SA’s biggest steel producer, ArcelorMittal SA (Amsa), is willing to invest its own money as a third-party to help Transnet improve the rail network that has forced many companies to transport goods via roads instead of railways.
The company told Transnet in discussions it is willing to add locomotives to the rail network, CEO Kobus Verster said on Thursday during a presentation of 2022 interim results.
“There is no legislative model for that yet, but we are working with experts to see what proposals we can put forward in trying to convince them to give third parties, like ourselves, access,” he said.
“Although locomotive availability has improved, it remains far below the contracted service levels and is still very volatile,” he added.
Problems with Transnet were reflected in Amsa reporting a 30% decrease in crude steel production to 1.1-million tonnes, worsened by a two-week strike that hit the industry and ongoing Eskom-related power blackouts.
A devastating flood in KwaZulu-Natal damaged the port, slowing down supply chains and complicating deliveries, particularly by rail, putting further pressure on a transport system already beset by a litany of issues.
Amsa said on Thursday it had “maximised road transport opportunities” and would continue to work with Transnet on issues of security and maintenance.
The steelmaker reported profit growth of more than a fifth for its half-year to end-June, benefiting from improved pricing and significantly lower debt costs.
Revenue rose 19% to R22.17bn to end-June and headline earnings were up 22% to R3.02bn, with the metals group reporting a 30% rise in average prices in rand terms, while its net debt more than halved. The company did not declare a dividend.
International steel prices rose substantially in May 2022 before they started correcting, while plants in China, the world’s largest steelmaker, have been idled to reduce high inventories and address weak orders.
Amsa, valued at R6.83bn on the JSE, used some of its cash generation to reduce debt, which fell 61% to a net R1.087bn, while finance charges fell 44% to R250m.
It had battled with a difficult operating environment, including a two-week strike that hit the industry, as well as ongoing load-shedding.
The group also expressed concern about the outlook for steel and commodities over the next 12-18 months amid inflation that is at multi-decade highs in major economies, as well as a heightened risk of global recession.
Amsa said its priorities will include improving its energy efficiency, with a focus on reducing fuel and gas consumption, and reducing fixed costs, such as overtime and subcontractors.
In morning trade, its shares were down 4.91% to R6.20, putting them on track for their worst day in two weeks. The shares, however, have been somewhat volatile in 2022, surging 16.7% earlier in July when it released a trading update. They closed down 4.14% at R6.25 on Thursday.
The shares have rocketed 16-fold over the past two years, coming under severe pressure in early 2020 as Covid-19 shuttered its operations and the global economic outlook was thrown into doubt. Amsa’s shares had traded at 25c in late July 2020.
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