Arcelor Mittal South Africa Plant Closures Expected Before September

Last year in November the National Union of Metal Workers SA (NUMSA) went on strike due to 107 workers being lost to job cuts and now the entire group is looking at losing their jobs. You cannot sympathize with these fools as they should be pressurizing the government and not Arcelor Mittal.

Large Industries Are Just Disappearing

Arcelor Mittal is the largest steel producer in Sub Sharan Africa and was due to shut down last year until the government gave them funds to continue. This time is no different and the reality is there has been no progress to fix the problems that exist. There are 3500 jobs on the line and the ending is inevitable due to the government stance on imports.

Cheap Chinese imports have hit the local markets hard which they now account for 40% of the business. Throw in the smaller steel mills mainly being fed via stolen metal from the infrastructure that is being stripped before our eyes and Arcelor Mittal is losing money hand over fist.

Trying to stay competitive is not possible as firstly they have to deal with the local Eskom supplied electricity that is expensive and unreliable. Secondly they have to deal with the government run railways which according to Arcelor Mittal have deteriorated so much they pose a huge operation risk.

Over the last 6 months blast furnaces had to be shut down due to railway failures supplying coal. These stoppages were caused by rampant cable theft and locomotive breakdowns. You may laugh but they are fortunate to have a railway line as the tracks are often stolen and miraculously disappear being sent to criminal scrap yards before being sent to small smelters.

Sales volumes are declining year on year by around 10% and the business cannot continue to be operating at a loss. What many will find strange is that the government has not protected the local workers by using protective measures. I mentioned in my previous post how the Chinese subsidize their exports in other industries dominating world steel trade. They dump cheap steel on the world markets making sure their competitors are forced to shut down whilst China continues to expand. China has over 500 steel mills and are planning on opening one in SA. What better way of making that happen by exporting and flooding SA with cheaper steel.

The problem with Chinese steel is the quality as they do not need to meet certain quality tests before selling. This is kind of worrying knowing new high rise buildings will all have Chinese steel and no one really knows how good or bad this steel is and this is all about price.

The only reason Arcelor Mittal is still open is they have business commitments with orders and once those are completed they expect to shut long before their September 30th dead line.

The problem is if and when China replace Arcelor Mittal they will not use local labor and this will be entirely Chinese run as this is how the Belt and Road initiative works. We may as well call those 3500 jobs gone or good and areas like Newcastle who rely on the steel mill will be decimated.

This could all be resolved if the SA Government added a 20-30% tariff on the cheap imports, but that we know will never happen as government officials are on the Chinese pay roll.

Arcelor Mittal (SA) has been trading at R1.05c per share which is down from R5 a share 3 years ago. This is not an investment and wonder why it has any value knowing the company is closing down.

Posted Using INLEO