Yuliya Fedorinova and Andre Janse van Vuuren
EVRAZ Highveld Steel and Vanadium plans to apply for bankruptcy protection as a slump in demand for the metal left it with insufficient funds.
Evraz’s board had filed a resolution to begin business rescue proceedings with the companies regulator, the unit said in a statement yesterday. Highveld had appointed business rescue officials, it said.
Evraz, which is partly controlled by billionaire Roman Abramovich, bought a quarter of Highveld from Anglo American in 2006. It raised the stake to 85 percent the following year, paying more than a combined $678 million (R8 billion at yesterday’s rate) for the transactions.
Moscow-based Evraz sought to sell the business in 2013, but failed to find a buyer as metals prices sank. The unit was hit by “weakened global steel and vanadium markets and a severe reduction of domestic steel demand”, Highveld said yesterday. Vanadium and steel fell more than 20 percent in the past year.
Protection from creditors would afford Highveld a way to consider whether it should continue implementing a turnaround plan and successfully re-establish itself, the producer said.
Highveld produced 642 405 tons of steel in 2013, it said in a statement in March last year. That means its production comprised 9 percent of South Africa’s total output of 7.2 million tons that year, data on the website of the nation’s Iron and Steel Institute show.
Highveld employed 2 303 people that year, according to data compiled by Bloomberg.
Industry struggles
ArcelorMittal’s local unit is the country’s largest producer, with 5.1 million tons in 2014.
The local steel industry was struggling as spending on infrastructure projects remained low, manufacturing declined and cheaper imports entered the market, Abrie Audie, a spokesman for the Pretoria-based steel institute, said.
Highveld had mainly supplied products to the construction industry, he added.
Manufacturing output, which made up 12.5 percent of gross domestic product in the fourth quarter, contracted 0.5 percent in February from a year earlier.
South Africa expanded 1.5 percent last year, the slowest pace since a 2009 recession.
“The market is not in a great place right now,” Audie said. “The combination of higher costs, lower-quality imports and a lack of activity in the construction space are hurting everyone.”
An agreement in which Macrovest 147 would buy 34 percent of Highveld for R289 million, which Evraz had announced in August, had lapsed, the local company said yesterday.
Macrovest is led by Barend Petersen, who is the executive chairman of De Beers Consolidated Mines.
Highveld had a market value of R164m at the close on Monday. The shares have been suspended in Johannesburg trading, after declining 47 percent since the beginning of the year.
– Bloomberg