Steelmaker ArcelorMittal's South Africa unit will retrench nearly 1,000 workers and shut down its Saldanha plant due to severe financial losses, amid a global downturn in the steel industry, the company said.
As part of a strategic operations review, the company found its Saldanha operations had lost cost competitive advantage in the export market, "mainly due to raw material and regulated prices", a statement read.
"This difficult decision was taken in the context of constructive ongoing engagements with key stakeholders, including government and organised labour, to find alternative solutions to the dire situation in the South African steel industry," it added.
The South African government has expressed "disappointment" at the decision of ArcelorMittal South Africa (AMSA).
"This comes despite significant efforts by Government and public agencies to provide additional support to AMSA over the past few months and to ensure a solution which would result in the elimination of job losses across the company and the continuation of the Saldanha Works," the Department of Trade and Industry said.
"The recent efforts of the government are additional to extensive trade support which has been provided to the steel industry over the last few years to ensure protection from imports, including safeguards on imported hot rolled steel. In addition, the government has designated the steel industry to ensure that steel procured for infrastructure projects is locally produced," its statement added.
AMSA's South African operations, acquired from former state-owned steel manufacturer Iscor almost two decades ago after Mittal first helped turn it around, has been under pressure for the past few years amid a global downturn in the steel industry.
Mittal himself met senior government officials last year as AMSA sought to downscale its operations at Vanderbijlpark, threatening the livelihoods of an entire town that depended on employment at the company.
Minister of Trade and Industry Ebrahim Patel also met with the management of AMSA on several occasions in recent months to explore opportunities to save jobs and keep all of AMSA's plants in operation.
A number of steps were put in place to avert the retrenchments at Saldanha. These included reduced energy and logistics costs for the company and at Saldanha, in particular, as well as further concessional pricing for AMSA from Kumba, which supplies ore to AMSA.
"The consequence of the expedited facilitation and dialogue initiated by National Government, secured commitments of half a billion in annualised savings, in addition to once-off savings of more than R 200 million and additional commitments from organised labour to fast-track discussions on enhanced productivity arrangements," the statement said.
Patel urged AMSA to reconsider its decision because of the impact it would have on an already ailing South African economy.
"We recognise the challenges presented to the steel industry globally from over-capacity. If no solution is found with Arcelor Mittal, they should consider selling the plant to ensure the country does not lose industrial capacity and workers and communities are not displaced," Patel said.
Global steel magnate Lakshmi Mittal's ArcelorMittal is the world's leading steel and mining company, with a presence in 60 countries and an industrial footprint in 18 countries.
The company reported a net loss of $539 million for the July-September quarter of 2019 hit by lower steel shipments and prices and high material costs.
Sales of the company declined to $16,634 million in the July-September quarter from $18,522 million in the year-ago period.
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