Growth in global steel demand to aid further recovery, says ArcelorMittal

By Paul Ploumis (ScrapMonster Author)

May 09, 2016 02:48:01 AM

SPOKANE (Scrap Monster):  The operating statement released by ArcelorMittal for the initial quarter of 2016 states that core markets witnessed slight recovery during the quarter. The anticipated rise in global apparent steel demand is expected to further aid the recovery during the forthcoming quarter.

Another loss making quarter

The first quarter result of the company reflects the tough operating conditions during the second half of 2015. The loss during the quarter is mainly attributed to lower commodity prices, noted Lakshmi.N. Mittal, Chairman and CEO, ArcelorMittal. The dumping of steel products from China has led to global steel overcapacity. The excess capacity in China is likely to pose threat of unfair trade.

Year-on-year, the company’s loss narrowed to $416 million during first quarter of the current year. The company had reported a loss of $728 million during the first quarter of the previous year. Revenue declined sharply by nearly 20% to $13.4 billion when matched with the same quarter a year before. However, when compared with Q4 2015, revenue increased marginally.

Arcelor Mittal’s mining business too suffered losses during the quarter. The iron ore production declined has by over 9% year-on-year to 14.1 million tonnes during the first quarter of the year.

Cautious on China

The global steel market is likely to remain vulnerable to excess steel capacity in China. On the other hand, Mittal also noted that China has become increasingly serious about cutting steel capacity. The country’s steel ministry has stated that it needs to cut at least 200 million tonnes of overcapacity. He cautioned that granting of market economy status either by the US or the EU would make it difficult to impose tariffs on steel products imported from China.

Average steel price

The company’s average steel price declined sharply during Q1 2016, when matched with the previous quarter. The prices in the NAFTA region fell sharply from $706/tonne during Q4 ’15 to $635/t during Q1 ’16. Prices in Brazil declined from $565/t to $474/t q-o-q. European region too witnessed steep fall in average prices from $568/t to $530/t, whereas those in Africa and CIS (ACIS) region dropped from $356/t to $320/t.

Crude steel output

Arcelor Mittal’s crude steel output increased significantly in the NAFTA and European region countries. The NAFTA output increased from 5.136 Mt in Q4 ’15 to 5.644 Mt in Q1 ‘16. The output by European region surged higher from 9.988 Mt to 11.171 Mt. The output by ACIS region too increased marginally from 3.663 Mt to 3.668 Mt.

Better times ahead

However, business conditions have started showing signs of improvement. The steel prices have rebounded sharply during recent weeks. Meantime, Mittal cautioned that it needs to be seen whether the prices are sustainable. The global apparent consumption of steel is expected to grow slightly in 2016. Accordingly, results are likely to see slight improvement in the upcoming quarters. The company expects FY ’16 Ebitda to be in excess of $4.5 billion. Also, it is likely to remain free cash flow positive in 2016.