Johannesburg - ArcelorMittal South Africa expects its "overall liquidity" to normalise at acceptable levels after the continent’s biggest steelmaker raised prices in the first quarter.
Higher international steel prices helped the company lift local ones to combat the cheap Chinese imports that are hurting steelmakers around the world, the Vanderbijlpark, South Africa-based company said in a statement on Friday. Even so, market conditions will "remain difficult" and the future sustainability of the company depends on local procurement by government and higher import tariffs, it said.
ArcelorMittal's total steel sales rose 3.1% to 1.1 million metric tons in first quarter from a year earlier. Liquid-steel production dropped 9% to 1.2 million tons, it said.
“Following the recent increases in international steel prices, and subsequent steel-price increases by the company, it is anticipated that overall liquidity will normalise at acceptable levels,” the company said in the statement.
ArcelorMittal, which employed almost 10 000 people in the country at the end of 2015, hasn’t posted an annual profit since 2010 as it struggles to compete with a surge in Chinese imports at prices that were as much as a quarter below local production costs.
The company is calling on government to buy local steel and increase tariffs and anti-dumping duties to make its business more viable.
A proposal that local steel be used for state procurement and in government infrastructure projects has been submitted to the National Treasury, the company said.
The company’s Saldanha mill on the west coast, built in a partnership with the nation’s government, remains viable at current prices, according to ArcelorMittal. The facility’s future was put under review in February after it booked a write down of R3.6bn because of high local power prices and low steel prices.
"Saldanha Works needs alternative energy solutions such as access to affordable electricity which is vital to ensure its long-term sustainability," said ArcelorMittal.
"The company is at an advanced state of exploring various options in this regard including an independent gas-to-power producer located in Saldanha. Such a project relies strongly on government support for the importation of liquefied natural gas, and other regulatory approvals."
ArcelorMittal's first-quarter profit dropped 33% as it contended with slumping prices of the material and a decline in iron ore. It maintained its full-year earnings target.
Earnings before interest, taxes, depreciation and amortisation in the three months ended March 31 fell to $927m from $1.38bn a year earlier, the company said on Friday. That was in line with the $924.5m average of 14 analyst estimates compiled by Bloomberg. ArcelorMittal expects full-year Ebitda to be more than $4.5bn.
The company has also scrapped its dividend, cut expansion plans and shuttered plants.
Steel and iron ore prices have recovered in recent months, helping ArcelorMittal’s shares to climb 55% this year.
The stock slid 57% last year, the most since the global financial crisis in 2008. ArcelorMittal shares fetched R9.40 on the JSE in mid-morning trade on Friday, up 4.44%.