Saldanha steelworks shutdown: Buyers eye ArcelorMittal plant as job cuts loom

Two parties have come forward with an interest to buy ArcelorMittal South Africa's (AMSA) Saldanha operations, the Department of Trade, Industry and Competition (DTIC) announced on Sunday.

The steel producer said in November it plans to wind down operations, which had lost its "structural competitive cost advantage" to allow it to effectively compete in the export market, reported Fin24.

Furthermore, it said the plant is suffering "severe financial losses" that are expected to continue in the foreseeable future. At the time, it noted that the winding down process, expected to be completed by the first quarter of 2020, could see it shed almost 1000 workers.

Following the announcement, minister Ebrahim Patel said it would be better to sell the plant in Saldanha, a town along the west coast, than to close it and harm the country's industrial capacity.

“If no solution is found with ArcelorMittal, they should consider selling the plant to ensure the country does not lose industrial capacity and workers, and to ensure that communities are not displaced.”

On Sunday, the ministry said it engaged with ArcelorMittal and indicated that potential buyers were considering making a bid for the steel plant.

“We are encouraged by these early expressions of interest in Saldanha Steel," it said. “Saldanha Steel plays an important role in South Africa’s industrial footprint. For the Saldanha region specifically, the steel works is an important source of employment and development as well.”  

It called on AMSA to consider every effort to retain employment in Saldanha, including giving consideration to potential bids by other investors.

"If AMSA is still intent on closing Saldanha Steel, a decision we do not agree with, then nonetheless we urge the company to engage actively and openly with potential buyers, and to offer them terms that would enable operations at the steel-mill and employment opportunities to the local community.”

The DTIC noted that government has, over the past few years, supported AMSA with tariff protection from imports, including safeguard duties and the designation of steel for state infrastructure projects.

South Africa is one of the only major primary steel producing countries on the African continent.

The DTIC said initiatives like the African Continental Free Trade Area (AfCFTA), which will come into effect in July 2020, will provide opportunities to drive increased regional demand for steel in construction, automotive manufacturing and mining. 

“We have embarked on the process to develop a Masterplan for the Steel and Metals value chain in South Africa which will include both demand- and supply-side measures, and bring greater competitiveness and dynamism to the entire steel and metals industry," Patel said.

He added that a number of initiatives are in progress to foster greater demand for steel by both the public and private sector, and to improve the cost base across the industry. 

AMSA was not available to provide comment to Fin24 on Sunday.

- Compiled by Adiel Ismail

ZAR/USD
17.76
(-0.54)
ZAR/GBP
23.16
(-0.48)
ZAR/EUR
20.87
(-0.31)
ZAR/AUD
12.69
(-0.42)
ZAR/JPY
0.17
(-0.30)
Gold
2030.35
(+0.16)
Silver
28.25
(+0.44)
Platinum
973.02
(+1.07)
Brent Crude
44.49
(0.00)
Palladium
2182.00
(+0.01)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 941 votes
It depends on how the funds are used.
74% - 6274 votes
No. We should have gotten the loan elsewhere.
15% - 1289 votes
Vote