IDC to make final decision on new steel mill with Hebei

SOUTH Africa’s Industrial Development Corporation (IDC) would make a final decision on whether to build a new steel mill with Hebei Iron & Steel Group by the middle of next year, the IDC said yesterday, even as producers in the country were closing operations and cutting jobs amid low demand and rising imports from China.

Abel Malinga, the head of mining at the state-owned company, said the IDC was finalising a feasibility study of a proposed $5 billion (R68bn) mill that would produce as much as 5 million tons of steel annually, or about 71 percent of South Africa’s current capacity.

Scaw Metals Group, in which the IDC holds a 74 percent stake, incurred a loss of R1.1bn in the year to March and is planning to cut 1 000 jobs, according to a presentation by the developmentfinance institution.

Job cuts

“It is not an ideal environment to talk about new steel capacity of that magnitude in South Africa knowing very well there’s about 28 percent oversupply worldwide,” Malinga said. “We know its not a cool thing to do right now, but the kind of planning and investment we are looking at is long term.”

South Africa’s largest steelmakers including the local unit of ArcelorMittal have announced plans to cut a total of more than 2 400 jobs as a surge in subsidised Chinese imports supplied at prices as much as 25 percent below local production costs have squeezed producers’ margins.

Struggling to compete, the companies have asked the government for more protection measures after the introduction of a 10 percent tariff on galvanised, aluminium-zinc coated and colour-coated steel last month.

Other steel producers risked going out of business as they failed to invest in efficient technology.

The new mill would produce steel cheaper than other incumbents through utilising its own sources of inputs including iron ore and coking coal in a plant equipped with new technology, Malinga said.

Other steel producers risked going out of business completely as they failed to invest in more efficient technology, he said, adding that Chinese imports would decrease once economic growth accelerated in that country.

If the IDC’s venture with Hebei proceeded, it was forecast to produce its first steel by 2020, Malinga said. In February, the company estimated first production by 2017.

He said the mill would be located near Witbank or Richards Bay. – Bloomberg COMMUNITY protests that disrupted work at Anglo American Platinum’s (Amplats) Mogalakwena mine in Limpopo had ended after costing the operation 8 600 ounces in lost production, the company said. The protests ended after Mineral Resources Minister Ngoako Ramatlhodi held talks with representatives from nearby communities, the company said in a statement. An Amplats spokeswoman confirmed that employees at the Limpopo mine had returned to work on Saturday after being prevented from doing so by protesters blocking roads. Amplats said last week that the protesters had been demanding jobs at Mogalakwena, a mechanised operation that does not require as big a workforce as a conventional mine. In the first half of this year, Mogalakwena produced just more than 200 000 ounces of platinum, about 18 percent of group output. – Reuters

AFRIMAX

AFRIMAX Group had raised $120 million (R1.6 billion) to fund the expansion of a high-speed broadband network in Africa, the mobile internet firm said, the latest firm to jockey for position in the continent’s fast-growing consumer internet market. The money has been raised from a consortium of investors led by Japan’s Mitsui. Other investors were Spain’s Torreal and the International Finance Corporation, an investment arm of the World Bank. Telecoms and internet companies are expanding in Africa to take advantage of growing demand for data-heavy services as more affordable smartphones encourage consumers to browse the internet, stream videos and download applications. Netherlands-based Afrimax runs high-speed 4G networks in Uganda, Tanzania and the Democratic Republic of Congo. It follows in the footsteps of Simile Telecoms, which raised $365m last week to extend its existing 4G LTE mobile network in three African countries. – Reuters

PALLINGHURST

PALLINGHURST Resources says it has increased its net asset value over the past six months but it reported a sharp fall in net profit. This result comes amid a difficult trading environment where commodity prices have been at multi-year lows and nearly all listed companies invested in the sector experienced major share price falls. In its interim report and trading update for the six months to June, the group said it had seen decreases in some of the carrying values of its assets but these declines had been more than offset by increases in the value of other assets in the Pallinghurst portfolio. At the end of June, Pallinghurst’s net asset value was $519 million (R7 billion), up 10 percent from $471m at the end of December. The company’s net profit fell by 97 percent in it latest interim period to $3.2m from $103.6m in the year to June 2014. It said its Sedibelo Platinum Mines achieved record dispatches of platinum group metals of 82 500 ounces for the half year. Shares closed 0.23 percent up at R4.25. – Banele Ginindza