Highveld Steel plant reopens – structural mill began producing in April

“The reopening of the Highveld Steel plant in Mpumalanga is an example of what can be done with focus and partnerships. When the plant was closed two years ago, government worked with industry to find solutions that can restart operations. Arcelor Mittal saw an opportunity to provide blooms as input for the production of structural steel products and railway lines. This means we can now replace products that are currently imported and there may be further opportunities on the rest of the continent to export these products,” said Economic Development Minister Ebrahim Patel at the recent official restart of the structural mill.

Highveld Steel & Vanadium, South Africa’s second-biggest steel manufacturer after ArcelorMittal SA, was put into business rescue in April 2015 after a prolonged downturn in the steel industry. The collapse of the group, which was majority-owned by Evraz, resulted in the retrenchment of almost 3 500 people, including about 1 800 of its own staff as well as contractors, in February 2016. An initial attempt to sell the business fell through due to soft market conditions and the 50-year-old mill’s significant environmental liabilities.

“The company and its partners have shown resilience and creativity and they are transforming the old steel mill complex into a new multi-purpose industrial hub, consisting of a steel-works, a coal storage depot for junior miners, a maintenance service centre for dumpster-trucks and a training centre that can address skills needs in the area,” said Patel.

“Steel is the foundation of any industrialisation plan and we have to retain and support our capability and industrial capacity at a time when global markets are still facing a supply glut. The most effective protection will be new investment in plant and training of staff to enable nimble, competitive enterprises. The announcement comes a few days after government announced a new R1,5 billion Steel Competitiveness Fund, and is a further boost to confidence in the industry,” he said.

“This is a specialised product that was previously fully imported. Making it at the Highveld plant is meeting local needs, saving foreign exchange, using spare capacity at ArcelorMittal SA and saving jobs,” said Piers Marsden of Matuson & Associates, one of Highveld’s business-rescue practitioners.

ArcelorMittal CEO Wim de Klerk says the first 4 100 tons were produced in April and more than 100 customer orders have been placed so far. Targeted production is 18 000 tons a month. This product complements ArcelorMittal’s product range and assists downstream customers, De Klerk says.

An agreement was reached with ArcelorMittal SA in 2016 to reopen part of the plant. ArcelorMittal SA supplies the primary steel in the form of blooms and slabs, which is processed into supplied at Highveld Structural Mill and marketed by ArcelorMittal SA.

Highveld Structural Mill CEO Johan Burger says ArcelorMittal SA has a two-year option to buy the mill that could be extended for another year. The price will be determined by the mill’s profitability, but there is a minimum price.

Mineral Resources Minister Mosebenzi Zwane says certain minerals will be designated that the mill can access at mine gate price to ease its difficulties.

Marsden says that if ArcelorMittal SA exercises the option to buy the mill it will realise cash to pay creditors. More tenants will be sought to bring in regular income. Other challenges remain, such as addressing environmental issues and resolving a dispute with Air Liquide over a take-or-pay contract.

Marsden expects the business rescue process will take about another two years to resolve but these processes, though taking longer than a scrapping of the plant, will ultimately realise more money for employees and creditors. De Klerk is grateful for government support in this venture, which is helping to sustain the smaller steel fabricators that are employing up to 100 people. This business will continue to increase its capacity.

Marsden says Transnet is expected to issue a tender shortly for rail line supply for 15 years and Highveld Steel is the only serious contender for it. Structural steel is a designated product for local procurement by parastatals.

About 500 people are working in various businesses on the site, including a black-owned logistics company that uses Highveld’s extensive rail infrastructure to ship coal for small producers in the area.

Among the other tenants are a technical training company and a business refurbishing dragline buckets.