ArcelorMittal South Africa announced that the previously communicated wind down of its Long Steel Businesswill be deferred for an initial period of at least six months.
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ArcelorMittal South Africa has announced a significant postponement of the planned wind-down of its Long Steel Business, deferring it to at least August 31, 2025.
This decision comes on the back of a substantial financial backing amounting to R1,683 million from the Industrial Development Corporation of South Africa SOC Limited (IDC), aimed at safeguarding jobs and ensuring continued operations during this critical period.
The facility from the IDC is repayable based on a mutual agreement dependent upon the Long Steel Business's financial performance, solvency, and liquidity.
As a part of this strategic agreement, ArcelorMittal has committed to maintaining operations and retaining its workforce throughout the deferral period. Moreover, the company has secured a Temporary Employee Relief Scheme (TERS) grant designed to alleviate employee costs, thereby reducing the reliance on the IDC financing.
This update builds on a preceding announcement made on 19 March, in which the company hinted at considering several strategic alternatives.
The IDC, in coordination with ArcelorMittal, will conduct a due diligence exercise during the next six months to assess the viability of the Long Steel Business. This assessment will be pivotal in informing future decisions.
While the Section 189(3) Labour Relations Act consultation process is set to be paused, restructuring might still occur in certain areas outside the Long Steel Business.
Crucially, the Newcastle works blast furnace will remain operational, ensuring that the needs of customers continue to be met.
In a broader context, the South African Government aims to use this deferral period to urgently address longstanding structural challenges facing the steel industry. T
hese issues include revising the Preferential Pricing System for scrap, implementing a scrap export tax, and establishing tariff measures, which will collectively work towards creating a fairer playing field within the sector.
ArcelorMittal South Africa expresses substantial gratitude towards Minister Parks Tau and the Department of Trade, Industry and Competition, alongside the IDC and other stakeholders, for their collaborative efforts, which have been vital to maintaining critical industrial capacity.
Kobus Verster, CEO of ArcelorMittal South Africa, remarked on the importance of this agreement.
"We are pleased to have reached an arrangement that enables the deferral of our Long Steel Business wind down. This not only provides a crucial pathway for our operations and employees but also gives us an opportunity to address issues that have impacted our sustainability."
Verster further stated the commitment to working closely with the government to foster an environment where steel manufacturing can thrive sustainably, reiterating the need for operational efficiency and robust supply chain relationships to bolster South Africa’s economy.
Significantly, Verster pointed to emerging signs of demand in sectors like energy, indicating the potential for the South African steel market.
This spike in demand could contribute positively to the operations of ArcelorMittal’s Long Steel Business, underscoring the importance of remaining cautious yet optimistic about the future.
As the company navigates this pivotal six-month window, the primary focus will remain on achieving sustainable profitability and determining the Long Steel Business's financial viability in the long run.
The outcome of this critical period will have profound implications for the future of the steel industry in South Africa.
IOL
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