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‘Lower power prices’- Amsa

Business Report
Johannesburg - Loss- making ArcelorMittal South Africa (Amsa), Africa’s biggest steel producer, has ­applied to the National Electricity Regulator of SA (Nersa) to implement a better ­electricity-pricing model for the struggling steel industry and was considering cutting the production of long steel at its Newcastle plant because of low demand.

“We have asked Nersa to look at a different tariff for the steel industry. If we do not get the answer we want, we will continue to struggle as an industry,” Amsa’s chief ­executive, Wim de Klerk. told a press conference in Johannesburg on Monday.

The move is the latest attempt by the company to convince the state to intervene on behalf of the struggling domestic steel industry. Amsa led the lobby that resulted in the government signing off on import duties on certain steel products to protect the industry from the surge of imports.

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ArcelorMittal South Africa is considering cutting production of long steel products at its plant in Newcastle because of low demand. It says the local market cannot absorb the products and it cannot export them because of competition from China.Photo: Simphiwe MbokaziArcelorMittal South Africa is considering cutting production of long steel products at its plant in Newcastle because of low demand. It says the local market cannot absorb the products and it cannot export them because of competition from China.Photo: Simphiwe Mbokazi

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The steel industry has become uncompetitive because of the dumping of cheap Chinese imports, the subdued economic outlook and low demand, which have resulted in the collapse a number of players, including Evraz Highveld, which went into business rescue last year.

De Klerk said Amsa was holding talks with Eskom over better pricing as part of a plan to deal with its biggest costs: electricity, transport, labour and coal.

“It will be difficult to be sustainable if we do not do anything about costs. As a result, we have embarked on negotiations with Eskom,” De Klerk said. “We are a business in distress, and we cannot continue to pay these prices. We need better prices for electricity.”

De Klerk said electricity comprised 34percent of the costs at its plant at Saldanha, and Amsa’s power bill was R2.6billion a year.

Regarding cutting production at its Newcastle plant, which employs 2800 people, De Klerk said the company was in a difficult position.

“We assured government that we will do everything in our power not to shed jobs, because we understand how important jobs are in the country. The cutting of production of long steel products will possibly affect people,” he said.

“We have to look at options and consider what is the footprint that we want as a company and a way that it will impact people.”

De Klerk said the local market could not absorb the long steel products made at Newcastle and the company could not sell the products internationally because of fierce competition from China.

“We have seen a lot of cheap imports, and our economy is not growing. We had a downgrade, which [means there is] less money available for government to introduce infrastructure projects. I am not convinced that the money that was available for infrastructure development is available,” he said.

BUSINESS REPORT ONLINE

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