AMSA reports R1bn third-quarter loss amid ‘particularly difficult period’

Steel producer ArcelorMittal South Africa (AMSA) has reported a headline loss of a little more than R1-billion for the third quarter.

“The global and local steel market deteriorated further since we released our June interim results. Despite the recent optimism in South Africa, the domestic steel industry has been facing a particularly difficult period.

“Demand remains weak, logistics and energy costs continue to be excessive, imports persist and the market distortions that contributed to the 2023 decision to wind down the longs business continue to provide an unsustainable and unfair advantage to scrap-based producers,” AMSA explained in a voluntary trading update on October 16.

The losses were incurred despite the company having implemented substantial cost-cutting interventions to ensure its sustainability, as the national and market constraints present a “significant hurdle to overcome”.

With a 4% stronger exchange rate in the third quarter compared with the comparative period in 2023, net realised selling prices in rand terms were down 4%, the company said.

However, AMSA said good progress had been made in addressing raw material and variable conversion costs, which collectively were 5% lower year-on-year.

“The severity of market weakness did not allow sufficient time to make the needed progress on the right-sizing of fixed costs. This will be a critical focus for quarter four,” the steelmaker explained, admitting that the expected return to profitability on an earnings before interest, taxes, depreciation and amortisation (Ebitda) level did not materialize in the third quarter.

The longs business posted a R512-million Ebitda loss for the quarter, sharply weaker than its marginally loss-making performance for the first six months of the current financial year.

Non-steel Ebitda was also down 83% at R34-million.

The company posted an Ebitda loss of R466-million, compared to the R52-million profit made in the third quarter of 2023.

However, owing to prudent and intensive cash management actions, net borrowings of nearly R3.8-billion as at September 30 were reported as stable when compared with June.

PRODUCTION

AMSA reported stable year-on-year crude steel production for the quarter, after successfully overcoming the instability which characterised operations at the company’s Vanderbijlpark facility earlier in the year.

Crude steel production for the third quarter amounted to 798 000 t, compared with the 795 000 t produced in the third quarter of 2023.

However, production within the longs business was reduced to cater for poor market conditions.

“In one of the toughest international and local markets that has been seen for some time, significant efforts were directed towards the restoration of market and customer confidence in supply from the company,” AMSA said.

The inventory position, in the face of reduced demand and falling prices, saw destocking by customers in the third quarter, with some recovery expected in the fourth quarter and heading into 2025.

“There is currently a high level of activity around project work streams in energy, logistics and infrastructure, however, the projects are not coming to market at the required pace,” AMSA complained.

At 598 000 t for the third quarter, total sales volumes were 51 000 t lower year-on-year. Domestic sales of 439 000 t were also down from the prior comparable quarter by 80 000 t. However, export sales increased by 29 000 t to 159 000 t for the third quarter.