As Power Prices Rise and Steel Prices Fall, ArcelorMittal Considers Future of South African Mill
02/04/2016 - ArcelorMittal’s South African division said it expects to record a headline loss of 1,250 cents per share in 2015 and is rethinking its investment in its ultrathin hot rolled coil mill along the country’s west coast.
In a statement, ArcelorMittal South Africa Ltd. (AMSA) said weak international steel markets and competition from Chinese imports are impacting the company in general. But “extremely high” power prices are especially weighing on the Saldanha Works.
“Consequently, the future of the operation is currently being reviewed,” the company said in a statement. It is recording a ZAR3.6 billion impairment related to the mill, it said.
The steel works is largely export-focused and annually produces approximately 1.2 million metric tons.
BloombergBusiness reported that when the mill was built, it was to have benefitted from some of the world’s cheapest electricity prices. However, prices have quadrupled since 2007, and in the winter, the utility that serves the plant hikes industrial rates by three times the usual amount.
“When it comes to the winter months in Saldanha, it is clear that the extremely high electricity tariffs, which are three times higher than in the summer months, doesn’t make it a viable proposition,” outgoing CEO Paul O’Flaherty said, according to Bloomberg.
Creamer Media’s Mining Weekly reported that O’Flaherty said the company is investigating a gas-to-power option, which would require finding other customers for the power that would be produced.
“An independent electricity solution is critically important for Saldanha,” O’Flaherty said.
“Consequently, the future of the operation is currently being reviewed,” the company said in a statement. It is recording a ZAR3.6 billion impairment related to the mill, it said.
The steel works is largely export-focused and annually produces approximately 1.2 million metric tons.
BloombergBusiness reported that when the mill was built, it was to have benefitted from some of the world’s cheapest electricity prices. However, prices have quadrupled since 2007, and in the winter, the utility that serves the plant hikes industrial rates by three times the usual amount.
“When it comes to the winter months in Saldanha, it is clear that the extremely high electricity tariffs, which are three times higher than in the summer months, doesn’t make it a viable proposition,” outgoing CEO Paul O’Flaherty said, according to Bloomberg.
Creamer Media’s Mining Weekly reported that O’Flaherty said the company is investigating a gas-to-power option, which would require finding other customers for the power that would be produced.
“An independent electricity solution is critically important for Saldanha,” O’Flaherty said.
