ArcelorMittal’s talks to sell its local unit to South Africa’s State-owned Industrial Development Corporation (IDC) are being held up by differences over the entity’s valuation, according to a Reuters report.
Talks about a takeover by the IDC – the steelmaker’s second-biggest shareholder after billionaire Lakshmi Mittal – have emerged as the South African authorities try to preserve steel operations crucial to the domestic economy. Since November 2023, AMSA has threatened to shut two loss-making mills that produce grades of steel essential to the automotive and mining industries.
The Luxembourg-headquartered company said in July that talks with the South African government have so far yielded little progress to avert the closure of its loss-making long steel operations at its SA unit.
While the IDC and ArcelorMittal may still reach an agreement on the fate of ArcelorMittal South Africa (AMSA) before the end of a due diligence period, which was due to end on 30 September 2025, the Luxembourg-based company wants considerably more than was offered. Offers of as much as R7 billion for AMSA have been discussed according to information received by Reuters
Earlier this year, the IDC and South Africa’s Department of Trade, Industry and Competition brokered a deal with AMSA to extend a loan and to consider boosting its 8.2% stake. In return, the DTIC agreed to review AMSA’s complaints about competition from cheap imports, scrap-metal discounts for rivals, high electricity costs and inefficient rail services.
“The company has been exploring various strategic options while the IDC has simultaneously been conducting its due diligence into the company and the government has been pursuing structural interventions,” AMSA said in a statement to the stock exchange in Johannesburg. “Significant effort has been given to this exercise, which remains ongoing.”
Still, in the absence of a firm commitment, AMSA said it’s switched off the blast furnace at its Newcastle steel mill and has begun talks with employees about the potential closure of its so-called longs business. In total, AMSA’s steel mills in Newcastle and Vereeniging employ about 3 500 people and support as many as 100 000 jobs at clients and suppliers, according to industry estimates.
AMSA isn’t prepared to cover any more losses at the Newcastle mill and neither is the IDC, the people said, meaning that even if the IDC does take over all of AMSA, it may still be mothballed.
Mittal took over the South African steelmaking operations of Iscor, a State-owned steelmaker and iron-ore miner that had been sold to private investors, in 2003. After Mittal merged his global steel company with Arcelor, the South African business was renamed AMSA.
The company’s stock has declined 19% this year in Johannesburg to R1.08, giving it a market value of R1.23 billion. That compares with a peak of R116 billion in 2008. In its most recent financial year, revenue was almost R40 billion.
To effect a takeover, the IDC – which has provided billions of rands of loans to AMSA – may need to bring in a strategic partner to help run the business, the people said.
In addition to Newcastle and Vereeniging, AMSA runs the Vanderbijlpark mill, which produces so-called flat steel used in appliance making and the car industry. It also has a number of idled plants, including one at Saldanha on South Africa’s west coast.
