outh Africa’s steel industry is on the ropes, forcing what looks like a desperate reversal of the frosty relationship between government and ArcelorMittal SA.
It is not alone as the world’s primary steel sector reels from a global oversupply of steelmaking capacity.
ArcelorMittal this week confirmed it was considering closing its century-old Vereeniging steel works, while Evraz Highveld Steel, which is already in business rescue, intends to retrench half its workforce.
At ArcelorMittal, 1 200 jobs are on the line, and about 1 200 more are due to get cut at Evraz while the company seeks bidders for its assets after running out of cash.
According to metal workers’ union Numsa, the bloodbath is radiating out beyond the main steel mills with trader Macsteel also proposing 600 retrenchments. Trident Steel recently let 700 workers go. ArcelorMittal CEO Paul O’Flaherty, gave a sombre media briefing on Thursday about the potential restructuring of the Vereeniging steel works.
As had previously been leaked to the Sunday Times, he announced that ArcelorMittal was talking to the government for wide-ranging protection against Chinese competition.
ArcelorMittal wants South Africa to set import tariffs on steel at the maximum bound rate of 10%-15% for various subcategories of products. The bound rate is the maximum a country is allowed under its commitments to the World Trade Organisation.
If the process of reviewing the tariffs can be accelerated, that would also be great, said O’Flaherty.
The company is also looking for more stringent antidumping duties on particular steel products, which requires investigations and takes months to put in place.
ArcelorMittal also wants the state to boost demand by finally making steel a designated input – meaning there would be a minimum local content requirement on infrastructure projects.
The fact that steel has not yet made it on to the designations list has been seen as an indication of the government’s animosity towards ArcelorMittal.
The plea for protection might mark a belated crossroads in the traditionally acrimonious relationship between the former state-owned steel monopoly and the state.
The company is “really poor at transformation” and is ready to talk about so-called developmental steel prices, O’Flaherty told journalists, adding that it was still not clear exactly what a developmental price entailed.
Demands that ArcelorMittal lower its domestic prices have dominated state planning around steel for more than a decade.
The Vereeniging steel works are already on borrowed time, while ArcelorMittal will make a call on its future at the end of next month – depending to some extent on what the state is able to do to help, said O’Flaherty.
Lakshmi Mittal, CEO of ArcelorMittal SA’s Luxembourgbased parent company, has been in South Africa and is meeting Cabinet members, he said.
O’Flaherty denied that ArcelorMittal was trying to force concessions with the threat of economically devastating Vereeniging.
“We’re not putting a gun to their head. We are