ArcelorMittal SA's September quarter profits were its highest since 2014, and BMI forecast its earnings would continue to improve throughout 2017 as iron ore prices gradually decline and there is growth in GDP for the first time in three years.
BMI expects SA's crude steel production to reach 6.2-million tonnes in 2017, representing a 1.5% rebound from a 4.5% decline in 2016.
SA's steel consumption is expected to be 6.1-million tonnes in 2017, 2% more than in 2016.
This turnaround comes after an average steel production growth rate of 10.8% during the fourth quarter of 2016, the highest quarterly growth rate for the sector in a year, the research note said.
"This uptrend will be boosted throughout 2017 by a gradual decline in iron ore prices, which we expect to retest lows of $50-$65/tonne, due to an oversupplied seaborne market and eventual weakening stimulus in China.
"At the same time, coal prices have significantly declined since the peaks of over $300/tonne in November 2016. This trend will improve steel-producing companies' margins, as they purchase the raw materials needed for steel-making at a lower cost."
BMI also noted some challenges that ArcelorMittal faced, including a new carbon tax the government intends to introduce in 2017.
Although the government made a multibillion-rand commitment to implement 40 "high impact investment projects" in September, BMI warned similar plans had failed to gain traction in the past.
Source: BDpro
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