Arcelormittal South Africa announced plans to close its mills in Newcastle and Vereeniging. Industry insiders now see South Africa's supply with long steel threatened.
In a statement, the company justified the decision with a decline in demand by 20 percent, increasing energy prices, delivery interruptions and persistent infrastructure problems. The company points out that it has no influence on these factors.
In general, domestic steel production is affected by high transport costs and the South African power restriction, which leads to regular power outages.
3500 jobs affected
The steel manufacturer is responsible for about half of the country's crude steel production. Flat products are currently produced in the works of Vanderbijlpark and Saldanha, long products in Newcastle and Vereeniging.
The company's long-steel division produces wire, rails, bars and rod steel for construction, mining and the processing industry. ArcelorMittal also produces foundry, flat steel and pipe products.
The closure of the long products mills in Newcastle and Vereeniging will affect around 3,500 employees. It represents the end of the production of special quality and long products of certain dimensions in South Africa.
Effects on import prices expected
Arcelormittal South Africa has now asked for its final long product orders and plans to close the plant in Newcastle until the end of March. South African steel buyers expect that the planned closure of the only iron ore based long steel mill in the country will lead to higher import prices.
Between 2018 and 2022, the country's steel imports rose by almost 55 percent to 1.43 million tons. By the end of October 2023, 1.25 million tons of steel were imported, despite the decline in consumption determined by ArcelorMittal. South African steel demand is currently around four million tons per year.
Criticism of the European CBAM regulation
Some long -products' customers expressed hope that the closure will not be carried out. They suspect that it could be an attempt to get the support of the South African government.
Despite the concern for domestic steel production, the South African Ministry of Trade, Industry and Competition was one of the authorities that questioned the CBAM regulation of the European Commission at the beginning of the year. The Ministry pointed out that the regulation contradicts the Paris Agreement and violated the rules of the World Trade Organization (WTO). CBAM represents the risk of tightening inequality, poverty and unemployment in developing countries.
Source: Meps International.
