LONDON, Feb 23: World’s largest steelmaker ArcelorMittal today said it expects iron and steel prices to remain under pressure through out this calendar year.
Billionaire Lakshmi Mittal-led firm reported a net loss of USD 7.9 billion in 2015 mostly because of a USD 4.8 billion writedown on iron ore mining business and a USD 1.3 billion charge on inventory due to the global steel price plunge.
The firm said steel and iron ore prices have been under pressure in recent periods and particularly in 2015, with both reaching “historical lows in 2015.”
A development that has had a pronounced “negative effect” on its operations, in the form of significant declines in revenues and operating income.
On outlook for 2016, the firm said: “Management currently considers it likely that while stabilisation is possible, steel prices will remain on the low side at least through 2016, given expectations regarding economic conditions and demand.
“Management expects iron ore prices to continue to remain under pressure in 2016 due to the supply/demand dynamics…”
Steel and iron ore prices are sensitive to trends in cyclical industries, such as the automotive, construction, appliance, machinery, equipment and transportation industries, which are significant markets for ArcelorMittal’s products, the Luxembourg-based firm said in a regulatory filing.
Explaining volatility in iron ore prices, ArcelorMittal said spot prices of the ore fluctuated between a peak of USD 160 per tonne (Platts index, CFR China, 62 per cent Fe) in mid-February to USD 110 a tonne at the end of May in 2013.
It culminated in a historical low of USD 44.50 per tonne in early July 2015 then recovered to USD 59.25 a tonne at the beginning of September 2015, before demonstrating further volatility and surpassing the historical low at the end of December 2015 at USD 38.50 per tonne, it added.
Similarly, steel prices too demonstrated significant volatility in 2013, ranging from a high of USD 690 per tonne to a low of USD 586 per tonne (SteelFirst, EU domestic HRC ex-works Northern Europe).
In the first half of 2014, steel prices rose steadily, continuing an upward trend beginning mid-2013. However, the second half of 2014 and the full year 2015 saw substantial decreases in steel prices, which dropped to USD 353 per tonne at the end of 2015, exceeding the historical lows, it said.
To bring the company out of the rut, ArcelorMittal said it will raise USD 3 billion from investors and sell USD 1 billion stake in Spanish auto parts maker Gestamp.
The world’s largest steelmaker outlined a plan to reduce its USD 15.7 billion net debt by nearly a quarter.
Mittal, who owns about 37 per cent of ArcelorMittal, will maintain his stake and will sign up to its entitlement of the share issue, worth about USD 1.1 billion.
Continuing to suffer from China’s overcapacity that drove down world prices, the firm posted net sales of USD 63.58 billion in 2015 as against USD 72.28 billion in 2014. (PTI)
Trending Now
E-Paper
Follow our WhatsApp channel