ArcelorMittal South Africa is nearing a funding deal with the government to support its steel mills, essential for the local economy. Initial funding of approximately 500 million rand will aid steelworkers, with further financing expected through the IDC. The company aims to secure additional investment to remain operational while navigating significant competition and declining share values.
ArcelorMittal South Africa is close to finalizing a funding agreement with the government to sustain its local steel mills, deemed vital for the country’s economy. Insiders report that the government intends to provide an initial funding of approximately 500 million rand (around $28 million) aimed at supporting steelworkers over the next six to eight months, amid ongoing discussions for further financing through the state-owned Industrial Development Corporation (IDC).
The IDC is expected to boost its shareholding in ArcelorMittal SA from its current 8.2%. Additionally, the government is encouraging ArcelorMittal to explore offers for two mills targeted for closure, located in Vereeniging and Newcastle. Despite proceeding with the closure plan, ArcelorMittal is actively negotiating financing arrangements.
The company asserts that without proper financing, postponing the idling of operations is not viable. They are considering various strategic options but have not received any solid offers thus far. Keeping the mills operational is crucial for the government’s economic revival efforts, particularly as they produce specialty steel not made by local competitors, which is important for key industries such as automotive and mining.
A resolution regarding the funding may be announced imminently, with sources indicating that ArcelorMittal’s board is currently deliberating on potential proposals. Supported by Indian billionaire Lakshmi Mittal, the firm aims to secure around 3 billion rand for continued operations and to maintain inventory levels for automotive clients like Volkswagen AG and Isuzu Motors Ltd.
While the IDC has provided prior financial assistance to sustain operations, it remains engaged in discussions to find a lasting solution. Furthermore, it is involved in substantial investments to bolster local automotive manufacturing, underlining the importance of ensuring a steady supply of steel to the industry.
Despite fierce competition from smaller mills, predominantly using scrap metal and benefiting from government subsidies, ArcelorMittal’s share value has plummeted over 90% since 2005, currently valued at about 1.6 billion rand, contrary to its annual sales of around 40 billion rand. The company’s stock initially surged by 21% before settling at a 6.9% increase.
In summary, ArcelorMittal South Africa is in advanced discussions for government funding essential to keep its mills operational, vital for the country’s economy. A potential solution may soon be announced, highlighting the need for strategic financial intervention to sustain the company amid competitor pressures. The government and IDC’s involvement underscores the broader economic significance of the steel industry within South Africa’s recovery plans.
Original Source: www.mining.com
