ArcelorMittal South Africa (Amsa) has once again pushed the long-running saga around its long steel (longs) business into the public domain. It has announced that the division may be permanently closed after September, unless urgent structural reforms and policy support materialise.
The timing of the announcement raises a question. Is this simply good corporate governance — keeping shareholders informed of downside risks — or a calculated move to increase pressure on the South African government, ahead of the next tariff and policy decisions?
On paper, the statement appears to be a responsible update. The R1.68bn injection facility from the Industrial Development Corp (IDC), which has kept the longs division afloat since March, is now fully drawn. Amsa has repeatedly said it cannot continue to absorb losses from this segment, which has been structurally unprofitable due to high input costs, Transnet’s poor rail performance and policy distortions such as the price preference system (PPS) for scrap metal and the associated export tax, which disproportionately benefit local mini-mill competitors.
If a sustainable solution isn’t found by the end of the third quarter, the company says it will have no choice but to begin a formal wind-down.
But the announcement may serve another purpose. By publicly framing the situation as urgent and existential, Amsa may be aiming to galvanise faster action from the government, particularly on import duties and scrap pricing reforms. CEO Kobus Verster has made no secret of his frustration with policy inertia. “We’re not asking for special treatment,” he says. “We just want a level playing field.”
What’s undeniable is that the longs business has become a flashpoint for broader debates about industrial policy and state support. Since 2023, the division has posted cumulative losses of R1.7bn. Products such as rebar, wire rod and structural beams, essential for infrastructure and construction, are still needed by the transport, energy and automotive sectors. And for some customers, Amsa is the only domestic supplier of specific grades and formats, raising the risk that a shutdown would push manufacturers to rely more heavily on imports, with longer lead times and greater exposure to global pricing volatility and delivery uncertainty.
While the headlines have focused on longs, the strategic implications for Amsa’s flat steel (flats) business deserve equal attention. This segment, which produces hot rolled coil, plate and related products, is supposed to be the more viable core of the company. Unlike longs, the flats segment has limited local competition; many of its products require integrated steelmaking and cannot be manufactured using the recycled scrap inputs that mini-mills rely on.
However, even here margins are under threat. The most recent trading update shows a group-wide headline loss per share of 89c-99c for the six months to June, with sales volumes down 10% year on year and realised prices 5% lower in rand terms. While the flats division has seen some operational gains, such as the repair and restart of blast furnace C and the R505m upgrade to the plate mill, it continues to face rising imports, weak domestic demand and escalating logistics and energy costs.
The industry has been caught off-guard by a sharp increase in steel imports, including flat products, particularly from China, Indonesia and Vietnam. These now account for more than a third of local consumption, undermining utilisation rates at domestic producers. A 13% safeguard tariff on hot rolled coil and plate was implemented in May, and a provisional 52.34% tariff on corrosion-resistant steel coil on July 1, but these have done little to stem the surge in imports.
This raises a strategic dilemma for Amsa and its shareholders. Should the group refocus entirely on flats, which, despite the headwinds, still offer a path to profitability with the right support? Or does the continued pressure on both segments raise deeper questions about the long-term ownership and direction of the business?
One noticeable absence in this unfolding story is the voice of Amsa’s parent company, ArcelorMittal. The Luxembourg-headquartered global steel giant owns 68% of the South African unit, yet has remained publicly silent throughout the recent turbulence. This absence invites speculation. Does the group still view South Africa as a strategic foothold into the rest of the continent, or has it already pivoted to more attractive growth regions?
The industry has been caught off-guard by a sharp increase in steel imports, particularly from China, Indonesia and Vietnam
The answer remains uncertain. ArcelorMittal maintains a notable footprint in several North African countries, including Algeria, Egypt and Morocco. These operations serve a mix of upstream and downstream markets, but none are as deep-rooted or vertically integrated as the group’s South African business, which traces its roots to its acquisition of Iscor in the early 2000s.
Importantly, ArcelorMittal does not operate any large-scale steel production facilities in Sub-Saharan Africa beyond South Africa, making its presence in the country strategically significant — particularly if the group wishes to maintain a material stake in the region’s industrial development. Given the scale of recent financial losses at Amsa and the considerable investment required to modernise ageing infrastructure, however, it is fair to ask whether the parent company might eventually consider a divestment.
Alternatively, the group may be adopting a wait-and-see approach, monitoring whether the South African government or a state entity such as the IDC is willing to increase its stake or take full control of the longs division. Such a shift could allow ArcelorMittal to derisk its exposure, while retaining a presence in what remains Africa’s most industrialised economy.
The IDC, which already owns 8.2% of Amsa, has so far played a dual role. It has supported Amsa through substantial loans but is also a backer of several mini-mills — companies that have benefited from the PPS regime that Amsa sees as unfair. The development financier has not ruled out increasing its stake, pending a due diligence review, but any such move would raise questions about policy coherence and the IDC’s long-term objectives and economic role.
For now, Amsa’s stated focus is on stabilising its core operations, lowering costs and lobbying for more predictable industrial policy. Management hopes to cut costs by at least R1bn annually, partly through energy-efficiency measures and possibly through the conversion of one of its blast furnaces to an electric arc furnace, though that would require significant capital and regulatory alignment.
Ultimately, the company’s future will depend on several converging factors: the outcome of tariff and scrap metal policy reviews, the pace of Transnet’s logistics reforms, the direction of local steel demand and the willingness of shareholders — local or foreign — to continue supporting the business through a volatile transition. Whether the latest announcements were primarily for transparency or strategic pressure, they underscore the urgency of these decisions.
For investors, the next few months will be pivotal in determining whether Amsa can reshape itself as a focused flat steel producer or whether deeper structural shifts, including a change in shareholding, are on the horizon. And is complete closure an option?
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