In a death-blow for South Africa's steel industry, the planned closure of the country's only iron ore-based long products mill is anticipated to lead to a surge in import prices, according to South African steel buyers.

This continues the bloodbath of South African jobs, as several major manufacturers including Volkswagen look to other manufacturing locations amid electrical supply instability and unionised wage rises.

ArcelorMittal South Africa, a JSE-listed company responsible for nearly half of the country's crude steel production, announced in late November its decision to close its steelmaking operations in Newcastle and Vereeniging. The company attributed the closure to structural issues beyond its control, including a 20% demand decrease over seven years, rising energy costs, supply disruptions, and government policies favoring scrap over iron ore-based production.

Government policies, such as a 20% export duty and a recent ban on scrap exports, have significantly reduced domestic scrap prices. This policy has benefited South Africa's Electric Arc Furnace (EAF)-based minimills. However, challenges like high transport costs and electricity load curtailment with frequent power outages continue to undermine domestic steelmaking, as noted by ArcelorMittal South Africa.

ArcelorMittal South Africa's closure of long products operations in Newcastle and Vereeniging, affecting around 3,500 employees, is expected to lead to specific shortages. Domestic minimills primarily produce commodity grades of long products, and the loss of ArcelorMittal's output may result in a shift to imported specialized grades and long products. South Africa's steel imports have already grown by almost 55% in the four years leading up to 2022, reaching 1.43 million tonnes.

Respondents to research by MEPS International's Developing Markets Steel Review suggested that the closure might prompt increased reliance on imports. Some customers expressed hope that the move could be a strategic maneuver to garner support from the South African government. However, wider economic concerns and challenges in the steel industry may exert greater influence, with potential impacts on supply constraints and rising prices for certain products.

While the closure raises concerns domestically, South Africa's Department of Trade, Industry, and Competition had questioned the European Commission's Carbon Border Adjustment Mechanism (CBAM) regulations earlier in the year. The department argued that the regulations conflicted with the Paris Agreement and breached World Trade Organization (WTO) rules, posing risks of exacerbating inequality, poverty, and unemployment in developing nations.

With South Africa's steel industry facing closures and challenges, buyers anticipate constrained supply for certain products and potential increases in prices, reflecting broader economic circumstances closer to home.

This herald the end of South Africa’s industrial base, as the country transitions downwards to being a primary resource export economy.