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JOHANNESBURG - ArcelorMittal South Africa’s (Amsa’s) shares on the JSE on Friday tumbled 8.85% on the JSE to close at R5.97 a share after the steelmaker issued an operational update for the quarter ended September 30.

In the update, Amsa said it expected a slight improvement in steel demand, because of lower imports. It also expected higher international steel prices to boost export sales.

The company recorded an 11% increase in liquid steel production.

“This improvement was mainly due to higher production at Saldanha as a result of the mini reline in (the third quarter) of 2016. However, this has been partly offset by lower production at Newcastle, following a cutback as a result of high input costs and poor market conditions,” said Amsa chief executive Wim de Klerk.

Amsa said local sales increased by 49 000 tons (6%), mainly because of higher demand for flat products as a result of the implementation of safeguards on hot rolled coil since the beginning of August.

“Long product sales decreased by 15.5% following strong competition from scrap producers in relation to manufacturers using raw materials in their production process,” the company said.

It said export sales increased by 66 000 tons (48.5%). However, a stronger rand/dollar exchange rate muted the higher international demand, highlighting the ongoing impact the volatile exchange rate has on our financial results, said De Klerk. Amsa said commercial coke sales were 3 000 tons (6.5%) higher.

De Klerk said local sales would continue to be under pressure.

“This is mainly as a result of lower steel demand in an environment of poor economic conditions and limited investment in infrastructure development. However, demand is expected to be slightly higher in quarter four, as we continue to see the impact of decreasing imports. Export sales are also expected to be higher due to better international prices,” he said.

Amsa reiterated its call for the protection of the downstream steel industry from cheap finished and semi-finished products that are being imported.

“We continue to engage the government and the downstream industry on the implementation of safeguards and other initiatives to stimulate local demand,” said De Klerk.

He also warned of the impact of high electricity and rail prices, which he said would affect the viability of some of the company’s plants.

Amsa said it would make a presentation at this week’s public hearings on Eskom’s application for a 19.9% tariff increase. The company said it would present a case for sustainable steel production in South Africa.

In its 2016 annual report, Amsa said its electricity bill was R2.5 billion. “Some of this electricity is bought via municipalities and not directly from Eskom,” Amsa said.