IDC Aid Staves Off ArcelorMittal South Africa Steel-Mill Closure
(Bloomberg) — ArcelorMittal SA’s South African unit will postpone the planned closure of two key steel mills by six months after a local state development-finance institution agreed to provide a 1.683 billion-rand ($91 million) facility and the government pledged to address problems plaguing the industry.
The loan from the Industrial Development Corp. will enable ArcelorMittal South Africa Ltd. to defer the winddown of its Newcastle and Vereeniging mills until at least Aug. 31, the company, known as Amsa, said in a statement Monday. The funds will stave off the immediate loss of about 3,500 jobs, with the producer suspending consultations on those cuts, it said.
The plants, which produce so-called long products, also supply grades of steel crucial to the country’s automotive, mining equipment and construction sectors that local rivals can’t currently make.
The South African government will use the deferral to “expeditiously address” structural problems Amsa has raised for years, such as the flood of cheap imports, surging electricity costs, erratic rail services and government regulations that discount the scrap metal that smaller local rivals use to make steel, the company said.
Amsa will also receive more than 400 million rand from the government’s Unemployment Insurance Fund to cover the wages of workers, it said.
In return the steel producer will allow the IDC, which has urged Amsa to consider offers for its mills, to conduct a due-diligence exercise on its operations.
Among demands Amsa said the government will meet is the review of a scrap steel export tax and a forced discount on scrap prices that the company said has given an unfair advantage to local competitors who recycle steel to make their products. Amsa uses iron ore instead.
It’s also reviewing steel import tariffs with a view to protecting the company.
The IDC funds follow more than 1.38 billion rand of support that the state finance institution provided in June and February.
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