ArcelorMittal South Africa (AMSA) has confirmed the closure of its Longs Steel business, marking the end of steel production at its Newcastle and Vereeniging plants. This decision arrives following unsuccessful attempts to secure government support and solutions to operational challenges facing the group. With significant ramifications for the local economy, approximately 3,500 direct and indirect jobs are at stake, alongside the potential loss of up to 100,000 additional jobs across related sectors.
The closure was formally announced in February 2025, with the company planning to halt production starting early March. This action follows extensive discussions with various stakeholders, which failed to yield any sustainable solutions. "Regrettably, the parties have not been able to find timely solutions required to defer the winddown," AMSA stated.
The company's Longs Steel operations, which produced fencing, rail, rods, and bars for construction and manufacturing, have been threatened by rising operational costs, stifled domestic demand, and competition from low-cost imports. The group indicated these factors have worsened significantly, underscoring their inability to remain viable. The operational loss of AMSA's long steel business doubled to R1.1 billion ($59.46 million) for 2024, contributing to its broader headline loss of R5.1 billion.
One core issue has been the existing policies surrounding the scrap export tax, which AMSA argues favors smaller competitors over established companies. Other contributing factors included high electricity tariffs and continued inefficiencies with South Africa's rail and port systems. AMSA pointedly noted, “The structural elements leading to the wind-down of the Longs Steel Business remain unaddressed... Since early 2024, when negotiations began... conditions have not merely remained static but have worsened.”
Industry experts critique the government for not adapting policies to support the local production of steel. Despite AMSA’s prime position in the domestic market, government measures fail to provide the necessary environmental adjustments to keep such businesses afloat. The anticipated increase of electricity costs by 12.74% beginning April 1, 2025, combined with rising logistics expenses, only exacerbates the already strained operational cost structure of the company.
The impact of the closures will extend beyond those directly employed by AMSA. Local economies, particularly communities like Newcastle, are poised to face severe repercussions, as these jobs play pivotal roles not only within AMSA but also connect to various upstream and downstream industries. Private school networks, including Curro, also indicated the anticipated adverse effects on their institutions due to reduced household incomes linked to job losses.
Kobus Verster, AMSA’s CEO, had earlier expressed concerns, stating, “The Newcastle Works and Vereeniging Works supply between 350,000 to 400,000 tons of steel products... no other company can match these outputs.” This pronouncement raises alarms for industries reliant on consistent supplies of steel during challenging economic periods.
Recent reports from the Steel and Engineering Industries Federation of Southern Africa (Seifsa) highlighted broader trends detrimentally affecting the sector, including decreased production and increased operational competition from mini-mills and imports from countries such as China. Despite growing interest in steel exports to African markets, the domestic industry struggles for survival, illustrating the pressing need for substantial economic reforms.
Compounding the industry challenges are regulatory barriers, with some stakeholders, including the National Employers' Association of South Africa, contesting the feasibility of maintaining anti-dumping duties on imports if local production remains hampered by infrastructural and policy failures. Questions arise: can the South African government enact effective measures to stabilize sectors at risk of collapse, ensuring firms like AMSA do not sink alongside their invaluable workforce?
The call for action has never been more urgent as AMSA moves forward with its shutdown and the industry faces what could be its most challenging period yet. Analysts caution against complacency, urging policymakers to focus on adaptive strategies benefiting domestic steel manufacturing rather than allowing policies to rigidly favor external competition.
While AMSA’s closure marks the end of significant long steel production, industry stakeholders hope policymakers can still recalibrate for long-term gains. With 2025 set to be pivotal, the necessity for comprehensive reforms remains clear, echoing calls from multiple sectors facing the crisis.
What remains apparent is the dire ramifications these closures carry for thousands of workers and the broader economy, set against the backdrop of governmental negotiations failing to avert disaster. Only time will tell if South Africa can adapt and reconstruct its industrial foundations before it's too late.