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ArcelorMittal SA to cut costs after drop in Q1 steel sales

Sales came in at 855 000 tonnes.

JOHANNESBURG – ArcelorMittal South Africa said on Friday it would cut costs and try to boost efficiency, including a review of its long products business, after posting a drop in first-quarter liquid steel production and local sales.

The steelmaker, a unit of ArcelorMittal, blamed poor local demand and a stronger rand against the dollar for the weaker performance in the three months to March 31.

Read: ArcelorMittal profit more than doubles as steel volumes rise

ArcelorMittal South Africa posted first-quarter production of 1.19 million tonnes, a drop of 2.3% from a year earlier. Sales came in at 855 000 tonnes compared to 885 000 tonnes.

“Performance was below what was expected due mainly to the strong rand against the dollar for most of Q1 2017, as well as the higher raw material basket as a result of higher coal prices, ongoing imports and the impact of 2016 operational incidents,” the company said in a statement. 

Its shares were down 0.91% at R7.63 by 0837 GMT.

The company, which has failed to make a profit for more than half a decade, gave no further details about the planned cost cuts and efficiency measures.

“Local sales will continue to be under pressure due to tough trading conditions, mainly as a result of lower steel demand due to poor economic activity and ongoing imports. Export sales will also come under pressure due to weak international prices,” it said.

Domestic steelmakers have said China, which produces half the world’s steel, has been dumping excess output locally as consumption at home wanes and these low-priced imports have resulted in poor sales volumes for South African firms.

South Africa is proposing to put emergency “safeguard” tariffs on imports of certain flat hot-rolled steel products from July, it said in a filing published by the World Trade Organization in early May.

The tariff would be in place for three years, and is proposed to fall from 12% in the first year to 10% in the second year and 8% in the third.

“This will provide a benefit in terms of sales volumes and the ability to consistently achieve the basket price,” the steelmaker said.

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