ArcelorMittal Announces Job Cuts
By Thabo Mosia
The National Union of Metalworkers of South Africa (NUMSA) has urged the government to engage stakeholders in response to ArcelorMittal South Africa’s (AMSA) announcement to wind down its long steel products division. This decision, which could lead to the loss of approximately 3,500 jobs, has sparked widespread concern across industries and communities reliant on AMSA’s operations.
NUMSA National Spokesperson Phakamile Hlubi-Majola emphasised the importance of collaborative solutions:
“Government must engage and involve NUMSA or involve all the unions that are organisers at ArcelorMittal. It must also ensure that it involves the auto sector and the component’s value chain. Because any closure of any aspect of ArcelorMittal’s business is going to have an impact not just on the downstream sector but also on the auto sector and components value chain. We need an overall solution that involves all of those stakeholders that are going to be affected if this business is to close.”
Reasons Behind the Closure
ArcelorMittal South Africa cited multiple factors contributing to the decision to wind down its long steel operations, including:
• Deteriorating Market Conditions: Global and local demand for long steel products has significantly declined.
• High Operational Costs: Rising energy tariffs and logistics expenses have eroded profitability.
• Increased Imports: The influx of low-cost steel imports, particularly from China, has further undercut AMSA’s competitiveness.
Despite prolonged consultations with the government and calls for policy interventions since December 2023, AMSA’s management has been unable to secure a sustainable path forward. Consequently, the company’s board opted to place the long steel division into care and maintenance.
Impact on Employment and Communities
The planned closure will directly impact approximately 3,500 workers, including those employed at Newcastle Works, Vereeniging Works, and the rail and structures subsidiary, AMRAS. The decision also raises concerns about broader economic consequences for the communities surrounding these plants.
In Newcastle, where AMSA is a major employer, the economic ripple effects could be devastating. The steel industry is pivotal to local economies, supporting businesses, housing markets, and public services. The South African Iron and Steel Institute (SAISI) has expressed deep concern over the socio-economic challenges that will arise from the closures.
NUMSA’s Advocacy for Stakeholder Engagement
NUMSA has called for urgent public engagement involving unions, the government, and affected industries. Hlubi-Majola stressed the importance of involving key sectors like automotive manufacturing and the steel value chain, given the cascading impact on related industries.
The union has also urged AMSA to explore alternatives to outright closures, such as production adjustments, diversification, and partnerships to preserve jobs and sustain operations.
Government and Industry Reactions
The Department of Trade, Industry, and Competition (DTIC) expressed disappointment at the outcome despite months of negotiations. The DTIC highlighted the steel sector’s significance to South Africa’s industrial capacity and reiterated its commitment to engaging with stakeholders to address the fallout from the closure.
Industry bodies, including the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), have warned of dire consequences for the broader steel value chain. SEIFSA estimates that the closure could indirectly affect nearly 294,000 jobs in sectors reliant on AMSA’s output.
Financial Implications for AMSA
ArcelorMittal South Africa outlined the financial pressures driving its decision. Key highlights include:
• Revenue Decline: A projected 5% drop in revenue for 2024 compared to 2023.
• Asset Impairments: Anticipated cumulative charges of approximately R2.7 billion related to asset impairments, severance packages, and wind-down operations.
• Earnings Impact: Earnings per share are expected to drop from a loss of R3.52 in 2023 to between R5.48 and R6.21 per share in 2024, reflecting a decrease of 56% to 76%.
AMSA has stated that placing the long steel division into care and maintenance is a necessary step to stem further financial losses.
The Ripple Effect on the Steel Sector
The closure of AMSA’s long steel division is expected to have significant downstream implications for industries reliant on steel products, including construction, automotive manufacturing, and infrastructure development.
NUMSA has warned that reduced domestic steel production will exacerbate South Africa’s reliance on imported steel, further weakening local manufacturing capabilities and increasing trade deficits.
Policy Interventions and Potential Solutions
NUMSA and other stakeholders have proposed several measures to address the crisis, including:
1. Protection Against Imports: Implementing tariffs and anti-dumping measures to protect local producers from unfair competition.
2. Energy Subsidies: Reducing energy costs for heavy industries like steelmaking to enhance competitiveness.
3. Industrial Policy Reform: Developing long-term strategies to revitalise South Africa’s manufacturing sector.
4. Public Infrastructure Projects: Increasing demand for steel products through government-led infrastructure programmes.
NUMSA’s Call to Action
NUMSA has reiterated its demand for the government to take a leading role in convening discussions with all affected parties. The union insists that any resolution must prioritise job preservation and address the broader challenges facing South Africa’s industrial base.
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