ArcelorMittal’s MT division, ArcelorMittal South Africa, has decided to wind down its Longs Business after facing continuous challenges like weak economic growth, high logistics and energy costs, and an influx of low-cost steel imports from China.

The Longs Business remained unsustainable even after extensive consultations with the government and stakeholders to find viable solutions due to persistent high logistics and energy costs, combined with insufficient policy interventions, especially those decisions made some time ago. This business will now be transitioned into care and maintenance, with the production expected to cease by late January 2025 and the remaining processes to end in the first quarter of 2025.

The decision will affect approximately 3,500 direct and indirect jobs, and also directly impact operations at the Newcastle and Vereeniging Works and AMRAS. After considering the reduced demand, Newcastle’s coke-making operations will continue but be scaled back. Certain roles will particularly be affected by the decision including the Flat Business as well as for some personnel within the corporate support service areas. The company will make efforts to minimize the impact on employees and suppliers and will actively work on the realignment of its R1 billion working capital facility secured last year.

The record-high Chinese exports have resulted in international steel prices dipping to unsustainable levels, global announcements of production stoppages, capacity cutbacks and plant closures. Such weak domestic markets for long steel products and overcapacity of local and international steel production have led ArcelorMittal South Africa to this decision.

ArcelorMittal South Africa also expects a significant decline in earnings for the year ended on Dec. 31, 2024, with earnings per share expected to decrease to a loss within a range of R5.48-R6.21 per share, compared to the prior year's loss of R3.52 per share. Revenues for 2024 are projected to decline by more than 5% year over year, driven by softer net realized prices, reduced asset utilization and the challenges in the Longs Business.

MT stock has plunged 20.4% in the past year compared with the 31.5% decline in the industry.

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MT’s Zacks Rank and Key Picks

MT currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Basic Materials space are Gold Royalty Corp. GROY, MAG Silver Corp. MAG and Fortuna Mining Corp. FSM. While GROY and MAG sport a Zacks Rank #1 (Strong Buy) each at present, FSM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gold Royalty expects earnings growth of 66.7% for the current year. GROY’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and met the same in the other, the average surprise being 125%.

The Zacks Consensus Estimate for MAG Silver’s current-year earnings is pegged at 75 cents per share. MAG's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 17.1%. The stock has gained 40.4% in the past year.

The Zacks Consensus Estimate for Fortuna Mining’s current-year earnings is pegged at 48 cents, indicating a year-over-year rise of 118.2%. FSM’s earnings beat the Zacks Consensus Estimate in two of the last four quarters while missing in the other two, delivering an average surprise of 53.6%. The stock has gained 23.3% in the past year.


 

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