Why primary steelmaking is vital to South Africa’s economy - Amsa

In a time of global uncertainty and fierce industrial competition, South Africa must decide whether it wants to remain an industrialised economy with strategic capabilities – or become a mere consumer of others’ manufactured goods. The answer lies, in part, in whether we choose to preserve and modernise our domestic primary steel capacity.

Although the steel industry in South Africa has been damaged by the realities of the past four years, there are some early signs of revival. As the only integrated producer of flat and long steel in South Africa, ArcelorMittal South Africa (Amsa) is an irreplaceable part of that recovery and a national asset. And its preservation is a critical investment in the country’s reindustrialisation, job creation, and economic sovereignty.

Primary steelmaking matters because it adds value at home. South Africa has abundant iron ore, but without local steel plants, we export this valuable mineral cheaply and import finished steel at a premium. This is a textbook example of deindustrialisation and a missed opportunity.

A functioning primary steel sector allows us to turn our natural resources into high-value inputs – from girders to rails to automotive parts – while creating skilled jobs, strengthening trade balances, and supporting local industries.

With integrated steel in operation, every tonne of local iron ore converted to steel domestically multiplies value across the economy. More than 3 500 direct jobs hang in the balance within Amsa’s Longs Business alone, but the broader implications are far greater.

According to industry estimates, up to 80 000 downstream jobs could be at risk if the Longs Business were to shut down.  If Amsa as a whole were to be lost, the implication for downstream jobs approach ranges from 350 000 to 450 000, as South Africa’s industrial backbone would disintegrate. The socio-economic ramification would be seismic.

South Africa’s construction sector, mining supply chain, heavy manufacturing, and automotive parts producers all rely on quality local steel inputs. Removing that supply would either raise costs or destroy capacity in these critical sectors. By contrast, securing Amsa’s future ensures that a vast ecosystem of downstream firms – many of them SMEs – can remain competitive and continue to employ South Africans.

Increasingly, the South African government can be seen to be dealing with the supply side barriers to competitiveness and growth for the steel industry and value chain. Over the past year, production volumes have stabilised, and capacity utilisation has improved.

The government has played a crucial enabling role, including through targeted trade interventions and financial support and has intervened via the Industrial Development Corporation (IDC), recently extending R1.68 billion in funding support. The IDC is currently concluding its important due diligence exercise for the Amsa business with a view to ensuring sustainability. Transnet has received over 163 applications for its RFI to test private sector appetite to participate in the rail and ports sector.

The government is also intervening on other critical uncompetitive supply side issues for the steel industry such as protection against unfairly priced imports. The International Trade Administration Commission (ITAC) has recently imposed duties on unfairly priced imports and is considering more safeguards in terms of levels and overall range of steel products along the value chain. Additionally, the government is also working on assisting energy intensive industries.

For example, Cabinet approved discounted electricity prices for ferrochrome and alloys on 25 June. Electricity and Energy Minister, Kgotsientsho Ramokgopa, noted “We are serious about decisively intervening in the economy and getting it on a proper growth path. We are not subsidising…. we are protecting the jobs, we are growing the South African economy and so we can do beneficiation.”   

The government is also investigating the Price Preference System (PPS) for ferrous scrap, and the level of the scrap export tax. These interventions have the ability to render the entire steel value chain significantly more competitive and are in support of South African national development goals.

These are not bailouts; they are no-regret investments on the part of the State to address structural supply-side constraints. The government is enabling success, not masking failure. They also speak to increased “investability” along the entire steel chain.

International precedent shows why this is smart policy. The UK government recently stepped in with £500 million (R12 billion) to preserve its primary steel plants. Australia has co-invested A$1.9 billion (R22bn) to save its Whyalla steelworks, and India offers incentives through its National Steel Policy. These countries understand that primary steel capacity is a strategic asset that is essential for national security, industrial independence, and trade competitiveness. South Africa should follow suit.

Losing the primary steel industry would be an irreversible blow to our industrial base. The timing is favourable although reversing economic contraction is difficult, and traction is not easy to gain without effort. However, it is clear that demand for steel will surge going forward.

Eskom, Transnet, Sanral, and the Presidential Infrastructure Coordinating Commission have all announced major project pipelines – from renewable energy rollout and transmission lines to ports, roads, and rail upgrades. The World Bank has pledged significant infrastructure-linked finance, including a $500 million (R8.9bn) guarantee facility to unlock private investment in electricity transmission. Combined with R450 billion in infrastructure-linked finance from development finance institutions. South Africa is on the cusp of a long-overdue construction boom and domestic steel should be core to this.

Critically, Amsa for example, is already preparing for the future. The company has plans to install a new electric arc furnace (EAF) and explore hydrogen-based production methods to support green steel. This positions South Africa to produce low-carbon steel using local renewables and green hydrogen – a game-changer in export markets increasingly driven by carbon border adjustments.

A revitalised primary steel sector can thus anchor not only the steel industry but contribute to the green industrial transition itself. We should be clear: this is not about nostalgia for big, old industry. It is about the pragmatic recognition that no country can industrialise or secure sovereignty without the ability to produce the materials it needs.

Tami Didiza: Manager: Corporate Communications, ArcelorMittal South Africa

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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