ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL
ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL

LOSS-making ArcelorMittal SA on Thursday placed its Saldanha Works under review. It is its second major operation to come under examination as plunging global steel prices, weak demand and competition from Chinese imports threaten the industry.

ArcelorMittal SA said the future of Saldanha was being reviewed after impairments of R3.57bn would result in the company plunging into a deeper loss than initially forecast. Saldanha employs about 600 people.

Last year, the unprofitable Vanderbijlpark Works plant was reviewed, shortly after two operations — the Vaal Meltshop and the Forge plants in Vereeniging — were mothballed. The company said it had identified improvements at Vanderbijlpark that would be executed over the next two years. However, the sustainability of the steel plant hinged on import tariffs and the localisation of primary steel products.

On Thursday, ArcelorMittal SA said it would incur an operational loss for the 2015 financial year that was 22 times bigger than the one it made last year. But its share price rallied more than 10% at the market close.

Gary Booysen, portfolio manager at Rand Swiss, cautioned against reading too much into the surge in the share price after it rose to R7.66, its highest close since November last year.

"I think it’s far more reasonable to assume the positive sentiment follows a rebound in oil prices, a weakening of the dollar and a general risk-on trade across emerging markets and commodity-related counters," he said.

Mr Booysen said ArcelorMittal SA was under immense pressure, citing SA’s ailing economy, the beleaguered construction sector and the unprecedented glut in iron ore and steel products on both the local and international markets.

Even with increased protectionism, "it is very unlikely this will create the desired sustainable financial turnaround SA and ArcelorMittal so desperately need", he said.

ArcelorMittal SA said it had made headway in getting the government to impose tighter tariffs on steel imports, mainly from China, and to prioritise the use of domestic steel.

Eight of the 10 applications it filed to have custom duties on primary steel products increased from 0% to 10% had been successful.

Only applications related to duties on hot rolled coil and other bars and rods remained. A decision would be made by the International Trade Administration Commission after a meeting scheduled for next Tuesday, the company said.

"Based on the current initiatives and with the expectation that the tariff and designation measures will be in place by the end of the first quarter, or shortly thereafter, the board remains of the view that these interventions have a reasonable prospect of returning the company to profitability in the medium term," the company said.

SA’s largest steel maker has not made an annual profit since 2010. The headline loss per share of R12.50 it was expected to incur this year would include a provision of R1.2bn to be used for settling several cases with local competition authorities, the company said.

Former chief financial officer Dean Subramanian will step in as acting CEO from February 13 when Paul O’Flaherty steps down.

Gerhard van Zyl, who acted as chief financial officer before Mr Subramanian’s appointment, will return to the role until a new CEO is formally appointed.