In a significant blow to South Africa’s economy, ArcelorMittal South Africa Ltd. is shutting down its long steel products business, potentially losing up to 3,500 jobs.
Reports by Bloomberg show that this move comes against the backdrop of a 20% decline in South African steel consumption over the past seven years, underscoring the challenges faced by the continent’s third-largest economy.
What Kobus said
ArcelorMittal South Africa’s Chief Executive Officer, Kobus Verster, emphasized that cutting jobs was a last resort after exhausting all available alternatives. He stated,
- “We must ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.”
South Africa’s economic woes are exacerbated by persistent issues in its power and transport systems, with frequent electricity outages and logistical bottlenecks impeding efforts to revive industrial sectors.
The decline in steel consumption, often considered a barometer of economic health, has particularly affected the construction industry, given the primary use of long steel products in building infrastructure.
The announcement triggered a sharp decline in ArcelorMittal South Africa’s shares, plunging as much as 17% in Johannesburg.
The steelmaker, under the control of ArcelorMittal SA, currently employs approximately 9,300 workers, including contractors.
These drastic job cuts pose another challenge for President Cyril Ramaphosa and the ruling African National Congress, already grappling with a broader issue of escalating job losses in the country.
Notable companies, such as Anglo-American Plc and Sibanye Stillwater Ltd., have also resorted to employee layoffs, contributing to broader economic concerns.
ArcelorMittal, the world’s largest steelmaker outside of China faces more challenges as weak demand in Europe has impacted its profits, and the company is set to lose its steel plants and mines in Kazakhstan following a tragic accident that claimed the lives of 46 people.
In trading in Amsterdam, ArcelorMittal experienced a 0.3% decline, marking another setback for the global steel giant.
What you should know
Arcelor Mittal is owned by Indian billionaire, Lakshmi Mittal. Originating from a lineage deeply rooted in steel, Mittal charted his course by diverging from his siblings to establish Mittal Steel.
This entrepreneurial journey reached new heights with the pivotal merger between Mittal Steel and France’s Arcelor in 2006.
Despite the triumphs, ArcelorMittal faced challenges in 2022, reporting a net income of $9.3 billion— a 38% decrease from the previous year’s $15 billion.
This decline was attributed to lower steel shipments and disruptions arising from the conflict in Ukraine.
In a strategic move in 2019, ArcelorMittal, in collaboration with Nippon Steel, completed the $5.9 billion acquisition of Essar Steel, a significant transaction involving assets once controlled by billionaires Shashi and Ravi Ruia.
Transitioning leadership dynamics, Mittal, in 2021, relinquished the CEO’s position to his son, Aditya Mittal, while retaining the distinguished title of executive chairman at ArcelorMittal.