ARCELORMITTAL, the world’s largest steelmaker, will face questions about its response to the sharp global downturn today at its first business review since last month’s stock market crash.
The Luxembourg-based company hosts an investor day starting at 1230 GMT in a far less buoyant environment than when it said at the end of July that it saw no repeat of last year’s sharp second-half slowdown.
The group has since revealed plans to idle three blast furnaces in Europe – in Belgium, France and Germany – because of low demand. Further end-user weakness, lower steel prices and destocking could force further capacity cuts in the weeks ahead.
It cut production by around a half in the depths of the 2008/2009 downturn and, while few expect such a radical measure for now, analysts say the company is likely to focus on its cost-savings plan, which has not been a central feature of presentations so far this year.
In July, ArcelorMittal said a continued recovery of underlying demand meant steel shipments in the second half should be higher than a year earlier. That may now be too optimistic.
Global growth expectations have been cut sharply in the past two months. The International Monetary Fund cuts its forecast for global economic expansion to four per cent this year and next from respectively 4.3 and 4.5 per cent and warned Europe and the US could slip into recession in 2012.
Current market consensus expectations are for ArcelorMittal to produce a core profit (EBITDA) at the upper end of the company’s own $2.4bn (£1.55bn)-$2.8bn (£1.81bn) guidance range in the third quarter and for the same figure in a latest data show.
However, customer destocking and a possible margin squeeze could yield a weaker final three months.
Hot-rolled steel cord prices in Europe continued their steady rise in August, but have come off three per cent in the past two weeks, according to Steel Business Briefing. However, iron ore prices are up two per cent in the same period, Metal Bulletin data shows. ArcelorMittal shares have plunged 50 per cent in the past two months, while the STOXX 600 index is down 20 per cent and the index’s basic resource components 30 per cent lower.
Some analysts say this is pricing in a recession, which may be a step too far – at least for now.
