Evraz Highveld Slumps on Doubt Over Survival: Johannesburg Mover
Evraz Highveld Steel & Vanadium Ltd. (EHS), the South African unit of Russia’s largest steelmaker, fell the most in three weeks in Johannesburg trading after saying it may not be able to remain in business.
Evraz Highveld slumped as much as 11 percent, the biggest intraday decline since July 31, and was down 8.1 percent at 17 rand as of 12:39 p.m. local time. Trading volumes were more than four times the three-month daily average.
Labor unrest, falling steel prices and plant shutdowns are threatening operations, the Witbank-based company said yesterday after reporting a first-half loss. It’s among steelmakers struggling to restore profitability after economic stagnation in Europe and slowing growth in China cut demand while costs rose.
“There are matters that may cast significant doubt about the ability of the company to continue as a going concern,” Evraz Highveld said in a statement.
South Africa’s steelmakers, which include a local unit of ArcelorMittal, can produce about 7 million metric tons a year, exceeding demand of about 5.4 million tons. Consumption has been muted as weak economic growth keeps building projects on hold.
“In the sustained absence of major government infrastructure spending growth, domestic steel demand is expected to remain slightly below GDP,” Evraz Highveld said.
South Africa’s annualized growth in domestic product was 0.9 percent in the first quarter, the lowest since 2009. It may have expanded to 3.3 percent in the second, based on the median estimate of 16 analysts surveyed by Bloomberg.
Evraz Highveld and the National Union of Metalworkers of South Africa are in wage talks, the company said. Russian parent Evraz Plc (EVR) is also in talks to sell its 85 percent stake for $320 million, it said this month.
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