ArcelorMittal SA awaits government solution to save steel operations and jobs: CEO Kobus Verster

ArcelorMittal South Africa will delay the closure of its long steel operations by a month, until the end of February. Long(s) refers to a range of steel products used in key sectors, such as rail, agriculture and mining, and is critical in power transmission.

The government is scrambling to find a way to save the company’s long steel operations in Newcastle and Vereeniging from closing down. The Industrial Development Corporation (IDC), a state-owned financier which is invested in ArcelorMittal SA, has thrown the company a final lifeline, about R380-million to keep its long steel operations going until the government finds a long-term solution.

On Thursday, ArcelorMittal SA recorded a financial loss of R5.83-billion for the year ending December 2024, mainly attributable to its loss-making long steel operations. 

Daily Maverick (DM): On 5 January 2025, ArcelorMittal SA was steadfast in winding down and shutting down its long steel operations. And on 6 February, ArcelorMittal SA delayed the winding down process for a month. What changed between January and February?

Kobus Verster: The government with all its departments — mainly trade, industry and competition; finance; labour; and electricity — and state-owned enterprises Eskom and Transnet came to us with serious intent. We [ArcelorMittal SA] are clear. We are not going to take any further financial losses or any funding commitments for our long steel operations. We told the government that if they wanted two more weeks [for ArcelorMittal SA to defer its winding down decision], then we require R380-million and we disclosed this number. We were given the R380-million facility.

If they want another two weeks, then they have to come up with another solution. So, the two weeks we gave is simply to allow more time for them to come up with a permanent solution. The government’s interministerial committee, which consists of those ministers plus the SOEs [state-owned enterprises], plus the Competition Commission and SA Revenue Service [SARS] are working on something [a rescue package]. And they’ve got two weeks.

Read more: ArcelorMittal forges ahead with steel plant closures despite government talk of a R1bn bailout

DM: What sort of interventions are you seeking from the government?

Verster: We’ve got issues with SARS not following up on the duty [tax relief]. We are there within the slow pace of duties with the International Trade Administration Commission of South Africa (Itac). So, then there is Eskom and Transnet relief. Having an electricity rate that’s competitive is not a lot to ask for. We’re paying too much for electricity. We have put in applications for a special tariff.

[Itac has implemented a provisional safeguard duty of 9% on certain hot-rolled steel products. The commission is considering duties on other steel products, including long products. ArcelorMittal SA has been calling for an import duty higher than 9%, instead suggesting 25%. Verster has argued that this percentage is justified because other countries have implemented similar levels of duty to protect their steel industries.]

DM: Do you think the delay of the long steel operations’ closure for one month is delaying the inevitable? We have been down this road before. Negotiations with the government happened for a year, and nothing came about.

Verster: I think if you look at some of the issues that are being discussed, it’s [not about] trying to save Newcastle in its totality, with 1.6 million annual tonnes capacity of steel production. However, there are unique assets in Newcastle that can produce 400,000 tonnes of unique products. So, the end result can be something different, maybe smaller Newcastle operations. So, these are the things that they are considering — things that we have contemplated in the past. But from our perspective, we are not keen to invest new money into a sector that’s hostile and unattractive.

DM: Is it correct to assume that no matter how much money is thrown towards the long steel operations, with structural market changes, the operations would still be in trouble? 

Verster: Yes. I think the rescue package is only buying time. There has to be a final solution. Otherwise, we will continue to incur financial losses while running long steel operations.

DM: While waiting for solutions from the government, are the steel operations still running? Are the furnaces still meeting customer demand?

Verster: The process of care and maintenance has begun in the sense that we don’t order longer-term lead items. We don’t order expensive material and equipment such as repair and maintenance motors. We’ve got raw materials to serve us until the end of February. We will not have material beyond February.

We will continue with a [retrenchment] consultation process. But we are still producing. What do we produce? We are producing high-value steel products. So if a customer comes to us and says they want to place an order for six months, I can fit that in within the February rolling cycles.

DM: If there is a possibility that the long steel operations will be saved by the government, then why continue with the retrenchment process of workers?

Verster: We had our second retrenchment consultation process today [Thursday, 6 February]. Our salary bill is about R90-million a month. To the extent that we say we don’t get a solution [from the government in February], I can’t [wait to] start a consultation process then. It’s going to be too expensive. So you have to get through this process as fast as possible. Let’s say we find a partial solution, and you have partial retrenchments, where irrespective of the outcome, there will be an impact.

Do we think this will save every job? No it won’t, but it will most probably save about 80% of the jobs in the total value chain, So that’s the logic. We cannot leave everything to hope.

DM: So, some jobs will be saved if the solution from the government materialises?

Verster: Yes, but I cannot commit yet to a number [of jobs set to be saved].

DM: About the government’s rescue package, are you privy to those discussions as to what is being considered at the moment?

Verster: I can share nothing. However, I am privy to some of the discussions. I haven’t received the necessary feedback. We will meet with this whole ministerial committee and we have to put forward our case on the sustainability of the long operations. DM