ArcelorMittal S.Africa warns of losses amid poor market
ArcelorMittal South Africa (AMSA) has warned of widening interim losses amid tough trading conditions and operational issues at its hot-rolled steel plant.
The steelmaker last week warned earnings losses for the six months ended in June could potentially quadruple as a result of difficult domestic and regional trading conditions; as well as the impact of operational interruptions of the two blast furnaces at flat steel plant in Vanderbijlpark.
Internationally, the market is down and prices are at historically low levels, AMSA CEO Kobus Verster said during a briefing last week. “Margins are under pressure in a normal trading environment,” he said. “In South Africa, demand is really depressed. We are seeing the lowest level of steel consumption probably in the last 10 years.”
Added to that is the operational issues at Vanderbijlpark, where two blast furnaces had to be repaired, and which impacted the group severely in the first half of the year
Two weeks of sales volumes were ultimately lost, but the biggest impact is the cost of restarting the furnaces, Verster said.
AMSA hopes lost volumes from Vanderbijlpark will be recovered in the second half of the year, which is expected to be more reflective of the underlying business performance, the steelmaker said.
Meanwhile, work continues to try to save AMSA’s long steel business, which continues to operate beyond an initially deferred wind-down period, as the company pursues a range of initiatives to secure the division’s long-term sustainability.
The decision to defer the wind down comes amid encouraging signs of growth in the manufacturing sector, as South Africa has now had over 100 consecutive days without rotational power cuts, known as loadshedding.
“Recent increases in power generation, coupled with renewable energy projects scheduled to come online over the next two years, suggest that the drag on economic growth caused by electricity shortages should gradually diminish, facilitating structurally higher production levels,” Verster said.
AMSA said it remained “acutely aware” of the potential impact that closing the longs business would have on the beneficiation and manufacturing value chain, overall industrialization in the country, jobs, and the local economy, particularly in KwaZulu Natal.
An anticipated softening of interest rates in the second half of this year coupled with various trade remedies are likely to provide an improved environment for pricing sentiment, boding well for a gradual recovery in prices, he added.
A key focus for AMSA is now the upgrade and expansion of the national logistics infrastructure and the electrical supply grid, including new renewable energy capacity.