Steel producer ArcelorMittal South Africa (AMSA) announced on Monday that processes had been initiated “with immediate effect” that could result in the retrenchment of 400 people at the Vereeniging meltshop and the forge, in southern Gauteng.
An “industrial footprint review” had also been initiated for its far larger Vanderbijlpark Works, which remained unprofitable – the review would be completed by the end of October and could also result in job losses.
The announcement of the Vereeniging Works Section 189 consultation process with trade unions followed a footprint review initiated by AMSA in July as a result of a sharp fall in prices, a surge in imports and weak domestic demand.
It also followed only days after government moved to impose 10% duties on certain steel grades and gave an indication that it was willing, as long as due process was followed, to institute protection across a broader range of flat- and long-steel products.
The increase in protection was approved following an investigation by the International Trade Administration Commission of South Africa, which recommended that the duties on zinc-coated, or galvanised steel, aluminium-zinc coated steel and colour-coated steel be increased from free of duty to 10% ad valorem.
President Jacob Zuma also released a statement indicating his concern about the pressure that the industry was facing. He urged government, business and labour to work “tirelessly together to save jobs in the iron and domestic steel industry sector”.
AMSA said in a statement that the decision to move ahead with the restructuring had been taken “despite our best efforts” and was made in light of an assessment that suggested the poor outlook was “not about to change in the foreseeable future”.
“We acknowledge and appreciate the steps taken by government with regards to the initial approvals of import tariffs for two of our products. However, these will only assist in the medium to long term and trading conditions continue to worsen since the announcement in July of the footprint study of our long steel-business,” Paul O’Flaherty said.
The possible closure of Vereeniging, which is South Africa’s oldest operational steel plant, would affect about 400 direct employees and contract service employees.
“It is envisaged that the operating mills of Vereeniging will be merged with the operations of the Newcastle Works to create one long-steel business. We anticipate that this decision will help optimise the already high and unsustainable fixed costs of the long-steel business.”
Besides the review of the Vanderbijlpark Works, a review would also be undertaken of AMSA’s corporate services, with a view to optimising structures and costs.
“It is envisaged that the review, which will use the services of experts in the field, will be concluded by the end of October 2015, at which time a decision will be announced with regard to any possible further restructuring. The review will include consultations with all employees at Vanderbijlpark Works and corporate services, as well as their representative unions, to find viable alternatives to potential job losses.”