Steel producer ArcelorMittal South Africa (AMSA) has announced that the wind-down of its long steel business will be deferred for an initial period of at least six months, to August 31, after securing a R1.68-billion facility from the Industrial Development Corporation of South Africa (IDC).

The IDC facility is repayable by agreement between the parties and subject to, besides others, the financial performance, solvency and liquidity of the AMSA longs business.

The IDC facility is part of a comprehensive package of intended initiatives aimed at positioning the Longs Business for future sustainability and profitability.

The company has also received a Temporary Employee Relief Scheme (TERS) grant to assist in funding employee costs and has undertaken to apply any TERS funding received in respect of employee costs relating to the longs business, which will reduce the drawdown required against the IDC facility.

The government will use the deferral period to address the structural problems previously identified by AMSA, including the scrap metal Preferential Pricing System (PPS), scrap export tax, tariff measures including safeguards and others to put the longs business on a sustainable footing. 

AMSA, meanwhile, will use the deferral period to focus on implementing further improvements to optimise the longs business operations, enhance product offering and supply chain reliability for customers and advance its commitment to localisation, particularly through continued collaboration with the industry.

The intervention by government and the IDC will assist in keeping the longs business operational while a viable sustainable long-term solution is being sought, AMSA states.

"Based on the engagements between the company and government to date, it is the company's understanding that a more market-related and less punitive PPS and export tax on scrap dispensation will be implemented soon, and that the implementation of safeguards is imminent.

"This will be strongly supportive of levelling the steel industry playing field to the benefit of the country," AMSA comments in a March 31 statement.

AMSA has thanked the government, and in particular Trade, Industry and Competition Minister Parks Tau for his leadership during the engagement, the Department of Trade, Industry and Competition, the IDC, as well as all stakeholders, including customers, suppliers and organised labour, for their role in supporting the continuation of this critical industrial capacity for the country.

"AMSA values the dedication of its employees and recognises the critical role they play in sustaining the business and its broader contribution to the economy," AMSA adds.

It further states that it is "very encouraged" by the emerging signs of demand growth in the South African economy, with potential for the steel market, due to recent opportunities emerging in a number of sectors, for example, energy.

"Should it materialise, this will have a positive effect on the high-quality products manufactured and supplied by the longs business in particular."