Primary steel producer ArcelorMittal South Africa (AMSA) expects to report a 238% to 261% year-on-year decrease in earnings per share (EPS) for the year ended December 31, owing to a R2.1-billion impairment charge on the company’s long steel operations and a challenging local trading environment.

The steel producer says it is likely to report a loss a share of between R3.25 and R3.80, compared with EPS of R2.36 reported for 2022.

Further, the company expects to report a 166% to 179% decrease in headline earnings per share (HEPS) to a headline loss a share of between R1.55 and R1.85, compared with HEPS of R2.34 in the prior year.

AMSA in November last year announced it is considering a wind-down of the long steel business, for which it has since launched a consultative process involving key customers, suppliers, organised labour and other stakeholders.

Despite the company’s best efforts, the long steel business has been struggling in the slow growth macroeconomic environment, as well as with high transport costs, high energy prices, logistics failures, electricity challenges and the scrap advantage over iron-ore with respect to steel production – as a consequence of policy, it states.

The long steel unit produces fencing material, rail, rods and bars used in construction, mining and manufacturing.

Amid the engagements with stakeholders, concerns have been raised about the negative economic impact of the closure of the long steel business, including the loss of 3 500 jobs and contractors.

ArcelorMittal South Africa says it does not need any preferential treatment or subsidies from government, rather, it requires government to ensure a level playing field for South Africa’s primary steel producers by addressing structural constraints affecting the steel industry.

Although the engagement process has been constructive, the company says finding solutions to the structural shortcomings of the industry is complex.

“Reversing the closure decision holds substantial risks and requires the commitment of, at a minimum, ArcelorMittal South Africa, its customers and suppliers, government, State-owned enterprises and employees,” it states.

Meanwhile, the company points out that the South African steel market is experiencing real demand weakness, as well as weak business confidence.

“Key steel consuming sectors remained weak [in the reporting year], with low to no growth. Inventory levels in the market are high, impacted by higher imports further negatively disrupting the supply/demand equilibrium.

“Elevated imports from China, where the majority of the steel industry is lossmaking, is impacting not only South Africa significantly, with its low trade protection measures, but also the Africa overland and sub-Saharan African markets, in general,” AMSA explains.

The company will release its full-year results on or about February 8, while it expects to be in a position to make a further announcement on the long steel business in the near future.