South Africa’s steel producer ArcelorMittal has recorded further losses in the first six months of 2020 because of a difficult trading environment created by the response to the Covid-19 pandemic and a low global steel demand, the company announced on Thursday.
The company saw its headline loss increasing to R2.613-billion from a R638-million loss in 2019.
Its revenue fell by 45% to R12-million because of a 47% reduction in total sales volumes.
This decline comes after a deep manufacturing recession in developed economies in 2019 which have been compounded by the pandemic.
The company said global crude steel production decreased to 874-million tonnes for the first half of 2020, which is 6% lower than the comparable period last year.
South Africa’s economy is expected to shrink to between 6% and 13% in 2020.
With a contracting economy, the company said that steel demand for the first half of 2020 decreased by 26% to 1.8-million tonnes “as the pandemic negatively impacted all key steel-consuming sectors”.
The government-imposed national lockdown led to a complete halt in steel production activities at ArcelorMittal South Africa.
In level four of the lockdown, which began on May 1, the company managed to operate at 50% of its usual labour levels. The company says that on June 1, level 3 allowed for a return to unrestricted operations. But they will return to full operational capacity only when demand improves.
Although more of their customers began operating, the vast majority operated on reduced shift patterns, which affected the demand.
The company said they expect steel demand to remain at best between 70% to 75% of levels prior to the lockdown and that they will have to cut jobs as a result.
The National Union of Metalworkers of South Africa (Numsa) last week picketed outside ArcelorMittal plants demanding that the company “stop attacking workers through possible retrenchments and salary cuts”.
The union delivered a memorandum to the company, demanding that it withdraw its retrenchment notices and stop the threat to reduce salaries.
The union said that it is unnecessary to cut jobs because last year, approximately 350 employees were forcefully retrenched and at least 700 agreed to take voluntary severance packages.
In a presentation this morning, ArcelorMittal said it is willing to look at alternatives to save jobs.
“Although the final outcome and number of positions affected is subject to a formal consultation process, the company aims to negotiate a multi-faceted, flexible solution in response to the idling of those operations that will remain underutilised for the foreseeable future while reducing its total cost of employment,” it said in the financial statement.
- For the first half of 2020, the company’s total sales volumes fell by 47% to 1.1-million tonnes compared to the same period in 2019, mainly because of a 40% reduction in domestic sales;
- Flat steel products decreased by 426 000 tonnes whereas long steel products decreased by 214 000 tonnes;
- Export sales, comprising Africa overland and seaborne volumes, decreased by 375 000 tonnes (65%); and
- Total steel sales volumes for the second quarter of 2020 fell by 54% to 361 000 tonnes compared to the first quarter.
The company said these numbers are a clear indication of the effect the nationwide lockdown had on the company’s sales.