Johannesburg - ArcelorMittal South Africa said it might return to profit for the first time since 2010, provided the government introduced more tariffs in the next three months that would protect the continent’s biggest steel producer from cheaper imports.
“With the expectation that the safeguard duties will be in place by the end of the third quarter in 2016 or shortly thereafter, the board remains of the view that there is a reasonable prospect of the company returning to profitability in the medium term,” the Vanderbijlpark-based steelmaker known as Amsa said on Friday.
Amsa, which employed almost 10 000 people at the end of 2015, is struggling to restore profit, because of a surge in Chinese imports at prices 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 antidumping duties to make its business more viable.
Loss widened
The appeal comes as the company’s loss widened in the six months to June to within a range of 42 cents to 46c a share, compared with 28c a year earlier, it said.
This is an improvement on the loss of R21.25 a share reported for the six months to December 31, because the continent’s biggest producer was able to lower costs and raise prices.
“The local steel industry continues to be threatened by imports entering the market, primarily from China, despite the positive progress made on duties,” it said. “Safeguard duties, a fair pricing mechanism and the rest of the initiatives committed to by the government regarding the use of local steel for government infrastructure projects, are necessary to ensure the company and the steel industry as a whole remain viable.”
The government introduced import duties on steel imports at Amsa’s request, which resulted in higher capacity usage at the company’s Vanderbijlpark and Newcastle plants. The producer has asked the country’s International Trade Administration Commission to approve five safeguard duty applications, with the request for tariffs on hot-rolled coil steel already pending approval.
Amsa is looking at introducing a low-cost energy solution, potentially using gas, for its Saldanha mill, built in partnership with the government.
The facility’s future was put under review in February after it booked a write-down of R3.6 billion because of high local power costs and low steel prices. The increase in international prices has provided temporary reprieve for Saldanha and it has allowed the operation to run at improved capacity levels, compared with the second half of 2015.
ArcelorMittal shares declined 1.1 percent to R8.11 at the close of the JSE on Friday.
BLOOMBERG