After having posted record results for the half-year period to June on Wednesday, ArcelorMittal South Africa said that it expected the current quarter’s figures to show a “substantial” improvement.

CEO Nonkululeko Nyembezi-Heita expected both domestic and international demand to remain robust, with Chinese demand, in particular, underpinning prices.

Also boosting results would be production from furnaces that ArcelorMittal South Africa had completed relines on in the first half of the year, coupled with better production stability from its Vanderbijlpark works.

“We expect prices to remain firm underpinned by ongoing strong demand from emerging markets, and continued upward pressure on costs,” Nyembezi-Heita said at a presentation in Johannesburg.

“Quarter-on-quarter, our average domestic prices will improve, due to the fact that the impact of price increases passed earlier on in the year will only be fully reflected from the third quarter onwards,” she added.

While average steel prices in the country had increased by up to 80% so far this year, ArcelorMittal South Africa had only realised a 26% increase in the first half.

“Overall, we expect our results for the third quarter to increase substantially on the back of a surge in sales volumes and higher average steel prices,” stated Nyembezi-Heita. “However, higher input costs will continue to have a negative impact on results, while fluctuations in the exchange rate will always be an important factor.”

The company reported that earnings for the six months ended June rose 45% to R10,27 a share, enjoying an earnings before interest, tax, depreciation, and amortisation margin of 33%.

During the same period, ArcelorMittal South Africa’s raw materials costs rose by 45%, leading to a cost-of-sales increase of 34%, the firm said. “Rising costs was a “theme that will keep coming back”, Nyembezi-Heita commented.

Along with surging iron-ore and coking coal prices, scrap metal had also shown substantial increases. Coking coal had risen by 218% in 2008, while scrap prices showed a 76% rise for the year.

Nyembezi-Heita said that while world economic growth would likely slow in 2008, consumption and production of the material were both expected to climb by 11,6% during the year.

By the end of the last quarter of this year, ArcelorMittal South Africa would be producing steel at a rate of eight-million tons a year.

The company anticipated 2008 production to be 6,5-million tons, after having lost 715 000 t during the first six months, owing to furnace rebuilds and the power crisis. A further 180 000 t loss was likely for the remaining six months because of having to operate at reduced power levels.

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