ArcelorMittal South Africa Idles Furnace, May Cut More Capacity

By Devon Maylie

JOHANNESBURG--ArcelorMittal South Africa (ACL.JO) said Wednesday that it has suspended a furnace in South Africa indefinitely this month due to weak demand and said it could close more production capacity if steel consumption doesn't improve.

The steel producer, the South African subsidiary of ArcelorMittal (MT), said it shut the electric arc furnace at its Vanderbijlpark plant on Oct. 16.

"This is an indefinite shut...restarting that furnace isn't justifiable in current market conditions," said Chief Executive Nonkululeko Nyembezi-Heita, adding it would lead to the loss of about 500 metric tons of annual production. "If it proves to be insufficient then we will look for further capacity cuts."

The steelmaker Wednesday reported a headline loss of 168 million rand ($19.37 million) for the third quarter and said the loss in the fourth quarter would be bigger due to the traditionally slow December period for consumption and generally weak demand backdrop.

"If we don't foresee a recovery in 2013, which early indications are that it would only happen in the latter part of next year, then that does say we have excess capacity," Ms. Nyembezi-Heita said.

The company also said it expects arbitration over an iron ore pricing agreement with Kumba Iron Ore Ltd (KIO.JO) to happen in the second half of 2013.

Write to Devon Maylie at [e-mail]