STEEL giant ArcelorMittal has said that it will shut down its South Africa-based Saldanha plant.
A higher than expected financial losses and the global slowdown have forced the company to retrench nearly 1,000 workers who work for the plant in the African country, the world’s largest steel producer said on Monday (11).
Kobus Verster, Chief Executive Officer of ArcelorMittal South Africa, said: “The Saldanha operations were founded and built on the premise of low input costs, which gave the operation a competitive cost advantage in export markets.
"Unfortunately, over the years, that structural cost advantage has been eroded and Saldanha can no longer sustainably and effectively compete in these markets, mainly due to raw material and regulated prices. Saldanha has incurred substantial losses in the past, and the short- to medium-term outlook remains bleak.
“While this has been a very difficult decision, particularly at a time when the country is struggling with unemployment and low growth, we believe that it is an absolutely necessary step to ensure the sustainability of our broader business.”
The global steel industry is experiencing the most challenging time in 2019 since the global financial crisis.
Locally, the situation is exacerbated by continued weak economic growth, especially in steel and steel consuming sectors, with apparent steel consumption at a 10-year low, according to the company.
The company, which for some time has been considering various options to ensure the longer-term sustainability of the business, formally announced a strategic asset footprint review in September.
The outcome of the first phase of the review is to immediately begin the process of winding down Saldanha’s steel operations to curb any further losses.
The process is expected to be completed during the first quarter of 2020.
Realising the importance of Saldanha to the West Coast region, ArcelorMittal South Africa (AMSA) will make every effort to minimise the impact of this decision on its stakeholders, including the approximately 900 own and contractor employees who work at the operation, according to the company.
Contractual domestic sales orders from Saldanha will now be fulfilled from the Vanderbijlpark Works.
The company will also assess its social commitments in the local communities in a responsible manner.
Meanwhile, the South African government has expressed "disappointment" at the decision of AMSA to retrench nearly 1,000 workers across the company and to shut down its operations in Saldanha town, despite significant efforts by the government and public agencies to provide additional support to AMSA over the last few months.
Country’s minister of trade and industry Ebrahim Patel has urged AMSA to reconsider its decision because of the impact it would have on an already ailing South African economy.
AMSA's South African operations was acquired from former state-owned steel manufacturer Iscor almost two decades ago after Mittal first helped turn it around.
ArcelorMittal has reported a net loss of £420 million for the July-September quarter of 2019, hit by lower steel shipments and prices, and high material costs.
Sales of the company declined to £12,962m for the same quarter from £14,433m in the year-ago period.
Mittal's ArcelorMittal has its presence in 60 countries and an industrial footprint in 18 countries.
Rachel Reeves