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JIMMY MOYAHA: This morning, around 10am I believe, we received our inflation print from Stats SA, and from that we got our inflation number – which didn’t look so good. That inflation number came in at 5.1%, [having] cooled from the expected 5.2%, and the core inflation also cooled there.
Read: Inflation cools to 5.1% in December
We’re going to dig into that story in a second. We’re going to look at how the household index is going to be impacted by this. But before we get to that, there was an even more pressing matter that made the news headlines today, and that was the matter around the urgent appeal submitted to the presidency and ministries around the need for interventions within ArcelorMittal [South Africa] [Amsa] to prevent the business from closing down.
If you remember, back in November of 2023 I mentioned that ArcelorMittal was facing closure and that would jeopardise more than 10 000 jobs at that time. It’s probably a lot more than that now, and that would have a disastrous impact on the steel sector.
I’m joined on the line by Neels van Niekerk, the CEO of International Steel Fabricators of South Africa.
They were part of this urgent submission and appeal to the president and ministries in South Africa regarding ArcelorMittal.
Good evening. Neels, thanks for taking the time. Let’s start with the appeal that was submitted today. How is that different from all of the other interventions that industry stakeholders have been trying to put forward in the past? I remember speaking to the CEO of Seifsa [Steel and Engineering Industries Federation of SA] as well, and there was also an appeal there to say we need some intervention and some assistance from the government. How much more urgent is it now?
NEELS VAN NIEKERK: Jimmy, yes. Good evening to you and your listeners. Firstly, it is not the total ArcelorMittal that is in question. Only the long products. They also make flat products, like you use in plate and roofing sheets, etc.
The appeal was sent to the government on Friday – and today we issued a press release – to resolve it. The problem is really that it’s not only the 3 500 at Amsa that will be retrenched in job losses, not the 30 000 immediately thereafter. It’ll actually grow into, we believe, hundreds of thousands.
The problem is that they produce about 500 000 tonnes of steel that cannot be made by the other mini-mills.
The mini-mills are largely supported by the government by way of regulation, by providing them with a subsidy of 30% to 40% below the world price for their input. That subsidy is of course not carried by the government, but it’s carried by the downstream, by the owners of the scrap.
The reality is just that some industries will continue. If they closed down, some materials could be imported, but many are relying on South Africa to make very specialised products here.
The auto industry, for example – it takes them 38 months to change the safety-critical parts. Now, in South Africa, safety-critical parts from Amsa include the suspension, etc.
They’re still making steel, they’ll switch off on 12 February, and then they will roll the billets out during the next two or three months. But when that material is no longer supplied to the industries, including the auto, those lines will stop. They cannot switch quickly.
Some industries are better off than others and will be able to bring in materials in time. Construction will be able to bring them in but the stock levels will go down, the price will go up, and variety will reduce.
So this is not a steel industry problem. This is a South African problem. The domino effect we expect will [cost] jobs into the hundreds of thousands in the end. This will destroy trust in our steel market.
There was agreement that we would see deindustrialisation, [dis]investment, etc, following [that].
JIMMY MOYAHA: Neels, how do we avoid the situation? Obviously the urgent appeal is for some intervention. What does that intervention look like? What is needed to avert this crisis?
NEELS VAN NIEKERK: When it was announced, we immediately interacted with the CEO of Amsa and asked him what was needed to stay open, because it’s totally unacceptable that they close down. That is unthinkable.
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He very clearly and repeatedly indicated ‘just a level playing field’. They want no bailouts; they want no subsidies.
They want the same tariffs and support as Transnet. They want the same electricity tariffs, and then [levelling of] the unequal playing field that has been created by government regulation on the scrap [market], favouring their competitors, because in a certain part of the market they do compete.
We’ve seen the growth since 2013, despite the government bringing the support for these scrap mills, of which many were in dire straits by 2013.
We don’t understand why the government, by way of the IDC, then continued to invest in more and more and more of the same mini-mills.
They play a role. They supply a certain market, the ungraded mini-type market, the general market, but they cannot produce the products required for the formal industry.
So if that is removed, as indicated by the CEO, then they can continue. Then they will become cash-positive again in that industry, and they will continue.
That is what we appealing to the government [for] – that they must come together.
And of course, according to ArcelorMittal, if those three things are resolved by the 12th of February, the mills will stay open and our industry will be saved, and South Africa will be saved from what is really a looming disaster on our hands.
We cannot allow it to happen.
JIMMY MOYAHA: Neels, I wonder – from a policy point of view, wasn’t the aim one of looking at some form of privatisation when we discussed this around Iscor many years ago? Wasn’t the aim of this to enhance the steel industry? Do you think that the policies that are in place at the moment – these policies that need to be adjusted that you’ve just alluded to – that some of them worked in the opposite direction or in an opposite manner from which they were intended to?
NEELS VAN NIEKERK: Yes, most definitely. The 2013 interventions were to save jobs at the mini-mills. But what we now see is that they can create massive job losses in the other industries.
The core of the problem lies in the low demand.
For steel industries worldwide the rule of thumb is if you are not growing, if your industry is not growing at 2.5%, your steel industry will suffer. When you go above 2.5%, it exponentially will grow.
So the first, the heart of it [lies with] our low demand, which is maybe the lack of infrastructure development, the lack of new factories going up, the lack of growth in manufacturing, etc, the lack of investment. These all translate into the lack of new mines being built, etc, which South Africa’s steel industry was really built on initially.
JIMMY MOYAHA: Well, we have to hold out and hope that this does receive the attention it so desperately requires. The steel industry and ArcelorMittal are not asking for a bailout, they are just asking for improved conditions and better structures so they can do what they do best.
We’ll have to leave it at that. Neels, thanks so much for your thoughts and your insights there. That’s Neels van Niekerk, the CEO of International Steel Fabricators of South Africa, on the latest appeal to the government to assist the long steel business at ArcelorMittal to preserve jobs.
Read/listen:
Lack of infrastructure development the death knell for long steel demand
The collapse of SA’s Steel Master Plan and disintegration of industry
Serious accusation about government intervention in scrap metal market
