By: Creamer media

The government’s trade department and one of its state-development banks, the Industrial Development Corporation is in discussions with ArcelorMittal South Africa (AMSA) about the potential closure of the Newcastle mill, said the people, asking not to be identified because the discussions aren’t public. The operation located in the eastern province of KwaZulu-Natal makes steel grades used in the country’s crucial automotive, mining and construction industries.

On April 1, the company said the IDC – its biggest shareholder after its parent – would conduct a due-diligence exercise with a view to taking a bigger stake in AMSA.

A decision could emerge in coming days and the mill is hemorrhaging cash, with the entire group being unprofitable, the people said. AMSA has set a date of September 30 for its closing along with another mill in Vereeniging, which also produces so-called long products.

That’s the latest deadline for the closure of the plants, which AMSA first said it intended to shutter in November 2023. This would affect 3 500 direct jobs and tens of thousands more in industries that depend on the mills. The steel grades aren’t made by local competitors and would have to be imported.

The trade department “has been in ongoing discussions with AMSA on the potential closure of Newcastle,” it said in a response to questions. “Since the beginning of this process, the department’s objective has been to maintain the country’s long-steel capacity.”

AMSA, which didn’t respond to a request for comment, on August 11 reiterated that unless a solution is found, the mills will be closed.

The company has said unfair discounts on the price of scrap metal used by local competitors – who produce some of the more basic products made by AMSA – are among the causes of its losses.

The steel producer has also complained about high power prices, limited protection against steel imports from China and a poorly run state-owned rail service.

The company’s stock has declined 31% this year in Johannesburg to 93c a share, giving it a market value of R1.06-billion, down from a peak of R116-billion in 2008. In its most recent financial year, its revenue was almost R40-billion.