The South African operations of Lakshmi Mittal's global steel empire, Arcelor-Mittal SA (AMSA), has announced that it may have to retrench staff as part of restructuring plans amid growing losses.
The proposal, comes barely days after Arcelor-Mittal SA's (AMSA) black economic empowerment partner Likamva Resources said it was willing to increase its 17 per cent stake in Africa's biggest steel producer despite its loss-making record.
However, the unions have decided to fight the move.
Arcelor Mittal South Africa (AMSA), born out of Mittal's buyout of state steel manufacturer ISCOR more than a decade ago after the steel magnate first rescued it from total collapse, last made a profit seven years ago.
After a peak in the middle of 2008, AMSA's share price has seen a 98 per cent drop.
Even though AMSA produces about 70 per cent of South Africa's steel, the current recession in the country as well as cheaper Chinese imports have seen it take a battering.
Last year, there was urgent government intervention after Mittal's threatened closure of one of its plants put the lives of the entire town of Vanderbijlpark, south of Johannesburg, in jeopardy through unemployment.
Previous interventions to turn the business around had failed, leading to the company considering other cost-cutting measures, including the sale of its non-core assets, AMSA chief executive Wim de Klerk was quoted as saying by the Business Report.
"It is difficult to estimate the number of employees who may eventually be retrenched because of the proposed restructuring and efficiency measures as this is subject to the outcome of the consultation process and other avoidance measures," De Klerk said.
AMSA said the restructuring came as the steel industry was under pressure from cheap imports, the volatile exchange rate and rising input costs.
Two major unions, the National Union of Metalworkers of South Africa and Solidarity, have said they will engage AMSA in attempts to avoid retrenchments of its members as far as possible.
But De Klerk said the outlook is likely to change in the foreseeable future despite higher import duties on steel and an increase in demand for government projects.
Half a million tonnes of steel has still been imported in the first half of this year.