Major steelmaker ArcelorMittal’s crude steel output and sales fell on-year in Q3 as prices slumped and market conditions deteriorated, forcing the company to cut higher-cost capacity, the company reported Nov. 10.
Shipments were impacted by the ongoing war in Ukraine and soaring energy costs, leaving the short term outlook uncertain and calling for caution, it said in a results release.
Crude steel production fell to 14.9 million mt in Q3, from 17.2 million mt a year earlier, while shipments fell 7.1% year on year to 13.6 million mt , mainly as a result of disruptions at ArcelorMittal Kryvyi Rih in Ukraine, impacted by the war.
The lower steel shipments largely reflected weaker demand in Europe (down 6.2%) and the war in Ukraine (down 29.2%) offset in part by NAFTA (up 2.6%), ArcelorMittal said. Excluding the impact of Ukraine, steel shipments in Q3 declined by 1% on the year, it said.
Lower steel prices, coupled with the lower shipments, brought sales down 6.2% on the year to $18.97 billion and from $22.23 billion in Q2, when prices had spiked on fears of supply shortages in the weeks following Russia’s Feb. 24 invasion of Ukraine.
Iron ore prices were 36.5% lower than in the same period last year, also contributing to the lower revenues.
Total group iron ore production fell to 10.6 million mt from 13 million mt in the same period a year earlier, although shipments from the company’s AMMC and Liberia operations remained stable at 6.9 million mt.
Q3 EBITDA slumped to $2.66 billion, from $6.06 billion a year previously. However, this came in above market expectations: a consensus of 15 brokers published Oct. 31 forecast the steelmaker would report EBITDA of $2.34 billion.
The steelmaker reported a Q3 slump in operating income per mt of product to $122/mt, from $366/mt a year ago.
Platts, part of S&P Global Commodity Insights, assessed benchmark hot-rolled coil in northwest Europe stable on the day at Eur640/mt ($643.01/mt) ex-works Ruhr Nov. 9. The price is 30.59% lower than at the beginning of the year.
“The strong market conditions enjoyed for much of the past two years deteriorated in the third quarter as seasonally lower shipments, a reduction in exceptional price levels, destocking and higher energy costs combined to put profits under pressure,” said Aditya Mittal, ArcelorMittal CEO. “The business responded quickly to the changing environment, cutting higher cost capacity to manage addressable demand and reduce fixed costs, and reducing European gas consumption by 30%”.
“The short-term outlook for the industry remains uncertain and caution is appropriate.”
Outlook
ArcelorMittal added that it has adapted its capacity for Q4 to address the weak apparent demand environment and higher energy costs, particularly in Europe.
“Apparent demand conditions are expected to improve once the current destocking phase reaches maturity,” it said. “The company is adapting its cost base during this period of low capacity utilization, optimizing energy consumption and reducing fixed costs of unproductive capacity.”
The group’s decarbonization goals remain a central part of its strategy moving forward, Mittal emphasized. In October, the group broke ground for a new direct reduced iron/electric arc furnace low-carbon emissions steelmaking plant at its Dofasco works in Ontario, Canada, supported by the regional and federal governments and which is now “hydrogen-ready”, he said.
The steelmaker also hopes to “scale up” on renewable energy, which is critical both for the decarbonization of steelmaking and for enhanced energy security, the CEO said.
AMNS India has meanwhile embarked on a growth strategy to expand its market share and play a leading role in development of the Indian steel industry, ArcelorMittal’s statement said. Expansion of the Hazira plant to around 15 million mt capacity by early 2026 is underway including automotive downstream and enhancements to iron ore operations, with capex of around $7.4 billion, it said.
— Diana Kinch
