The closure of ArcelorMittal South Africa’s Saldanha Steel plant will affect roughly 900 workers – 550 of whom are directly employed by the company, with the remainder sub-contracted.
The move is expected to have serious economic consequences for the region, where ArcelorMittal is one of the largest employers. Shanah Damonse, chairperson of the Weskus Sakekamer (West Coast Business Chamber), said she is concerned about the financial impact not only on affected employees, but the region at large.
“There are a number of local businesses that relied heavily on Saldanha Steel and unfortunately the true extent of the financial impact or damage will only be apparent in a few months,” she said.
Efforts to save the plant were in vain
Francine Higham, spokesperson for the Provincial Minister of Finance and Economic Opportunities, said the Western Cape government had been working with ArcelorMittal since June on measures to prevent the shutdown of Saldanha Steel. This included assistance in exploring alternative energy sources, in a bid to reduce electricity and freight costs and including the company in the Saldanha Bay Industrial Development Zone.
The Saldanha Bay Municipality also allowed ArcelorMittal relief on water tariffs.
However, ArcelorMittal South Africa CEO Kobus Verster said high electricity costs and water tariffs were not the only factors and that the changing international competitive environment had contributed to a bleak long-term outlook for the steel sector.
“The international steel market downturn in 2019 was steeper and quicker than anticipated.
“Globally, the steel industry is experiencing its most challenging time since the global financial crisis. Locally, the situation is exacerbated by continued weak economic growth, especially in steel and steel-consuming sectors, with apparent steel consumption at a ten-year low,” he explained.
He reiterated that Saldanha Steel is largely an export-driven business, that had been impacted by the international market.
“With multiple factors at play, there is no easy solution and in the long-term, we don’t see any of the factors within our control changing.”
Verster said contractual domestic sales orders from Saldanha would be fulfilled by the Vanderbijlpark Works.
A miracle required to resume operations
Verster told media that the plant would retain a core staff in order to prevent vandalism and maintain the plant in a state such that it could resume operation “at some point in time … if some miracle does happen”.
Over the next few months, management will try to determine what type of activity can be driven from the plant to reduce the financial impact of its maintenance. This process is expected to be concluded in the first quarter of 2020.
Verster noted that the financial drain on the company is a concern, adding that “the bottom line is that we don’t have a two-, three- or five-year timeline to resume activity at the plant”.
Saldanha Steel produced roughly 1 million tons of steel a year, but had been operating at roughly 70% capacity over the last five or six months. Verster said this was the lowest production level since the plant’s doors opened in 1998.
The latest in widescale retrenchments
He confirmed that the retrenchment consultation process for Saldanha Steel staff would kick off on Tuesday morning. “In terms of an allocation process, if we are able to accommodate skills elsewhere in the business, that will be an option.”
ArcelorMittal is already in the process of retrenching 2 000 staff, both direct employees and sub-contracted staff, at a national level.
According to the Commission for Conciliation, Mediation and Arbitration’s 2018/2019 annual report, a total of 529 large-scale retrenchment referrals were received in the past year.
Of the 38 588 employees who were the subjects of the large-scale retrenchment referrals, 21 391 were retrenched, while 15 787 jobs were saved. Of these, the metal sector accounted for 1 741 retrenchments, second only to the mining sector with 3 260 retrenchments.