ArcelorMittal is shutting down its steel plants in SA. Here’s why this may worry Zimbabwean coal producers

The closure of ArcelorMittal’s steel mills in South Africa may be felt in Zimbabwe, where the company is the major buyer of coking coal from Hwange.

Africa’s largest steel producer announced Tuesday that it is winding down its long-steel operations at Newcastle and Vereeniging because of the “slow economy” in South Africa. Some 3,5000 workers there may lose their jobs, the company said in a statement.

ArcelorMittal says it tried to avoid closure through “aggressive cost savings initiatives”. But these steps have not been able to counter the impact of a slow economy, which has cut steel consumption in that country by 20% over the past seven years. The company also blames high transport costs and loadshedding. For now, the coke batteries – the furnaces which use coking coal to make steel – “remain operative”. However, ArcelorMittal’s action points to a drop in production that may eventually force it to cut imports of coal.

What may be the impact of ArcelorMittal’s troubles on Zimbabwe?

According to reports, the company buys over 70% of Zimbabwe’s coking coal. It also owns 10% of Hwange Colliery.

Last year, ArcelorMittal CEO Kobus Verster met President Emmerson Mnangagwa in Harare, and said his company planned to increase its purchases of coking coal from Zimbabwe. He said his company was buying around 5,000 tonnes of Hwange coking coal and 20,000 tonnes of coke for their South African plants every month. ArcelorMittal planned to increase tonnage to 30,000 tonnes of coking coal and 50,000 tonnes of coke by 2024, he said then. He estimated that ArcelorMittal had bought US$140 million worth of coal products from Zimbabwean producers in the previous year.

ArcelorMittal has also reportedly been in talks to buy coking coal from Muchesu Mine, a new coal operation commissioned this year by UK mining company Contango. A statement from Contango in October said it was in talks with a “multinational” for 80,000 tonnes of washed coking coal, and that the potential buyer “will be responsible for transporting the washed coking coal in its own fleet of trucks to its facilities in South Africa where the trial will take place”.

The grim prospects of ArcelorMittal may also worry Tsingshan, which is building its own steel plant at Manhize, near Chivhu, through its subsidiary Dinson Iron and Steel Company. The plant is scheduled for completion in 2024.

The shutdown of ArcelorMittal’s factories also means less business for freight companies and associated logistics service providers across the region, including in Zimbabwe. Many construction companies in Zimbabwe buy steel products from South Africa, and the closure of ArcelorMittal’s plants may cause shortages and drive up prices.

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