South Africa’s port, electricity and rail logistical nightmares could be turning the corner for good, ArcelorMittal South Africa (Amsa) said yesterday, citing improvements in Transnet services and ready access to a R1 billion funding facility for its decision to keep its longs steel manufacturing business operational.
The company’s longs steel product operations had been “operationally stable” for the first half of 2024. This at a time when the Vereeniging and Newcastle longs business operations had been placed under review over the past six months.
Despite the stability of the longs business in the first half of this year, Amsa’s flats steel product operations in Vanderbijlpark had experienced “notable instability-levels” at the blast furnaces in April and May, 2024 due to chilled hearth conditions.
Consequently, two weeks of sales volumes were lost.
However, due to the stable performance of the longs business, Amsa expects its financial results for the first-half of 2024 to mainly be affected by “the difficult domestic and regional trading conditions, and by the two-week sales volume impact and high direct cost of the operational interruptions of the two blast furnaces” at Vanderbijlpark.
Amsa expects headline earnings per share for the period under review to decline from a R0.40 loss per share in the same period last year to a loss within a range of R0.96 and R1.04 loss per share.
Chuffed by the longs steel business’s stable performance and noted improvements in Transnet services, the board and management at Amsa have decided that the longs business “will continue to operate to allow an opportunity for the short, medium and longer-term initiatives aimed at securing its sustainability” to be fully explored.
The performance of Transnet to Amsa had notably “improved” while negotiations with the parastatal to guarantee port and rail service efficiency had “progressed well”, it said.
However, there are other “key matters that have not yet been agreed” to.
Positively though, Amsa had obtained an additional 12-month secured working capital facility of R1 billion to support ongoing initiatives. This funding facility could be “called on to support” continued operations for the company.
“The short-term initiatives detailed above only partially address the structural sustainability of the longs business. However, progress is being made on the medium and longer-term interventions,” Amsa said yesterday.
“Work is advancing through various work streams regarding local mineral beneficiation policies, enabling iron-ore beneficiation to supply regional demand; and advancing local supply for local demand in both key economic sectors and by state-owned enterprises.”
Overall, Amsa said South Africa’s economic activity had continued to be largely stagnant in the first quarter of this year, buffeted by uncertainties relating to the country’s national elections.
During that period, said Amsa, South Africa’s primary steel exports increased by 13%, reflective of the 14% increase in crude steel production.
However, “all of (this production) could not be consumed domestically” given the weak demand conditions.
BUSINESS REPORT