South Africa’s largest steel maker has warned that without urgent government protection, it will be a matter of time before local production is no longer viable. (David Harrison/M&G)
Steel giant Arcelor-Mittal reported that steel consumption decreased by 2% in the first half of 2019 and is now at 70% of the steel consumption of the first half of 2008 – a 10-year low.
It says increases in electricity, port and rail tariffs have already have made the group “uncompetitive internationally,” adding R168 million of costs compared to the first half of last year.
The surge in iron ore costs and administered costs meant it slipped from a headline profit of R54-million previously to a headline loss of R638-million.
Overall revenue decreased by 5% to R21.7-billion for the first half.
The company says it plans to mitigate further losses by cutting jobs and focusing on improving cash flows. It says cash preservation and generation, and cost control remain its primary focus areas moving forward. It also intends engaging key stakeholders to reduce the electricity, rail and iron ore costs.
“To get our cost competitive levels correct – driving out business transformation programme and reduce our costs is in the centre and a precondition for any of our other strategic elements,” said Kubos Verster chief executive officer of ArcelorMittal.
Last month the company said it will cut 2 000 jobs this year but Verster told the Mail & Guardian on Friday this number might increase.
“We are officially in a consultation process with unions and the numbers can be more than 2 000.” “But obviously the consultation process will determine the exact number,” he added.
The process is envisioned to take around four months.
Its performance has also been impacted by imports of steel from Asian countries and Russia, the results showing that steel imports for the six months are 18% higher with flat product imports increasing by 23%.
These increases consist mainly of hot rolled coils imported from China, Russia and Taiwan. The company says its numbers reflect a challenging operating environment during this period.