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ArcelorMittal South Africa says Saldanha steel plant will keep operating

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – ArcelorMittal South Africa’s Saldanha plant will keep operating, its chairman said on Wednesday, after the facility was placed under review earlier this year due to low steel prices and rising costs.

The plant, north of Cape Town is the newest in the company’s fleet and was opened in 1998 to focus specifically on steel exports, but low steel prices and high electricity and transport costs made it unprofitable last year.

“As the board, we are comfortable that we will have a Saldanha that is a good, healthy, performing business for a long period,” said ArcelorMittal South Africa Chairman Mpho Makwana.

The weaker rand and a pickup in West African steel demand have since ensured the plant’s viability, said acting Chief Executive Dean Subramanian.

South Africa’s currency lost about a quarter of its value from end of May last year until now, providing relief to some of the nation’s exporters.

Subramanian and Makwana were speaking at the release of report on ArcelorMittal’s contribution to South Africa’s economy, which also stated that the plant was responsible for 16 percent of the steel produced in Africa’s most industrialised country.

ArcelorMittal will start maintenance at Saldanha in August, which Subramanian said would increase the plant’s life by up to five years.


(Reporting by TJ Strydom; Editing by James Macharia)

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ArcelorMittal South Africa seeks power producer to build new plant

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JOHANNESBURG (Reuters) – ArcelorMittal South Africa is looking for an independent power producer to build an 800 megawatt gas-fired power station on land at its Saldanha steel works to help ensure its survival, Chief Executive Paul O’Flaherty said.

ArcelorMittal, which is reviewing its Saldanha operation partly due to high electricity costs, is willing to take as much as 220 MW of the plant’s capacity and the company is in talks with other industrial users and the government to sign long- term contracts for the rest.

Building an independent power plant is vital for the survival of Saldanha, O’Flaherty told Reuters, adding that state-owned utility Eskom’s rising electricity prices were unaffordable.

Electricity accounts for nearly a third of costs at Saldanha, the company’s newest and only export-focused plant, compared with less than 10 percent for the rest of the company.

“An environmental impact study is underway on our land,” O’Flaherty said adding that ArcelorMittal South Africa would not own the project.

On Friday, the company reported a slightly narrower loss than expected, sending its shares soaring.

There are also expectations that the government will give local steelmakers further protection beyond the 10 percent steel import tariff agreed in August.

Shares in ArcelorMittal South Africa were up a further 12.74 percent at 6.99 rand by 1200 GMT on Friday.


(Reporting by TJ Strydom and Thekiso Lefifi; Editing by Greg Mahlich)

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ArcelorMittal SA plans $323 mil rights issue, plus possible bond

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JOHANNESBURG (Reuters) – ArcelorMittal’s South African business plans to raise up to $323 million through a rights issue and is considering a $350 million bond issue, it said on Friday, as it battles falling steel demand, rising cheap imports and higher costs.

Steel companies around the world are grappling with a global supply glut that has sent producers’ share prices to their lowest levels in more than a decade and prompted the ArcelorMittal parent company to cut its full-year profit guidance on Friday.

ArcelorMittal SA, Africa’s biggest steelmaker, plans to raise between 4 billion rand and 4.5 billion rand ($322.77 million) from new shares that could dilute the current shareholding by 30 percent, it said after flagging an annual loss expected to be 11 times bigger than last year’s 277 million rand.

The cash call, at least 14 percent bigger than the company’s market capitalisation, is fully underwritten by the parent company.

The South African business is also considering issuing up to $350 million of bonds, finance chief Dean Subrimanian told Reuters.

“The bond would be subject to how much we raise on the rights issue,” he said.

The company said it would use the money to pay off debt, which stands at 3.2 billion rand, with the balance used for operational and capital expenditure.

Shares in ArcelorMittal SA fell as much as 12.6 percent to their lowest level in 14 years on Friday. By 1125 GMT, the stock had recouped some of the losses to trade 6 percent lower at 7.36 rand.



To cope with weak demand and rising costs, the company has said it would close parts of its Vereeniging Works plant and cut about 283 jobs as part of a review of its operations.

Along with industry rivals, ArcelorMittal SA has also asked the South African government to introduce import and anti-dumping tariffs to help them compete against cheap steel coming mainly from China.

“If we go, the industry goes.” Chief Executive Paul O’Flaherty told reporters on Friday.

ArcelorMittal SA reported 16 percent higher output in the quarter to Sept. 30, but sales to China fell 20 percent.

“Market conditions are expected to remain tough and all our units are expected to maintain their current below-capacity production levels,” it said

Separarely, the company and its raw material supplier Kumba Iron Ore have amended their supply agreement, under which ArcelorMittal SA paid costs plus 20 percent for iron ore.

Under the new deal, ArcelorMittal SA would pay an export parity price, or the price Kumba can expect to get if its product is exported, that would be discounted by as much as 7.5 percent depending on the market price of iron ore.

“This pricing amendment is commercially acceptable and sustainable for both parties,” Kumba Chief Executive Norman Mbazima said in a statement.


(Editing by Tiisetso Motsoeneng and David Goodman. By Zandi Shabalala. Reuters)

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