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ArcelorMittal again defers longs wind down as IDC provides another R1.68bn
JSE-listed steel group ArcelorMittal South Africa (AMSA) has deferred the wind down of its long-steel business for at least six months to August 31, after the State-owned Industrial Development Corporation (IDC) provided another R1.68-billion in funding support.
The Newcastle works blast furnace, in KwaZulu-Natal, which was initially scheduled to be closed at the end of February, remained operating until the end of March after the IDC extended a R380-million loan.
The latest deferral in the mill's wind down meant that retrenchment consultations initiated under Section 189(3) of the Labour Relations Act had also been be suspended, but AMSA said certain areas outside the longs business might still undergo "restructuring" for operational reasons.
The company has also received a Temporary Employee Relief Scheme grant to assist in funding employee costs, which will reduce the draw down required against the IDC facility.
In a statement, AMSA said the IDC facility was repayable subject to agreement between the parties and contingent on the financial performance, solvency and liquidity of the longs unit.
As part of the agreement, the IDC may also conduct a due diligence exercise into possible alternative solutions for the business, but no details were provided as to what solutions might be considered.
"The South African government will utilise the deferral period to expeditiously address structural problems for the industry, including the scrap Preferential Pricing System (PPS), scrap export tax, and tariff measures including safeguards," CEO Kobus Verster said in a statement.
The group said it anticipated imminent changes to the PPS and export tax, along with new protection.
"These measures will help level the playing field in the steel industry to the benefit of the country," Verster stated, while noting emerging signs of demand growth in the South African economy.
"The IDC facility, combined with the government's commitment to address structural challenges in the industry, offers a pathway to potential long-term sustainability for the business," he added.
The next six months would be crucial in determining whether the longs business could achieve the "financial stability required for long-term viability".
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By Engineering News
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JSE-listed steel group ArcelorMittal South Africa (AMSA) has deferred the wind down of its long-steel business for at least six months to August 31, after the State-owned Industrial Development Corporation (IDC) provided another R1.68-billion in funding support.
The Newcastle works blast furnace, in KwaZulu-Natal, which was initially scheduled to be closed at the end of February, remained operating until the end of March after the IDC extended a R380-million loan.
The latest deferral in the mill's wind down meant that retrenchment consultations initiated under Section 189(3) of the Labour Relations Act had also been be suspended, but AMSA said certain areas outside the longs business might still undergo "restructuring" for operational reasons.
The company has also received a Temporary Employee Relief Scheme grant to assist in funding employee costs, which will reduce the draw down required against the IDC facility.
In a statement, AMSA said the IDC facility was repayable subject to agreement between the parties and contingent on the financial performance, solvency and liquidity of the longs unit.
As part of the agreement, the IDC may also conduct a due diligence exercise into possible alternative solutions for the business, but no details were provided as to what solutions might be considered.
"The South African government will utilise the deferral period to expeditiously address structural problems for the industry, including the scrap Preferential Pricing System (PPS), scrap export tax, and tariff measures including safeguards," CEO Kobus Verster said in a statement.
The group said it anticipated imminent changes to the PPS and export tax, along with new protection.
"These measures will help level the playing field in the steel industry to the benefit of the country," Verster stated, while noting emerging signs of demand growth in the South African economy.
"The IDC facility, combined with the government's commitment to address structural challenges in the industry, offers a pathway to potential long-term sustainability for the business," he added.
The next six months would be crucial in determining whether the longs business could achieve the "financial stability required for long-term viability".