ArcelorMittal

One of the world’s biggest steel makers, ArcelorMittal, is at a crossroads. Created by the takeover of Western European steelmaker Arcelor by Indian-owned multinational Mittal Steel in 2006, the Luxembourg-headquartered business has been facing tough times since recently, much of it because of external factors such as collapsing economies, but some of the pain is certainly of its own making.

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ArcelorMittal is at a turning point. It initiated a series of steps which management hopes will turn a corner and help it survive this period of global instability, especially in the  steel sector.

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Cheap imports are hurting ArcelorMittal as much as any steelmaker as almost all of the markets the steel giant operates in are suffering price falls due to the imports.

Shareholders met in Luxembourg and by an overwhelming majority, passed a stock issuance for a capital increase of $3 billion.

Stock Sold to Pay Down Debt

The fundraising is part of an overall plan unveiled in February 4 by ArcelorMittal. For now, though, it has too much debt on its records. At the end of 2015, ArcelorMittal’s total debt was $19.8 billion. The debt rate had reached 57% by December 31, compared to 35% a year ago.

Except for India and China, global steel purchasing — on the national level — is down in the last few years. Cheap Chinese imports are hurting the markets that ArcelorMittal competes in as much as any. If a further market deterioration was to take place, ArcelorMittal would be looking at a bleak future, hence the rush to raise funds and retire debts, some analysts.

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The narrative flow in the automotive industry has been firmly behind aluminum in the quest for lower weight and better fuel consumption, but steelmakers were never going to stand idly by and see one of their most lucrative markets rapidly eroded even though the speed of the change has caught some of them by surprise.

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Brian Aranha, Vice President of Global Automotive at ArcelorMittal is quoted in Automotiveworld saying Ford’s decision to switch a large chunk of the F-150 to aluminum “…was a bad surprise for us, we just didn’t see it coming.”

factory manufacturing

Aluminum might be making inroads, but steelmakers are going to fight to keep their automotive customers. Source: Adobe Stock/AnastasiiaUsoltceva.

Well, whether they saw it coming or not, they are reacting now. Steelmakers the world over are pouring millions into research and development to carve out a role for steel in the car designs of the future.

The Aluminum Challenge

They have much to fear, in an executive summary to a report by Ducker Worldwide last year called DriveAluminum highlight is made to the rapid gains made by the light metal.

Source Ducker Worldwide

Source: Ducker Worldwide

Although the F-150 leads the class with 1,080 lbs. of aluminum, the pickup truck segment has embraced weight reduction more than any other. The average content will be 548.9 lbs per vehicle almost the same as E segment sedans at 549.9 lbs. and SUVs close behind at 410.3 lbs.

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Could world markets finally see a respite from Chinese steel imports? Molycorp, Inc. vowed in court papers that it won’t completely shut down its Mountain Pass, Calif., facility.

Chinese Steel Prices Collapse

A collapse in Chinese prices last month is set to push already stretched Chinese steel mills even further into the red, curtailing production and exports, according to billionaire steel mogul Lakshmi Mittal, CEO of ArcelorMittal, the world’s largest steel producer.

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Chinese prices for the benchmark product, hot-rolled coil, already at rock bottom, fell a further 10% last month.

We have been hearing a lot that the Chinese government wants to reduce capacity,” Mittal, chief executive officer of ArcelorMittal, the world’s biggest steel producer, told investors on July 31. “This should really accelerate the process of closing down the capacity.”

Molycorp Won’t Shut Down Mountain Pass

In a bankruptcy-court filing, Molycorp, Inc., said it is weighing a number of options for its Mountain Pass, Calif. operation, which has consistently lost money. From 40 to 200 of the 400 jobs at the facility could be saved, depending on how much of the Mountain Pass facility Molycorp decides to keep running while it addresses a $1.7 billion pile of debt, according to court papers filed Wednesday.

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Six steelmakers with major US operations filed a trade complaint Wednesday seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

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The suit, which concerns corrosion-resistant steel used in automobile and construction industries, is the first salvo in the campaign this year by the beleaguered US steel industry to protect itself against a record flood of imports.

The steelmakers are U.S. Steel Corp. , Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp. and California Steel Industries. All are based in the US except multinational ArcelorMittal, the world’s biggest steelmaker, which is based in Luxembourg and London but owns big mills in Indiana and elsewhere in the country.

Prices have been sluggish—down about 25% since the start of the year—despite strong demand in the US. That has forced the companies, which make most of their steel near auto factories in the Midwest and South, to lay off thousands of workers and idle plants around the country.

They blame imports, particularly from China. The US International Trade Commission must decide within 45 days whether the business of US producers was sufficiently “injured” to merit duties. The Department of Commerce will issue a preliminary ruling by the end of 2015. Final rulings by both agencies are expected by mid-2016. The steel companies are expected to argue before the USITC that foreign companies benefit from subsidies from their governments and from currencies that have been intentionally depreciated relative to the dollar.

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It was barely two years ago that major steel multinationals, ArcelorMittal and the South Korean giant POSCO had announced they were pulling their multibillion dollar project investments out of India. Some of these had been pending for a decade or so for such varied reasons as lack of land and government permissions.

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Now, ArcelorMittal is back, like that famous line from Arnold Swarznegger in “The Terminator.” Different time, different government, fresh hope.

ArcelorMittal Signs MoU with SAIL

A few days ago, billionaire Lakshmi Mittal-led ArcelorMittal announced the signing of a memorandum of understanding with the Indian public sector giant Steel Authority of India Ltd. (SAIL) for an automotive steel plant. Obviously, ArcelorMittal is betting on an expected spurt in steel demand in India. Who can blame the conglomerate? Now that China has spun out of investors’ trajectory, steel companies, domestic as well as multinationals, can only look with hope at the until-now dormant Indian steel sector. It’s a case of damned if you do, damned if you don’t.

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Today in metals, two steel majors joined forces in India and predictions differed for the US economic recovery.

ArcelorMittal and SAIL Team Up for Auto Plant

ArcelorMittal, and the Steel Authority of India Limited (SAIL), India’s leading steel company, signed a memorandum of understanding to set up an automotive steel manufacturing facility under a joint venture arrangement in India.

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The MoU was signed in London Lakshmi Mittal, Chairman and CEO of ArcelorMittal, and C.S. Verma, Chairman of SAIL. Rakesh Singh, Secretary to the Government of India, Ministry of Steel and Aditya Mittal, ArcelorMittal CFO and CEO ArcelorMittal Europe, were also present.

The MoU is the first step of a process to establish a JV between the two companies. The proposed JV will construct a state-of-the-art cold rolling mill and other downstream finishing facilities in India that will offer technologically advanced steel products to India’s growing automotive sector.

MarketWatch: US Recovery Murky

It’s a mystery if the US economy will fire back up and grow at a significant rate this summer.

Not long ago, economists thought US growth could reach nearly 4% in the second quarter after a tepid 0.2% gain in the first three months of the year, a period marked by unusually harsh weather. That would be a carbon copy of the feast-or-famine growth pattern that occurred in 2014.

Many are so sure after an uneven batch of economic reports midway through the second quarter. A poll of analysts compiled by MarketWatch predicts the US will expand at a 3.2% annual rate from April through June — and some have chopped their forecasts to below 3%.

A cluster of fresh reports this week probably won’t give much inkling.

Orders for durable goods such as TVs and trucks that are meant to last a long time are expected to fall again in April. Business spending and investment have softened considerably since last fall.

Sales of new homes nationwide, meanwhile, might creep higher in April, but closings are still historically weak.

Another domestic steel plant closing has been blamed on cheap imports and a major steelmaker in India took a big write-down for similar reasons.

ArcelorMittal Shut Down

ArcelorMittal is permanently closing its money-losing Georgetown, S.C., mill, delivering a blow to the local economy, the Charleston Post and Courier reported.

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The company said the shutdown will be completed by Sept. 30 and 226 workers there will lose their jobs.
Luxembourg-based ArcelorMittal blamed “challenging market conditions facing the USA business,” which uses electric arc furnaces to make wire rod used in the automotive and construction industries.
In the press release announcing the closure, ArcelorMittal also said the mill “has been severely impacted by waves of unfairly traded steel imports from China and other countries.”
ArcelorMittal previously shut down the Georgetown operation in 2009. It reopened in early 2011 after negotiating pay cuts and other cost-saving measures with employees.
“Despite our joint efforts and a highly productive workforce, the facility has incurred significant losses since the restart due to high input costs and imports,” P.S. Venkat, CEO of ArcelorMittal Long Carbon North America, told the Post and Courier.

Tata Steel Has Long Product Woes, Too

Tata Steel Ltd. slumped in Mumbai after India’s largest producer of the alloy wrote off its long-products business in the UK.

The shares fell as much as 3.1% to 355.10 rupees and traded at 359 rupees as of 9:37 a.m. local time, Bloomberg reported. The stock has declined 10 percent this year, compared with a 0.7% drop in the benchmark S&P BSE Sensitive Index.

The Mumbai-based company expects to take a non-cash impairment of 50 billion rupees ($787 million) for the quarter ended March 31, according to a statement Thursday. That would completely write off the value of the UK long-products business, which Tata Steel is trying to sell to Geneva-based Klesch Group.

ArcelorMittal has received a reprieve in its court fight over patent infringement for lightweight steel and Novelis reported a first quarter drop in profits.

ArcelorMittal Patent Infringement Actions Revived

A lightweight steel patent at the center of three separate infringement lawsuits filed by ArcelorMittal, the world’s largest steel company, against competitors AK Steel Corp. and two others should not have been canceled outright, a US appeals court said this week.

In a partial victory for Luxembourg-based ArcelorMittal and its attorney Constantine Trela of Sidley Austin, the US Court of Appeals for the Federal Circuit revived two claims of the company’s reissued patent, although it affirmed Delaware US District Judge Sue Robinson’s ruling invalidating the rest.

Novelis Reports a Profit Drop

Novelis, Inc., the world’s largest recycler of aluminum, reported a nearly 50% drop in its net profit at $29 million compared to $54 million in the corresponding quarter of previous financial year.

Its earnings before interest, taxes, depreciation, and amortization (EBITDA) or gross profit was $222 million compared to $250 million in the previous financial year.

Analysts say lower volumes led to lower operating profit for the company. Europe accounted for 75% of the decline in its operating profit, analysts say.

More first quarter results today in MetalCrawler and, as with other steel companies, ArcelorMittal‘s are not good.

ArcelorMittal Loss Widens

ArcelorMittal, the world’s biggest steelmaker, based in Luxembourg, said last week that its first-quarter net loss widened to $728 million from $205 million a year earlier. Revenue fell 13% to $17.12 billion.

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Sales declined 8.6% sequentially due to lower steel selling prices, seasonally lower market-priced iron ore shipments and lower iron ore prices, partly offset by increased steel shipments. Total steel shipments for the quarter were 21.6 million metric tons compared with 21 million metric tons in the year-ago quarter.

More Middle East Aluminum

Saudi Arabian Mining Co. (Ma’aden) said a massive smelter run jointly with Alcoa, Inc. will produce above its initial capacity target this year.

The Ma’aden smelter started commercial operations last year after facing problems during the start-up phase.

Ma’aden, the Gulf’s largest miner, is currently exporting around 70 to 80% of the smelter’s production, Thomas Walpole, senior vice president, Aluminium, Ma’aden said at a conference in Dubai.

The smelter had an initial annual capacity of 740,000 metric tons per year, but this year it is expected to achieve a slightly higher production of 760,000 mt, Walpole said.

In today’s MetalCrawler update, the jobless rate fell again even as the world’s largest steelmaker, ArcelorMittal, said it might idle more US plants.

Jobless Rate Falls

The US economy added a solid 230,000 jobs in April, according to government data released Friday morning by the Bureau of Labor Statistics, a sign that the labor market is regaining its footing after taking a slide earlier this year.

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The unemployment rate fell to 5.4%, a seven-year low.

The latest numbers offer encouragement that the recent economic slowdown marks a temporary blip rather than a sign of deeper problems. Both the jobs growth in April, as well as the tick down in the unemployment rate, were almost exactly in line with market expectations.

ArcelorMittal May Close US Plants

ArcelorMittal SA said it might follow U.S. Steel Corp. in idling more American plants as it struggles to cope with a global steel glut, weak iron-ore prices and a surge of imports into the US.

The world’s biggest steelmaker, based in Luxembourg, said Thursday that its first-quarter net loss widened to $728 million from $205 million a year earlier. Revenue fell 13% to $17.12 billion.

The company plans to cut costs in its iron-ore mining business and reduce operations in the US., Chief Executive Lakshmi Mittal told the Wall Street Journal in an interview. “We are contemplating all actions” to remain competitive, he said. “Including idling some [plants].”

The US is ArcelorMittal’s No. 2 market, after Europe.