JOHANNESBURG – ArcelorMittal South Africa (Amsa) has said it is fighting losing battles behind the scenes against over-regulation and high production costs, including that of electricity, as the six months to June indicate a bruising period in which it made a R222 million loss from a R1.2 billion profit a year earlier.
At the results presentation yesterday, chief executive Kobus Verster said he was concerned that electricity, port and rail tariff hikes had already made the group uncompetitive internationally.
“These unaffordable increases resulted in R168m in additional costs against the comparable period. “Winter tariffs add on average R110m to the monthly electricity cost of the company,” said Verster. Verster said the company had so far received negative feedback from Eskom, which had turned down its proposed tariff reduction, adding that Amsa planned to convince Eskom otherwise.
“They are saying their short-term marginal cost is equivalent to where their tariff is. Hence there is no opportunity for tariff relief. We are busy challenging the process and we are speaking to the company,” Verster said.
Amsa last month said it would embark on a restructuring exercise that would possibly result in 2 000 job losses, citing a difficult domestic economic environment. The group warned that South Africa’s steel consumption was at a 10-year low as it posted a headline loss of R638m compared to headline earnings of R54m for the same period last year on lower sales prices and volumes, higher electricity, rail and port tariffs, and sharp increases in iron ore.