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ArcelorMittal South Africa to close Saldanha operation

ArcelorMittal’s South Africa unit said on Monday it would close its steel operations at Saldanha Works in the south of the country because it could no longer compete in export markets.

The company, majority owned by ArcelorMittal, announced in September that it could close some operations as part of a review aimed at strengthening long-term sustainability amid cheap imports, rising costs and a flagging local economy.

In a statement, the company said it would undertake an orderly and commercial wind-down of the Saldanha operation, which its website says employs 568 staff and produces 1.2 million tonnes of steel per annum.

“Saldanha… has lost its structural competitive cost advantage to effectively compete in the export market, mainly due to raw material and regulated prices,” the statement said, adding the site is suffering severe financial losses forecast to continue for the foreseeable future.

The process to wind the operation down will begin immediately and is expected to be completed during the first quarter of 2020, it added.

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ArcelorMittal South Africa, which has for some time complained about cheap imports eating into its business, has also been hit by subdued investment and infrastructure spending in the country, as well as a weak South African economy.

It said on Monday there were constructive discussions ongoing with stakeholders including the government and organised labour to find “alternative solutions to the dire situation in the South African steel industry”.

The next phase of its review will focus on its operations in Newcastle, in the eastern province of KwaZulu-Natal and some long-steel products rolling facilities, it continued, adding that exploration of the benefits of a concentrated operating footprint will be central to this.

Key Insights

  • The company, controlled by the world’s biggest producer, ArcelorMittal, said in September it was reviewing the financial sustainability of major operations. The South African producer in July this year announced plans to cut 2,000 jobs.
  • The country’s steel industry faces a “dire situation” as it struggles with high costs for electricity and raw materials, and weak economic growth in Africa’s most industrialized economy. The global steel industry is also struggling, and ArcelorMittal warned last week demand is continuing to weaken.
  • Saldanha, once an ambitious partnership between South Africa’s government and industry, is suffering severe financial losses, which are forecast to continue for the foreseeable future, the company said Monday. The next focus of the operational review will be its Newcastle plant.