Steel producer ArcelorMittal South Africa (AMSA) reports early signs of a demand recovery after years of weak domestic conditions. CEO Kobus Verster expressed cautious optimism, citing improving demand dynamics in the energy, construction, and automotive sectors.
In the first half of the year, AMSA saw a 2% fall in volumes to 1.2 million tons and a 10% slump in production, primarily due to issues at the Vanderbijlpark blast furnace. Despite this, Verster pointed to a pro-business environment under the Government of National Unity (GNU) as a positive factor.
The prospect of an interest rate reduction is expected to stimulate future demand. Higher downstream steel fabrication, less affected by power disruptions, also holds promise. The National Treasury estimates that 35% of the growth slowdown from 2007 to 2021 can be attributed to underperformance in network industries like electricity and rail.
AMSA forecasts 1.2% year-on-year growth in manufacturing due to more stable power supply and improved freight logistics. The company plans a 200 MW solar PV plant in Vanderbijlpark and is pursuing a deal with a private rail provider. These steps are part of AMSA’s strategy to enhance its operational capabilities.
The JSE-listed group is positioning itself for a stronger localization drive in energy, logistics, and infrastructure. President Cyril Ramaphosa’s signing of the Public Procurement Bill in July will enable government departments and state-owned companies to prescribe local content during procurement.
Trade, Industry, and Competition Minister Parks Tau highlighted local procurement to create early-stage demand in targeted sectors. The steel master plan is one of eight sector master plans aimed at stimulating demand. AMSA estimates that South Africa’s transmission grid expansion program could consume 450,000 tons of structural steel between 2025 and 2032.
Transnet’s R160 billion investment program is also expected to drive demand, along with private sector investments in rail and port operations. “ArcelorMittal Rail and Structures is well positioned to support Transnet in rebuilding South Africa’s rail network,” Verster said.
However, AMSA is also in talks with a private rail operator to potentially replace Transnet Freight Rail. This move comes as the regulatory framework for third-party access to the network is finalized. While praising Transnet’s new leadership, Verster noted that tariffs remained exorbitant. AMSA plans to partner with an alternative supplier.
AMSA is also keeping an eye on the GNU’s ambitions in water infrastructure, dams, pipelines, bridges, and roads. These projects are likely to require private-sector support due to the government’s weak fiscal position. National Treasury Director-General Duncan Pieterse emphasized the need to mobilize private-sector resources to augment public-sector capability and finances.
Outside the public sector, AMSA is engaging with naamsa | The Automotive Business Council and carmakers to establish an Auto Steel Demand Council. This council aims to restore confidence in local automotive steel supply and drive localization.
Despite these positive developments, AMSA will continue to lobby for additional protection beyond the general 10% duties imposed on imports. The company seeks to increase and make permanent the additional 9% safeguard duties on plate and hot-rolled coils.
AMSA recently reversed a decision to close its long-steel operations and is pushing ahead with major capital investment plans. The company issued a tender for a 1.7 million-ton-a-year electric arc furnace (EAF) at Vanderbijlpark. This will replace Blast Furnace C from 2028 and help the site decarbonize. An EAF investment in Newcastle is also under consideration as an alternative to a blast-furnace rebuild scheduled for 2034.
To secure stable and cleaner electricity, AMSA will seek to buy an additional 200 MW of wheeled electricity later in the decade. This is in addition to its own solar production at Vanderbijlpark and various energy efficiency projects aimed at reducing its sharply rising electricity bill.
AMSA is also pursuing plans to become “gas neutral” and will participate in the gas aggregation company announced by the Industrial Gas Users Association of Southern Africa. This is part of efforts to avert a so-called gas supply cliff. Verster expressed optimism that the supply cliff could be delayed for about two years, with discussions on a slower ramp-down for Sasol underway.
Source: Mining Weekly
