ArcelorMittal South Africa (Amsa) has announced a headline loss of R5.1 billion for the year ending 31 December 2024, a staggering increase from the R1.9bn loss the previous year, while the closure of the Longs Business has been stayed for a month.
This significant downturn signals a crisis in the South African steel market, which is grappling with the bleakest environment since the financial crisis of 2008/09.
As international steel-to-raw material price spreads remain under strain, the industry is facing formidable challenges while governments around the world scramble to protect their domestic steel sectors from perceived unfair trade practices.
In its latest financial disclosures on Thursday, Amsa revealed that sales volumes of steel dropped by 6% to 2.3 million tons, echoing a similar decline in crude steel production, which fell to 2.6 million tons.
Furthermore, realised steel prices decreased by 4% in rand terms and 3% in US dollar terms, compounding the difficulties faced by the troubled steelmaker.
Last month, Amsa made the tough decision to wind down its long-steel business by the end of January 2025—a retreat that is expected to result in the loss of up to 3 500 jobs.
This decision came in response to soaring energy costs, logistical challenges, and complications related to an export scrap tax.
However, the commencement of the Longs Business wind down implementation plan has now been delayed by approximately one month to enable the fulfilment of the higher than anticipated outstanding order book, continuing discussions with the government on the future of the Longs Business.
Amsa has indicated that the additional Industrial Development Corporation shareholder loan of R380 million will facilitate a further one month extension of operations in the Longs Business.
An announcement expected in the second half of February 2025.
The operational earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss for the Longs Business reached R1.1bn in 2024, a drastic rise from R600m in 2023.
Overall operational EBITDA losses for Amsa totalled R1.8bn, as opposed to a R56m profit in 2023. Factors contributing to this decline included R670m attributable to Blast Furnace instability and an alarming R1.5bn linked to inventory disposal losses aimed at liquidity improvement.
In light of these tumultuous circumstances, reports indicate that government officials are contemplating a R1bn rescue package aimed at Amsa. If approved, this package could potentially reverse the company’s decision to cease operations, preserving critical jobs within the sector.
Despite the bleak outlook, Amsa continues to explore options for financial support, with net borrowings increasing to R5.0bn from R3.7bn in 2023.
A non-adjusting subsequent event has seen the restructuring of the outstanding R950m from a secured short-term loan, extending its settlement date from June 2025 to September 2026.
The company is also advancing efforts to bolster the bankability of its high-payback investment portfolio, highlighting the importance of balance sheet resilience through potential recapitalisation strategies.
BUSINESS REPORT