It is reported that shares of steel giant ArcelorMittal closed down 8 cents at USD 32.44 after Goldman Sachs analyst Mr Peter Mallin Jones cut his rating on the stock to Neutral from Conviction Buy after lowering steel demand estimates for Europe.

Earnings reports by ArcelorMittal, as well as US Steel and others this week, have made clear that weaker than expected demand in various markets is holding down prices of steel.

According to Mr Mallin Jones, despite economic recovery, European steel distributors are stocking less steel, in part because of sluggish demand in some industries (construction), in part because they have greater visibility in raw materials prices and so are waiting on better pricing for steel down the road, and in part because they can’t in some cases get the financing required to take delivery of steel.

As a result, Mr Mallin Jones cut his 2010 steel demand growth forecast to a decline of 4.3% from a prior rise of 5.8%. His estimate for steel demand growth in Europe in 2011 goes to 5% from a prior forecast for a rise of 7.4%.

Based on lower demand, Mr Mallin Jones revised down his steel price estimate for 2011 in the spot market to EUR 600 per tonne from a prior EUR 620. His entire price model gets ramped down for 2012 and 2013, too.

Mr Mallin Jones wrote that ArcelorMittal’s earnings estimates are coming down, given its greater exposure to spot market prices. He now sees revenue this year of USD 84.3 billion, down from a prior USD 86.9 billion estimate and profit per share of USD 1.69, down from USD 2.95 previously.

(Sourced from www.barrons.com)