Bleak start to 2025 as ArcelorMittal South Africa winds down Longs Business

The shock move follows mounting financial struggles, including rising logistics and energy costs, weak economic growth, and a surge in low-cost steel imports, particularly from China.

In a statement issued on Monday, CEO Kobus Verster confirmed that the Longs Business would transition into “care and maintenance,” with steel production expected to cease by late January 2025.

The remaining production processes will be phased out by the end of the first quarter.

Verster explained that the decision was driven by persistent high costs and insufficient policy interventions.

“The Price Preference System and the Export Scrap tax, which heavily subsidize scrap-based steelmaking at the expense of South African-sourced materials, have made the Longs Business unsustainable,” he said.

Despite multiple consultations with the government and stakeholders, efforts to find solutions were ultimately insufficient.

While Newcastle’s coke-making operations will continue, they will be scaled back in response to reduced demand.

However, the shutdown will also affect roles in the Flat Business and corporate support services.

Verster added that the broader economic impact, particularly in Newcastle, would result in the loss of far more jobs through the ripple effect.

“The company is committed to minimizing the impact on employees and suppliers,” Verster stated.

“A formal process will commence shortly to ensure a responsible approach to the transition.”

The company is also realigning its R1 billion working capital facility, secured in 2024, to support the transition.

ArcelorMittal South Africa’s struggles come at a time when the local steel industry is facing significant challenges.

South Africa’s steel production is expected to decline in 2024, with exports dropping by 40% since 2018.

The weak domestic market for long steel products, combined with global overcapacity and competition from low-priced imports, has made the Longs Business unsustainable.

The company has also forecast a significant decline in earnings, with earnings per share expected to range from a loss of R5.48 to R6.21, compared to last year’s loss of R3.52 per share.

Headline earnings per share are projected to drop between R4.06 and R4.41, down from a loss of R1.70 per share in 2023.

Despite these ongoing challenges, Verster reaffirmed the company’s commitment to long-term sustainability and competitiveness.

ArcelorMittal South Africa plans to refocus on its Flats Business, with an emphasis on innovative, export-driven steel production.

The company is also looking to secure investments in key industries such as automotive, renewable energy, and infrastructure while addressing its balance sheet issues.

“As a leadership team, we are dedicated to ensuring the long-term sustainability and improvement of our operations,” Verster said. “We remain focused on re-establishing ourselves as a champion of industrialisation in South Africa and beyond.”

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