Trouble as SA’s largest steel producer readies closure in 2025

Only government assistance can save ArcelorMittal, South Africa’s largest steel producer. Anything less could be catastrophic …

There will be far-reaching consequences should South Africa's largest steel producer shutter its operations. Image: Ford South Africa

Steel firm ArcelorMittal announced earlier this month (February 2025) that it was ready to shutter its operations completely. Poor 2024 financial results for South Africa’s longest-surviving steel producer looks like it will lead to its Vanderbijlpark and Newcastle operations closing, reports The Citizen.

Furthermore, the closure of South Africa’s largest steel producer won’t just lead to thousands of job losses, but massive economic knock-on effects. The steel company services seven local automotive companies which build and export vehicles all across the globe. A loss of operational efficiency won’t just impact the local car market, but the viability of major foreign investment into these South African plants.

SOUTH AFRICA’S LARGEST STEEL PRODUCER

Moreover, the company sited weak economic growth, logistical challenges and high energy costs as reasons for its impending closure. In the face of an influx of low-cost imports from India and China, ArcelorMittal simply cannot remain competitive. However, since its initial announcement to wind down operations, it has been able to delay closure by at least one month.

A R380-million loan from the Industrial Development Corporation (IDC) has helped the embattled company fulfill outstanding orders, specifically for the automotive sector. Meanwhile, discussions are on-going with government regarding a reported R1-billion bailout, in the face of unprecedented challenges. “We’re engaging with government and key stakeholders to implement the urgent interventions needed. We need to address the decline in this strategic sector and reposition it for growth,” says Kobus Verster, CEO of ArcelorMittal.

BAD NEWS FOR NEW-CAR PRICES

South Africa’s best-selling CAR — The new Suzuki Swift was the first imported car to top the best-selling list in January 2025. Image: Suzuki Auto South Africa

Steel imports in 2024 reached their highest recorded levels in South Africa, accounting for 34% of consumption. As a result, ArcelorMittal reported a headline loss of more than R5 billion in 2024. This is bad news for local carmakers, including Ford South Africa, Volkswagen, BMW, Nissan, Isuzu and Mercedes-Benz. Each will have to source steel elsewhere or find a reliable local source if nothing is done about the closure. Even delaying the ArcelorMittal shutdown by one year will help them find and negotiate alternative suppliers, reports TopAuto.

However, if no middle ground is found, the nation’s Original Equipment Manufacturers (OEMs) will suffer terribly. BMW produces the X3, Ford the Ranger and Amarok, Isuzu the D-Max, Mercedes the C-Class, and Nissan the Navara for both local consumption and global export. If production delays ensue, the scarcity of new cars will create a price bubble as demand outstrips supply.

LOSS OF PROFITABILITY

However, even more worrying than new-car prices locally, is the impact a steel shortage could have on global exports. Even if OEMs find a viable alternative supplier, this will most likely be an import operation, in which case the material cost will be much higher. The National Association of Automotive Components and Allied Manufacturers (NAACAM) says steel imports can raise production costs by up to 25%. And also lead to increase lead times, logistical challenges and forex volatility.

WHAT DO YOU THINK OF THE PLIGHT OF SOUTH AFRICA’S STEEL INDUSTRY?

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