ArcelorMittal says it has signed an agreement with a hopeful South African independent power producer (IPP) to buy land adjacent to its Saldanha Works operation, should the party be successful in the current emergency power bidding process.
Chief executive Kobus Verster said on Thursday during a media briefing that the gas-based plant is expected to generate 350 megawatts of power in its first phase. The power generated from the plant will however not be used for the steel maker. It will “participate…in some of the benefits of passing on the land to the supplier,” Verster said.
In October last year amendments to the electricity regulations were finally gazetted, allowing for Eskom to procure additional power from IPPs to supplement its capacity.
The gazette stipulates that Eskom will be able to procure power from a variety of sources: wind and solar photovoltaic power (6 800MW), storage (513MW), gas and diesel (3 000MW) and coal (1 500MW), giving a total of 11 813MW.
On Thursday, ArcelorMittal said it is also considering the establishment of a back-of-port logistics hub using the ancillary land and equipment at Saldanha Works.
Verster said the hub will expedite the loading of ships which will de-bottleneck some port operations and allow an increase of exports.
“We will build that business and gradually grow it to see how we facilitate largely raw material increases in exports,” he said.
The steel maker says its Saldanha operations remain under care and maintenance “until a sustainable input cost solution can be developed.” The plant was closed in June last year following consistent losses due to cheap imports, rising costs and a flagging local economy, with the aim of ensuring that previous losses did not reoccur in 2020
The closure contributed R951 million to the company’s overall R2.5 billion (2019: R7.6 billion) fixed costs reduction programme in 2019/20.
ArcelorMittal was able to return to profitability in the second half of the year, boosted by an increased demand for steel and the recovery of supply chains.
The company recorded a loss in the first half of the year, when almost all its operations recovered to make a R1.02 billion profit in the second six months.
With the return to profitability in the second half, the company was able to reduce its full-year headline loss to R2.04 billion – a R1.2 billion reduction from the previous financial year.
Global crude steel production remained flat at 1.8 billion tonnes in 2020 due to the impact of the worldwide pandemic. This is 16 million tonnes or 0.9% lower than 2019 levels. Africa’s output decreased by 10% to 13 million tonnes due to lower production in South Africa and Egypt.
Verster described the impact of the pandemic as “unprecedented”, as the market experienced increased protectionism from large steel-producing countries to prevent excessive imports.
“This was deemed necessary in light of the economic contraction and the vulnerability of their recovering production capacity,” the company said.
Total sales volumes in South Africa fell by 47% or 1.9 million tonnes to 2.2 million tonnes compared with 2019, mainly due to a 37% or 1.1 million-tonne reduction in domestic sales and a 72% or 827 000 tonne reduction in seaborne export sales.
Revenue decreased by 40% to R24 billion due to a 47% reduction in total sales volumes.
The company restarted its Vanderbijlpark Works in December 2020, while the electric arc furnace at its Vereeniging plant – which was scheduled to be placed under care and maintenance in the third quarter of 2020 – will continue to operate for the foreseeable future in support of long steel supply, the company said.
For 2021, the company foresees strong international steel prices continuing. If more restrictive lockdown regulations are not implemented, the company also anticipates that both sales volumes and prices will improve.
Listen: ArcelorMittal CEO Kobus Verster discusses its full-year results with Nompu Siziba