Amsa acts on poor re­sults

Steel gi­ant cites high costs

The Star Early Edition - - BUSINESS - Di­neo Faku

ARCELORMIT­TAL South Africa (Amsa), Africa’s steel gi­ant, said as it re­leased poor re­sults yes­ter­day that the high cost of elec­tric­ity was threat­en­ing its com­pet­i­tive­ness and it would meet the Na­tional En­ergy Reg­u­la­tor of SA (Nersa) next week to dis­cuss low­er­ing elec­tric­ity prices.

Amsa re­ported a R714mil­lion and R1.161 bil­lion in­crease in its op­er­at­ing and head­line losses, re­spec­tively in the first half of this year, ow­ing to higher cok­ing coal and iron ore costs, the strength­en­ing of the rand against the dol­lar and con­tin­ued weak­en­ing of the do­mes­tic econ­omy.

Rev­enue in­creased by 12.6 per­cent to R19.15bn, mainly due to an 18.9 per­cent in­crease in av­er­age net re­alised steel prices.

Speak­ing at the re­sults pre­sen­ta­tion held at the JSE yes­ter­day, Amsa chief ex­ec­u­tive, Willem de Klerk, said the com­pany would ne­go­ti­ate with the likes of Eskom and Transnet for cheaper prices. This af­ter the gov­ern­ment pre­vi­ously awarded tar­iffs to shield against cheap Chi­nese im­ports.

“Our Sal­danha plant, as an ex­am­ple, where we are pay­ing 180 per­cent more than the most ex­pen­sive plant in the ArcelorMit­tal group in­ter­na­tion­ally. It goes up from $0.6 cents a kW/h to 0.22c a kW/h. We have been talk­ing to Eskom for a year to try to get the num­bers re­duced… Last week we were told to go di­rectly to Nersa. Our first meet­ing with Nersa is next week,” he said.

Re­al­is­tic prices

“We’ll have to get re­al­is­tic prices for busi­nesses in dis­tress like the steel in­dus­try.”

In terms of Transnet, De Klerk said Amsa had for the last five years paid a tar­iff that was 50per­cent more than the pro­ducer price in­dex.

“You can­not be sus­tain­able with the rest of the world when it costs you more to take any prod­uct a few kilo­me­tres in South Africa than it is to bring a prod­uct into South Africa from China,” he said. Amsa plans to dis­pose of non-core as­sets, im­prove pro­duc­tiv­ity and in­tro­duce struc­tural changes, in­clud­ing its New­cas­tle plant.

The loss from op­er­a­tions in­creased by R714m to R983m, pri­mar­ily due to the higher coal and iron ore prices.

How­ever, Ger­hard Papen­fus, the chief ex­ec­u­tive of the Na­tional Em­ploy­ers’ As­so­ci­a­tion of SA, said Amsa’s huge losses were tes­ti­mony to the un­sus­tain­abil­ity of Amsa as a busi­ness due to their age­ing plant and high pro­duc­tion cost.

He said Amsa’s cost of pro­duc­tion for hot rolled coil (base) now stood at $685 (R8915) a ton com­pared with the world av­er­age trad­ing at $433 a ton.

The mess

“They jus­ti­fi­ably blame the mess that the South African econ­omy finds it­self in as a re­sult of the credit down­grades and neg­a­tive growth, for re­duced pro­duc­tion, but they omit to men­tion that plant fail­ures in De­cem­ber last year at Van­der­bi­jl­park caused huge back­logs even amidst re­duced de­mand.

“The lat­est re­sults just con­form the fact that the 10 cus­tom du­ties, fol­lowed by mul­ti­ple price in­creases, which se­verely prej­u­diced the steel down­stream, had lit­tle ef­fect on Amsa’s per­for­mance,” he said.

Amsa said flat liq­uid steel pro­duc­tion de­creased by 83000 tons and plant util­i­sa­tion de­creased to 79 per­cent com­pared with 83per­cent last year due to a rup­ture of the stove at blast fur­nace C at Van­der­bi­jl­park works in the fourth quar­ter of last year, and the blast fur­nace D in­ci­dent that re­sulted in a de­crease in pro­duc­tion of 80 000 tons.

Amsa’s shares rose 3 per­cent to R5.15 on the JSE yes­ter­day.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.