In a reversal of its earlier decision, ArcelorMittal’s South African division has decided against shutting down its steel plant in the KwaZulu-Natal province. The company is now working on a plan to make the plant viable, despite the challenges it has faced.
Just over six months ago, ArcelorMittal had announced its intention to close the plant, citing weak demand and infrastructure problems in Africa’s most advanced economy. The company had also complained about policies that gave scrap metal an advantage over iron ore in steel production.
However, the company’s Johannesburg-listed shares fell 12.1% on Tuesday as it revealed that losses would widen due to tough market conditions and disruption at its Vanderbijlpark furnaces, where it produces flat steel products.
Despite the difficulties, ArcelorMittal South Africa CEO Kobus Verster said the decision to shelve the closure of the long steel operations, which produce fencing material, rods, and bars used in sectors such as construction, mining, and manufacturing, will save 3,500 direct jobs and thousands more indirectly.
The company said its board and management have decided to continue operating the business to allow for the exploration of short, medium, and longer-term initiatives aimed at securing its sustainability.
ArcelorMittal South Africa noted some improvements in electricity generation as well as port and rail efficiencies, which have contributed to the decision to keep the plant open. Additionally, the non-renewal of a steel scrap export ban after it expired in December 2023 has started to bring “greater fairness and equity into the input cost structures” between integrated steelmakers like ArcelorMittal and scrap-based producers.
The company has also obtained a 1 billion rand ($54.29 million) working capital facility to support the continued operations of the plant.
This reversal of the planned closure underscores the challenges faced by the steel industry in South Africa and the importance of finding viable solutions to ensure the sustainability of the sector and protect local jobs.