Patel suggests AMSA sell Saldanha plant to avoid loss of industrial capacity

12th November 2019 By: Marleny Arnoldi - Creamer Media Online Writer

The Department of Trade, Industry and Competition (DTIC) has expressed its disappointment at the decision by steel producer ArcelorMittal South Africa (AMSA) to retrench nearly 1 000 workers across the company and to put its Saldanha Works plant on care and maintenance.

This followed after AMSA completed the first phase of its operational and financial sustainability review of certain major operating sites, individual plants and production areas.

The steel producer’s decision was made despite government and public agencies’ efforts to provide additional support to AMSA over the last few months. This support included trade support for the steel industry, including safeguards on imported hot rolled steel.

Government had also designated the steel industry to ensure that steel produced for infrastructure projects was locally produced.

Additionally, Trade and Industry Minister Ebrahim Patel had met with AMSA to explore opportunities to save jobs and keep all the company’s plants in operation, while the DTIC, the Department of Public Enterprises, power utility Eskom and freight group Transnet had engaged with AMSA on additional support to reduce its costs.

AMSA, however, on Monday said its Saldanha operation had lost its structural competitive cost advantage to effectively compete in the export market, owing to raw material and regulated prices. It was suffering severe financial losses that were expected to continue for the foreseeable future.

AMSA said it would retrench 900 people as soon as the first quarter of next year.

Contractual domestic sales orders from Saldanha would then be fulfilled from AMSA’s Vanderbijlpark Works.

Patel said on the sidelines of the Brazil, Russia, India, China and South Africa Trade Ministers meeting, on Tuesday, that the closure of Saldanha Works and the retrenchment of AMSA employees was a harsh blow to industrialisation in the country.

“This is particularly regrettable given the energy and efforts of government, State-owned entities, organised labour and others to provide support and savings to AMSA. These commitments follow significant tariff protection and localisation initiatives provided to protect the steel industry from the threat of imports.

“We recognise the challenges presented to the steel industry globally from over-capacity. Our efforts are directed at maintaining a primary steel production capability in South Africa,” he noted.

The Minister hoped that AMSA could still reverse its decision and find solutions that could keep Saldanha in operation. If not, he recommended that AMSA sell the plant to ensure the country did not lose industrial capacity, which would displace more workers and communities.

Trade union Solidarity also expressed its dissatisfaction at AMSA's decision to place the Saldanha plant on care and maintenance.

"Solidarity is shocked by the announcement. We are aware of the fact that AMSA is facing major challenges in Saldanha with high input costs, a declining export market and government's economic policies, but such a drastic step gives rise to major concerns,” commented Solidarity deputy general secretary for the metals and engineering industry Willie Venter.

Meanwhile, AMSA had progressed with reviewing its Newcastle operations and certain long steel products rolling facilities, with the objective of improving the company’s structural cost position and service offering.