Two parties have shown interest to acquire Amsa’s Saldanha Works
THE DEPARTMENT of Trade and Industry (dti) said yesterday that ArcelorMittal South Africa was aware of the government’s comment pertaining to potential buyers for the Saldanha Works.
The dti and competition (DTIC) has received expressions of interest by two parties to buy the Saldanha Steel works from ArcelorMittal South Africa (Amsa), the department said on Sunday.
The DTIC have referred two expressions of interest in the Saldanha Works to ArcelorMittal South Africa, the first dated November 15 and the second dated November 30, 2019. Neither contains sufficient substance to assess commercially.
Amsa announced on November 11 that it would be closing Saldanha Steel following what the company called an operational review of its asset footprint, the department said in a statement.
“ArcelorMittal South Africa is acutely aware of the role that its Saldanha Works plays in the West Coast region, which is why the decision to wind-down operations and place the plant on care and maintenance was not made lightly by the board and management of the company.
“As such, ArcelorMittal South Africa will consider all serious and viable commercial opportunities for the future of the plant, especially if it means that job losses can be prevented.”
The dti recognised that the company had been severely impacted by unaffordable increases in regulated input costs, including electricity, rail and port tariffs and raw materials.
“The global steel market, and in turn the South African steel industry, continues to face significant headwinds. The 2019 downturn in world steel has been faster and deeper than could have ever been anticipated and steel producers are struggling to respond fast enough,” the dti said.
Iron ore prices had risen substantially while international steel prices had fallen.
South African steel production fell by 7.6 percent year-on-year (y/y) in October to an estimated 502 000 tons, according to the World Steel Association.
Global steel production dropped by 2.8 percent y/y.
The dti said locally the economy was weak and hence, so was the demand for steel – a situation exacerbated by high input costs.
“Several downstream steel businesses have disclosed that they are in financial distress. The export market reflects a global steel industry that is experiencing the most challenging time since the global financial crisis,” it said.
The dti said that further investigations had begun into the feasibility of relocating all or parts of the Saldanha steel making melt shop and rolling mills to Vanderbijlpark. “ArcelorMittal
South Africa has also started to review alternative applications for the site and surrounding land to minimise the socio-economic impact on the community”, it said.
Trade and Industry Minister Ebrahim Patel earlier this month urged Amsa to continue working with the national government and other social partners to reverse this decision and find solutions which could keep Saldanha Steel in operation and its workers in employment.
Speaking in response to Amsa’s announcement, Patel said: “If no solution is found with ArcelorMittal, they should consider selling the plant to ensure the country does not lose industrial capacity and workers, and to ensure that communities are not displaced.”
The ministry subsequently met the Amsa management to request the company to review its decision. The ministry advised that potential buyers were considering making a bid for the steel plant and requested that Amsa consider every effort to retain employment in Saldanha, including giving consideration to potential bids by other investors.
“We are encouraged by these early expressions of interest in Saldanha Steel. If Amsa is still intent on closing Saldanha Steel, a decision we do not agree with, then nonetheless we urge the company to engage actively and openly with potential buyers, and to offer them terms that would enable operations at the steel mill and employment opportunities to the local community,” Patel said.
“Saldanha Steel plays an important role in South Africa’s industrial footprint. For the Saldanha region specifically, the steel works is an important source of employment and development as well.”
Amsa’s decision to place Saldanha on care and maintenance and retrench almost 1 000 workers came despite significant efforts by the national government to provide support to Amsa to prevent job losses across the company and the continued operation of Saldanha Steel.
The DTIC, together with the public enterprises department, Eskom, and Transnet, engaged with Amsa management on support which could be provided to reduce energy and logistics costs for the company and at Saldanha in particular.
South Africa was one of the only major primary steel producing countries on the African continent. The African Continental Free Trade Area (AfCFTA), which would come into effect in July 2020, is expected to open up additional demand for primary steel across the continent as countries built the required infrastructure and factories needed to take advantage of the expected increase in intra-regional trade.
The steel sector has faced problems in its operating environment due to global oversupply. However, initiatives like the AfCFTA provide opportunities to drive increased regional demand for steel in construction, automotive manufacturing, and mining. Ensuring that South Africa maintained its capacity in primary steel production capacity was thus critical to seeing that the country benefits.
“We have embarked on the process to develop a master plan for the steel and metals value chain in South Africa, which will include both demand- and supply-side measures, and bring greater competitiveness and dynamism to the entire steel and metals industry. A number of initiatives are in progress to foster greater demand for steel by both the public and private sector, and to improve the cost base across the industry,” Patel said. | With additional reporting by Helmo Preuss