By Alex MacDonald
LONDON--ArcelorMittal (MT) said Friday it is in talks with labor
unions to restructure its U.S. and South African steel operations,
which have suffered from shrinking steel demand and increased steel
import pressure.
The talks are focused on the potential closure of the company's
Vereeniging mini-mill in South Africa and boosting the productivity
of its finished steel operations in the U.S.
"Clearly people are [going to be] affected," Chief Financial
Officer Aditya Mittal told journalists on a call, referring to the
proposed U.S. restructuring proposal. He added that the company
would jointly announce the proposal with the union sometime in the
third quarter.
ArcelorMittal, the world's largest steel maker that accounts for
some 6% of global production, reported a swing to a small net
profit of $179 million in the second quarter from a net loss of
$728 million the quarter before. The profit was largely due to
foreign exchange gains which masked a 1.5% drop in its earnings
before interest, taxes, depreciation and amortization to $1.4
billion. Ebitda fell due to lower iron ore and steel prices as
steel demand in several of it key regional markets remained weak,
with the notable exception of Europe.
The company's North American apparent steel demand--which takes
into account consumption of domestic and net imported steel--is
forecast to shrink by as much as 4% this year versus its previous
expectation for up to a 3% contraction. South African demand is
also forecast to shrink although the company didn't provide a
forecast.
In the U.S., the company is looking to restructure its steel
finishing operations rather than closing blast furnaces, Mr. Mittal
said.
"In the U.S., shipments are not off 2008 levels by 25% where
they were in Europe. Europe required primary capacity changes. In
the U.S., it's more how do we further improve the productivity and
cost performance of our finishing operations," through
debottlenecking among other things, he said.
Mr. Mittal said the underlying U.S. steel market is strong with
demand already back at levels prior to the financial crisis of
2008-09. U.S. real demand is growing at a forecast 2.3% this
year--the highest out of all the regions in which ArcelorMittal
operates--due to strong construction and automotive steel demand.
But the regional market is still suffering from tightened
competition from steel imports, particularly from China, and
continued U.S. inventory destocking.
ArcelorMittal employs more than 20,000 employees at 28
operations in the U.S. with an additional 1,200 employees in
research, development, sales and company offices.
In South Africa, ArcelorMittal is considering closing
Vereeniging Steel, a mini-mill that produces about 0.4 million tons
of crude steel annually. Mr. Mittal said a final decision will
depend on whether steel import pressures abate. ArcelorMittal
directly employed 8,825 people in South Africa last year.
Mr. Mittal said that Chinese steel exports remain a threat to
the global steel market although he noted the country's monthly
steel exports are falling.
Write to Alex MacDonald at alex.macdonald@wsj.com
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