ArcelorMittal South Africa is planning to shut two mills and is reviewing operations at its largest plant, it said on Monday, as the money-losing unit of the world’s biggest steelmaker struggles with weak demand and lower prices.
Shares in the South African division of ArcelorMittal slumped 23 percent in Johannesburg to a 13-year low of 9.01 rand after the news.
ArcelorMittal said in a statement that trading conditions had continued to worsen since it started reviewing its long steel business in July, adding that higher South African import duties would only bring relief over the medium to long term.
The steel firm said it had started discussions with unions about the closure of two mills, cutting as many as 400 jobs, at its plant in Vereeniging, about 60 km south of Johannesburg.
The steelmaker has warned in the past it could close the entire Vereeniging plant, putting 1,200 jobs at risk.
Operations at the company’s largest plant, in the nearby industrial town of Vanderbijlpark, continue to be unprofitable and will be reviewed before the end of October, the firm said.
“The company will first consider implementing alternatives before retrenchments are implemented, as a last resort,” it said on Monday.
The Vanderbijlpark review will involve the plant’s fixed cost structure and its layout and is unlikely to look at reducing labour, Themba Nkosi, the South African steelmaker’s head of human resources corporate affairs, told Reuters.
Shares in ArcelorMittal recovered slightly to trade 16.2 percent down at 9.81 rand by 1309 GMT.
“There is a lot of selling pressure from shareholders who are now getting concerned that the steel industry is on the precipice of collapse,” said Nicholas Sorour, a portfolio manager at Sasfin Securities.
South Africa last week imposed a 10 percent import tariff on steel, the maximum level allowed by the World Trade Organisation, in line with its steel-making peers. .
ArcelorMittal has also launched applications with South Africa’s state-run international trade commission to impose anti-dumping duties on cheap Chinese steel.