SA’s largest steel manufacturer, ArcelorMittal SA (Amsa), has delayed closing its ailing long-steel business for a month to allow further talks with the government on rescuing it.
The JSE-listed group, which received a R380m interest-free loan from shareholder the Industrial Development Corporation (IDC) for the delay, is expected to make an announcement in the second half of February.
“No meaningful improvement in the domestic steel market is anticipated for the next six months. Consequently, actions by the SA government to support the industry and protect it against unfair trade and policy practices are vital,” it said.
“The longs business will only continue with financial support as the company does not have the appetite to bear any financial risk associated with the continued operations of that business.”
The delay is aimed at enabling the fulfilment of the higher-than-expected outstanding order book, prioritising automotive and seamless tube customers, the group said.
Also on the day Amsa reported a wider annual loss than in the previous period as the company and the steel industry faced their greatest challenge since the financial crisis of 2008/09.
The group reported a headline loss of R5.1bn, or 458c per share, for the year to end-December, from a headline loss of R1.89bn, or 170c per share, a year ago.
The attributable loss for the year widened to R5.84bn from a loss of R3.92bn previously.
No dividend was declared.
The group, which is preparing to focus on flat-steel plate production, said international steel-to-raw material price spreads remained under pressure.
“Countries and many regions including Brazil, India, the US, EU, and those in Southeast Asia which regard their steel industries as strategic, have rushed to protect their industries against unfair trade and policy practices. Near record-high China exports at subsidised-enabled low prices continue to be the catalyst for this,” it said.
Revenue fell 7% to R38.6bn, mainly due to a 6% decrease in total steel sales volumes, a 4% fall in net realised steel sales prices, partly offset by a 7% increase in nonsteel and other revenue.
The longs business wind-down charge, severance packages charge, writedown of inventory and impairment charges amounted to R1.81bn.
The company’s sales volumes decreased by 6% and the overall realised steel price in dollar terms declined 3%.
Crude steel production fell 6% to 2.59-million tonnes for 2024 due to blast furnace instability in the second quarter, it said.
“Pending any further clarity around the future of the longs business, a notice in terms of the Labour Relations Act has been issued and the consultation process regarding the contemplated large-scale retrenchment process as detailed in the January 6 2025 announcement, has commenced. Resizing of the fixed cost structure of the company is vital in the current market environment,” it said.
The key focus areas for the first half of 2025 would be advancing discussions with the government on the longs business and the placing of the flats business and market coke operations on a more sustainable financial footing with an intense focus on improving reliability, quality, on-time delivery and customer service, it said.
Amsa will also focus on resizing the fixed cost structure of the company and advancing the bankability of its high-payback investment portfolio, which includes addressing balance sheet resilience, through a potential recapitalisation.
By market close Amsa’s share price had fallen 12.5% to 98c.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.