ArcelorMittal South Africa shares tumbled nearly 14% on Tuesday after the company said it plans to close its long steel operations due to weak demand and persistent infrastructure problems, potentially affecting 3,500 workers.
Shares in the company, the South African unit of the world’s No.2 steelmaker ArcelorMittal, were down 13.87% at 1312 GMT, their lowest level since January 2021.
Its long steel unit produces fencing material, rail, rods and bars used in the construction, mining and manufacturing sectors. ArcelorMittal also produces foundry, flat steel and tubular products.
The company said steel consumption in Africa’s most advanced economy has fallen 20% over the past 7 years, due to limited spending on infrastructure and project delays.
The country’s persistent rail logistics problems and an intensifying electricity crisis had also added costs to the business, ArcelorMittal South Africa said in a statement.
“In the circumstances, the ArcelorMittal South Africa Board and Management have had no option but to embark on a process that contemplates the wind down of the Company’s Longs Business, which for now may be placed in care and maintenance,” the company said.
ArcelorMittal South Africa said the 3,500 jobs that could be affected include full-time staff and contractors.
Labour union Solidarity called the company’s announcement a “shock”, adding it was yet to receive formal notice of the planned redundancies as required under South African law.
“A consultation process with key parties affected by such a decision, including trade unions, should undoubtedly have preceded such an announcement,” Solidarity said in a statement.
The company slumped to a 448 million rand headline loss in the first half to June 30, compared with a 3 billion rand profit in the same period last year, on the back of South Africa’s electricity crisis, high inflation and weak demand from key steel-consuming sectors.