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Unaudited operational information for the quarter ended 31 March 2017
ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1989/002164/06)
Share code: ACL ISIN: ZAE 000134961
(ArcelorMittal South Africa, the company or the group)
Unaudited operational information for the quarter ended 31 March 2017
Salient features
- Two fatalities at Saldanha Works' Corex plant on 3 April 2017
- LTIFR improved to 0.44 at the end of Q1 2017
- Difficult trading conditions in the domestic market
- Volatility in the rand/US dollar exchange rate continues to impact the business significantly
- Refurbishment of coke batteries at Newcastle Works progressing as planned, to be completed in
Q2 2017
- Liquid steel production down 2%
- Local sales down 3%
- Export sales up 9%
Operational information
Quarter ended
31 March 2017 31 March 2016 % change
Liquid steel production 000 tonnes 1 199 1 227 (2.3)
Flat steel products 000 tonnes 813 827 (1.7)
Long steel products 000 tonnes 386 400 (3.5)
Capacity utilisation % 80 81 (1.2)
Flat steel products % 79 79 0.0
Long steel products % 83 85 (2.4)
Steel sales
Local 000 tonnes 855 885 (3.4)
Flat steel products 000 tonnes 620 560 10.7
Long steel products 000 tonnes 235 325 (27.7)
Export 000 tonnes 247 227 8.8
Flat steel products 000 tonnes 168 166 1.2
Long steel products 000 tonnes 79 61 (29.5)
Total 000 tonnes 1 102 1 112 (0.9)
Flat steel products 000 tonnes 788 726 8.5
Long steel products 000 tonnes 314 386 (18.7)
Coke and Chemicals
Commercial coke produced 000 tonnes 48 86 (44.2)
Commercial coke sales 000 tonnes 46 127 (63.8)
Tar sales 000 tonnes 20 20 0.0
Commentary
Safety
Safety remains our number one priority and it is with great regret that we report two fatalities at our Saldanha
plant on 3 April 2017; both being contractor employees. However, in Q1 2017 our lost time injury frequency rate
(LTIFR) improved from 1.17 to 0.44 when compared to Q1 2016.
Production: Q1 2017 vs Q1 2016
Liquid steel production was 28 000 tonnes (2.3%) lower, mainly due to lower production at Vanderbijlpark as a result
of poor raw material quality and, as reported previously, the rupture of the stove at blast furnace C during Q4 2016.
This has been partly offset by higher production at Saldanha. Newcastle’s production was lower mainly due to import
coke and iron ore quality. The capacity utilisation for Q1 2017 was 80%, slightly down on the 81% of the comparable
period.
Sales: Q1 2017 vs Q1 2016
Local
Local sales were 30 000 tonnes (3.4%) lower, mainly due to weaker local demand for long products as a result of high
stock levels at the merchants and strong competition in the local market. Long product sales decreased by 27.7% while
flat product sales increased by 10.7%.
Although having declined slightly from 2016 levels (257kt Q1 2017 versus 310kt Q1 2016), imports are still high
despite the 10% duties having been imposed.
Export
Export sales increased by 20 000 tonnes (8.8%), of which flat products were slightly higher with 2 000 tonnes and long
steel products with 18 000 tonnes. The strong international demand was negatively impacted by the strengthening of the
average rand/US dollar exchange rate for most of the quarter.
Commercial coke
Commercial coke sales were 38 000 tonnes (44.2%) lower. The company is currently undertaking a repair programme on two
of its coke batteries which has had the effect of limiting the amount of coke available for blast furnace production
and for sale to the commercial coke industry. During the repair of the coke batteries, the company is importing
metallurgical coke in order to supplement shortfalls.
Performance
Performance was below what was expected due mainly to the strong rand against the dollar for most of Q1 2017, as well
as the higher raw material basket as a result of higher coal prices, ongoing imports and the impact of 2016 operational
incidents. In order to mitigate some of the negative impact, further cost cutting and efficiency measures are being
implemented. This will also include a review of the long steel business in light of the price of scrap in relation to
the raw material basket.
Outlook for Q2
Local sales will continue to be under pressure due to tough trading conditions, mainly as a result of lower steel
demand due to poor economic activity and ongoing imports. Export sales will also come under pressure due to weak
international prices.
ArcelorMittal South Africa remains firmly of the opinion that a solution is required to protect the downstream industry
from cheap finished and semi-finished products that continue to be imported into the country. We continue to engage
government and the downstream industry on the implementation of safeguards and initiatives to stimulate local demand.
It should also be noted that the International Trade Administration Commission of South Africa (ITAC) has notified
the World Trade Organisation (WTO) of its decision to implement safeguards on hot rolled coil (HRC) with effect from
1 July 2017, although there are certain processes to be completed before this is confirmed with all stakeholders.
This will provide a benefit in terms of sales volumes and the ability to consistently achieve the basket price.
The volatility in the rand/US dollar exchange rate will continue to have an impact on our financial results.
By order of the board
2 May 2017
Sponsor: Absa Bank Limited (acting through its Corporate and Investment Banking division)
Release date: 12 May 2017
For further information please contact:
Themba Sepotokele, Corporate Communications, Branding and Social Media
Telephone +27 16 889 2425
This report is available on ArcelorMittal South Africa’s website at: http://www.arcelormittalsa.com
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