By John W. Miller And Alex MacDonald
LONDON-- ArcelorMittal posted another fourth-quarter loss as it
took a hit from lower iron ore prices and a torrent of Chinese
exports that have flooded global steel markets.
The world's biggest steelmaker said its net loss narrowed to
$955 million from $1.23 billion a year earlier, but it also warned
Friday that its profit would fall in 2015, rather than improve as
analysts expected, and global steel consumption would grow less
than last year at between 1.5% and 2%.
The steelmaking business is suffering from exports out of Asia,
where economic growth has been slowing, Chief Executive Lakshmi
Mittal said in an interview. "There is a price pressure everywhere
due to surge in exports due to China and South Korea," he said. In
2014, steel exports from China rose 59% from 2013, to 82.1 million
tons, and exports from South Korea increased 8% to 28.4 million
tons, according to Global Trade Information Services.
Steel demand in all key markets should rise by more than 1%,
except for the Commonwealth of Independent States and the U.S.,
ArcelorMittal said. It was particularly bearish about North
America, its second largest market, where it said steel demand
could fall by as much as 1%.
Investors took the lower outlook in stride, as fourth-quarter
results exceeded views. The company's New York-listed ADRs were up
4.7% in recent trading.
The Luxembourg-based company said it took around $1 billion in
charges related to asset impairments and currency exchange losses
in the fourth quarter, including a $621 million write-down at
Chinese steelmaker China Oriental Ltd., in which it owns a
significant minority stake.
For the year, ArcelorMittal showed modest improvement, lowering
its net loss to $1.1 billion from $2.5 billion. Steel shipments
increased 3% to 85.1 million tons, and steel margins improved $14
per ton thanks to cost cuts, better productivity, and lower raw
material prices. ArcelorMittal plans to boost total steel shipments
by 4% to 5% this year, half of which will come from recent blast
furnace restarts in Brazil and South Africa.
"Operating conditions remain tough [but] we expect steel markets
to continue to improve, particularly for high value-added products
such as automotive," said Mr. Mittal. ArcelorMittal is the world's
largest supplier of flat steel to the global automotive sector.
The company in recent years has also become a major, and
profitable, miner. It now digs up iron ore, the main ingredient for
making steel, in nine countries, from Canada and the U.S. to
Ukraine and Liberia.
As Chinese demand growth has slowed and mining companies have
expanded production, prices are half what they were a year ago.
Operating income at ArcelorMittal's mining division swung to a $50
million loss from a $324 million profit.
"We expected iron ore prices to fall," Mr. Mittal said, adding
that weaker currencies in mining countries and lower oil prices
would mitigate the pain. In addition, a spokeswoman said, lower
iron ore prices will help offset lower steel prices.
ArcelorMittal said its iron ore reference price had dropped 45%
in the quarter compared with a year ago. Partly as a consequence,
overall revenue fell 5.7% to $18.72 billion in the fourth quarter
compared with the same period a year earlier. "The mining division
will become less and less a profit driver for the group" in the
future, said Jefferies analyst Seth Rosenfeld.
Chief Financial Officer Aditya Mittal said the company will
continue to look at buying and selling assets. It unloaded a stake
in a U.S. mill last year and remains interested in buying privately
owned Ilva, Europe's largest steelworks, although the Italian
government wants to restructure the business first before
permitting a sale.
Although oil and gas markets account for a small percentage of
ArcelorMittal's American operations, the recent collapse of oil
prices will hurt the company's U.S. business. Demand for steel pipe
and tube had driven up U.S. steel prices and fueled a 35% increase
last year in U.S. imports to $34.2 billion. Last year, the U.S.
became the world's biggest steel importer.
But now energy companies have responded to the fall in oil
prices by canceling orders en masse, and the U.S. is no longer as
likely to keep sucking up excess steel production. Benchmark
hot-rolled coil prices are down 13% since Jan. 1.
Mr. Mittal declared himself optimistic. "Low energy pricing will
help U.S. consumers spend more on cars and houses," he said.
Write to John W. Miller at john.miller@wsj.com and Alex
MacDonald at alex.macdonald@wsj.com
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