Photo by: Duane Daws
New ArcelorMittal South Africa (AMSA) CEO Wim de Klerk views the prospect of ongoing electricity tariff increases as among his chief anxieties as he settles in at a company that is edging towards recovery, having not shown a profit since 2010.
Addressing shareholders for the first time on Friday, De Klerk listed several positive developments at the group, where he worked prior to the 2001 unbundling of Iscor into separate steel (AMSA) and mining companies (Kumba Iron Ore and Exxaro).
However, besides the current oversupply conditions in the steel market itself, the threat of yet more expensive electricity was listed as an overarching concern.
The future of energy-intensive businesses such as AMSA was threatened, De Klerk argued, by ongoing tariff increases over-and-above the 300% step-change that had taken place over the past decade.
“If I’m restricted to a 9% or 10% increase yearly ad infinitum it is going to put major stress on the system, which is the same for every other business in this country.”
Some industrial demand (such as that which arose from ferrochrome smelters shut during the load-shedding period) might never return, despite the restoration of supply stability.
De Klerk was heartened, though, by recent statements by Public Enterprises Minister Lynne Brown, who acknowledged the need for fresh consultations on how to restore demand in the interests of growth and job creation.
“Do I see that picture today? No. Have the channels been opened? Yes, and hopefully we will be able to jointly find a solution – otherwise this country faces significant issues.”
State power utility Eskom indicated recently that, in light of increased plant availability and the pending introduction of new supply from Medupi, Kusile and Ingula, it was planning to increase cross-border sales and was also open to deals with domestic industrial consumers.
The utility also indicated that it had approached the aluminium smelters with a proposal for them to return to “optimal load” and that it was awaiting their response.
However, some observers remain sceptical about the sustainability of Eskom’s energy availability factor, which has shown a strong recovery in recent months from levels below 70%. Should it not be sustained, and demand recovers, the power system would come under pressure again.