South Africa’s second-largest steelmaker Evraz Highveld Steel and Vanadium confirmed on Monday that it had temporarily ceased steel production at its steelworks, citing working capital constraints and reduced domestic demand mainly owing to a “significant” increase in steel imports from China.
The group said in a statement that it was currently communicating with its employees, adding that it intended to resume production once adequate funding had been secured and steel trading conditions had improved to ensure the company’s sustained future financial viability.
The decision to halt production at the company’s ironmaking division was brought about by delayed debtors payments; inadequate cash to procure the required raw materials to continue with manufacturing operations; difficulties experienced with access to funding; and a continued inability to pay major creditors timeously, it outlined.
The company added that the feeding of raw materials into the ironmaking kilns had been halted to enable the furnaces to be safely drained and switched out, ready for a future start-up.
“The steel plant will be stopped and made safe once all the hot metal has been processed. The two mills will continue operating until all the available stocks have been rolled into saleable products, whereafter these operations will also be safely stopped.
“All plant and equipment will, for the moment, be placed on care and maintenance and prepared for future start up,” it held.
South Africa’s largest steel producer ArcelorMittal South Africa (AMSA) had also recently spoken out about the difficult conditions facing local steel producers, with AMSA CEO Paul O’Flaherty last week confirming that the industry was seeking greater protection from steel imports through the implementation of a 10% ad valorem duty on such imports.
Further, the sector had also called for regulations stipulating that locally produced steel be used in public infrastructure projects.
Evraz, a vertically integrated steel and vanadium slag producer, had initiated voluntary business rescue proceedings in April, citing an inability to meet its short-term obligations as a result of historical operating difficulties and sustained financial losses within a capital-constrained operating environment.
The decision came despite the earlier implementation of a turnaround plan that looked to improve the steelmaker’s fragile financial position, which had been negatively impacted by weakened global steel and vanadium markets and a “severe” reduction in domestic steel demand.
“The board believes that the implementation of voluntary business rescue will afford the business practitioner the opportunity to consider the continued implementation of the turnaround plan and successfully re-establish the company,” it said at the time.