Increased maintenance costs, poor rolling mill yields and strike action have widened Evraz Highveld Steel’s operating loss, from R149-million in the nine months ended September 30, 2013, to R483-million for the comparative 2014 period.

The company added on Monday that earnings before interest, taxation, depreciation and amortisation swung from a R93-million profit in the prior year’s nine months to a loss of R262-million.

In contrast, during the nine-month period in 2014, sales revenue of R4.5-billion was up 8.9% and reflected higher average market prices compared with the same period in 2013.

Revenue from the sale of goods increased to R4.4-billion, compared with R4.07-billion in the prior period, largely owing to favourable steel product pricing.    

“Domestic demand remains steady for our structural range of products, while demand for flat products has decreased, especially in the plate market.

“Production operations are still recovering from the adverse effects of operational challenges in the first half of the year and the company continues to utilise a credit line from shareholders that is committed until the end of the year,” it said in a results statement.

The group added that “significant” progress was being made to secure commercial funding.

Looking ahead, Evraz stated that, while the domestic market had shown some signs of recovering sales lost during 2014, given the current slow economic growth and the pace of government infrastructure spending, the domestic steel industry was not expected to expand significantly in the near future.

It expected the industry to be further impacted by a volatile labour market, continuing difficulties with security of electricity supply and rising input costs.

“Dialogue between all stakeholders with regard to developmental pricing is imperative given the importance of steel in the economy of South Africa,” it advised.

Global steel markets would, meanwhile, continue to be under pressure during the last quarter of 2014, as the market struggled with overcapacity and oversupply.

Prices were predicted to soften slightly in the remainder of the year and a marked recovery in global steel demand was not expected for 2015.    

“The turnaround of the company is deemed achievable for a number of reasons, including the strategic importance of a significant proportion of its products, the dedicated low-cost vanadium-bearing iron-ore resource base held by Mapochs mine and the company's unique processing capability to extract vanadium slag from the ore.

“It is however, dependent on the urgent sourcing of capital and much needed operational skills,” it stated.