Weak rand boosts Evraz's local steel demand

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“South African GDP forecasts for 2014 have been revised to two per cent. The trend of the weak rand in Q1 2014 has continued to provide increased demand for steel from local producers, driven by customers diverting procurement from imported goods to local supply,” the vertically integrated steel and vanadium slag producer said.

“The global economy remained weak during Q1 2014 and has not reached the required levels of growth needed to support a strong recovery in steel demand. It is predicted that global steel demand is likely to increase by 3.1 per cent to 1,475 Mt in 2014.”

Steel sales volumes grew two per cent from 135,512 tons in the first quarter of 2013 to 138,207 tons in the 2014 first quarter.

[DATA EHS:Evraz Highveld Steel and Vanadium] also reported that domestic steel sales decreased by 17 per cent from 134,231 tons to 110,765 tons for the 2014 period. Export steel sales volumes however increased to 27,442 tons from 1,281 tons in the first quarter of 2013.

“Inventories of cast steel ahead of the rolling mills were worked down in the first quarter with the intention of increasing finished product revenue,” Evraz said.

(READ MORE: Evraz begins recovery from 2012 strike)

“There is visible change in the market purchasing trends from imports to domestic supply, combined with notable progress towards production improvement and labour stability. The company, though, remains alert to these market conditions and the abovementioned risks.”

The company’s operating loss was 89 million rand for the first quarter of 2014, compared to a profit of 50 million rand for the same period in 2013 while revenue from sale of goods increased to 1.5 billion rand from 1.4 billion rand.

Evraz also reported a loss before interest, taxation, depreciation and amortisation of 15 million rand from a profit of 124 million rand in 2013.

“Global steel markets remain in a state of oversupply and a market recovery in global steel demand is not expected during the remainder of 2014. The maintained slow pace of large infrastructure project implementation in South Africa, a volatile labour market and electricity supply concerns will all continue to pose challenges to the domestic steel industry,” said the company.

“The sub-Saharan African region remains a key growing market for the steel industry, driven mainly by opportunities from the widely published infrastructure related projects in countries such as Nigeria, Kenya, Tanzania and Zambia, as well as mining related investments in Mozambique.”