ArcelorMittal turns to loss, foresees improved demand, pricing

ArcelorMittal says the demand slowdown is beginning to stabilise and the supportive inventory environment will help apparent steel consumption (ASC) in core markets grow in 2020.

The steelmaker saw steel shipments fall -2.5% on-year in the fourth quarter of 2019 to 19.7 million tonnes, while iron ore shipped at market price fell -4% to 9.6mt. Revenue dropped -15% to $15.51 billion and the firm turned to a net loss of $1.88 billion versus a profit a year earlier of $1.19 billion.

Brazil, especially, is expected to see ASC rebound 4-5% this year following the pronounced destocking of flat products in 2019 and expected growth in construction activity.

Chinese demand is seen growing 0-1%. “Absent a degradation of the situation and/or a further extension of the holiday period, we believe the effect of the Coronavirus will likely have a short-term negative demand impact in China and to a lesser degree elsewhere,” ArcelorMittal says in a report seen by Kallanish. “Our current view is that the vast majority of the impact on 1Q 2020 demand is expected to be recovered throughout the remainder of the year.”

Q4 shipments also fell -2.5% on-quarter due to a -4.2% deliveries drop in Europe, -2.1% in NAFTA and -3.3% in Brazil. The on-year revenue drop was down to the reduced deliveries, a -16.2% drop in sales prices and -3.2% decline in lower market-priced iron ore shipments. This was offset partly by a 24.3% rise in higher seaborne iron ore reference prices.

Exceptional items for Q4 of $828 million primarily include inventory related charges in NAFTA and Europe following a period of exceptionally weak steel pricing.

Steel shipments in full-year 2019 rose 1% on-year to 84.5mt, but iron ore shipped at market price inched down -1% to 37.1mt. Revenue fell -7% to $70.6 billion and the firm sunk to a net loss of $2.45 billion versus a profit in 2018 of $5.15 billion.

“2019 was a very tough year, clearly reflected in our significantly reduced profitability,” ArcelorMittal chairman Lakshmi Mittal says. Nevertheless, net debt was reduced to its lowest-ever level, with further deleveraging expected this year, he adds.

“Although market conditions remain challenging, there are encouraging early signs of improvement particularly in our core markets of US, Europe and Brazil,” Mittal continues. “With inventory levels having reached a very low level following a period of de-stocking, we are seeing customers return to the market, supporting an improved pricing environment.”