earlier that year, the National Energy Regulator (Nersa) approved Eskom tariff increases of around 25% each year for the next three years. This saw Amsa’s annual power bill double from R1.3bn in 2009 to R2.5bn by 2012.

Before the hefty energy increases, Amsa, in 2008, reported its record profit of R9.5bn before swinging to a loss of R440m in the 2009 financial year.

Like its peers in the chrome industry (Glencore-Merafe Chrome Venture and Samancor), which have been granted 54% tariff relief by Eskom, Amsa is also looking for substantial electricity tariff relief, with negotiations between it and the power producer ongoing.

Beyond the debilitating electricity costs and logistics woes, the influx of cheap imports, particularly from China, has seen Amsa on the ropes

Today, the group’s very future depends on the high-stakes negotiations it is having with the Industrial Development Corporation (IDC) over a potential transaction — negotiations complicated by the state of the steel producer’s finances, which showed a loss of R3.3bn in the 2025 financial year, from R5bn in the prior year.

Despite significant effort and support from the IDC and others, the decision to close Amsa’s long steel business was ultimately unavoidable to ensure the company’s long-term viability — with a possible recapitalisation key in substantially reshaping the company’s outlook.

Despite its headwinds, as Sub-Saharan Africa’s only primary steel producer Amsa is closely integrated into the economic and social fabric of South Africa, while its products and its procurement of goods and services have far-reaching consequences.

Beyond the debilitating electricity costs and logistics woes, the influx of cheap imports, particularly from China, has seen Amsa on the ropes.

This was underscored by the group’s chair, Bonang Mohale, in his annual letter to shareholders, where he decried a lack of government support.

“As we have continuously argued, primary steel — and by extension many industries, including automotive — look to government for protections that will only foster domestic competition and job creation. It is a sad fact that such public-sector support that was forthcoming has been too little and, invariably, came too late,” Mohale wrote.

“It is another sad and even baffling reality that this country is almost alone among countries possessing a primary steel industry in not putting in place effective measures against a flood of unfair imports.”

South Africa’s International Trade Administration Commission (ITAC) last year launched the most extensive review of steel tariffs in two decades, covering anything from primary to stainless steel — a move that zooms in on about R67bn of imports.

Amsa CEO Kobus Verster has opted to remain optimistic in the face of a difficult trading environment for the group.

“We now look with renewed confidence to the government following through on its stated intentions to prioritise localisation, import control, and combat illicit trade and to ensure a fair and competitive playing field for all,” Verster said in his annual letter to investors.

“As I recently told investors and other stakeholders, we fully expect that trade remedies and localisation initiatives will support our volumes, reinforce our market position and bolster the downstream that relies on the quality and variety of locally produced steel products that only Amsa can provide.”

Amsa’s poor performance over the years has been reflected in the plunge of its market value.

The group ended the 2007 financial year ranked in the JSE Top 40 Index in terms of total market capitalisation, with an average market capitalisation of R56bn that year.

It has since dwindled to a penny stock, worth just R1.5bn — representing an enormous shareholder-value destruction.