ArcelorMittal South Africa has announced its plans to retrench nearly 3,500 employees once finalises its processes to close Newcastle Works and Veereniging Works.
The steel giant explained that it will not close one of its sections at Newcastle Works.
The company's statement reads:"ArcelorMittal South Africa said today that it will be embarking on a process that contemplates the wind down of the Company's longs business,subject to a due diligence and consultation process.This will affect the Newcastle Works,and Vereeniging Works.It excludes the coke batteries at Newcastle which will remain operative,producing metallurgical coke for use at the Vanderbijlpark Works,and for sale of commercial market coke to the ferro-alloy industry.
The company has adopted a variety of intervention over the last few years to secure its long-term sustainability,including aggressive cost-cutting activities,increased raw material cost savings,asset footprint modifications,and numerous other productivity initiatives."
The steelmaker has mentioned few of the challenges which are forcing the Board to retrench thousands of employees to save the business from collapsing.
The steel giant complained with a sluggish economic growth in the country as well as low demand for its products over the years.
The steelmaker revealed that other challenges are beyond its control such as high transport and logistics costs as well as escalating energy prices.
The company praised the implementation of a preferential pricing system for scrap,a 20% export duty,and,more recently,a ban on scrap exports has given steel production via electric arc furnaces an 'artificial' competitive advantage over steel manufacturers beneficiating iron-ore to produce steel.
"The ArcelorMittal South Africa Board and Management have reached this point after having exhausted all possible options.As difficult as these circumstances are,we have a duty to ensure that the business remains sustainable in the long term,in the interests of the Company and its stakeholders.The remaining business,after the wind down,will be on a more sustainable financial footing and able to invest the appropriate capital in product development and available growth prospects,"commented Kobus Verster,CEO of ArcelorMittal South Africa.