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May 24, 2007

Saldanha Steel output may fall 100 000 t next year on furnace relines

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Mittal Steel South Africa’s Saldanha Steel mill is preparing for two major furnace relines in February next year, which could have a net effect of a 100 000 t fall in production for the 2008 financial year.

The mill, on South Africa's West Coast, currently produces around 1,2-million tons a year, and the reline projects will lead to an incremental increase in production, to around 1,3-million tons in the 2009 financial year.

The projects will cost R270-million, of which R200-million will go towards the relining of the Corex furnace, which will start on February 4, 2008, and will last for 68 days, while some R50-million will be directed towards a reline of the Midrex furnace during the same period.

Speaking at a site presentation on Thursday, CEO Rick Reato said that the plant had been successfully turned around from its troubled financial and operational history, and that the mill was expected to produce a record 113 500 t this month.

He also said that the effect on production of the two relines could have been significantly steeper, but that the company had put in place mitigating strategies in preparation for the projects.

However, as these relied on imported material, they were expected to push costs up.

Reato said that targets had been set in place to sustain incremental increases in nameplate capacity to around 1,3-million tons a year and to increase the level of high-value thin and ultra-thin gauge material that is produced at the mill.

A target of 25 000 t/m, around 25% of total production, of ultra thin gauge material (below 1,2 mm) of hot rolled coil has been set for December 2008.

Reato said that only once the targets had been met would the group consider any major step change in Saldanha Steel.

This could come either in the form of an expansion, or could involve investing in downstream cold-rolling capacity.

He said that, at this point, the downstream opportunities appeared more attractive, but would not be drawn on whether they might involve a possible acquisition of the Duferco plant which is situated over the fence from Saldanha Steel.

Reato said that, at this stage, no discussions were under way between Mittal and Duferco, and that Mittal would first investigate installing its own cold-rolling capacity.

The ultra-thin material is of much higher value, and becomes more so the thinner the gauge.

Vanderbijlpark

Meanwhile, Mittal Steel South Africa said earlier this month that the reline of its blast furnace D at its Vanderbijlpark operations was behind schedule, but this would not impact on supplies to the local market.

“The slabs that we imported were adequate and we are not short supplying the local market at all," Reato told journalists after the firm’s AGM in Johannesburg. “We are running some 10 days late,” he noted, adding that the problems causing the delay had been resolved, and Mittal Steel South Africa was “tracking the situation very tightly”.

Mittal Steel South Africa’s R578-million relining of the Vanderbijlpark Blast Furnace D to increase capacity at the plant was originally scheduled to start in February 2007. The reline will increase the production capacity of Blast Furnace D by an additional 150 000 t of liquid iron production a year. Previously, Blast Furnace D produced 1,7-million tons a year.

Shares in Mittal Steel South Africa closed 0,78% lower on Thursday , at R126,00 a share.

Edited by: Creamer Media Reporter
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