ArcelorMittal SA posts significant loss
The CEO says the SA market is currently not capable of supporting the steel industry.
JOHANNESBURG - ArcelorMittal South Africa, a unit of the world's top steelmaker, has reported a first-half loss as sales weakened and production dipped, saying it expected the bleak outlook to continue.
Africa's biggest producer of steel posted a diluted headline loss of 31 cents per share for the six months to end-June compared with 26 cents in the same period last year.
While international prices appear to have stabilised, the company said lingering weakness in the domestic economy continues to hit steel demand.
"Domestic sales are expected to remain flat and any increase in steel prices will be more than offset by increasing costs," it said in a statement.
The company said steel sales dropped 16 percent and liquid steel production declined 9 percent, primarily due to a fire at its Vanderbijlpark operations in February.
Shares in ArcelorMittal South Africa have fallen 25 percent over the last 12 months, under-performing a 19 percent gain in the JSE's All-share index.
However, it's CEO Nonkululeko Nyembezi-Heita told 567 CapeTalk/Talk Radio 702's Bruce Whitfield on Thursday night the company was already seeing slight improvements in pricing.
"It's actually been quite mixed because they dropped initially in the first part of the year and then stabilised, and in the last couple of weeks we've certainly seen some strength coming back into pricing."
She said the health of US and European economies had less of an effect on steel prices here than the Chinese economy did.
She said while the Chinese economy has suffered a slow-down, its 7.5 percent growth was still significant and the country would continue to need steel.
"Their steel consumption is actually quite healthy, there's a lot more momentum in that market [than people think]."
But comparatively, she said, the current health of the South African economy was not helping the steel industry here.
"Two percent growth this year is just not supportive for steel demand, we need growth rates above 3 percent to start seeing steel really fly off the shelves."
She compared South Africa's consumption with China's, saying consumption of steel per capita is only 100 kilograms per person while China is seeing rates at 480 kilograms per person.
She said it would be difficult to adapt to the weaker South African market, but it was possible with carefully managed capacity reduction.
Nyembezi-Heita said the Vanderbijlpark fire was a major factor in the company's financial woes over the last quarter, but the insurance claim they are in the process of finalising would help address the losses.
"We will be compensated for market-share loss as well as the assets that were destroyed."