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ArcelorMittal South Africa declares force majeure due to civil unrest

Highlights

Road, rail transport routes affected

Limited impact on operations in short-term

Increased security measures implemented

South Africa's largest primary steel producer, ArcelorMittal South Africa, or AMSA, said July 14 that it has given notice to its customers of a force majeure, with factors beyond the company's control preventing it from fulfilling its contractual and delivery obligations.

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The current unrest taking place in South Africa's KwaZulu-Natal and Gauteng provinces has affected major highways and transport routes, including the N3 highway linking the two provinces. There have been reports of roads being blocked, widespread vandalism, and vehicles, especially the trucks of transport companies, being petrol bombed and stoned, said Tami Didiza, AMSA group manager of stakeholder engagement and communications.

The KwaZulu-Natal freight rail corridor to and from the town of Newcastle, where AMSA's Newcastle Works is located, has also been affected, with transportation flows coming to a halt, Didiza told S&P Global Platts.

"As a result, the transport of material into and out of our plants and all dispatches by road have been disrupted," Didiza said, noting that several of its customer have also closed their premises to ensure the safety of people and property.

In some cases, loaded trucks remain on AMSA's property, with transport providers indicating that they would only leave the premises once it is safe to do so, Didiza said.

Apart from impacts on dispatches due to the unrest and road closures, AMSA said that it anticipates only limited impact on its operations in the short-term, having put contingency plans in place to limit disruption to its operations and to minimize the impact on its customers, while also ensuring the safety of its employees and contractors.

Contingency plans

The contingency plans include higher security measures for its assets and critical supply chains as well as the sourcing alternative supplies of critical materials, AMSA said.

"This position could however change if the current unrest situation continues," the company told Platts.

AMSA has five main operations in the country. The Vanderbijlpark Works is the largest supplier of flat steel products in sub-Saharan Africa and the Vereeniging Works is the sole producer of hot rolled and cold drawn seamless tube products in South Africa. Both plants are located in the Gauteng Province.

The company's Newcastle Works produces profile products including include low and medium-carbon commercial grades, low-carbon rimming steel substitutes, sulfur containing free-cutting steels, micro-alloyed steels, high-carbon wire-rod steels and low, medium and high-alloy steels. The coke and chemicals operations process steelmaking by-products and produce commercial grade coke for use by the ferroalloy industry from coke batteries located in the cities of Tshwane, Newcastle and Vanderbijlpark.

The company's Saldanha Works in the Western Cape is currently not operational, having been placed on care and maintenance in 2020.