ArcelorMittal Blurs Steel Outlook – US-FOREX.US
Signs of the recovery in demand for steel aren’t translating into concrete numbers for its suppliers it seems, highlighted by the latest update from Lakshmi Mittal’s ArcelorMittal.The firm’s forecasts for the a third quarter EBITDA of between 1.4 billion and 1.8 billion disappointed a market that had been hoping that signs of the green shoots for the global economy, could lead to a pick up in demand and pricing power in the beleaguered steel sector. “The outlook is towards the lower end of guidance and means that significant improvements are needed in the fourth quarter,” said Rochus Brauneiser, an analyst at Kepler Capital Markets. “The speed of recovery in earnings is lower than expected. Production rates aren’t picking up, and price increases are filtering through later than anticipated.”Announcing a net loss of 792 million for the second quarter – a figure broadly in line with expectations – Mittal, the chief executive of the Luxembourg-based firm said that “positive signals” were beginning to emerge. “The past month has underlined that we expect the first half of the year to represent the bottom of the cycle,” he told investors on a conference call. “As inventories have been run down, demand has increased, prices are picking up and we have started to announce the re-start of some blast furnaces.”The firm has recently restarted three more of its furnaces, having been running on nine of the 25 as it scaled down its production to reflect lower global demand. While demand from countries such as Brazil and China is returning, it’s the muted European and American markets that seem to be thwarting a more profound recovery for ArcelorMittal, says Brauneiser. A similar bleak picture of Europe has been built by Sweden’s SSAB Svenskt Staal which said earlier this week that the market wouldn’t recover till next year, as it reported a quarterly loss of 86 million.
This bodes badly for producers such as ThyssenKrupp and Salzgitter of Germany, almost entirely dependent on European demand for steel, said Brauneiser.Revenues at ArcelorMittal
more than halved in the second quarter, while write-downs on steel stocks, and severance pay for workers who had taken up the company’s voluntary redundancy program also contributed to the quarterly loss.