ArcelorMittal South Africa Ltd. (ACL.JO) Thursday reported a loss in third-quarter earnings on a drop in demand and rising costs, but said the fourth quarter should bring better results due to an increase in steel prices.

ArcelorMittal South Africa, an arm of steelmaker ArcelorMittal (MT), said conditions in the quarter ending Sept. 30 "deteriorated markedly."

The company posted a loss in headline earnings, a common measure of profit in South Africa that strips out a number of one-time items, of 460 million rand for the quarter compared to a gain of ZAR68 million the year before. The company said steel shipments also fell by 1%.

ArcelorMittal said that, in the last quarter of the year, production volumes should rise along with steel prices and that should lead to an improvement in earnings.

Steel production in the third quarter was 1.18 million tons, down 28% from 1.64 million tons in the second quarter. "Clearly, we have lost a lot of production," Gonzalo Urquijo, a member of ArcelorMittal's group management board, said during the parent company's quarterly analysts conference call.

He attributed a large part of the roughly 450,000-ton production loss to three major incidents. First, ArcelorMittal South Africa suffered a catastrophic failure of its blast furnace dust catcher in Newcastle in early August. The structural failure resulted in 287,000 tons of lost production at the plant, Urquijo said.

The second major incident was chilled hearth conditions experienced on blast furnace D in Vanderbijlpark Works during August, which resulted in steel production loss of about 46,000 tons, Urquijo said.

Lastly, the company had to repair a tap-hole at its Saldanha works, which resulted in lost production of about 86,000 tons, he added.

Furthermore the company suffered a foreign exchange loss on exports, due to a strong rand, which negatively affected its bottom line, Urquijo said.

ArcelorMittal South Africa expects the repairs to the dust catcher to be complete in time to start production in early December. Operations should therefore return to normal by the first quarter of next year, Urquijo said.

The company also said the arbitration between itself and Kumba Iron Ore Ltd. (KIO.JO) over a disputed supply agreement following the loss of ArcelorMittal's mining right to the Sishen iron ore mine is scheduled for May 2012. The outcome of the hearing between the Department of Mineral Resources in South Africa and joint respondents Kumba and ArcelorMittal over the lost Sishen right is still outstanding.

-By Devon Maylie, Dow Jones Newswires; +27117837848; devon.maylie@dowjones.com

--Alex MacDonald in London contributed to this story.

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