(Bloomberg) — ArcelorMittal SA said it’s up to South Africa to keep crucial steel mills open and questioned the government’s industrial policy.
Most Read from Bloomberg
The company’s South African unit has negotiated with state officials since Jan. 6, when the firm said it planned to close three units including two mills that the country’s automotive, mine equipment and steel-fabrication industries depend on.
ArcelorMittal South Africa Ltd., or AMSA, on Thursday delayed the closures by a month and said it expects to make a final announcement toward the end of February.
“We are not going to carry any further losses on that business,” Chief Executive Officer Kobus Verster said at the company’s headquarters in Vanderbijlpark, south of Johannesburg. “The discussions are active, they are daily. They are actively focused on trying to find a solution.”
The one-time state steel business bought by billionaire Lakshmi Mittal’s company in 2003 has effectively thrown down the gauntlet to the government to address complaints ranging from high power and transport costs, to what it sees as inadequate tariffs on imported steel and unfair support for rivals.
“Electricity is too expensive in South Africa, rail tariffs are too expensive in South Africa, safeguards are not good enough, the scrap discount given to competitors is unfair,” Verster said. “You need to address the structural issues.”
The company may need a rights issue to bolster its finances, Verster said, prompting its stock to drop as much as 17% to 93 South African cents in Johannesburg, the lowest since December 2023. It traded at 1 rand at 3:28 p.m.
The closure announcement drew pleas from the industries to intervene.
They argue the plants, which also supply construction steel, are key to the health of their own operations because imports would be too costly and less reliable.
Verster said the Vereeniging and Newcastle mills, which indirectly support more than 100,000 jobs, supply between 350,000 tons and 400,000 tons of steel products that cannot currently be manufactured by any other companies in South Africa.
While that’s a fraction of the mills’ total production, it consists of the flexible spring steel needed for automotive components and the hollow variety used to make hand-held mining drills essential to South Africa’s deep-level precious metals operations. It’s also key to the 4.8 trillion-rand ($258 billion) infrastructure drive championed by President Cyril Ramaphosa.