Devastating consequences of ArcelorMittal's Newcastle furnace closure: A call to action
As the Cosatu, we are deeply concerned about the impending closure of the Newcastle furnace of ArcelorMittal (Amsa). This decision has far-reaching implications for the livelihoods of thousands of workers, the local economy, and the steel and motor manufacturing industries as a whole. It is imperative that we take immediate action to mitigate the devastating consequences of this closure.
The closure of the Newcastle furnace will result in the loss of over 1 300 direct jobs, with an estimated 2 200 indirect jobs at risk in the surrounding communities. This will exacerbate the already dire unemployment situation in South Africa, particularly in the rural areas where job opportunities are scarce. The economic spin-offs of the closure will be felt far and wide, with local businesses, suppliers, and service providers also facing financial ruin.
The steel industry is a critical component of South Africa's economy, and the closure of the Newcastle furnace will have a ripple effect throughout the sector. The motor manufacturing industry, which relies heavily on locally produced steel, will be severely impacted, threatening the very existence of this critical sector. The consequences of this closure will be felt for generations to come, as the skills and expertise developed over decades are lost forever.
The threatened closure of Amsa’s Newcastle Furnace repeats a similar crisis when Amsa did likewise with its Saldanha Bay operations five years ago. Amsa’s possible exit would have similar catastrophic effects for its plants in Richard’s Bay and Vereeniging.
With a 41.09% unemployment rate, GDP growth barely breaking 1% and years of devastating de-industrialisation; this would be a blow we simply cannot afford.
As Cosatu, we believe that the closure of the Newcastle furnace is not only a corporate decision but also a societal issue that requires a collective response by not only Amsa but also industry, including downstream, the government, labour and communities.
We have heard Amsa’s complaints against government. And yes, many may be valid. The years of loadshedding were devastating across the economy, similarly the crises facing Transnet Freight Rail and Ports. The rapid rise of electricity tariffs has posed a danger to industry and intensive uses for years.
But to say the government has not responded or provided support over the years is disingenuous and is not based in fact.
Eskom has always provided favourable tariffs for intensive users. The government and Eskom have made tremendous progress in overcoming loadshedding with nearly a year without an hour lost. Transnet is being stabilised and improvements seen on rail and port turnaround times, including at Richards Bay. The Industrial Development Corporation (IDC) too has injected capital into Amsa.
Whilst we appreciate the difficult international and local headwinds facing steel and Amsa, what we are not hearing from Amsa or the government are solutions, both immediate to stem the closure and long term to ensure not only the company’s sustainability but also that of downstream sectors.
Pointing fingers may be therapeutic but the crises require a concerted plan of action and collaboration.
Proposals by Amsa to remove export levies on scrap metal will not help as whilst they may benefit, other smaller companies will suffer and government’s efforts to stem the pandemic of copper and other metals thefts be endangered.
We believe the following measures to mitigate the effects of the closure:
1. Amsa: The company must engage with stakeholders, including workers, unions, and local communities, to explore alternatives to closure. This could include investing in new technologies, diversifying products, or seeking partnerships to ensure the long-term viability of the furnace.
2. Industry: The steel industry as a whole must come together to develop a comprehensive strategy to support the Newcastle furnace and ensure the sustainability of the sector. This could involve collaborative investments, joint marketing initiatives, and the development of new products and services. In fact, this needs to be part of the auto-manufacturing industrial plan or a dedicated stand-alone steel master plan be put in place.
3. Banks: Financial institutions must provide support to ArcelorMittal and other industry players to facilitate investments in the steel sector. This could include providing low-interest loans, guarantees, or other forms of financial assistance.
4. Government: The Department of Trade, Industry and Competition (dtic) and the IDC must intervene to prevent the closure of the Newcastle furnace. This could involve providing financial support, facilitating discussions between stakeholders, and developing policies to support the steel industry.
Eskom and Transnet as well as the host municipalities must be part of this discussion.
Similarly, the Department of Employment and Labour with the Unemployment Insurance Fund need to be roped in to see if the Temporary Employment Relief Scheme can assist with employees’ salaries. But this will require a turnaround plan from Amsa and a commitment not to retrench workers.
5. IDC: The IDC must play a more active role in supporting the steel industry, including providing financing for investments in new technologies, products, and services.
The Public Investment Corporation as well as the Development Bank of Southern Africa too should be roped in to see how they too could be part of an overall plan not just to save Amsa’s operations and its workers’ jobs but those of the entire value chain.
In conclusion, the closure of Amsa's Newcastle furnace is a ticking time bomb that threatens the livelihoods of thousands of workers, the local economy, and the steel and motor manufacturing industries.
As Cosatu, we urge all stakeholders to come together to prevent this closure and ensure the long-term sustainability of the steel sector.
We propose a comprehensive package of measures to support the industry, including investments in new technologies, collaborative initiatives, financial support, and policy interventions. The time for action is now – we cannot afford to wait. Nor can we afford to abandon a single worker’s job.
Cosatu General Secretary Solly Phetoe
BUSINESS REPORT