ArcelorMittal South Africa (AMSA) is due to decide by end-August on whether some plants at its Vereeniging steelworks should be mothballed and/or placed under maintenance, the firm tells Kallanish.

“The South African market has been particularly impacted by lower steel prices as a result of the global slowdown in steel demand, and is facing the challenge of increased imports of cheaper Chinese flat and long products into the local market,” AMSA says. “In addition, the growth patterns in the South African construction industry, the largest steel consuming sector, remain very weak and domestic manufacturers and fabricators are also struggling to cope with the suppressed global economy.”

“In this economic climate, and with the ongoing power, labour and consumable cost pressures, billet production from the Vereeniging facility has become unsustainable,” AMSA continues. "To best optimise the long steel business, the company is considering moving all billet production to its newly relined and more efficient Newcastle furnace, which was recently commissioned following the ZAR 1.8 billion upgrade.”

Since the recommissioning of the Newcastle furnace, South Africa has been hit by a “surge” in steel imports, coupled with weaker-than-expected local demand and exports, AMSA says. The company has implemented measures, including a restructuring of the corporate services departments, to improve its operating performance.

“The harsh reality is that the profitability of our operations remains under pressure,” says AMSA chief executive Paul O’Flaherty. “We have to explore the synergies that will contribute to the long term sustainability of the ArcelorMittal South Africa operations as a whole. We have to ensure that the company is agile enough to adapt to the new market realities that seem inevitable.”

AMSA’s Vereeniging works produces up to 400,000 tonnes/year of specialty steel, profiles, seamless pipe and forge products.

Earlier this month AMSA was reported to have requested the government implement a 10% import duty to help it recover losses caused by a combination of cheap China-origin imports and weak infrastructure project activity (see Kallanish 15 July).