ArcelorMittal South Africa Shuts Down Longs Business, Threatening 3,500 Jobs

ArcelorMittal South Africa (AMSA) has announced the closure of its Longs Business, citing unsustainable financial performance due to weak economic conditions, high logistics and energy costs, and competition from low-cost imports. This decision will have far-reaching consequences, including the loss of approximately 3,500 direct and indirect jobs and significant impacts on local economies like Newcastle.

Challenges Facing the Steel Giant

In November 2023, AMSA revealed plans to place its Longs Business into care and maintenance, emphasizing the structural challenges that have plagued South Africa’s steel industry. Despite targeted interventions throughout 2024 and collaboration with government and stakeholders, the issues proved insurmountable.

Key factors contributing to the closure include:

• Rising logistics and energy costs.
• Insufficient policy support, including decisions related to PPS and export scrap tax.
• Intense competition from low-cost steel imports.

“Persistent high costs and insufficient policy interventions have left the Longs Business unsustainable,” said AMSA CEO Kobus Verster.

Impact on Operations and Jobs

The closure will affect all Long steel plants, including Newcastle Works, Vereeniging Works, and the rail and structures subsidiary, AMRAS. While Newcastle’s coke-making operations will continue on a reduced scale, steel production across affected plants is set to cease by late January 2025, with a full wind-down expected in Q1 2025.

AMSA will begin a consultation process under Section 189(3) of the Labour Relations Act to address the anticipated job losses. Although approximately 3,500 jobs are at risk, the final number of retrenchments will depend on consultation outcomes and agreed alternatives.

Economic and Social Consequences

The closure represents a significant blow to South Africa’s steel production capacity and the socio-economic stability of communities reliant on AMSA’s operations. Newcastle, in particular, faces severe challenges as its local economy is heavily intertwined with the steel industry.

Despite AMSA’s efforts to avoid this outcome, Verster acknowledged the broader implications:
“At a time when our country can ill afford job losses and further industrial erosion, this decision is particularly difficult.”

Financial Impact on AMSA

The wind-down will result in asset impairments, severance costs, and wind-down charges totaling approximately R2.7 billion. Financial losses are expected to deepen, with earnings per share forecasted to drop from a loss of R3.52 in 2023 to a loss of R5.48–R6.21 in 2024. Similarly, headline earnings per share are expected to decline significantly.

AMSA remains committed to minimizing the socio-economic fallout through ongoing consultations and efforts to realign its R1 billion working capital facility. However, the closure underscores the urgent need for structural reforms and policy support to sustain South Africa’s steel industry.

The closure of AMSA’s Longs Business highlights the deep-rooted challenges facing South Africa’s industrial sector. With thousands of jobs at stake and local economies under threat, the steel giant’s decision serves as a stark reminder of the need for sustainable economic policies and industry support.

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