Soaring steel prices propel ArcelorMittal to the best quarterly profit since 2008

ArcelorMittal posted its highest quarterly profit since 2008 as soaring steel prices helped the world’s largest producer ignore weaker demand from automakers.

The Luxembourg-based group made third-quarter profits of $ 6.1 billion, 19.9% ​​more than the second quarter, its previous record since 2008, although slightly below analysts’ expectations.

Net debt for the quarter fell to $ 3.9 billion, its lowest level since 2008. Sales also increased to $ 20.2 billion.

The company is increasing its share buyback by an additional $ 1 billion, bringing the return on capital announced since September 2020 to $ 6 billion.

The company’s shares rose 2% to € 28 by mid-morning in Europe.

The good results came despite a drop in total steel shipments in the past three months of 9% to 14.6 million tonnes from the second quarter of this year due to weaker demand, especially from the share of automotive customers, as well as production constraints and delays in shipping orders. . ArcelorMittal said it expects this to reverse in the fourth quarter.

Western steel producers had their best year after a decade in which many factories closed and downsized due to weak demand. The global economic recovery from the pandemic helped boost demand for steel, while supply constraints also supported prices.

The high price of steel has trickled down the supply chain and added to rising costs for manufacturers in industries including automotive and rail.

Although the price is down from highs reached earlier this year, prices for some products are still nearly 50% higher than they were in January, according to data from the commodities consultancy. BELIEVED.

The price of hot-rolled coils in Germany, the benchmark product used in the manufacture of steel structures and pipes, started the year at € 655 per tonne, peaked at just under € 1,200 per tonne at the end of June and traded at just under € 1,000. beginning of November.

“The price of steel has gone down. We’re not at the top, but we’re still extremely high by all historical standards, ”said Matt Watkins, senior analyst at CRU.

Analysts expect high prices to fuel supply contracts for next year, many of which are expected to be renegotiated in the coming weeks.

The high prices will be a “massive tailwind for producers,” said Alan Spence, analyst at Jefferies.

Aditya Mittal, CEO of ArcelorMittal, presented a bullish outlook on Thursday. “The outlook remains positive: underlying demand should continue to improve; and, although slightly outside recent records, steel prices remain at high levels, which will be reflected in annual contracts for 2022, ”he said.

The company also said it still expects steel consumption outside of China to increase 12 to 13 percent this year. However, Chinese demand is now expected to decline slightly, driven by a collapse in real estate. The Asian country’s real estate and construction sectors contracted in the third quarter for the first time since the start of the Covid-19 pandemic.