[miningmx.com] – STEPS to impose tariffs on imported steel have come too late for ArcelorMittal South Africa’s (AMSA’s) Vereeniging Works following a review of the historic mill’s long-steel business which will result in the loss of 400 jobs.
AMSA said today that the long-steel business at Vereeniging, founded in 1911, would be merged with the Newcastle business in an effort to stave off the effects of low steel prices and the impact of cheap imports on the company’s domestic business. It added that it had extended its business review to its Vanderbijlpark Works.
South Africa’s Minister of Trade and Industry, Rob Davies, on Friday approved recommendations to impose a 10% import tariff on some Chinese steel imports which AMSA said today related to two products, but had not been finalised.
“We acknowledge and appreciate the steps taken by government with regards to the initial approvals of import tariffs for two of our products,” said AMSA in a statement to the Johannesburg Stock Exchange.
“However, these will only assist in the medium to long-term and trading conditions continue to worsen since the announcement in July of the footprint study of our long steel business [at Vereeniging],” it added.
“Shareholders are hereby advised that despite our best efforts, and given our assessment that the outlook is not about to change in the foreseeable future, the board has had no option but to approve that management commence the consultation regarding the potential closure of the Vaal Meltshop and the Forge in the Vereeniging Works,” it said in its statement.
“At the same time, like Vereeniging, the Vanderbijlpark Works continues to be unprofitable in the face of the current market conditions,” it said.
“It is for this reason that we will also be initiating an industrial footprint review of the Vanderbijlpark Works and a review of corporate services, with a view to optimising structures and costs,” it added.
The review of the Vanderbijlpark Works would be completed by the end of October “… at which time a decision will be announced with regard to any possible further restructuring,” the company said.
AMSA reported a R109m interim headline loss earlier this month, a R103m deterioration over the R6m loss in interim earnings of the previous financial year and said that prospects for the international steel industry remain depressed.
CEO Paul O’Flaherty has made much of the need for price protection from cheap, predominantly Chinese, imports adding that some 200,000 jobs were at risk in South Africa’s steel making sector.
He has promised to make a number of concessions and commitments in return for winning the protection of the government, including settling its Competition Commission issues, discussing “a fairer price for steel,’ and following through on R4.5bn in specific projects in order to boost job creation. “We need tariff protection and localisation of steel in order to survive,’ he said.
O’Flaherty told Miningmx on July 31 that the company was hoping to get Kumba Iron Ore to sell it the steel-making ingredient for a lower price than agreed in arbitration in 2013. The iron ore AMSA receives from Kumba is 60% above spot price – equal to $68/t – said O’Flaherty. “We are not obliged to buy it so we would look to import iron ore,” he said.
