ArcelorMittal posts highest profit since 2014 as steel rebounds

Employees of the ArcelorMittal plant in Florange, France. The steel firm will shut down two furnaces at Florange that are no longer used if a buyer for them cannot be found. (AFP)
Employees of the ArcelorMittal plant in Florange, France. The steel firm will shut down two furnaces at Florange that are no longer used if a buyer for them cannot be found. (AFP)

London - ArcelorMittal reported its highest quarterly profit since 2014 after a rally in steel and iron-ore prices boosted earnings. The world’s biggest steelmaker expects profitability to decline in this quarter after coal prices surged.

Earnings before interest, taxes, depreciation and amortisation in the three months ended September 30 rose to $1.9bn from $1.35bn a year earlier, the Luxembourg-based company said in a statement on Tuesday. That missed the $1.95bn average of nine analysts’ estimates compiled by Bloomberg.

Steelmakers’ earnings have been boosted by an increase in steel prices as China’s economy stabilised and policy makers around the world pledged to back growth. European steel prices have rallied 47% this year, while iron ore and coking coal, which ArcelorMittal also mines, have jumped 55% and 270% respectively.

“Our third-quarter results reflect the progress the company is making,” CEO Lakshmi Mittal said in the statement. ”Looking ahead, while real demand remains stable, we will be impacted by the unexpected significant increase in the price of coal.”

ArcelorMittal has more doubled in value this year as deep cost cuts started to pay off and raw-material prices rebounded. The company was forced to raise $3bn from investors earlier this year as it sought to cut debt.

ArcelorMittal SA also sees improvement

ArcelorMittal South Africa [JSE:ACL] reported that sales for the quarter ended 30 September 2016 were 20 000 tonnes (3%) higher than the corresponding period in 2015, driven mainly by flat products.

Liquid steel production was 67 000 tonnes (6%) lower mainly due to the planned mini-reline at Saldanha Works resulting in approximately 110 000 tonnes of lost production, it said in a statement on Tuesday.

“Despite the reline at Saldanha Works, flat product sales increased by 3% and long products sales by 2%,” it said. “However, local sales were still 11% less than quarter 2 of 2016 due to weaker local demand and ongoing imports.

“Although having declined slightly from 2015 levels, imports are still high despite the 10% duties having been imposed,” it said. “The need for additional protection through safeguards is therefore imperative to address the surge in imports.”

ArcelorMittal South Africa said that despite the expected seasonal impact of the slowdown on local sales during the festive period, export sales are expected to increase compared to the third quarter of 2016, mainly due to increased blue water exports.

“As reported in our interim results in July 2016, ArcelorMittal South Africa has been experiencing tough trading conditions mainly as a result of lower steel demand due to poor economic activity and ongoing imports,” it said.

“We do not expect this to change in the next quarter,” it said.

ArcelorMittal SA results amid R1.5bn fine

On August 22, it was announced that all investigations and prosecutions relating to a settlement agreement between ArcelorMittal SA and the Competition Commission were finalised and ArcelorMittal would pay an administrative penalty of R1.5bn for price fixing. It also  committed to a R4.64bn capital expenditure over five years.

The agreement relates to various cases the commission investigated, some relating to complaints dating as far back as 1999. Some complaints were subsequently referred to the Tribunal for adjudication.

ArcelorMittal admitted guilt to only two of six matters: the long steel matter, which relates to allegations of fixing prices, allocating customers and sharing commercially sensitive information, and as a consumer of scrap in relation to a scrap metal allegation of price fixing.

FULL STORY: ArcelorMittal to pay R1.5bn price fix fine

On Tuesday, ArcelorMittal South Africa said it "supports the notion that a solution is required to protect the downstream industry from cheap imports of finished and semi-finished products that continue to be imported into the country”.

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