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South Africa: ArcelorMittal to Boost Capacity With Electricity Generator in Newcastle
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Business Day (Johannesburg)
15 May 2008
Posted to the web 15 May 2008
Thabang Mokopanele
Johannesburg
GLOBAL steel maker ArcelorMittal SA, which yesterday posted a 31% jump in headline earnings per share to R2bn for the first-quarter to March, plans to build another electricity co-generation plant in Newcastle.
The plant would complement plans to build a cogeneration project at Vanderbijlpark, which will feed an extra 130MW into the national grid, CEO Nonkululeko Nyembezi-Heita said yesterday. The plant will cost about R1,2bn.
"We are planning a similar plant in Newcastle for capacity-building with a new furnace and if we could expedite we would. We are busy with cost studies so I can't give more details," Nyembezi-Heita said.
The group has been frustrated by delays on Eskom's side to finalise a power-purchase deal and when asked whether the group had managed to secure an agreement Nyembezi-Heita said: "Who has? N o, we don't have an agreement with Eskom, but we are nevertheless going ahead with our projects."
ArcelorMittal SA (ACL) plans to use gas-lit flares to generate electricity at the Vanderbijlpark power plant, as part of Eskom's co-generation project.
The group lost 96000 tons in production in the quarter because of power cuts and is expecting a further cut of 58000 tons in the second quarter.
The group's domestic sales for the quarter climbed 14% compared to the previous quarter and 1% compared with the equivalent period last year, and now represent 85% of total sales as against 73% last quarter and 79% in the same period last year.
Exports declined 47% compared with the previous quarter and 35% compared with the corresponding period last year due to higher domestic sales and lower production volumes.
Revenue for the quarter surged 11% compared with the corresponding period last year and 12% compared to the prior quarter to R8bn. Operating income rose 26% compared with the previous quarter to R2bn.
The quarter-on-quarter cash cost of hot rolled coil increased 21%, while the year-on-year cost rose 34%. The cash cost of billets increased by 20% quarter-on-quarter and 31% when compared with last year.
"The weaker average rand and a substantial increase in the prices of market coke sales by the coke and chemicals business were some highlights of our improved operating performance. However, this was partially offset by lower steel sales and a significant increase in costs mainly due to higher input material prices," Nyembezi-Heita said.
In the case brought before the Competition Tribunal by gold miners Harmony Gold and DRD Gold alleging excessive pricing, Nyembezi-Heita said an appeal hearing was expected to take place in the latter part of this year. "We have decided not to make provision for the fine after management's assessment of the case."
The group has also reached a full and final settlement for an amount of R100m pertaining to the tax deductibility of payments made in terms of the Business Assistance Agreement with the Alternative Dispute Resolution process with the South African Revenue Service.
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ArcelorMittal expects results for the second quarter to show a significant improvement driven by higher sales prices, despite more hikes in raw materials costs, mainly coal and scrap.
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