ArcelorMittal South Africa, a unit of the world’s biggest steel maker, on Wednesday said it posted a full-year headline loss on low demand for steel, but forecast a return to profitability on growing demand.
Sales fell 12% on weak demand and it reported a R440-million headline loss, but said restocking of steel products by its customers would help it rebound.
“While domestic steel prices remain subdued, we are cautiously optimistic that global demand will continue to show steady improvement during the year,” ArcelorMittal chief executive Nonkululeko Nyembezi-Heita said in a statement.
ArcelorMittal South Africa predicted headline earnings in the first quarter to the end of March would be an improvement on the fourth quarter, due to higher production, increased sales and improved prices, but a stronger rand could erode some gains.
The company said it may consider adjusting prices of its steel products, but did not give details.
Nyembezi-Heita said worsening in transport infrastructure in South Africa, a proposed annual 35% tariff raise by power utility Eskom for the next three years, and a possible power shortage were a threat to the company’s business.
“We cannot afford the level of increase that Eskom is suggesting … it is causing shockwaves, it is simply unaffordable,” Nyembezi-Heita told journalists during a conference call.
Nyembezi-Heita forecast her firm’s capacity production utilisation of steel products at 84% of total capacity in the first quarter of this year.
She said the company — chosen as one of two preferred bidders for Zimbabwe’s steelmaker — Zisco Steel was still waiting for a final decision on the winner of the bid.
Zisco has two furnaces with a capacity to produce between 750 000 and one million tonnes of steel. — Reuters