bold spirit - ArcelorMittal South Africa

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ArcelorMittal South Africa
Annual Report 2010
Commercial matters
External environment
Steel market
International steel market
According to the World Steel
Association, total world steel output
was up by 15% to 1.4 billion tonnes
in 2010 compared to 2009. The
developed world reversed the
trend it showed last year, with
North America, Japan and the EU
recovering strongly in percentage
terms, although this was off an
extremely low base as compared to
the 2008 levels.
In developed markets, the real estate
sector remains weak with further
recovery likely to be retarded by the
phasing out of stimulus packages.
China’s role as the locomotive of steel
demand cannot be overstated as it
accounts for nearly 50% of the global
steel consumption. Thus the effects
of the Chinese government’s moves
to cool their real estate sector will
negatively affect the steel sector and
this effect is expected to carry over
into 2011. India, with an anticipated
growth rate of 9% for the year ahead,
is expected to overtake Japan in 2011
to become the third largest user of
steel after China and the US. Future
growth will therefore come largely
from these countries.
We are expecting the global steel
market to grow at around 5% in
2011. We expect growth in major
developed markets like Europe and
North America to be slow, with
emerging economies such as Brazil,
India and China driving growth in
global steel demand.
Local steel market
The South African economy is
steadily recovering from the
recession of 2008-09 with GDP
growing by 2.8% in 2010, driven
mainly by a strong recovery in
consumer spending and improved
export performance. Overall, the
South African economy had a tale
of two halves. The first half of the
year leading into the FIFA Soccer
World Cup showed good growth,
with GDP peaking at 3.1% in the
second quarter but later slowing to
2.6% in the third quarter. However,
the economy registered a stronger
growth of 4.4% in the fourth quarter
of 2010, with the mining and the
manufacturing sector attributing
strongly to this growth, while the
construction sector contribution
remained relatively low and growing
only by 0.2%. This is a concern
for the steel industry, considering
that construction sector accounts
for almost 60% of the SA steel
consumption. The reported results
of the listed construction and
cement companies have also shown
the pressure that construction is
currently under. With sustained
recovery not expected until 2012,
steel demand will remain muted.
Construction activities for the mining
sector consumes around 15% of steel
output and is clearly another industry
undergoing a period of uncertainty,
with the stronger rand not helping
its cause. Uncertainty around mineral
rights and the long-term future of
the local mining industry are also
discouraging some mining companies
from investing heavily in the mining
construction projects at their
operations.
Almost 25% of the South African steel
sales are exposed to the automotive,
packaging and residential housing
industries, which are dependent on
consumer demand. However, despite
a strong recovery in consumer
spending as compared to last year,
this did not translate into higher
steel demand in the sector. Cheaper
imports, mainly from Asia, coupled
with a strong rand, have underpinned
local production.