Posted on 16 Feb 2015
SA’s primary steel maker, ArcelorMittal SA, has reported a headline loss of R227m for the year to December — similar to the R224m loss posted in 2013 — saying it has been a "tough" year not only for itself, but for the country’s steel industry.
However, the group’s net loss of R158m was a considerable improvement on the net loss of R2.15bn in 2013 — though earnings before interest, tax, depreciation and amortisation (ebitda) was R510m lower at R1.258bn.
Total sales volumes stayed largely unchanged at 4.2-million tonnes. But domestic sales fell 4% due to lower overall demand for steel, the R1.8bn reline of a blast furnace at its Newcastle works in KwaZulu-Natal and stronger competition from imports.
CEO Paul O’Flaherty said on Friday that cheaper imports — "most notably from China" — were damaging sales.
The worldwide steel industry has continued to be intensely volatile.
Last year Chinese demand for the metal dropped for the first time in 14 years. China consumes almost half of global output. This has created further excess capacity worldwide, also leading to higher levels of exports from Europe and Japan. Meanwhile, international prices for steel and commodities have plunged, while SA’s weakened currency has pulled down the company’s profit margins in export markets.
The company’s liquid steel production of 4.5-million tonnes dropped by 578,000 tonnes compared to the same period last year. This was largely due to the blast furnace reline at Newcastle that took longer than the expected six months.
This meant the group’s capacity utilisation averaged 70% for the year, compared with 76% in 2013.
It also caused an ebitda "opportunity loss of R1.2bn" that included the cost of sourcing long steel products from elsewhere to maintain deliveries.
In announcing the results in Sandton, Mr O’Flaherty apologised to customers for the protracted outage. But the group can now produce another 200,000 tonnes a year of long steel products, and intends to boost sales volumes. "Although we expect international steel prices to remain low for the first half of the year, these factors, together with ArcelorMittal SA producing to full capacity and reducing costs, should contribute positively to (first-half) results (in 2015)," he said. ArcelorMittal SA said it supplied 62% of steel used in SA last year. It also exports steel to the rest of sub-Saharan Africa, and to other parts of the world.
It said exports rose 12% in the year. This offset tonnage losses in the domestic market "to some degree".
The group also said exports to sub-Saharan Africa were 77% of total exports and with a forecast for economic growth in excess of 5% in future, the region shows promise for sales.
