Steel giant sees first demand ‘green shoots’ in years as GNU prioritises infrastructure and local...

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Steel producer ArcelorMittal South Africa (AMSA), which has been bemoaning weak domestic demand conditions for several years, reports that it is witnessing signs of "green shoots" in manufacturing and has also expressed cautious optimism over a potential for a recovery in energy-, construction- and automotive-related demand.
While reporting a 2% fall in volumes to 1.2-million tons in the first half of the year, as well as a material 10% slump in production to 1.2-million tons, largely owing to blast-furnace chilled hearth conditions at Vanderbijlpark in April and May, CEO Kobus Verster pointed to improving demand dynamics.
He attributed part of his optimism to the pro-business environment emerging under the Government of National Unity (GNU), but also pointed to several other market factors that he said held both short- and longer-term promise for steel consumption.
The prospect of an interest-rate reduction was highlighted as a key factor for stimulating future demand, alongside higher downstream steel fabrication that would be less constrained by the power disruptions that had crimped output in the real economy for more than a decade, but especially over the past three years when loadshedding intensified to an almost daily occurrence.
The National Treasury has estimated that about 35% of the growth slowdown from 2007 to 2021 can be attributed to the underperformance of network industries such as electricity and rail, with productivity shocks from these industries having significantly impacted the rest of the economy.
AMSA is expecting year-on-year growth in manufacturing of 1.2% on the back of more stable power supply and freight logistic services, while still pressing ahead with plans for a 200 MW solar PV plant in Vanderbijlpark and pursuing a deal with a private rail provider.
The JSE-listed group is also positioning itself for a more concerted localisation drive in energy, logistics and infrastructure under the GNU and following President Cyril Ramaphosa's signing of the Public Procurement Bill in July, which would enable government departments and State-owned companies to prescribed local content during procurement.
In his recent Budget Vote address, Trade, Industry and Competition Minister Parks Tau reported that he would be leaning on local procurement to create early-stage demand in targeted sectors and indicated that he would seek to leverage eight existing sector masterplans to stimulate demand, with a steel masterplan being one such plan.
AMSA had calculated that South Africa's transmission grid expansion programme alone could consume 450 000 t of structural steel between 2025 and 2032 and Verster also saw the company's collaboration with renewable-energy original equipment suppliers yielding benefit as they sought to drive localisation.
Transnet's R160-billion investment programme is also expected to be a source of demand, along with private sector participation investments in both rail and port operations.
"ArcelorMittal Rail and Structures is well positioned to support Transnet in rebuilding South Africa's rail network," Verster said.
PRIVATE RAIL?
However, AMSA is also in talks with a private rail operator to potentially replace Transnet Freight Rail as a service provider once the regulatory framework has been finalised for third-party access to the network.
While praising the new Transnet leadership for significant improvements in its service, Verster said it tariffs remained exorbitant and that the group was, thus, moving ahead with a plan to partner with an alternative supplier, which he refused to identify.
AMSA is also keeping an eye on the GNU's ambitions in the areas of water infrastructure, dams, pipelines, bridges and roads, which are likely to require private-sector support in light of government's weak fiscal position.
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