ArcelorMittal SA blames rising costs for hefty interim loss

ArcelorMittal SA says a surge in administered costs, including electricity and rail tariffs, has made it uncompetitive on the global stage as the steel producer slipped to a half-year headline loss of R638m.

“The group’s strategic imperative of improving its cost competitiveness against, in particular, China-sourced steel and that of domestic producers is being severely hampered by structural disadvantages associated with unaffordable electricity, port and rail tariffs and raw-material costs,” the company said.

These “unaffordable” increases added R168m to its cost base in the interim period.

ArcelorMittal SA warned in July that more than 2,000 jobs may be on the line because of losses stemming partly from cost hikes.

The group said on Thursday revenue in the six months to end-June edged 4.9% lower to R21.7bn, partly due to lower steel prices. The surge in iron-ore costs and administered costs meant it slipped from a headline profit of R54m previously to a headline loss of R638m.

ArcelorMittal SA said steel consumption in SA had declined further amid the country’s economic malaise.

Apparent steel consumption was now at just 70% of the level seen in the first half of 2008, implying a 10-year low.

Despite this, imports rose, with the company saying more import tariff protection was needed.

But the group said international steel prices were expected to improve, while raw material costs should fall.

Nevertheless, domestic steel demand would only rebound when “real infrastructure spend and economic growth improve”. 

“ArcelorMittal SA has implemented various initiatives to return the group to profitability and to generate positive cash flows,” it said. “The group will continue to drive interventions to address the challenges it faces as part of its turnaround and strategy implementation.”

In a separate announcement, the company said it would buy the Highveld Structural Mill from Highveld, paying R150m initially, with another R150m due at a later stage if certain requirements were met.

hedleyn@businesslive.co.za