ArcelorMittal emphasises severe pressure on steel industry - CNBC Africa

ArcelorMittal emphasises severe pressure on steel industry


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ArcelorMittal is an integrated steel and mining company. PHOTO:

“Despite a strengthening economy in the United States, the demand for steel in China, the biggest consumer of steel, dropped for the first time in 14 years,” the company said.

“This drop influenced the overall world demand for steel and aggravated the global excess capacity which led to stronger exports out of China, Europe and Japan.”

(READ MORE: ArcelorMittal buoyed by Africa infrastructure investment)

The integrated steel and mining company also stated that international prices for steel and commodities declined, and currency parities shifted.

“Export markets faced particularly unsatisfactory profit margins. Overall these developments accelerated the need for steel producers to reduce cost in order to stay competitive,” said [DATA ACL:ArcelorMittal].

“Locally, the ongoing load shedding by Eskom, slow implementation of the large infrastructure development projects, the protracted mining and metals and engineering strikes put severe pressure on the steel industry.”

During the period, the company reported an increase in revenue to 34 billion rand from 32 billion rand for the year to 31 December 2013.

“Revenue increased eight per cent to following a seven per cent increase in average net realised prices. Domestic prices were nine per cent higher, while exports rose five per cent. Prices for flat and long steel rose six per cent and 10 per cent respectively,” it said.

“Total steel shipments remained in line with the previous year with export shipments up 12 per cent, while local shipments were down four per cent in line with reduced local market activity.”

(READ MORE: ArcelorMittal weathers challenging market conditions)

EBITDA decreased to 1.2 billion rand in the 2014 year from 1.7 million rand in 2013 and it reported a headline loss per share of 57 cents from a loss of 56 cents in 2013.

“We expect higher production and sales volumes following the completion of the reline of the blast furnace at Newcastle and the seasonal slowdown in the fourth quarter of 2014,” ArcelorMittal indicated.

“Although we expect international steel prices to remain low for the first half of the year, these factors, together with ArcelorMittal producing to full capacity and reducing costs, should contribute positively to the results.”