ArcelorMittal Sees Diverging Outlook for South Africa

ArcelorMittal South Africa Ltd. said it sees diverging growth prospects for the country and the rest of Africa as labor strikes and a decline in manufacturing weigh on its outlook for the continent’s second-largest economy.

Large infrastructure investments in sub-Saharan Africa, including spending on transport, energy and housing projects continue to offer market opportunities for steel, the Vanderbijlpark-based unit of the world’s largest steelmaker said in a statement today. New investments in the oil and gas industries are also stimulating steel demand, it said.

In contrast, cheap imports are flooding the South African market, while high costs limit steelmakers’ prospects for exports, said AMSA, as the unit is also known. “It is still worrying times.”

South Africa’s purchasing managers’ index, which indicates activity in the manufacturing sector, measured 45.9 points in July, compared with 46.6 points in June, after the largest union representing metalworkers embarked on a month-long pay strike. A reading of less than 50 points shows a contraction.

“The much anticipated positive story for the steel market will depend on the government’s infrastructure investment implementation, which as of now is moving at a slow pace,” AMSA said.

South Africa will spend 847 billion rand ($79 billion) on infrastructure in the next three years, former Finance Minister Pravin Gordhan said in February.

The company today reported a loss excluding one-time items of 82 South African cents (8 cents) a share for the six months through June, compared with a loss of 37 cents a share a year earlier.

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