Engineering News reported that ArcelorMittal South Africa, whose board had previously provided in principle backing for a Brownfield expansion of its long product focused Newcastle mill in KwaZulu Natal, had not merely delayed the ZAR 3 billion project in light of the rapid deterioration in market conditions, but would require fresh validation once market visibility improved before allowing it to re enter its project plans.
Ms Nku Nyembezi Heita CEO of ArcelorMittal South Africa said that the project would then also have to be re motivated to the board, given the changes that have taken place in the steel market since late 2008. However, she remained optimistic that in the context of Africa's large infrastructure backlogs, the group would eventually return to its growth profile, and that its specific focus on the expansion of long products would be reaffirmed.
Ms Nyembezi Heita said that we ended 2008 with a total spend of ZAR 1.83 billion on our capital investment program and we currently have on plan ZAR 1.4 billion for this year, adding that nearly ZAR 1 billion of that capital related to maintenance and replacement programs. Other than the so called N6 blast furnace at Newcastle, projects such as the galvanizing and color lines at Newcastle and Vanderbijlpark respectively had also been put on ice. In addition, the company had planned to generate its own electricity in gas powered cogeneration power stations at a cost of about ZAR 4 billion.
She said that these plans have now been postponed and will only be revisited when the market for steel returns to a sustainable growth situation. It was, therefore, highly unlikely that the company would now meet its aspiration to raise nameplate capacity from 8 million tonnes to 10 million tonnes by 2013 at a cost of ZAR 12 billion.
She could also not be drawn on how long the group could refrain from resorting to retrenchment of its some 9,500 permanent employees in light of what was now a chronically lower production profile. Currently, the company was producing at an average rate of between 65% and 70% of capacity and had staved off job cuts by terminating its use of hired staff a program which had probably affected 2,000 people.
Ms Nyembezi-Heita said that “If we can hold production levels and dispatches to customers at current levels and prices recover, we should be able to hold the position. But those are two big ifs, noting that prices had fallen by 40% since their peak of August last year.
In fact, South Africa's domestic carbon steel sales slumped 27.1% to 886,000 tonnes during the Q4 of 2008 when compared with figures for the corresponding period in 2007 and the South African Iron and Steel Institute reported recently that the bulk of that decline came in the last quarter of the calendar year. This resulted in Africa's largest steel producer cutting output in the fourth quarter by a massive 54% in a bid to align production to new demand patterns. But the group also used the period to review its entire CAPEX suite, leaving very little in the way of expansionary projects on the books for 2009.
(Sourced from www.engineeringnews.com)
