South Africa’s largest primary steel producer ArcelorMittal South Africa said Nov. 28 that it was contemplating the winddown of its long steel products business at the Newcastle and Vereeniging works, which for now it said may be placed on care and maintenance.

The Johannesburg-listed company said this would include most plants at its Newcastle and Vereeniging Works, as well as rolling facilities which use Newcastle material as feedstock. The company’s coke batteries would remain operative, it said.

AMSA said the proposed winddown of operations was a result of several issues outside of its control, including a 20% fall in demand over the past seven years to 4 million mt; high transport, logistics and energy costs, compounded by logistics failures and energy availability; as well as the scrap advantage over iron due to the preferential pricing system for scrap, a 20% export duty, and the recently imposed ban on scrap exports which had given electric arc furnaces an “artificial” competitive advantage over steel manufacturers beneficiating iron ore to produce steel.

AMSA CEO Kobus Verster said the board and management team had reached the decision after exhausting “all possible options” and that the decision had been taken to ensure that the business would remain sustainable in the long term and would be on a more “sustainable financial footing”.

The company said the winddown was subject to a due diligence and a consultative and iterative process involving key customers, suppliers, organized labor and other stakeholders. The due diligence and final implementation plan will determine the extent, timing and phasing of the winding down of operations, it said.