Africa’s biggest steelmaker, ArcelorMittal South Africa, could shut one its mills if the government does not impose anti-dumping duties on cheap Chinese imports, it said after flagging a dramatically wider half-year loss.
Shares in the world’s largest producers of steel are trading around their lowest levels in more than a decade amid a global supply glut and the company has said that South Africa’s high labour costs, poor rail infrastructure and slowing economy have forced it to consider cutting back operations and jobs.
“This company has made losses for five or six years. I don’t have an open chequebook,” Chief Executive Paul O’Flaherty said.
He confirmed that steel baron Lakshmi Mittal was in South Africa in June, where he briefed President Jacob Zuma’s government on the challenges facing the industry and asked for intervention to counter cheap Chinese imports.
ArcelorMittal South Africa had applied for tariff protection of between 10% and 15% and O’Flaherty said the government appeared “sympathetic” to the company’s request.
The steelmaker said it could be forced to shut its Vereeniging mill on the outskirts of Johannesburg, which employs 1,200 workers.
“The announcement of a potential closure of Vereeniging is not putting a gun to anybody’s head. It is not a statement. It’s a reality of business,” O’Flaherty said. “When you have got bleeding, you must stop the bleed.”
In a trading statement released earlier, the company warned of an up to fourteenfold increase to its half-year loss, citing tough trading conditions and higher finance costs. The headline loss for the six months to June 30 is expected to be between 25 cents and 30 cents per share, it said, against a loss of 2 cents per share a year earlier.
Headline earnings, excluding certain one-off items, are the main profit gauge in South Africa.
The company’s shares fell nearly 3% but recovered to trade 0.65% higher at R15.51. The stock has plunged more than 40% this year.
ArcelorMittal rival Evraz Highveld Steel and Vanadium has applied for protection from creditors and plans to reduce its 2,200 workforce by about a half.