On Tuesday, shares of ArcelorMittal South Africa (ACLJ.J) fell by about 14% after the firm said it intends to shut down its extended steel operations due to low demand and ongoing infrastructural issues. This decision might potentially have an impact on 3,500 employees.
Stocks of the firm, which is the South African subsidiary of ArcelorMittal (MT.LU), the second largest steelmaker in the world, were trading at their lowest level since January 2021, having dropped by 13.87% as of 13:12 GMT.
Its long steel unit is responsible for producing fence material, rail, rods, and bars utilized in the manufacturing, construction, and mining industries. ArcelorMittal manufactures other foundries, flat steel, and tubular goods.
According to the corporation, steel consumption in Africa’s most sophisticated economy has decreased by twenty percent over the previous seven years. This decline may be attributed to restricted infrastructure expenditures and project completion delays.
In a statement, ArcelorMittal South Africa stated that the company has incurred additional expenses due to the ongoing rail logistics issues in the nation and the worsening electrical crisis.
“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,” according to the organization.
According to ArcelorMittal South Africa, full-time employees and independent contractors are included among the 3,500 positions that might be impacted.
“Shock” was the word that the labor organization Solidarity used to describe the news made by the corporation. They also mentioned that they had not yet received formal notice of the planned layoffs, which is 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,” the union Solidarity stated.
As a result of South Africa’s energy crisis, high inflation, and sluggish demand from major steel-consuming sectors, the firm experienced a sharp decline in its headline loss to 448 million rands in the first half of the year, compared to a profit of 3 billion rands in the same time of the previous year.