After a challenging 2019, the world’s largest steel producer ArcelorMittal sees real demand slowdown in the steel industry beginning to stabilize. Moreover, a supportive inventory environment would lead to growth in apparent steel consumption in the steel giant’s core markets in calendar 2020.
Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said, “2019 was a very tough year, clearly reflected in our significantly reduced profitability. However, our cash generation remained strong helping to reduce net debt to the lowest ever level. This demonstrates the contribution of our Action2020 programme which was designed to ensure ArcelorMittal can be cash flow positive through all aspects of the steel cycle. We expect to make further deleveraging progress this year. Maintaining a strong balance sheet and reaching our net debt target is a clear priority for ArcelorMittal. Having now completed the acquisition of Essar Steel India in partnership with Nippon Steel, we have also secured a new opportunity for the group in the fast-growing Indian market. The asset is performing well and offers considerable brownfield potential aligned with the country’s ambition to triple crude steel production over the next ten years”.
“We also continue to invest strategically in research and development, including lower carbon steel-making processes and low carbon products. Steel has the potential to significantly reduce its carbon emissions, but new policy will be vital. In this regard we are encouraged by the position adopted by the new European Commission, including their support for a carbon border equalisation”, he added.
Despite challenging market conditions, ArcelorMittal sees encouraging early signs of improvement particularly in its core markets of US, Europe and Brazil. With inventory levels having reached a very low level following a period of de-stocking, the steel behemoth is seeing customers return to the market, supporting an improved pricing environment.
ArcelorMittal’s total steel shipments in calendar 2019 stood at 84.5 MnT, a meagre increase of 0.8% over 83.9 MnT in calendar 2018 primarily due to higher steel shipments in Europe (+3.2%) due to the impact of the consolidation of ArcelorMittal Italia as from November 1, 2018, offset in part by the remedy asset sales related to the ArcelorMittal Italia acquisition (completed June 30, 2019) and ongoing weak demand driven by macroeconomic headwinds including declines in automobile production.
Operating loss for 2019 was USD 627 million as compared to an operating income of USD 6.5 billion in calendar 2018, primarily impacted by weaker operating conditions (negative price-cost effect in steel segments) reflecting both the decline in steel prices and higher raw material costs (due in particular to supply-side developments in Brazil).
“The most significant development for ArcelorMittal in 2019 has been the completion of the acquisition of Essar Steel, in partnership with Nippon Steel, which was completed in December 2019. Our new joint venture has been named AMNS India and represents a continuation of a strong partnership over several decades. Bringing the highest standards of governance, the JV plans to invest sustainably to enable the growth of Indian steel demand, from what are still low levels given the size of the population. Several interesting medium term and long term growth opportunities have already been identified”, ArcelorMittal said in an analyst presentation.
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