By Chris Maxon

The announced closure of ArcelorMittal Steel plants in Newcastle (KwaZulu-Natal) and Vereeniging (Gauteng), resulting in the loss of 3,500 jobs, underscores a critical failure in government policy and intervention. This development highlights the economic and social consequences of misaligned industrial policies and reveals a lack of strategic foresight in safeguarding one of South Africa’s most vital industries – steel manufacturing.

Since December 2023, ArcelorMittal CEO Kobus Verster has engaged with the Department of Trade, Industry, and Competition (DTIC) to explore measures to avert the impending closure. The company sought government intervention through protection measures, such as export tax relief on steel, and initiatives to address unfair competition posed by cheap steel imports, particularly from China.

Additionally, ArcelorMittal raised concerns about intense competition from scrap-based steelmakers, which have gained a competitive edge through government policies favouring electric arc furnace production. Despite these discussions, the DTIC failed to implement timely and effective solutions, leading to the cessation of operations.

The global iron and steel market was valued at US$ 1,599.4 billion in 2022 and is projected to grow to US$ 1,928.6 billion by 2027, at a compound annual growth rate (CAGR) of 3.8%. This growth is driven by:

Expansion in the global construction industry.
Rapid industrialisation and urbanisation.
Accelerated infrastructure development, particularly in emerging economies.

In South Africa, the steel industry is integral to re-industrialisation and economic revitalisation. Key areas such as bridge construction, railway logistics, and broader infrastructure development depend heavily on a robust domestic steel manufacturing sector.

The closure of ArcelorMittal plants jeopardises these efforts, undermines economic growth, and exacerbates unemployment in a country already grappling with a jobless rate of 32.6% as of 2024.

The DTIC’s handling of this crisis reveals deeper systemic issues in policymaking:

Lack of Strategic Alignment: Policies favouring electric arc furnace steel production - including a preferential pricing system for scrap metal, a 20% export duty, and an outright ban on scrap exports - have inadvertently disadvantaged integrated steel producers like ArcelorMittal. These measures create an artificial competitive advantage for scrap-based steelmakers while ignoring the broader economic implications.

Failure to Address Unfair Trade Practices: Despite clear evidence of the detrimental impact of cheap steel imports on the domestic market, the government has been slow to implement protective tariffs or anti-dumping measures to level the playing field.

Neglect of Long-Term Economic Interests: Short-term, populist policy decisions have taken precedence over the country’s long-term industrial and economic goals. This policy vacuum reflects a lack of commitment to industrialisation and economic diversification.

The closure of ArcelorMittal plants will have far-reaching consequences:

Job Losses: The direct loss of 3,500 jobs will ripple through local economies, affecting families, small businesses, and communities reliant on the steel industry.

Economic Stagnation: The reduced capacity for domestic steel production will increase reliance on imports, worsening the trade deficit and weakening the country’s industrial base.

Missed Opportunities: The decline of the steel industry undermines South Africa’s ability to capitalize on global infrastructure development trends and limits its capacity to rebuild critical infrastructure such as bridges and railways.

This crisis demands immediate and decisive action from the government:

Policy Recalibration: The DTIC must revisit and revise policies that disadvantage integrated steel producers. This includes reconsidering the preferential pricing system for scrap and implementing measures to protect the domestic steel industry from unfair competition.

Strategic Investment: Government and private sector partnerships should be forged to modernize steel production facilities, making them more competitive and environmentally sustainable.

Trade Protections: Anti-dumping measures and tariffs on cheap steel imports must be enforced to safeguard the domestic market.

Industrial Policy Overhaul: South Africa needs a coherent and forward-looking industrial policy that prioritises the steel sector as a cornerstone of economic development and job creation.

Accountability and Transparency: The government must demonstrate accountability by openly addressing its failures in this matter and committing to tangible corrective actions.

The closure of ArcelorMittal’s steel plants is a stark reminder of the consequences of inadequate policymaking and government inaction. South Africa cannot afford to lose its steel industry - a critical economic growth and national development pillar. It is incumbent upon all stakeholders, including government, industry, and civil society, to demand better leadership and accountability.

We can ensure the survival and revitalisation of this vital sector through coordinated efforts, thereby securing a sustainable economic future for all South Africans.

* Chris Maxon is social and political commentator and Rise Mzansi public representative candidate.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.

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Steel Meltdown: How government failure doomed ArcelorMittal and 3,500 jobs