Rapid steel market rebound improves ArcelorMittal outlook: Fitch

A faster-than-expected rebound in steel markets is a major factor behind Fitch Ratings’ revision of ArcelorMittal’s Outlook to Positive from Negative. The steelmaker’s measures to optimise costs and gains from realisation of organic growth projects have also contributed.

The credit rating agency has also affirmed ArcelorMittal’s Long-Term Issuer Default Rating (IDR) and senior unsecured ratings at ‘BB+’.

Since last year’s initial Covid-19 lockdowns were eased, steel capacity restarts have been lagging demand recovery and, along with low inventories, led to a shortage in the value chain, Fitch says. This has translated into a price rally and high margins.

“We expect the current price gains to be short-lived, but they will support 1H21 results, given European steelmakers’ full order books,” the credit rating agency comments in a note seen by Kallanish. “We forecast AM’s reported Ebitda at close to USD9.5 billion in 2021 with possible upside depending on the pace of price moderation.”

The new arrangement between ArcelorMittal and Invitalia to form a public-private partnership to recapitalise Ilva will allow ArcelorMittal to deconsolidate the loss-making entity, Fitch says.

The sale of ArcelorMittal’s US assets and the new agreement on Ilva streamline ArcelorMittal’s asset portfolio and allow more focused investments in strategic projects, the firm adds. Key investment projects with a total budget of $1.5 billion include two projects in Brazil and Mexico, and recommencement of expansion in Liberia that will add 10 million tonnes/year of iron ore production by 2024. These projects are expected to add $600 million Ebitda by 2024.

ArcelorMittal’s crude steel output fell 20% on-year in 2020 to 71.5 million tonnes. Revenue fell 25% to $53.3 billion but net loss narrowed 70% to $733m. Ebitda dropped 17% to $4.3 billion.

Adam Smith Germany