SA steel maker in talks to raise loan

ArcelorMittal SA says it is in talks to borrow R3.5bn as part of a new capital-raising plan. This sum is apart from a recent R4.5bn rights issue by the country’s biggest steel maker.

The group has not specified what the funds will be used for but has indicated it wants to refurbish existing facilities, including its Saldanha steel works in the Western Cape. This will include capital expenditure on plant and equipment to make production more environmentally friendly. The steel producer, which has plants across the country, lowered its net debt to R290m at the end of its financial year in December 2016 following the rights issue.

“ArcelorMittal is in the process of raising funds via a borrowing-based facility to the value of R3.5bn as part of a capitalraising for the entire business,” the company said on Thursday.

Like many steel makers across the world, ArcelorMittal SA has been hit by cheap Chinese imports and rising costs. The company reported a record loss of R8.6bn in financial 2015.

The group produces about 80% of SA’s steel. It was under unrelenting pressure from government for many years over mineral rights, black economic empowerment and also for collusive market conduct.

The group has pledged to limit job cuts, increase black ownership and invest in production and pollution improvements. This is in return for the state increasing tariffs on steel imports and buying domestic steel for infrastructure projects.

In addition, ArcelorMittal SA has paid a R1.5bn Competition Commission penalty for pricefixing and has costs relating to the closure of the Thabazimbi iron-ore mine, along with a recent impairment of R4.2bn, mainly for its Saldanha plant and Vereeniging melt-shop closure.

The group has said if it did not get further safeguard protection from the government — in addition to a 10% basic tariff protection — against imported steel, the local industry would probably collapse.