Amsa seeks cheaper electricity

13 Feb 2017

Sunday Times, 13 February 2017
By Lutho Mtongana

WITH a surplus of electricity output, Eskom is now in talks with heavy industry on preferential pricing and looking for avenues to sell.

ArcelorMittal South Africa CEO Wim de Klerk said on Friday that for the first time in years his company was in talks with Eskom on electricity prices, especially for its Saldanha Works, a heavy user of power.

When Amsa decided to shut Saldanha Works down last winter, it said that it would close the plant permanently in two years if market conditions did not improve.

However, since October last year, after cost-cutting and operational improvements, Saldanha was again operating at full capacity.

“They understand we need production back and they need to sell excess electricity. We have a task force with Eskom to look at the survival of Saldanha, and electricity is crucial . . . It’s such good news for us as an industry and for kickstarting the economy,” De Klerk said.

The company said it did not yet know whether the talks would lead to price reductions or an absence of price increases or both as Eskom had its own liquidity issues.

Eskom spokesman Khulu Phasiwe said on Friday Eskom had requested permission from regulator Nersa to offer Silicon Smelter an incentive tariff after it approached Eskom on its financial constraints. If other firms such as Amsa had the same issues, a request would prompt a determination on whether an incentive tariff could be worked out, but there would be no blanket tariff for every industry and Nersa would have to approve first.

We have a task force with Eskom to look at Saldanha and power is crucial

Amsa reported a loss on Friday, although it had narrowed as it had benefited from higher steel prices. The loss of R4.7-billion in 2015 went to one of R1-billion for the year to December 2016.
Performance was helped by global steel producers increasing prices due to the high costs of iron ore and coking coal, vital ingredients in steel production.

Amsa’s share price gained 115.3% over the past year.

“Gradually, things are turning around and for the positive, and also for the fact that we have seen an increase in the demand for steel globally. When we say things are better, we don’t expect to gain ground fully, but to at least have a better year compared to last year,” said Makwe Masilela, BP Bernstein portfolio manager.

But De Klerk said that despite the 10% import tariff on steel products about 1.2 million tons of imports were still coming into the country, showing that the import tariff was not enough. In 2015, about 1.3 million tons of steel were imported.

The company was in talks with the International Trade Administration Commission on safeguard options for the industry.

Amsa said it was still uncertain whether economic growth would be fuelled by growth in infrastructure projects.

“Encouraging local content will help and if government will stick to that it will improve the local steel industry and steel demand,” Masilela said, referring to the recent government announcement that government infrastructure projects had to prioritise the use of locally produced steel.