IDC considering increasing its holding in steelmaker ArcelorMittal SA

The Industrial Development Corporation (IDC) wants to increase its stake in primary steel producer ArcelorMittal SA (Amsa), after injecting R1.683bn to delay the wind-down of Amsa's long-steel business by at least six months.

Amsa CEO Kobus Verster said the IDC would embark on a due diligence exercise in the six months in which it will decide whether to increase its stake in the business. The IDC now owns 6.4% of Amsa.

“The IDC has indicated that they have a desire to look at an increased shareholding, and for that a due diligence period has been agreed upon. It is for them to look under the bonnet to see whether they want to increase [their holding] and at what value,” said Verster.

Loss-making Amsa listed high power costs, rail constraints and smaller mini mills as some of the reasons for the wind-down of its long-steel business.

Amsa last month received R417m to sustain 2,982 jobs from the Temporary Employee Relief Scheme (Ters) and had sought a R3.1bn rescue package to save its long-steel plants in Vereeniging and Newcastle.

“We have been clear all along that we cannot afford to continue the long-steel operation, and incur additional losses or negative cash flow and funding must be made available to cover that for a period to allow the permanent interventions to come in,” he said.

Verster said the six months will be used to find solutions including the scrap preferential pricing system (PPS) and tariff measures.

He said Parks Tau, the minister of trade, industry and competition, had a better understanding of the impact that many of the policies have on Amsa and the steel industry in general and has demonstrated a willingness to make changes.

“In terms of the scrap, PPS, I got the impression that the minister understands that the impact of that is much more severe on Amsa and that some normalisation is required. My understanding is that it is weeks, not months, away. Hence the loan facility allowed these things to be implemented so that we can start to normalise profitability,” he said.

Verster said Amsa remained committed to its long-steel business.

“You can judge that by the support that has been given to us over the past many years, not only financial support but also technical support, and research & development assistance,” he said.

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