ArcelorMittal's $1.9 billion profit in the second quarter marked its best financial result since 2011.
ArcelorMittal CEO Lakshmi Mittal said during a conference call with investors last week the company was benefiting from recent cutbacks in steelmaking capacity at mills like ArcelorMittal Indiana Harbor and from tariffs and rising prices.
"The ongoing progress we are making with our Action 2020 strategic plan is delivering sustainable structural improvement across our business," Mittal said. "Secondly, there's improved global steel demand and steel industry reform. There has been significant supply side rationalization over the past two years, which has led to higher industry capacity utilization rates and higher steel spreads. Nevertheless, in the steel industry, overcapacity is still a challenge that needs to be fully addressed."
All three major credit rating agencies have upgraded ArcelorMittal, giving it an investment-grade credit rating.
"Achieving this reflects the significant progress we have made in strengthening our balance sheet and improving our financial results in recent years," Mittal said.
And things have been looking up.
"Steel demand is growing in each of our core markets and we have today revised our 2018 apparent steel consumption forecast upwards by 0.5 percent for the U.S. and 1 percentage point for Europe," Mittal said. "Our order books are strong and customer inventory levels are at or below normal levels. Supply-side reform and supportive actions against unfair trade provides further support."
Chief Financial Officer Aditya Mittal said cutbacks and new emissions rules in China, as well as tariffs, have helped address some of the overcapacity issues that have dogged the global steel industry in recent years.
"I think we have structural trade measures in place which have not existed in the past," he said. "I'm talking about anti-dumping and anti-subsidy cases. So that was a story of 2017 and summer 2018. So this applies to our European business, it applies to our U.S. business, certain actions have also been taken in other geographies. More recently, we have seen Section 232 tariffs in the U.S., as well as safeguarding actions in Europe."
"With Section 232 and safeguarding," he continued, "there have been questions about the timing and how long they would last. But the anti-dumping measures and anti-subsidy measures typically last five years and typically get extended by another five years."
The company has yet to reap the full benefit from the new Section 232 tariffs on 25 percent on all foreign steel, Mittal said. "Section 232 started in the second quarter, but the full impact has not yet hit our results. The other lag that is embedded in 232 which is not really a second-half phenomenon, but more a going-forward phenomenon. Automotive as you know is an annual business and automotive contracts have not yet reset."