ArcelorMittal executives are chalking up the company's $539 million third-quarter loss to the fact that "deteriorating steel market conditions have continued to weigh on the company's results."
"Demand in our core markets, Europe and the United States, has remained weak, reflecting depressed manufacturing activity and continued weakness in automotive markets compounded, obviously, by further customer destocking," ArcelorMittal Head of Investor Relations and Vice President of Corporate Finance Daniel Fairclough said in a conference call with investors. "The current sales spread environment is both exceptional and unsustainable. Nevertheless, we must be disciplined in our active response to this exceptionally challenging environment."
The Luxembourg-based steelmaker, the largest steel company in the world by volume and one of the Region's biggest industrial employers, has lost nearly $1 billion over the past six months as demand for steel has sagged worldwide. It's cutting production by 4.2 million tons during the second half of the year by moderating output at some mills and taking blast furnaces offline at others.
ArcelorMittal plans to idle Blast Furnace #3 at ArcelorMittal Indiana Harbor West in East Chicago later this month. The steelmaker said it would not invest in the high cost of a reline unless market conditions warranted it.
Fairclough said demand has been weak this year, deteriorating most in the automotive sector. But conditions seem to have stabilized over the past few weeks.
"Looking forward, while there are some constructive signs, particularly the recently announced price increase in the U.S., steel industry fundamentals do remain in a fragile state," Fairclough said. "As such, we remain focused on delivering against our Action 2020 targets. The business is expected to generate healthy free cash flow this year and demonstrate progress in our efforts to further strengthen our balance sheet and towards improved shareholder returns."
ArcelorMittal Head of Group Finance Genuíno Christino said the company is responding to weak demand by cutting back on discretionary capital projects but not necessary maintenance ones that will just have to be done later.
"These are discretionary capital expenditures and something that we will consider going forward, to the extent that the market conditions improve," he said. "But we are not at all here creating any future liability for the operations."