ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL
ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL

Africa’s largest steelmaker, ArcelorMittal SA, which said in November that it would shutter its Saldanha operation, swung to a R4.67bn loss in its year to end-December due to a sharp downturn in steel demand in the wake of the US-China trade war.

The loss is more than three times the group’s market capitalisation of R1.4bn, with the steelmaker also saying that weak economic growth in SA and rising local electricity costs  played a role.

The global downturn in steel demand was “faster and deeper than anticipated”, the steelmaker said, and there had been a breakdown in the correlation between steel prices and raw material costs during the year.

The cash cost per tonne of liquid steel produced increased 12% to end-December, while sales volumes decreased 8%, the company said.

“Internationally, steel producers are struggling to respond fast enough to the dramatic change in the business environment compared to 2018,” the statement read.

The company expects a loss of R4.676bn to end-December, from a profit of R1.37bn previously.

After reporting headline earnings of R968m in 2018, the company now expects a headline loss of R3.625bn. Net writedowns for the year amounted to R1.4bn compared with R10m in 2018.

Revenue to end-December 2019 fell 9% to R41.4bn, with the group also reporting dramatically weaker trading conditions in SA.

“Increases in electricity, port and rail tariffs had a detrimental impact on the company’s international competitiveness,” the company said.

ArcelorMittal SA had said in November it would shutter its Saldanha operation, after concluding it had lost its structural competitive cost advantage.

The group said on Thursday the wind-down was expected to be completed by the end of the first quarter of 2020.

In morning trade on Thursday, the group’s share price was up 3.2% to R1.29, having lost 90.88% of its value over the past three years.

gernetzkyk@businesslive.co.za