ArcelorMittal, IDC end exclusive South Africa talks with no deal

Credit: ArcelorMittal SA

ArcelorMittal South Africa’s exclusive sale talks with IDC end without agreement
ArcelorMittal SA’s exclusive negotiations with South Africa’s largest development-finance institution over a possible sale of its local steel business have concluded without a deal, freeing the Luxembourg-based steelmaker to pursue other investors.

An informal offer of about R8.5 billion ($492 million) from the Industrial Development Corporation (IDC) failed to resolve the impasse, according to people briefed on the matter. Discussions are continuing on a potential phased takeover of ArcelorMittal South Africa (Amsa), the sources said.

The IDC’s proposal — which would have covered roughly R7 billion of loans and interest owed by Amsa — was judged insufficient by ArcelorMittal, and the IDC is reportedly reluctant to increase its offer. Amsa said in a Johannesburg Stock Exchange statement on Nov. 4 that “engagements to explore alternative solutions continue” and that it will make further announcements when appropriate.

Initial talks involving ArcelorMittal, the IDC and the trade and industry department began in November 2023 after Amsa announced plans to close two mills that supply critical grades to the automotive and mining sectors. Those talks intensified and became exclusive earlier this year when the IDC — which owns about 8% of Amsa — advanced a loan to prevent the closures.

One mill, Newcastle, has since shut and a related iron-ore mine operated by Assmang Ltd. has been idled. Sources say a satisfactory proposal could allow the Vereeniging mill to keep operating.

Amsa’s operations include long-steel plants and a flat-steel complex in Vanderbijlpark that produces sheets for manufacturing and construction. The company also holds idled sites in Pretoria and Saldanha, plus a mothballed iron-ore mine that could be reactivated. It remains unclear how downstream industries dependent on Amsa’s products are adjusting to the closures.

Relations between Amsa and the government appear strained, with little progress on several outstanding issues, including electricity-price relief and a government policy that provides a discount on the international price of scrap steel — a benefit to some local competitors that use scrap rather than iron ore. Amsa said a small cut to that discount was inadequate and warned the policy “continues a decade-long approach that has weakened the country’s steel sector,” arguing it favors a narrow group of beneficiaries at the expense of the broader industry.

Separately, Amsa is appealing a Labour Court ruling that ordered the reinstatement of several thousand workers dismissed after the Newcastle shutdown. The IDC’s most recent loan has enabled limited stockpiling of steel and given some breathing room for auto-makers and other local manufacturers to source alternatives.

Amsa traces its roots to Iscor Ltd., which was bought by Lakshmi Mittal’s Mittal Steel Co. in 2003; Mittal later combined with Arcelor in 2006 to form ArcelorMittal.