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ArcelorMittal's Saldanha plant to keep running

27 May 2016

ArcelorMittal SA fears a disaster for the country if the primary steel industry collapses, as the sector underpins national economic growth and social development.

ArcelorMittal's Saldanha plant to keep running

But it says rising steel prices, rand weakness and better export prospects in both West and East Africa mean its export-oriented Saldanha Works in the Western Cape is viable again. It had placed the plant under review after recording an R8.63bn loss in the year to December 2015.

"We continue to be a significant contributor to (gross domestic product) growth and employment," said chairman Mpho Makwana when releasing the company's 2016 Factor Report on Wednesday, 25 May. "If this industry ceases to exist in SA, it will be a disaster. We must start thinking of SA Inc and tell the story of steel in growth and development."

The report, produced annually since 2013, measures the effect of the company's individual operations on SA's regional and national economies. The Indian-backed group directly and indirectly supports 90,000 jobs in SA. It said it had provided 1,079 suppliers in local communities with work to the value of R5.6bn in 2015.

Makwana said the company was busy negotiating a "partnership package" with the state amid a flood of cheap Chinese steel imports and rising costs for iron ore, labour and electricity.

The company has long been at odds with the state over "a developmental steel price" and its "effective monopoly" in the production of about 70% of SA's steel products. To this end, the partnership with the government, and labour, intends to protect jobs, secure "fair" steel pricing and advance black economic empowerment.

"The big thing about the package was to secure our licence to trade," Makwana said. "The company has been engaging with government on resolving various legacy issues and, in return, ArcelorMittal SA has committed to supporting government's black industrialist programme and the national transformation agenda through various initiatives over the next five years."

Before stepping down earlier in 2015, former CEO Paul O'Flaherty had warned of a "bloodbath year" in the industry, indicating that antidumping duties of 30% to 60% were needed on some Chinese steel imports. The government had approved a 10% tariff on eight imported steel product categories, with two more in the pipeline.

Meanwhile, ArcelorMittal SA had invested R7.5bn of capital expenditure over the past five years in expansion, maintenance and cost-competitiveness at plants across the country - including for reducing greenhouse gases.

Trade and Industry Minister Rob Davies told Business Day in late March the government would soon designate domestically manufactured steel products for infrastructure development and use by state-owned entities.

Source: Business Day

Source: I-Net Bridge

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