South African steel producer Highveld Steel & Vanadium on Wednesday said that it could increase its operational levels systematically to full production during the later part of the year, if higher demand levels continued.

The producer, led by CEO Walter Ballandino, said that there were some signs of improved demand, particularly for steel, and that the company would have to position itself to ensure that the increased demand could be met in a profitable manner.

It expected the upswing in demand to be gradual.

In the six months ended June 30, 2009, the company’s headline earnings fell by nearly 89% to R145-million, compared with headline earnings of R1,29-billion recorded the year before.

Revenues declined by 51% and headline earnings a share from continuing operations by 86%.

Highveld’s gross steel output declined by 35% year-on-year in the six months, while total sales volumes were down 25% year-on-year in the six months.

However, sales of casted products in the six months had increased to 117 743 t, the majority of which was exported, compared with 2 084 t sold in the first half of 2008, of which none had been exported.

Overall, export sales had increased “dramatically”, accounting for 53% of total steel sales in the first half of the year, compared with 9% the year before, as a result of weak domestic demand and extensive destocking by local merchants, said the steelmaker.

Meanwhile, the company noted that its vanadium slag production had declined in line with its steel production.

Vanadium prices had, however, recovered somewhat during the past few months, with the average ferrovanadium price for June improving to $22,56/kg, compared with $18,96/kg the year before.

Meanwhile, the producer said that depressed markets and significant variations in exchange rates remained dominant business risks, while the supply of services to the eMalahleni municipality, in Witbank, also remained a business risk that required continuous monitoring.