ArcelorMittal lowers 2019 consumption guidance, says spreads ‘unsustainable’

ArcelorMittal has lowered its global apparent steel consumption growth guidance to 0.5-1% on-year for 2019 from the previous 0.5-1.5% forecast. At -3%, Europe will register the steepest contraction, but Russian and Chinese guidance has been revised up. ArcelorMittal’s shipments are consequently expected to remain stable this year compared to the previous forecast of growth.

ArcelorMittal’s steel shipments fell -1.7% on-year in the third quarter to 20.2 million tonnes. They also fell -11% on-quarter due to lower shipments in Europe owing to seasonality and weaker demand, Ukraine, Kazakhstan, South Africa, and NAFTA. Iron ore shipments at market price were flat at 8.4mt.

Compared to Q2, European shipments in Q3 were down -17.9% to 9.7mt due to seasonality and weaker demand driven by macro headwinds including declines in automobile production.

“As anticipated, we continued to face tough market conditions in the third quarter, characterized by low steel prices coupled with high raw material costs,” ArcelorMittal chairman and ceo Lakshmi Mittal says in a report seen by Kallanish. “We continue to expect a substantial working capital release in the fourth quarter which should enable us to further reduce net debt year on year.”

Consolidated sales fell -10% on-year in Q3 to $16.63 billion due to lower sales prices and steel shipments, offset partly by higher seaborne iron ore reference prices. The firm sunk to a net loss attributable to equity holders of the parent of $539 million versus a $899m profit a year earlier. This includes foreign exchange and other net financing losses of $524m.

“Demand in our core markets of Europe and the US has remained weak, reflecting depressed manufacturing activity and continued weakness in automotive, compounded by customer destocking,” ArcelorMittal says.

The significant spread compression observed in the first half 2019 continued in Q3, resulting in a further deterioration in operating results. “The current steel spread environment is both exceptional and unsustainable,” ArcelorMittal adds.

In the nine months through September ArcelorMittal’s consolidated steel shipments rose 2% on-year to 64.8mt, primarily due to a 6.9% increase in European shipments and the ArcelorMittal Italia consolidation effect. But iron ore shipments declined -1% to 27.5mt.

Nine-month revenue fell -5% to $55.1 billion and the firm turned to a $572m net loss versus a $3.96 billion net profit.