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ArcelorMittal South Africa eyes investments in rail locomotives, wagons

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ArcelorMittal South Africa is considering investing in rail transport equipment, Reuters reported, citing Chief Executive Officer (CEO) Kobus Verster.

The company, which lost about 600 million rand in H1 2022 due to rail service disruptions, is considering procuring locomotives and wagons, in partnership with a third-party equipment supplier, the top executive said.

The South African unit of ArcelorMittal Group, the world’s second-largest steelmaker, reported a 22% jump in first-half earnings to R3.025 billion ($180.75 million), according to a financial statement published on the company website.

The company produced 1.1 million tonnes of crude steel in H1 2022, down 31% from last year, partly due to poor rail services and floods in South Africa’s KwaZulu-Natal province that damaged infrastructure.

The company’s average capacity utilisation should reach 76% after the R464 million Newcastle blast furnace mid-life campaign restoration is completed in early August 2022. 

South Africa experienced its worst electricity load shedding in June 2022, taking the year-to-date levels for 2022 to the full-year 2021 levels. Loadshedding negatively impacts the economy and does not bode well for investor sentiment and job creation. 

ArcelorMittal South Africa, with the support of the ArcelorMittal Group, will embark on a process to develop two 100MW renewable energy projects planned for Gauteng and Western Cape. 

The subject to the outcome of a feasibility study, which should be finalised in 2023/2024, to yield meaningful cost reduction benefit by 2024/25. These benefits will be increased and accelerated if regulations are relaxed, the statement said.

Despite the current challenges and the short-term weaker trading environment, the long-term investment case for steel remains intact, given steel’s inherently vital role in the transition to a low carbon, circular economy, the statement stated.

( Editing by Seban Scaria seban.scaria@lseg.com)