CAPE TOWN: ArcelorMittal South Africa Ltd. expects its “overall liquidity” to “normalize at acceptable levels” after the continent’s biggest steelmaker raised prices in the first quarter. The stock rose. Higher international steel prices helped the company lift local ones to combat the cheap Chinese supplies that are hurting steelmakers around the world, the Vanderbijlpark, South Africa-based company said in a statement Friday. Even so, market conditions will “remain difficult” and the future sustainability of the company depends on local procurement by government and higher import tariffs, it said.
AMSA’s total steel sales climbed 3.1 percent to 1.1 million metric tons in first quarter from a year earlier. Liquid-steel production dropped 9 percent to 1.2 million tons, it said. “Following the recent increases in international steel prices, and subsequent steel-price increases by the company, it is anticipated that overall liquidity will normalize at acceptable levels,” AMSA said in the statement. The shares advanced 4.4 percent to 9.40 rand at 10:12 a.m. in Johannesburg, paring the drop over the past 12 months to 55 percent and giving the company a market value of 10.7 billion rand ($713 million).
AMSA, which employed almost 10,000 people in South Africa at the end of 2015, hasn’t posted an annual profit since 2010 as it struggles to compete with a surge in Chinese imports at prices that were as much as a quarter below local production costs. The company is calling on the government to buy local steel, and increase both tariffs and anti-dumping duties to make its business more viable. A proposal that local steel be used for state procurement and in government infrastructure projects has been submitted to the National Treasury, AMSA said.
The company’s Saldanha mill on South Africa’s west coast, built in a partnership with the nation’s government, remains viable at current prices, AMSA said. The facility’s future was put under review in February after it booked a writedown of 3.6 billion rand because of high local power prices and low steel prices.
“Saldanha Works needs alternative energy solutions such as access to affordable electricity which is vital to ensure its long-term sustainability,” AMSA said. “The company is at an advanced state of exploring various options in this regard including an independent gas-to-power producer located in Saldanha. Such a project relies strongly on government support for the importation of liquefied natural gas, and other regulatory approvals.”
