Our opinion on the current state of ACL

ArcelorMittal (ACL) is South Africa's largest steel producing company. It has survived where companies like Highveld Steel have disappeared. Arguably, ArcelorMittal felt the impact of the sub-prime crisis more than any other South African company and has fallen from its high of R260 in June 2008 to as low as 25c in August 2020. Since then, it has rallied strongly and now trades at 1052c. It has had to deal with the collapse of the construction industry locally, which was a major consumer of steel, and the massive imports of cheap Chinese steel which were dumped onto our market. Those imports have slowed down somewhat, and ArcelorMittal was successful in getting certain tariffs in place to discourage imports. We believe that this company came close to closure in July 2020 when the share price reached 25c. It has been rescued by the rising steel price combined with severe cost cutting. In its results for the six months to 30the June 2023 the company reported revenue down 5,1% and a headline loss of R448m. The company said, "Falling international commodity demand affected most sectors. Understandably, steel demand remained muted, which put significant pressure on local prices. The company committed to adopt a flexible approach to operating plants in reaction to the available order book, adjusting fixed cost levels accordingly, and following an assertive cash management process". The share fell 43% after the trading statement. This share remains a commodity share subject to the international price of steel. In late April 2023 talks between ACL and NUMSA deadlocked and the union said it was preparing for a major strike. On 17th July 2023 the company announced the resignation of its chief financial officer (CFO), Siphamandla Mthethwa, had resigned and would be replaced by Gavin Griffiths in an acting capacity. On 28th November 2023 the company announced that it had decided to wind down its "Long Steel Products" business in Newcastle which would probably result in the retrenchment of as many as 3500 workers. The decision was caused by logistics problems, the slow economy and the advantage of scrap over iron ore. The We recommend waiting for the share to break above its 65-day exponentially smoothed moving average before investigating further.