ArcelorMittal South Africa, which slumped to a R448-million loadshedding-induced loss in the interim period to June 30, expects renewable energy and regional infrastructure projects to stimulate a recovery in sales for the remainder of the year but probably without a commensurate price recovery.

The JSE-listed company shocked the market on July 20, when it revealed in a trading statement that its earnings were poised to contract dramatically from the comparable period of 2022 when it reported a R3-billion profit, which resulted in its shares falling 40% to R2, before recovering slightly.

The poor performance was attributed to intense loadshedding during the period, which CEO Kobus Verster said had disrupted the market and its own operations, with Eskom instructing the group to curtail its demand 41 times during the period, up from only four such episodes for the whole of 2022.

More damagingly, however, the group admitted to having underestimated the effect that the intense power cuts would have on curtailing downstream demand, as fabricators pulled back on production shifts leading to a build-up of steel stocks and a fall in demand – all of which took place in an already soft international steel-price environment.

Speaking during the release of the group’s interim results, Verster forecast a recovery in sales for the remainder of the year, making specific reference to demand emerging from both the renewables sector as well as several steel-intensive infrastructure projects in the rest of Southern Africa.

He also revealed that ArcelorMittal South Africa was making preparations to leverage future anticipated renewables growth over the coming ten years, including by using its own 200 MW solar project at Vanderbijlpark to showcase the use of steel in such facilities.

The R3-billion project, which will be jointly owned by the South African company and its international parent, is the first of several renewables projects on ArcelorMittal South Africa’s radar. This, as it seeks to reduce carbon emissions and shore up clean electricity supply ahead of the introduction of a 1.7-million-ton-a-year electric arc furnace at Vanderbijlpark, which also forms part of its decarbonisation roadmap.

Interim CFO Gavin Griffiths reported that the South African group was planning to introduce its parent company’s patented high-strength, high corrosion-resistant Magnelis solution, a metallic coating that enables steel to withstand hostile environments such as those to which solar-plant components are exposed.

“We have an opportunity to really convert our own solar project into a banner project for steel in South Africa,” Griffiths reported.

He added that it was also looking to develop downstream partnerships with fabricators able to convert Magnelis into components used in solar farms, such as upper structures, poles and cable trays.

The company was already supplying plate into the domestic wind market having worked with various original-equipment manufacturers to ensure that its plate grades were specified.

Besides the immediate and emerging renewables opportunities, ArcelorMittal South Africa expected second-half demand to be buoyed by seasonal factors (the third quarter of the calendar year is historically the strongest for steel sales) and a stabilisation of production, which would ensure that product was available in the event of a recovery.

“That’s the volume story, if not hope, and then obviously price is the uncertain part,” Verster said.

He also reported that, following much soul searching, it had also concluded that there was a future business case for its troubled Newcastle mill, within a revamped long-products strategy.

“We have earmarked areas where we have superior quality and product and we are going to grow these markets.

“And, we think that we can secure, in the next three years, a baseload of a million tons of steel, which would be adequate to cover Newcastle’s minimum production.”