ArcelorMittal makes first profit of this decade

Steelmaker ArcelorMittal has announced its first profit this decade. In the year ended December 31 2018, ArcelorMittal increased revenue by 16% and improved earnings before interest, tax, depreciation and amortisation from a loss of R315 million to a R3.6 billion profit.

This excluded income from the sale of MacSteel in which the group had a 50% stake. That was used to reduce net debt from R3.2 billion to R475 million.

ArcelorMittal CEO Kobus Verster said the improved results were largely due to stronger international prices and higher sales volumes. The local market remained subdued, with a 4% decrease in local steel consumption, but steel demand and prices in China, Europe and the US improved, he said. Markets in Africa, especially East Africa, performed well on the back of infrastructure investment.

Imported products, however, remained a threat in SA (and the rest of Africa), despite some protective measures instituted by government. Verster said ArcelorMittal was constantly engaging government about the matter.

The group was eyeing a target of $50 per ton savings by 2021 and said it was already making progress by removing bottlenecks at plants. It could amount to R3 billion in savings per annum, said Verster.

But there was a risk that sharp increases in electricity tariffs and other administered prices like rail and port costs could nullify those gains.

ArcelorMittal was submitting applications to Eskom for special pricing arrangements for its Vanderbijlpark, Vereeniging, Saldanha and Newcastle plants.

The National Energy Regulator of SA granted Silicon Smelters and Sublime Technologies (in 2017 and 2018 respectively) discounted tariffs for a limited time on condition they used a specified volume of electricity. The approvals were given on the basis the companies were in distress, aiming to save jobs.

Government has finalised its framework for such short-term negotiated pricing agreements and Eskom has so far received five applications from large users, including ArcelorMittal.