ArcelorMittal mulls closures amid rising steel imports

ArcelorMittal is considering closing some plants as the continent’s largest steel producer reviews operations amid rising imports that are deepening losses.

Sales volumes from the refurbished Newcastle plant in the eastern KwaZulu-Natal province haven’t met expectations due to “a surge in imports,” AMSA, as the company is known, said in a statement Thursday. Local demand has been weaker than expected, it said. The producer may move output of billets, a material for the manufacturing of long steel, to Newcastle from its Vereeniging plant in the Gauteng province.

AMSA has reported annual losses for four years and in 2014 asked the government for tariffs on Chinese imports as increases in operating costs exceeded inflation.

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Steel prices have slumped globally this year as China, the biggest producer, shipped excess output overseas as domestic demand slowed. Evraz Plc’s South African unit is in talks with unions to cut staff by 50% as the company undergoes the local equivalent of bankruptcy protection.

“While the closure of some plant cannot be excluded should circumstances not change, the immediate priority will be a focus on the alternatives that can be implemented to avoid such a situation,” AMSA said. “Should a final decision be taken to proceed along this path, it will not be taken lightly.”

The review is expected to be completed by the end of August, it said.

The company’s headline loss per share, which includes one- time items, will widen to a range of 25 cents (2 US cents) to 30 cents for the six months ended June 30, from 2 cents a year earlier, the company said in a separate statement Thursday.

“This is mainly due to a decline in net operating profit due to trading conditions and an increase in finance costs due to additional borrowings required,” it said.

The stock dropped as much as 6% to 14.50 rand after the trading update and erased declines to trade 0.5% higher to 15.50 rand by 1:09 p.m. in Johannesburg.

- Bloomberg