ArcelorMittal South Africa: The Wind Down of Longs Business

ArcelorMittal South Africa (AMSA) has announced its decision to wind down the Longs Business, which includes the Newcastle Works, Vereeniging Works, and the rail and structures subsidiary, AMRAS. This move is expected to impact around 3,500 jobs and affect various enterprises supplying the affected works. The company cited persistent high logistics and energy costs, insufficient policy interventions, and the unsustainability of the Longs Business as the primary reasons for this decision.

The Longs Business has been facing significant challenges for some time, with weak financial performance driven by deteriorating global and local steel markets, unaffordable energy and logistics costs, and surging low-cost steel imports, particularly from China. Despite implementing cost-cutting and cash management measures, the financial outlook for the fourth quarter of 2024 remained extremely challenging, leading to a substantially weaker expected financial performance for the 2024 financial year compared to 2023.

AMSA has been working intensively on this issue for over a year, engaging with the government and other stakeholders to address structural issues affecting the Longs Business and create a level playing field in the steel industry. However, these efforts have not been adequate to prevent the wind-down, as the company faces no alternative but to prioritize a well-considered and responsible process to minimize the impact on employees and stakeholders while ensuring the sustainability of its remaining operations.

The wind-down of the Longs Business will have significant long-term impacts on South Africa's steel industry and economy. Job losses and socio-economic impacts on Newcastle and its surrounding communities, as well as Vereeniging, will be substantial. The loss of high-quality local steel production could lead to increased dependence on imports, higher prices for consumers and businesses, and supply chain disruptions. Additionally, the reduced government revenue and potential brain drain could further hamper the industry's ability to recover and grow in the long term.

To mitigate these impacts, AMSA is prioritizing a well-considered and responsible process, including a consultation process to discuss the wind-down and potential support measures. Discussions are also underway to realign the R1 billion working capital facility secured in 2024 to support the transition. The company will continue to engage with the government and other stakeholders to address the structural problems facing the South African steel industry.

In conclusion, the wind-down of ArcelorMittal South Africa's Longs Business is a significant development with far-reaching implications for the steel industry and the broader economy. The company's decision to prioritize a responsible process and engage with stakeholders highlights its commitment to minimizing the negative impacts on employees, local communities, and the broader economy. As the company moves forward, it is crucial for the government, industry, and other stakeholders to work together to find solutions that address the structural problems facing the South African steel industry and support its long-term success.