Eskom’s transmission line build could come too late to save Amsa’s Newcastle steel mill

(From left) Amsa’s Tami Didiza, group manager for stakeholder management and communication, CEO Kobus Verster and Jacques Kotze, chief operations officer. Photo: Supplied

(From left) Amsa’s Tami Didiza, group manager for stakeholder management and communication, CEO Kobus Verster and Jacques Kotze, chief operations officer. Photo: Supplied

Published May 1, 2024


The South African government upcoming billion of rand spend on steel for its 14000 km of new transmission lines in the country could affect the decision made by ArcelorMittal South Africa (Amsa) as regards the closure of Newcastle, Vereeniging steel mills, but it might come to late.

This was according to Kobus Verster, Amsa’s CEO, who on Tuesday held a media round table.

Amsa is currently weighing whether to shut down or keep going the long steel businesses. In February it agreed to defer the closure of its Newcastle, Vereeniging steel mills by six months depending on government commitments to fix Transnet, other infrastructure and policy framework bottlenecks.

Roughly 3500 permanent and contract workers jobs are on the line.

Verster said the Newcastle steel plant currently was being kept open to prevent the potential social impact of its closure, despite its negative financials, but, ultimately, it had to have a sustainable future and be a sustainable venture.

Steel consumption in South Africa was at 4 million metric tons (Mt) in 2023, but was expected to be stagnant this year. Amsa has the domestic capacity to produce 10Mt, so it is producing at less than half its capacity.

Amsa is facing persist cost and price pressure as well as margins squeeze. The stagnant South Africa economy is not driving steel demand with only 0.9% gross domestic product expected in 2024 and low growth on the horizon.

When asked about the steel mills’ closure timeline Verster, said Amsa would make the final decision by around July or August.

“We have customers that need to have some longevity and alternative plans,” if we close Newcastle, he said, reflecting on three mines and other businesses in the area that would be forced to close down if it came to that.

Verster, talking about the Eskom spend on transmissions lines in response to Business Report questions, said this move was only expected in about two or three years time. For Amsa to keep the two steel mills going in the meantime would be costly and the “gap can be very painful”.

Eskom’s transmission lines main ramp up is only expected to happen around 2028 or 2030: 20% of the lines, or 2893km forecast in 2023-27 and the balance 80% of the lines, 11325km in 2028-32.

However, Amsa was not sure if it could keep Newcastle, Vereeniging steel mill open waiting for the transmission roll-out.

Verster said 40% of the steel requirements locally could only be produced by the Newcastle steel plant due to quality requirements.

Newcastle Works has a blast furnace; a ladle furnace, two basic oxygen furnaces with a 1.8Mt per annum crude steel capacity.

“One would either have to export or import the steel or you have to lower the standards, which is unlikely because they build these things to last for around 30 to 60 years,” Verster said.

Amsa, in a slide presentation, shared that Eskom had estimated steel demand for the transmissions lines would be 452 kilo tons (kt) from 2025 to 2032 for 13 740km lines targeted in that period. This was 56kt per annum, or roughly 33 tons per km of installed tower.

Amsa said, “Our estimates basis industry supply history shows that this would require up to about 44 tons of steel products per kilometre inclusive of of tower section and bolt and nuts; ACSR cabling; ground wire conductor; close to 605kt could be required in the period 2025 to 2032.

Amsa said that its domestic supply history into Eskom transmission projects demonstrated that Amsa had more than enough primary steel capacity to supply Eskom demand.

At peak in 2030 Eskom’s plan entailed 2763km, 121kt, 10kt per metre.

Amsa said Eskom’s long steel product demand fell within local ranges.

The Amsa team questioned at what stages would Eskom invest in the transmission line, which areas and how would they lay out their plan?

Amsa said it was talking to the Energy Council and the transition build demand for steel was a reasonable amount of constant supply and volumes.

Verster said Transnet was in a similar position with rail potential, which was positive for Amsa.

However, Amsa said currently there was no major infrastructure builds in the country to keep the Newcastle, Vereeniging steel mills in business.

Amsa executives also explained that it would be extremely difficult to shut down and massively expensive to restart Newcastle, Vereeniging steel mills, which would take months to do.

For example, a blast furnace alone to restart costs between R150-R200 million.

Furthermore, Amsa said, in general, skills in South Africa were a major problem. If the company shutdown the plants, Amsa would loose a portion of their highly skilled workforce, which was hard to regain.

Employees working in Amsa operations in other countries did not want to work in South Africa due to questions of personal safety, executives said.