ArcelorMittal South Africa unit output below capacity (update1)

JOHANNESBURG (Bloomberg) -- ArcelorMittal South Africa Ltd., the continent's largest steelmaker, said its Saldanha plant has been operating "well below capacity" since late in the third quarter after demand for exports slowed.

"The export market is very flat," spokesman Sven Lunsche said by mobile phone on Saturday. "Saldanha is very much focused on the export market." The South African company is controlled by ArcelorMittal, the world's biggest steelmaker.

The Vanderbijlpark plant, the base for ArcelorMittal South Africa, is also operating "slightly below" capacity as demand slows in local markets including packaging and autos, he said.

Hot-rolled steel, an industry benchmark, fell 13 percent in the month to Oct. 14, according to an index compiled by Steel Business Briefing, an online steel news service. Mills have been cutting output from China to Russia and the U.S. as a slowdown in global economic growth and a tightening of lending by banks curbs demand for raw materials from automakers and builders.

The output cuts, reported earlier by Engineering News, are partly on "softening of demand and part of it is precautionary measures against the whole financial meltdown," Lunsche said.

-----Price cuts

The steelmaker plans to cut average prices 10 percent from Nov. 1, after reducing them in October for the first time this year. It plans to bring forward repairs that were scheduled for next year, given slower production, Lunsche said.

The company is expanding its production capacity to 10 million metric tons a year by 2012 on prospects for rising demand in South Africa, where the government is building power plants, roads and railways as the economy expands and in preparation for hosting the 2010 Soccer World Cup. The company shipped 88 percent of production to local customers in the first half.

ArcelorMittal South Africa fell 4.70 rand, or 5 percent, to 90 rand in Johannesburg, giving the company a market value of 40 billion rand ($4 billion). The company will release third-quarter earnings on Nov. 5.

Jean-Louis Kayitenkore
Procurement Consultant
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Home: +250-55014140
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Kigali - RWANDA
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