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ArcelorMittal: Steel’s Surprising Comeback Is Far From Over

Source: Industry Week

The top steelmaker in both the U.S and Europe has been well placed to ride the recovery. Its stock more than doubled in 2016 and is up 20% this year, and the firm is forecast to report its biggest annual profit in half a decade. It also cut debt almost in half in the last five years.

After years of bleak news from U.S. and European steelmakers, the industry is finally thriving again. ArcelorMittal, the largest producer, says it’s more than just a blip.

“When things structurally improve they last longer than months,” CFO Aditya Mittal said in an interview in Paris. “It should be a multiyear phenomena.”

Steel prices and producers’ shares are being buoyed by a rare combination of good news. Global demand is strong — ArcelorMittal sees usage rising 3% this year — and China, which has long been the cause of too much supply, is shutting plants to cut pollution. Nations have also strengthened trade defenses after China’s so-called steel dumping became a political flashpoint.

Chinese exports have dropped to the lowest since 2014 as the nation, which makes half the world’s steel, closed outdated mills to reduce overcapacity and clean up the environment. Officials have also directed further cuts be enforced over winter in some key areas.

Better demand and falling Chinese output prompted Credit Suisse Group AG in October to warn of a possible supply squeeze, something that was unthinkable just a few years ago. Liberum Capital Markets Ltd. expects Chinese shipments to drop sharply this winter and maybe move toward zero in the medium term.

Still, Mittal, who has repeatedly called for stronger protection from unfair exports, said it’s too early to know whether Chinese capacity cuts will stick.

“You really have to look at China on an annual basis,” said Mittal, who is also head of the firm’s European business and son of majority owner Lakshmi Mittal.

 

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