Up to 3,500 jobs at risk in steel industry as Eskom, Transnet failures bite

A retrenchment process potentially affecting 3,500 people has started at ArcelorMittal South Africa, which says its operations have been affected by the weak economy, load-shedding and logistics costs.

This comes as the mining industry sheds 10,000 jobs due to falling commodity prices, rolling power cuts and reduced exports as a result of dysfunction at Transnet.

ArcelorMittal SA said it has been hit by the cumulative effect of a slowing economy and a difficult trading environment.

“As a result of South Africa's low GDP growth, the country's apparent steel consumption has decreased by 20% in the past seven years, reaching levels of around 4-million tonnes, reflecting low market demand in key steel-consuming sectors, limited infrastructure spend and project delays, resulting in market overcapacity and overall weaker business confidence.”

Factors outside the company's control include high transport and logistics costs, as well as escalating energy prices. This, it said, has been “compounded by well-publicised logistics failures and their cost impact, as well as the country's ongoing electricity challenges”.

The implementation of a preferential pricing system for scrap, a 20% export duty and, more recently, a ban on scrap exports have given steel production via electric arc furnaces an “artificial” competitive advantage over steel manufacturers beneficiating iron-ore to produce steel, and these have also impacted its business.

“These structural market issues are beyond ArcelorMittal South Africa's control and do not appear capable of being resolved in the foreseeable future.”

The company is starting a process to wind down its long steel operations. Reuters reports this unit produces fencing material, rail, rods, and bars used in the construction, mining and manufacturing sectors. 

The company said the wind-down affects the Newcastle and Vereeniging works, excluding the coke batteries at Newcastle which will remain operative, producing metallurgical coke for use at the Vanderbijlpark works, and for sale of commercial market coke to the ferroalloy industry.

The restructuring potentially affects up to 3,500 employees, both own and contracted.

ArcelorMittal SA CEO Kobus Verster said: “The remaining business, after the wind-down, will be on a more sustainable financial footing and able to invest the appropriate capital in product development and available growth prospects.”

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