Despite ArcelorMittal SA’s (Amsa) annual results showing that the steel producer once again suffered multibillion-rand losses, Eskom’s special tariff for ferrochrome firms provided a glimmer of hope that the company’s financials could improve soon.
Amsa’s chief executive, Kobus Verster, unveiled the company’s 2025 annual results on Thursday, noting that the R3.4-billion loss was an improvement from the R5.1-billion loss in 2024.
Recently, the company has faced significant challenges due to high electricity costs and unsustainable low global steel prices, only managing to turn a profit in 2023.
Due to these headwinds, Amsa had to wind down its long-standing steel businesses in Vereeniging and Newcastle, leading to the loss of over 3 500 jobs.
“Industry costs remain elevated in ports, rail, and energy. Eskom’s special pricing arrangement for the ferrochrome industry should improve the demand for market coke and thereby improve the utilisation of our coke batteries, and therefore the prospects of additional earnings generation,” said Verster.
Steel markets under pressure
He said they were working with Eskom on the implementation of the special tariffs and further touched on the recent announcement involving the state-owned Industrial Development Corporation (IDC), saying they have signed a non-binding term sheet.
“Discussions with IDC are progressing well. If successful, it will reshape the company’s outlook for 2026 and beyond,” said Verster.
However, he declined to go into the specificities of the agreement.
Verster also unpacked where the company suffered losses, saying sales in the flat steel business declined by 4% to 1.4-million tonnes compared to 1.45-million tonnes in 2024.
He pointed out that crude steel production increased by 8% to 1.8-million tonnes due to improved reliability.
Earnings before interest, taxes, depreciation and amortisation loss reduced by nearly two-thirds to R1.1-billion, an improvement compared to R2.95-billion loss in 2024.
Vester added that though the global gross domestic product was expected to grow by a generally healthy 3.3% this year, the steel business was not positioned to benefit from the growth.
“Despite this steady macro outlook, the steel markets remain under pressure. At $130 (R2 103) per ton, steel price spreads remain far below the sustainable levels of between $200 and $220 per ton.
“Though Africa’s steel production grew by 4%, to 23-million tonnes, South Africa’s steel production decreased by 5% to 4.5-million tonnes,” he said.
He explained that the low demand for steel was due to negative growth in key sectors like construction and manufacturing (excluding automotive).
The crude steel production declined by 12% to 2.3-million tons, while the flat steel production was up by 8% to 1.8-million tons due to what Verster described as “improved reliability”.
Sales volumes take a dip
However, sales volumes decreased by 12% to 2-million tons, with flat steel business sales down by 4% to 1.4-million tons. Export sales volumes suffered a massive blow, with a 25% decline of steel to 390 000 tonnes.
When it comes to input costs, the raw material basket dropped to 39% from 46% of cash costs per tonne, resulting in a 15% reduction in rand terms, mainly due to lower coal and coke prices.
However, consumables and auxiliaries rose to 40% from a 30% cash cost per ton.
He stated that the 15% increase in electricity tariffs negated the benefits of lower alloys, fluxes, and electrodes.
Verster said the company continued to use investments to enhance product availability, quality, and reliability.
The revenue was also down by 16% to R32.3-billion compared with 38.6-billion in 2024. Employee costs amounted to R3.6-billion from R4.4-billion in 2024.
