KEY POINTS
- ArcelorMittal South Africa will close its long steel plant due to losses.
- The closure could result in 3,500 direct and indirect job losses.
- Headline loss per share is expected to widen significantly in 2024.
Steel giant ArcelorMittal South Africa announced plans to close its long steel production plant, a decision that has caused its shares to plummet by more than 15 percent.
The closure, expected in November 2023, has been blamed on adverse economic circumstances, logistics and energy constraints, and competition from low-cost imports.
In a statement on Monday, the company described the closure as a necessary step to preserve its overall sustainability.
According to Reuters, the plant, which produces fencing material, rail, rods, and bars for the construction, mining, and manufacturing sectors, could lose approximately 3,500 direct and indirect jobs.
“The company is at a point where any further delay could affect the sustainability of the company, and therefore, a decision cannot be pushed back any further,” said the South African division of the Luxembourg-based steel producer.
Economic challenges force operational adjustments
The closure comes after the company postponed similar plans in July 2024, citing temporary improvements in international steel prices following Chinese stimulus measures.
However, those gains proved short-lived, and the prolonged challenges in the market have forced ArcelorMittal to proceed with the shutdown.
The plant’s shutdown is best understood in the light of the volatility South Africa’s steel industry has been experiencing including, economic stagnation, increase in energy costs, and inefficient transport facilities.
Compounded by competition from cheaper imports, these issues have significantly impacted profitability.
Financial outlook underscores difficulties
ArcelorMittal South Africa reported that its headline loss per share for the year ending December 31 is expected to range between 4.06 rand ($0.22) and 4.41 rand, a steep decline from the 1.70 rand loss reported the previous year.
This situation reveals challenges that the company has faced, which are evident in the case of the South African steel industry and the global market. Analysts argue that unless structural factors are dealt with, other operations could face similar fates.
However, ArcelorMittal reiterated its focus on searching for measures that would help support its remaining operations. The decision to close the long steel plant, the company stated, was made after exhausting all other options to restore profitability.
