Electric steel producers form the backbone of the long steel sector. They currently supply 75% of the country’s needs and employ thousands of people.

A representative group of the electric steel producers of South Africa previously expressed their serious concerns regarding the government’s decision to help provide a financial bail-out to the long steel operations of ArcelorMittal South Africa (AMSA), arguing any bail-out will further distort market conditions in a steel sector already under severe domestic and international pressure. At the time, the group requested an urgent meeting with the Minister of Trade, Industry and Competition, Parks Tau, to discuss the future of the country’s long steel industry and securing the supply of steel products at little or no cost to the fiscus.

In the letter to the Minister, the electric steel producers highlighted the potentially disastrous distortion of the market because of the government’s intervention, warning that it can lead to more job losses in the long-term than what the AMSA bail-out temporarily saves.

While the electric steel producers have empathy with AMSA’s employees, the R1.7 billion loan provided to AMSA together with the TERS scheme funding the wage bill, puts the rest of the long steel industry at a significant and unfair disadvantage, which ultimately will do more harm than good for the sector and could lead to even more job losses.

Clear evidence of this unfair advantage became apparent recently when significant price reductions were announced by AMSA in their long steel products at a time when the rest of the industry – who do not have the luxury of state financial support – had to increase prices due to a shortage of scrap metal.

These price reductions are inexplicable following AMSA’s enormous losses, which it itself is unwilling to fund, and is in all likelihood an early indication of how the bail-out will create an even more uneven playing field for the steel industry. The bail-out has seemingly benefited AMSA to such an extent that it is shielded from economic realities, such as the need to make a profit. Ultimately, bail-outs of the kind afforded to AMSA clearly undermine the principles of fairness, efficiency and accountability.

“The current constrained economic realities require smart regulatory interventions that come at minimal cost to the fiscus but will help initiate a turn-around in the sector,” said Oren Kaplan, Chairman of electric steel producer Cape Gate.

Electric steel producers utilise cleaner and more sustainable methods that transform scrap metal into high-quality long steel. This method aligns with the global shift towards environmentally sustainable steel production.

“Our entire industry is currently being affected by a chronic shortage of scrap metal. The shortage is putting downstream supply at risk and pushing up the costs of production. A scrap ban will avoid the threat of a temporary reduction in employee working hours and operational stoppages. Supply of scrap must be secured,” explained Kaplan. He added that the electric steel producers have requested a reinstatement of a previous export ban on scrap metal from Minister Tau last month, but have surprisingly received no answer yet.

Electric steel producers form the backbone of the long steel sector. They currently supply 75% of the country’s needs and employ thousands of people. They are also actively investing in upgrades and product diversification to eventually absorb most of the gaps that will be left when outmoded long steel mills such as those of AMSA are finally closed. Where gaps will emerge initially, in areas like the automotive sector, limited and temporary imports can help ensure continuity. However, these gaps are simply not substantial enough to justify the exorbitant cost of artificially sustaining the AMSA plants.

“This is a pivotal moment for the South African steel industry. We share the Minister’s goal of a thriving and sustainable steel sector. We are eager to engage with government and industry stakeholders in an urgent discussion about the future of our industry and the thousands of jobs supported by electric steel producers,” said Kaplan.