ArcelorMittal South Africa Gains From Higher Steel Prices

  • Steelmaker calls on government to buy locally made products
  • First-quarter sales advanced 3.1% to 1.1 million tons

ArcelorMittal South Africa Ltd. said most of its production is profitable after the continent’s biggest steelmaker raised prices in the first quarter to track international ones.

“Based on where prices are, the bulk of our products are cash-flow generative,” acting Chief Executive Officer Dean Subramanian said on a conference call Friday. Even so, cheap Chinese supplies that are hurting steelmakers around the world will ensure market conditions “remain difficult,” he said.

AMSA hasn’t posted an annual profit since 2010 as it struggles to compete with a surge in Chinese exports at prices that were as much as a quarter below local production costs. The company is calling on the government to buy local steel, and increase both tariffs and anti-dumping duties to make its business more viable. ArcelorMittal, which owns about two-thirds of the African business, on Friday said it sees a broad recovery in the global steel market.

AMSA’s total steel sales climbed 3.1 percent to 1.1 million metric tons in the first quarter from a year earlier, the Vanderbijlpark, South Africa-based company said in a statement. Liquid-steel production dropped 9 percent to 1.2 million tons, according to the firm, which employed almost 10,000 people in South Africa at the end of 2015.

Share Price

The shares advanced as much as 5.3 percent before paring gains to trade little changed at 9.02 rand by 2:28 p.m. in Johannesburg. The stock has dropped 57 percent over the past year, giving the company a market value of 10.3 billion rand ($689 million).

The government has approved tariff increases on most of the products AMSA requested, while the company’s proposal that local steel be used for state procurement has been submitted to the National Treasury, Subramanian said.

AMSA’s Saldanha mill on South Africa’s west coast, built in a partnership with the nation’s government, remains viable at current prices, it said. The facility’s future was put under review in February after it booked a writedown of 3.6 billion rand because of high local power costs and low steel prices.

“Saldanha Works needs alternative energy solutions such as access to affordable electricity which is vital to ensure its long-term sustainability,” AMSA said. “The company is at an advanced state of exploring various options in this regard including an independent gas-to-power producer located in Saldanha.”

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