Buoyed by the completion of its extensive re-engineering and rightsizing programme since the ArcelorMittal Group (then Mittal Steel) bought a controlling interest in 2003, ArcelorMittal South Africa is committed to driving and implementing continuous cost efficiency and productivity improvements to keep the company amongst the world’s lowest cost producers.
The company’s financial strength is underscored by its low cost of production and ownership of its iron ore resources, as well as the company’s strong position in the domestic market. Strong cash flow and virtually ungeared balance sheet places ArcelorMittal South Africa in a highly beneficial position to focus more intensely on growth opportunities once the current economic crisis has subsided.
ArcelorMittal South Africa has cut back on its capital expenditure plans in the wake of the impact that the economic crisis has had on demand for steel products, both globally and in South Africa. The company had planned to boost its output of liquid steel from its current nameplate capacity of 8 million tons to 10 million tons by 2013.
These plans have now been postponed but will be revisited when the market for returns to a sustainable growth situation. Each of the planned capex projects will then be re-evaluated on whether it is still needed in a post-crisis market environment. No timelines for a resumption of the growth plan has been set but the company is confident that the medium-term growth potential of its sub-Saharan African target market of 18-20 million tonnes is still achievable. A market of this size would justify the investments to boost the company's capacity to 10 million tons a year.
For now ArcelorMittal South Africa has cut back its capex plans from R1.8 billion in 2008 to a budgeted R1 billion in 2009. But most of the projects that had been started as part of the capex programme were completed in 2008 or are near completion. They include the construction of two new direct reduction kilns at Vanderbijlpark, completed in June 2009, and a sinter off-gas treatment plant.
Two environmental projects are also near completion: the R200 million installation of a dust extraction system at Vereeniging, on track for commissioning early next year, and the Coke Gas and Water Cleaning project at Vanderbijlpark.