[miningmx.com] – PRESSURE on steel sales that forced Evraz Highveld Steel to the brink of bankruptcy may force its larger rival, ArcelorMittal South Africa (AMSA), into the closure of its Vereeniging Works.
The company said in a statement today that it would review Vereeniging Works with “… a view to considering alternatives and deciding on whether mothballing some of its plants and placing others under care and maintenance would be a prudent decision”.
The initial part of this process was expected to be completed by end-August.
Paul O’Flaherty, CEO of AMSA, said the company’s efforts at saving the Vereeniging Works – the oldest in South Africa having been founded in 1911 – was also a battle to sustain the country’s steel-making industry which urgently needed the protection of government-backed tariffs to deter up to 1.6 million tonnes a year in cheap imports.
“We have requested that the steel industry be protected,” said O’Flaherty in a media conference call. “We are talking about steel industry that on a primary basis directly provides 200,000 jobs. That is what we are talking about.
“Without the primary steel industry, the industrialisation in the National Development Plan would be extremely difficult,” he said. The South African government had given his company “a sympathetic ear”, he added.
“If we had to shut the entire steel industry, it would take ten to 15 years to rebuild it. I don’t believe that is an option,” said O’Flaherty.
First, however,the company will consider additional optimisation plans of the Vereeniging Works after an effort to trim corporate costs failed to take the group into profit, it said. AMSA said earlier today it could post an interim share earnings loss of 30 cents.
These measures may include “… moving all billet production from its Vereeniging Works to the newly relined and more efficient Newcastle furnace,” said AMSA.
“The South African market has been particularly impacted by the slowdown in local demand for steel products, which has resulted in increased imports of Chinese flat and long products into a declining local market,” said AMSA.
“In this economic climate and with the ongoing power, labour and consumable cost pressures, ArcelorMittal South Africa faces a difficult challenge,” it said, adding that imports and lower domestic demand was eating into margins.
It had hoped that a larger portion of domestic demand would be consumed from the relined Newcastle Works.
“However … the local market has been affected by a surge in imports and local demand, combined with a challenging export market, has been weaker than expected,” the company said.
Evraz Highveld said on July 21 that it planned to suspend parts of its operation to save costs whilst it was is in business rescue.
