Steel producer ArcelorMittal South Africa (AMSA), which recently completed the R2-billion reline of the blastfurnace at the Newcastle mill, has decided not to immediately ramp up the plant to its expanded 1.9-million-tonne-a-year nameplate capacity,owing to weak domestic market conditions.
CEO Paul O’Flaherty said that, while the JSE-listed group’s ‘fill the mills’ strategy remained largely intact and was helping to lower costs, particularly at its Vanderbijlpark operation, it would be “financial suicide” for Newcastle to pursue the strategy in the current environment.
He described the South African steel market as being under “severe pressure”, noting that, in the absence of import protection, the domestic market was currently heavily exposed to cheap imports, especially from China.
AMSA estimated that imports comprised 40% of all steel consumed in South Africa during February.
As a result the group had decided to hold Newcastle’s daily output at 4,300 t instead of operating it at its 5,200 t daily potential.
But Newcastle GM Gerald Gadd stressed that the mill would require only between four and six weeks to move to full capacity should market conditions improve.
He also said that AMSA had no intention of making a bid for Highveld Steel & Vanadium, which recently entered business rescue. But he described the predicament of South Africa’s second largest steel producer as bad news for South Africa, for Highveld’s 3 000 workers and for the “depressed” Emalahleni area.
