Mittal – outlook improves despite challenges

VANDERBIJLPARK. – ArcelorMittal recently indicated dramatic improvements in its mid-year financial results from the new CEO, but with major trust and compliance issues still clouding its all-important future relationship with the South African government.
And, in another indication that the recovery of South Africa’s domestic steel industry lies in government hands, the new CEO Wim de Klerk stressed that a final broad-based black economic empowerment (BBBEE) deal with Likamva Resources seemed imminent.
AMSA could even be expanding its domestic steel industry footprint and has confirmed it is looking at acquiring, with the IDC (the state-owned Independent Development Corporation), one of Highveld Steel’s production plants.
De Klerk took office at the beginning of July instead of August as announced previously and presided over AMSA’s mid-year results in mid-July – and announced AMSA made an after-tax loss of R450 million in the six months to June, a major improvement on the R8.5 billion loss reported in the second half of 2015.
This comes against the international backdrop of other countries taking dramatic steps to protect domestic steel industries – the United States imposing duties of more than 520 per cent on imported steel – while, in stark contrast, the South African government had imposed duties in the region of only 10 to 12 per cent for cheap Chinese imports.
The glut in international markets has been such that even the Chinese government has reportedly set up a special committee to look at their own overproduction of steel and recently even announced production cuts, according to international media reports.
De Klerk and AMSA now clearly face major reputation and trust issues, especially on a fair pricing mechanism, BBBEEE and settling a major fine of R1,5 billion imposed on AMSA years ago for unfair competitive practices.
But steel industry insiders say De Klerk brings with him, major experience from the mining industry – which has proved more adept than the steel industry at advancing its interests with government – to re-engineer a frayed steel social contract for not only government relations, but also social and economic responsibility.
“Building trust all-round is central to the viability of AMSA in all spheres, not least in treating its employees, contractors and communities as investments and not commodities.
“This will require dramatic steps in business practice, social responsibility, safety and also employee and contractor wellness, which is a wasteland at present,” said one expert who did not want to be named.