The sustainability of South Africa’s steel industry [1] faces significant challenges, with government intervention now seen as essential to ensuring long-term competitiveness and economic stability.
ArcelorMittal South Africa’s recent decision to close its Longs Business has underscored the need for policy-driven efforts to stabilize the sector. A strong steel industry can drive economic growth, create jobs, support infrastructure development, and contribute to South Africa’s decarbonization goals, while also fostering the production and export of greener steel.
However, high energy and logistics costs, along with policy distortions—including the scrap export tax, scrap price preference system, and preferential funding for mini mills—have placed other industry players at a disadvantage. Authorities are now working to level the playing field and ensure the sector remains competitive.
Mini mills under the Electric Steel Producers Association (ESPA) have historically benefited from government support, receiving over R14 billion in Industrial Development Corporation (IDC) funding, alongside protective measures such as the Price Preference System, Scrap Export Tax, and export bans. Despite these advantages, several ESPA members continue to struggle financially.
Industry experts highlight additional preferential policies benefiting mini mills, including an estimated R5-6 billion in annual scrap steel subsidies, largely funded by manufacturers, fabricators, and scrap collectors. Mini mills in Special Economic Zones (SEZs) enjoy further benefits, such as a 10% PPS discount, corporate tax exemptions for a decade, reduced electricity rates, and import duty relief of at least 10%.
While ESPA has promoted job creation as a key achievement, concerns persist over its impact on informal workers. An estimated 50,000 scrap collectors have lost their income due to policies favoring mini mills. Despite claims of scrap shortages, South Africa has an ample scrap reservoir, but artificially low prices have discouraged collection and transportation. Experts suggest that offering international market rates—around R7,000 per ton—could significantly boost scrap supply, employment, and the competitiveness of local manufacturing.
Transparency concerns also surround the mini mill sector. Unlike listed steel producers, which publicly disclose financial and operational details, ESPA members do not publish reports, limiting insight into their business practices. Industry observers argue that greater transparency and oversight could benefit the broader steel value chain, consumers, and taxpayers.
Although mini mills contribute to South Africa’s decarbonization strategy, their reliance on scrap primarily limits output to lower-value products such as rebar and commercial-grade sections, which are unsuitable for specialized engineering applications. Many of these products are exported as billets, using South African electricity to produce materials refined abroad rather than maximizing local beneficiation.
The government’s intervention to delay the wind-down of AMSA’s Longs Business presents an opportunity to address structural issues and remove market distortions, setting the steel industry on a more sustainable path.
Sources:
[1] Government Intervention Crucial For A Sustainable Steel Industry In South Africa https://africannewsagency.com/government-intervention-crucial-for-a-sustainable-steel-industry-in-south-africa/