Reuters reported that ArcelorMittal is expected to say that a summer dip is deepening into a second half slump due to threatened recession in developed markets and policy tightening in China.
As per report, the third quarter is typically a thin period for the USD 500 billion a year steel industry, but US and Asian producers have already forecast weak demand and prices stretching into the end of the year, when a pick up had been expected.
ArcelorMittal, which makes 6% to 7% of the world's steel and whose production is more than double its nearest rival, typically gives EBITDA forecast for the quarter ahead, the most keenly watched number for investors.
The market is expecting core earnings to be 27% lower in the third quarter than the second and to drop by a further 9% in the final three months.
The Luxembourg based company still believes shipments and earnings per tonne and its overall performance will be higher in the second half of 2011 than a year earlier when a sharp slowdown and margin squeeze drove it into a fourth quarter loss.
ArcelorMittal now has more mining income to soften the blow and told investors in September it was better braced to weather a recession than in 2008-09 because of savings made to date and an improved balance sheet.
Steelmakers have profited from a booming auto sector, but there is little sign of recovery among the other main customers in construction, a market where ArcelorMittal is more exposed than rivals because of its product mix.
Some analysts see lower demand from the automotive and construction sectors in the developed world, with growth only in engineering.
With developed markets sluggish at best, China where evidence of a slowdown is mounting is crucial to the health of the sector, even if not a market for ArcelorMittal itself. A construction slowdown in China would lead to increased exports by Chinese steel producers, affecting rivals elsewhere.
The price of rebar, reinforcing steel used by the construction sector, has tumbled 20% since August to a record low. Inventories have also risen for two months as end users slowed orders and daily steel output has already begun to ease.
(Sourced from www.reuters.com)
