ArcelorMittal Sees Better Steel Market as Prices Rebound

  • Earnings fell 33% in first quarter after iron ore collapse
  • Steelmakers have been hit by cheap exports from China

ArcelorMittal, the world’s biggest steel producer, sees a broad recovery in the global steel market after prices for the metal rallied.

"Sentiment in the steel industry has improved. You can see that across the board," Chief Financial Officer Aditya Mittal said on a call with reporters. “Rising steel prices in China have supported prices globally and this has been further supported by the rebound in iron ore.”

Aditya Mittal

Photographer: Christophe Morin/Bloomberg

A recovery in steel would be in the beginning stages for ArcelorMittal, which today reported a 33 percent drop in quarterly earnings after iron ore prices collapsed. Signs of economic strength in China and a broader commodities rebound have started to reverse the plunge in steel and iron ore rose to a 15-month high in April.

ArcelorMittal fell 3.3 percent to 4.538 euros by 9:32 a.m. in Amsterdam. The shares are up 50 percent this year, rebounding from a 57 percent slump in 2015.

Earnings Season

Earnings before interest, taxes, depreciation and amortization fell to $927 million in the three months ended March 31 from $1.38 billion a year earlier, the Luxembourg-based company said in a statement Friday. That was in line with the $924.5 million average of 14 analyst estimates compiled by Bloomberg. 

ArcelorMittal expects full-year Ebitda to be more than $4.5 billion.

While the company maintained its forecast that global steel demand would grow no more than 0.5 percent this year, it also said Chinese demand may fall less than previously expected.

"You will see the improved pricing dynamics reflect more into our second-quarter performance and then fully be reflected in the second half,” Aditya Mittal said. Still, the CFO cautioned that Chinese steel prices may have overshot and could fall back. "Risks remain in China because the fundamental overcapacity still exists.”

Record Exports

Steelmakers have been hurt by top supplier China exporting record amounts of material as its own economy slows, undercutting prices in Europe and the U.S. Cheaper iron ore, used to make steel, also pulled down prices. ArcelorMittal was forced to raise $3 billion from investors earlier this year as it sought to weather the crisis and cut debt.

The company, which supplied steel for New York’s One World Trade Center and London’s Wembley stadium, has also scrapped its dividend, cut expansion plans and shuttered plants.

ArcelorMittal reported sales of $13.4 billion in the first quarter, 22 percent lower than a year earlier. Steel shipments were flat at 21.5 million tons while it mined 14.1 million tons of iron ore, 9.6 percent less than the same period in 2015.

Steel prices in Europe reached the lowest in at least nine years in February and the average in the first quarter was down 37 percent from a year earlier, according to Metal Bulletin Ltd. Iron ore, used in blast furnaces to fashion the alloy, was 22 percent cheaper.

Before it's here, it's on the Bloomberg Terminal.