ArcelorMittal eyes Africa

With steel demand in SA almost at a 10-year low, ArcelorMittal is looking for export opportunities in the rest of Africa, says CEO Kobus Verster.

With steel demand in SA almost at a 10-year low, ArcelorMittal is looking for export opportunities in the rest of Africa, says CEO Kobus Verster.

The domestic steel demand looks set to be lethargic for longer, with economic growth being slow. The IMF this week lowered its economic forecast for 2018 to 0.8%, from 1.5%. It also lowered the 2019 forecast from 1.7% to 1.4%.

“Most steel firms require a reasonably strong local demand to be profitable. We are at the bottom of the cycle at this point in time and steel demand is severely impacted, with steel consumption in SA almost at a 10-year low,” Verster said.

The company wants a bigger market share in Africa as there is no evidence of growth in domestic demand, he said.

The foray into new markets is among steps the company is taking to improve financial and operational performance, including restarting the Vaal Meltshop plant in Vereeniging.

Verster said the company has prioritised reducing its cost base. “I think it is naïve to think that you can come out of a period of seven or eight years of losses and suddenly start making profits.”

The company’s “structured” cost reduction includes lowering costs by $50/ton, which would improve sustainability. In addition, ArcelorMittal wants to raise output, hence the decision to restart Vaal Meltshop.

The low steel demand is in contrast to the improvement in global demand in the past two years. “China has become much more responsible in its supply. Internationally, we are around 80% of global steel capacity utilisation. That has resulted in better prices. In the past two years, steel companies in Europe, US, Canada, China and South America are making good money,” Verster said.

Commenting on US tariffs on imported steel and aluminium, he said the company’s exposure to the US market is minimal.