bold spirit - ArcelorMittal South Africa

14
ArcelorMittal South Africa
Annual Report 2010
Chairman’s and Chief Executive Officer’s report continued
Continuos improvement will enhance efficiencies and with
that will come sustainable cost savings.
level of performance lags that of
other emerging market integrated
steel producers in Russia, Brazil and
India. This is a clear indication that we
determine our prices in a responsible
manner, bearing in mind that we have
operated in the lowest cost quartile
over this period.
An important element to emphasize
is the ongoing competition we face
from steel imports into the country.
Unlike the overwhelming majority
of countries with domestic steel
production capabilities, South Africa
imposes no import duties on steel
products nor offers any kind of
protection or incentive to the steel
industry. Historically, 10% to 12%
of domestic steel consumption is
sourced from foreign markets largely
in steel grades that are not produced
locally. When domestic prices fall
out of line with international prices
or indeed the company cannot
meet local demand, nothing stops
our customers from importing
steel. Indeed, this is precisely what
occurred in the second half of 2010.
A confluence of negative events
combined to create a perfect storm,
namely: the transport strike in April
which severely limited deliveries
of raw materials to our plants,
resulting in steel supply shortages;
further uncertainty about future
supply occasioned by the iron ore
dispute; the imposition of the iron
ore surcharge pitched domestic steel
prices above international prices; and
the strong appreciation of the rand
against the US dollar making imports
relatively cheaper. The consequence
of these developments was the
highest level of steel imports into
South Africa in 30 years.
B-BBEE transaction
In August 2010, the company
announced its intention to conclude
a Broad-Based Black Economic
Empowerment deal that will introduce
a 26% B-BBEE shareholding into the
company’s ownership structure. Our
new equity partners will include more
than 8 500 ArcelorMittal staff as
well as neighbouring communities.
Although broadly supportive of the
deal in principle, our shareholders
have expressed various concerns
relating to aspects of the deal which
we are endeavouring to address prior
to tabling the transaction for board
and shareholder approval.
Operations
We continued to manage our
production output according to
the volatile demand levels that
have persisted for the last two
years. The fairly stable operating
performance for much of the year
suffered a setback when cold hearth
conditions beset both Blast Furnaces
D at Vanderbijlpark Works and N5 at
Newcastle Works towards the end of
the year. Vanderbijlpark Works was
able to recover full furnace operation
by mid-December and Newcastle
Works only in mid-January, which had
a serious impact on production and
consequently sales of long products.
At Vanderbijlpark Works, the electric
arc furnaces were used to balance
supply and demand during the year
although these never reached full
capacity due to low levels of demand.
The failure of a raw material bin at
Saldanha Works thankfully did not
result in any injuries, but limited
the plant’s ability to operate at full
capacity during the year. The company
has advanced to the final phase of
a feasibility study to restart coke
battery No. 1 at Newcastle Works.
This battery, which operated for only
8 years before it was decommissioned
in 1981, will produce an additional
450 000 tonnes per annum of coke
for the ferrochrome industry. The
project will be completed towards the
end of 2013.
Transforming business
processes
We are determined to retain our global
cost competitiveness by reaffirming
our commitment to excellence
in everything we do. Continuous
improvement will enhance efficiencies
and with that will come sustainable
cost savings.
Our business improvement initiatives
leverage off the experience of the
ArcelorMittal group, taking proven
methodologies from successful
units and implementing them locally.
Vanderbijlpark Works launched an
ambitious masterplan during the
first quarter of 2010 focussing
on reliability, cost efficiencies and
throughput improvements.