06 November 2008
ArcelorMittal Doubles Steel Output Cuts as World Prices Drop

Bloomberg - ArcelorMittal, the world's biggest steelmaker, will slash production after prices tumbled as an economic slowdown eroded demand from builders and carmakers.

Output of flat carbon steel will fall by as much as 35 percent in the U.S. and as much as 30 percent in Europe, the Luxembourg-based company's biggest markets, ArcelorMittal said Wednesday in a presentation on its website. It will also reduce stainless steel supplies and output in Africa and Asia. ArcelorMittal, founded by Chief Executive Officer Lak-shmi Mittal, 58, is joining competitors in Russia, South Korea and Japan in reining in production only two months after prices rose to a record. Steel demand will decline next year, according to forecasts by Citigroup Inc. analyst Johan Rode and Peter Marcus, the managing partner of research firm World Steel Dynamics.

"We remain optimistic about the industry's medium-term growth prospects, but it is appropriate to pause our growth strategy until we have a more settled economic outlook," Mittal said in the company's earnings statement.

Third-quarter net income rose to US$3.82 billion, or $2.78 a share, from $2.96 billion, or $2.10, a year earlier. That missed the $5.72 billion median of four analyst estimates compiled by Bloomberg. Sales gained 38 percent to $35.2 billion.

ArcelorMittal said it will maintain its base dividend at $1.50 a share in 2009 and cut net debt by $10 billion by the end of next year. Earnings before interest,deprecation and amortization will be $2.5 billion to $3 billion in the fourth quarter, it said.

Steel shipments fell 1.5 percent to 25.6 million metric tons in the third quarter.

Hot-rolled coil, a benchmark steel product used in cars and construction, averaged 797.31 euros ($1,028.3) a ton in the third quarter in Europe, 61 percent higher than a year earlier, according to data compiled by Metal Bulletin. It will average $550 in 2009, Citigroup's Rohde said in a Nov. 2 note to investors.

OAO Severstal, Russia's largest steelmaker, and domestic rivals Evraz Group SA and OAO Mechel said last week they're curbing spending. Corns, the U.K. unit of India's Tata Steel Ltd., said last week it may prolong a 20 percent cutback through the second quarter of 2009.

U.S. car sales tumbled 27 percent in September, the steepest monthly decline since 1991, while European sales slid 8.2 percent.

Global production of steel was 108.4 million tons in September, 3.2 percent lower than a year earlier, the Brussels-based World Steel Association said Oct. 22. Output in China, the largest steelmaking nation, declined 9.1 percent. Global production will drop 5 percent in 2009, World Steel Dynamics' Marcus said Nov. 3.

Formed in 2006 through Mittal Steel Co.'s $38.3 billion purchase of Arcelor SA, ArcelorMittal has sought to increase control over raw materials such as iron-ore and coking coal. The company has invested in mines in Russia and Africa and said in May that it was considering acquisitions or possible joint ventures in Indonesia, Thailand and Malaysia.

(Source: The Jakarta Post)

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