Johannesburg – ArcelorMittal, which earlier on Thursday warned that it expected its loss per share for the six months to June to rise by up to 1 400 percent, later in the day announced that it was exploring options to remain viable and did not rule out the possibility of plant closure.
“The South African market has been particularly impacted by the slowdown in local demand for steel products, which has resulted in increased imports of Chinese flat and long products into a declining local market,” the company said in a statement.
“In this economic climate and with the ongoing power, labour and consumable cost pressures, ArcelorMittal South Africa faces a difficult challenge.”
The company said it had explored a number of options to improve operational efficiency, including restructuring corporate services, “but the harsh reality is that profitability remains under pressure” the company added.
The company said it had hoped that higher steel volumes produced at the newly refurbished Newcastle furnace in the KwaZulu-Natal town would be consumed by the local market.
“However, since the commissioning of the Newcastle furnace, the local market has been affected by a surge in imports and local demand, combined with a challenging export market, has been weaker than expected,” the company said.
The company said it was now exploring additional cost saving measures. “While the closure of some plants cannot be excluded should circumstances not change, the immediate priority will be a focus on the alternatives that can be implemented to avoid such a situation.”
One of the options it was exploring was to optimise its long steel business by moving the production of billets from Vereeneging in the Vaal in Gauteng to Newcastle. The company said it was assessing the impact of such a move.
The company said it would be engaging with various parties, most notably unions, in reviewing the industrial footprint of the Vereeniging plant. This was in order to decide whether mothballing some plants or place them under care and maintenance would be prudent.
“Should a final decision be taken to proceed along this path, it will not be taken lightly,” the company added.
ArcelorMittal shares closed at R 15,31, down 0,71 percent on the day.
ANA