ArcelorMittal South Africa says profit fell 62% on weak steel prices, demand

ArcelorMittal South Africa’s full-year profit declined by 62% due to weaker steel prices and demand at a time when costs were driven up by significant price increases of key inputs such as coal, the company said at the release of its latest financial results.

The unit of Luxembourg-based ArcelorMittal, the world’s No.2 steelmaker, said its headline earnings per share (HEPS) – the main profit measure in South Africa – fell to R2.34 per share in the year to December 2022, from R6.15 the previous year.

“Globally, steel prices declined at a faster rate than raw materials as particularly evident in the second half of the year,” ArcelorMittal South Africa said.

On the other hand, it added, international prices of coking coal, a key ingredient in steelmaking, had gone up by 62% year-on-year in dollar terms.

Steel consumption declined by 12% to 4 million tons last year in South Africa, reflecting low market activity in key steel-consuming sectors, high market inventory levels the required destocking, project delays due to rising interest rates and overall weaker business confidence, the company said.

Therefore, the company added, it was adjusting production by idling plants, consolidating production at the most productive facilities and reducing fixed costs.

One blast furnace at Vanderbijlpark was idled in November 2022 and only restarted in early February 2023 once it was commercially supported by the order book. In the long steel business, following the restart of the Newcastle blast furnace, the Vereeniging electric arc furnace was idled in October 2022 as the combined production of Newcastle and Vereeniging is way more than current demand. Further strategic asset footprint optimisation will take place in 2023 within the long steel business as certain operations in Pretoria and Vereeniging are idled and consolidated, with products from these mills moved to rolling operations in Newcastle to improve mill capacity utilisation and productivity.

Vanderbijlpark 200MW renewables project
AMSA expects initial construction work on a 200MW renewable-energy plant in Vanderbijlpark, to begin during the fourth quarter of 2023, with a feasibility study into the solution nearing completion.

The solar photovoltaic project is expected to cost the company R4 billion to construct and the facility will be built and operated by a special purpose vehicle (SPV) owned by AMSA and the ArcelorMittal Group, which has agreed to support the funding of the project.

Besides investing in its own electricity supply, AMSA is also studying the viability of pursuing a third-party rail solution, given that its operations are continuing to be negatively affected by the collapsing performance of Transnet Freight Rail (TFR).