ArcelorMittal South Africa says the closure of its Longs business in Vereniging remains planned for September 30, 2024, unless supportive regulatory and policy measures are put in place.
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ArcelorMittal South Africa’s interim headline loss was virtually unchanged at R1.01 billion, non-core asset sales may be necessary and the closure of the Longs business in Vereniging next month is still on the cards.
All this bad news sent the beleaguered steel maker’s share price tumbling 7.4% on the JSE late Thursday afternoon to R1.00. The price has fallen steadily from R1.36 a year ago.
“Subdued market demand, disruptive rail and electricity interruptions (with a R358m cost impact), and aggressive import penetration placed significant pressure on volumes and margins. Domestic sales volumes fell 10%, and exports by 13%, while long steel imports, predominantly from Zimbabwe, rose sharply,” CEO Kobus Verster said.
He warned that should due diligence by the Industrial Development Corporation (IDC) not yield an outcome, non-core assets would be sold, including plant and equipment, Saldanha Steel, the Tubular Mill, Vereeniging Bar Mill, rail producer AMRAS, and non-core property, and the proceeds would be used to cut the debt and invest in the core Flats Business, to lift earnings and cash flow.
“We are committed to finding a solution that ensures the long-term sustainability of our business and the South African steel industry,” said Verster in the results.
Meanwhile, in the absence of a sustainable solution for the Longs Business, its final wind-down remained scheduled for September 30, 2025. The IDC funding for the Longs Business to the end of September had been applied to support productive capacity, preserve value chains, and protect employment, he said.
International and domestic steel markets remain under pressure, with some recent price improvements internationally. The group’s crude steel production increased by 5% to 1.3 million tons, reflecting improved asset utilisation in the Flats business.
Sales volumes fell 11% to 1.05 million tons. Realised steel prices were down 7%. The raw material basket fell 12%. Fixed costs declined 5% to R3.25bn. The earnings before interest, tax, depreciation, and amortisation loss came to R394m versus R221m loss at the same time last year. Net borrowings came to R4.62bn versus R5.11bn at the same time last year.
ArcelorMittal SA's directors said that several major economies, including the EU, US, UK, Canada, India, and Brazil, had implemented strong measures this year to defend their domestic steel sectors.
These included new safeguard duties, anti-dumping measures, and tariff-rate quotas aimed at curbing import surges, particularly from China, and the preservation of their critical steelmaking capacity.
“ArcelorMittal South Africa reiterates the urgent need for the government to act decisively in support of primary steel production as a strategic national asset,” Verster said.
The company is awaiting the outcome of multiple regulatory and policy processes, including Department of Trade, Industry and Competition reviews of the scrap-based Preferential Pricing System (PPS), the steel tariff framework, and the NERSA decision on a petition for reconsideration of Eskom’s rejection of a negotiated electricity price.
There were also talks with Transnet and the Competition Commission on the cost and reliability of rail services.
“Looking ahead, we remain focused on stabilising operations, supporting the Flats Business, and strengthening the foundation for future investment and localisation. The continuation of the Longs Business remains contingent on external support and favourable policy outcomes, with particular emphasis on reducing import pressure and restoring predictable, cost-competitive energy and logistics inputs,” the group said.
There were signs of international price improvements in both flat and long steel products.
“We appreciate the government’s willingness to explore strategic alternatives and look forward to working together to find a mutually beneficial solution,” said Verster.
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