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ArcelorMittal South Africa (AMSA) Limited has announced the wind-down of Longs Business in Newcastle in Kwa-Zulu Natal and in Vreeniging Works which could affect 3 500 direct and indirect jobs.
While the economy of South Africa is still trying to recover, the loss of jobs serve as a major blow given the high rate of unemployment in the country. Citing a poor performing economy, low demand of steel from international markets, competing against low cost steel from China, policy making and the struggling steel industry for years, AMSA was left with no option but to win down Longs Business.
AMSA says the decision to wind down Longs Business comes after sustained challenges, including weak economic growth, high logistics and energy costs, and an influx of low-cost steel imports, particularly from China.
Persistent high logistics and energy costs, combined with insufficient policy interventions (especially those policy decisions made some time ago (namely, the Price Preference System [PPS] and Export Scrap tax) relating to the substantial subsidisation of scrap-based steelmaking operations to the detriment of the Newcastle Works – which beneficiates South African-sourced raw materials), have left the Longs Business unsustainable.
The company said in its statement that, despite extensive consultations with Government and stakeholders to find viable solutions to sustain the Longs Business, progress was insufficient to avert the wind down. The Company will now transition the Longs Business into care and maintenance. Steel production is anticipated to cease by late January 2025, with the wind-down of the remaining production processes completed in Q1 2025.
“It is with deep regret that we must take this difficult decision. Over the past year, our employees and dedicated management team have shown remarkable commitment and resilience in the face of serious uncertainty. Unfortunately, despite everyone’s best efforts, including significant engagement with stakeholders, the structural challenges in the Longs Business were not resolved. While this outcome is deeply disappointing, especially given the economic challenges facing South Africa, we remain focused on securing a sustainable future for the remaining operations,” said the CEO of AMSA Kobus Verster.
According to Vester, This wind down decision will directly affect operations constituting the Longs Business, namely, at the Newcastle and Vereeniging Works, and AMRAS (the rail and structural subsidiary). Newcastle’s coke-making operations will continue, though scaled back to reflect reduced demand.
There will also be a knock-on impact on certain roles in the Flat Business as well as for some personnel within the corporate support service areas. It is envisaged that approximately 3,500 direct and indirect jobs will be affected. The broader economic effect on induced jobs is expected to be significantly higher, especially in the Newcastle region. A formal Section 189(3) labour consultation process will commence shortly, and the company remains committed to a responsible process to minimise the impact on employees and suppliers.
Vester said the Company is actively working to realign its R1 billion working capital facility secured in 2024 to support this transition.
