ArcelorMittal plans to invest in rail equipment

ArcelorMittal SA reported a 22% jump in first-half headline earnings to R3.025 billion.

Image: Waldo Swiegers/Bloomberg

ArcelorMittal South Africa shares fell 10% on Thursday after the company said poor rail service, labour disruptions and the country’s worst-ever power cuts drove steel production down.

The South African unit of the world’s second largest steelmaker ArcelorMittal SA reported a 22% jump in first-half earnings to R3.025 billion ($180.75 million) as higher steel prices offset lower production.

The ArcelorMittal group also got a boost from higher prices, beating profit expectations.

ArcelorMittal South Africa produced 1.1 million tonnes of steel in the first half, down 30% from the same period last year, partly due to poor rail services and floods in South Africa’s KwaZulu-Natal province that damaged infrastructure.

Rolling power cuts, called “load-shedding” in South Africa, were also “particularly disruptive” to suppliers and customers, the company said.

ArcelorMittal South Africa is considering investing in locomotives and wagons to mitigate the impact of state-owned logistics firm Transnet’s low rail capacity, which cost the company around R600 million ($35.7 million) in the first half, Chief Executive Kobus Verster said.

Transnet’s freight rail services have been crippled by a shortage of locomotives and large-scale theft of copper cables.

“As soon as we are allowed, we want to participate in rail access, either directly or through a third party, most likely a third party to solve the longer-term problem,” Verster said during a results call.

In the short term, ArcelorMittal is exploring using trucks as an alternative, he said as well as helping Transnet secure its network by providing drones.

In April, Transnet invited bids from private firms to operate sections of its freight network, as it seeks investment into its deteriorating infrastructure.

Roy Walsh

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