The Luxembourg-based company, Arcelor Mittal which accounts for about 6% of the world’s steel production has revised its forecast for global steel demand with sharper reduction forecast in Europe due to slack in region’s automotive market.
On Thursday, the company said that it now expects global apparent steel consumption, which includes inventory changes, to rise between 0.5% and 1.5% in 2019, from a previous forecast of 1%-1.5%.
The steelmaker said that Europe would see a decline in demand between 1-2% which is altered from the previous forecast of 1% and has also trimmed its expansion hopes for U.S. and Brazil. European steelmakers are suffering from a weak manufacturing sector, including a 3% decline in new car purchases in Europe. For ArcelorMittal, and many other steelmakers, the automotive industry is second only to the construction sector in terms of steel sales.
ArcelorMittal has idled a series of plants across Europe, cut production in others and slowed a planned ramp-up of production at Ilva, Europe’s largest steel plant that was acquired by ArcelorMittal last year. The company’s South African arm has also cut more than 2,000 jobs.
Market conditions had been very tough in the first half of this year after a strong 2018, with steel profitability squeezed due to lower steel prices and higher raw material costs, Chief Executive Lakshmi Mittal said in a statement.
However, ArcelorMittal’s outlook for China demand remained bright but its business in the country is negligible. The company produced almost half its steel last year in Europe, with just under 40% from plants in U.S.
The company reported a second-quarter core profit (EBITDA) of USD 1.56 billion, slightly above its compiled consensus of USD 1.53 billion, but down from USD 1.65 billion in the first quarter and only about half its earnings of a year earlier.
The organisation’s management highlighted that the steel profitability had been squeezed due to lower steel prices and higher raw material costs which was only partially offset by the company’s mining operations.
Arcelor Mittal believes that the EU needs to take more stringent measures to prevent influx of cheap imports in the region as the safeguard quotas, which have been increased by 5% twice this year, have not been effective.
Europe’s crude steel output registers decline in H1 2019
Europe’s cumulative crude steel production during the first half of 2019 has been recorded at 84.77 MT, nearly 2.5% down over the corresponding period of the previous year. The domestic production totaled 13.790 MnT during the month, as reported by the World Steel Association. This is slightly lower by 3% when matched with the output of 14.2 MnT achieved by the region in the same month a year before.
The top five steel producing countries in the region were Germany, Italy, France, Spain, and Poland. The combined production by the above five countries totaled 8.79 MnT accounting for approximately 64% of the total regional output.
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