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