Temporary reprieve for ArcelorMittal SA’s long steel division as closure deferred amid financial woes

3 Apr 2025

This development follows a R1.683-billion facility provided by the Industrial Development Corporation, aimed at sustaining the business while seeking long-term solutions to a proposed business dissolution that would have seen South Africa’s longest-running steel producer close down, with thousands of jobs on the line.

ArcelorMittal South Africa (Amsa) this week announced a six-month deferral of the planned wind-down of its Long Steel Business, extending operations until at least 31 August 2025 and preventing the loss of at least 3,500 direct jobs, for now.

The lifeline is not a Band-Aid nor yet a permanent solution, with Amsa stating: “The facility is repayable subject to agreement between the parties and contingent on the financial performance, solvency and liquidity of the Long Steel Business,” in a press release.

This development follows a R1.683-billion facility provided by the Industrial Development Corporation, aimed at sustaining the business while seeking long-term solutions to a proposed business dissolution that would have seen South Africa’s longest-running steel producer close down, with thousands of jobs on the line.

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

Long steel long in the tooth

The long steel business — Amsa’s division focused on the production of fencing material, rail, rods, and bars — serves as a vital supplier to the construction, mining, and manufacturing sectors, with core operations centred in Newcastle and Vereeniging.

While its products form the literal backbone of infrastructure development, the business has struggled to remain standing, in large part due to the broader infrastructure challenges within the country regarding entities such as the Passenger Rail Association of South Africa (Prasa) and Transnet.

By end 2024 operational losses at the Longs division had doubled to R1.1-billion, and for Amsa overall, headline losses topped R5.1-billion — reflecting an unsustainable combination of sluggish domestic demand, punishing electricity tariffs, inefficient rail logistics, and pressure from smaller, nimbler mini-mill competitors.

The wind-down

In November 2023 Amsa announced its intention to shutter long steel operations by April 2025, citing persistent losses and an absence of favourable policy concessions; the company had signalled that it could no longer absorb the unit’s cash burn.

But in a turn of events on Monday, 31 March 2025, Amsa confirmed that the Industrial Development Corporation had stepped in with a R1.683-billion funding facility, halting the shutdown — at least for now.

The Industrial Development Corporation facility is repayable based on the solvency, liquidity, and financial performance of the Long Steel Business, and buys Amsa six more months to stabilise operations and negotiate longer-term reforms.

Government and stakeholder involvement

The deferral forms part of a broader emergency rescue framework involving government ministries, regulators, and key stakeholders. Minister of Trade, Industry and Competition Parks Tau has committed to addressing long-standing structural challenges in the steel sector.

These include a reform of the scrap metal Preferential Pricing System, revisions to the scrap export tax, and the introduction of safeguard tariffs to shield domestic producers from low-cost imports.

To ease pressure on Amsa’s balance sheet, the company has also secured Temporary Employee Relief Scheme funding to offset payroll costs during the deferral window. In response, Amsa has suspended the Section 189(3) retrenchment consultations, offering a temporary reprieve to thousands of workers.

In a joint effort with the Industrial Development Corporation, government representatives have said the deferral period would be used to address “structural problems previously identified by the company”, with the goal of placing the Long Steel Business on a more sustainable footing.

Industrial Development Corporation in to save the day

The Industrial Development Corporation’s support may extend beyond this immediate bailout. The state-owned financier, which already holds a 6.4% stake in Amsa, has signalled its interest in increasing its shareholding. CEO Kobus Verster confirmed that a due diligence process was now under way in a media briefing earlier today: “The Industrial Development Corporation has indicated that they have a desire to look at an increased shareholding, and for that, a due diligence period has been agreed upon.”

Graphic created using Napkin AI

Jobs on the line

The decision to keep Amsa’s long steel operations running preserves about 3,500 direct and indirect jobs that would have been lost in the event of a shutdown. But even with this intervention, the sustainability of those jobs hinges on deeper reforms.

South Africa’s steel value chain — critical to sectors such as construction, mining, and automotive manufacturing — relies heavily on long product availability. Any disruption risks ripple effects across the broader economy. The deferral provides breathing room to maintain that supply while systemic fixes are pursued, but should these not be resolved, it’s unclear how similar challenges will be avoided for the Industrial Development Corporation in the future.

Catch up

What this means for you:

Temporary job security – The six-month deferral prevents the immediate loss of 3,500 direct jobs, giving employees a temporary reprieve.

Economic ripple effects – Industries like construction and mining, which rely on long steel products, won’t face immediate supply disruptions.

Uncertain future – The government and AMSA still need to find long-term solutions, or these jobs could be at risk again after six months.

Possible government support – Policies such as scrap metal pricing reforms and protective tariffs might help stabilize the industry if implemented effectively.

Higher consumer prices – If government intervention leads to price changes in steel, this could trickle down to construction costs, affecting housing and infrastructure projects.

The industry’s long-term mettle

Despite the temporary fix, fundamental issues — aging infrastructure, low cost competitiveness, and regulatory burden — require more than financial stopgaps. Without major industrial reform, the Long Steel Business could merely be delaying the inevitable.

Protective tariffs have been inconsistently applied, and regulatory interventions have often come too late to be effective. The scrap Preferential Pricing System, in particular, has been blamed for distorting market prices and advantaging recyclers over primary producers like Amsa.

During the deferral period, Amsa will explore strategic alternatives to turn the business around. These include operational efficiency programmes, modernising production processes, expanding the product range, and deepening supplier and customer collaboration.

More promisingly, Amsa is cautiously optimistic about green shoots in demand — particularly in the energy and infrastructure sectors, where state and private projects could revive appetite for long steel products.

The six-month deferral of Amsa’s Long Steel Business closure offers a temporary reprieve for a company, workforce, and industry segment under siege. But it is a window, not a solution. The true test will come in the form of structural reforms, policy coherence, and whether Amsa can evolve fast enough to reclaim its relevance in a changing industrial landscape. DM

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