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ArcelorMittal shares fell the most in two years after announcing that its cutting steel production across its European plants to cope with weak demand and rising imports.
The world’s largest steelmaker will reduce primary production in Dunkirk, France and Eisenhuettenstadt, Germany, according to a statement on Wednesday. It will also cut output in Bremen, Germany and extend a stoppage planned in Asturias, Spain in the fourth quarter. The company didn’t provide any numbers on how much output will be curbed, only saying that it would “align its production to the current market demand.”
The shares lost as much as 7.3 per cent, the biggest intraday drop since May 2017. The stock traded at 13.35 euros as of 9:09 a.m. in Amsterdam. Steelmakers Thyssenkrupp AG, Voestalpine AG and Kloeckner & Co. lost more than 2 per cent
This is again a hard decision for us to have taken but given the level of weakness in the market, we feel it is the prudent course of action,” said Geert van Poelvoorde, the chief executive officer for the company’s flat products division in Europe. “This will be a temporary measure that will be reversed when market conditions improve”
This is the second time this month that ArcelorMittal has announced production cuts. It previously said it would shutter plants in Poland and Spain in response to the worsening market.
European steelmakers have been hit by a slump in demand from Germany’s auto industry and competition from cheap imports. That’s also making it hard for them to pass on higher prices for iron ore, a key steel-making ingredient, that are being stoked by mine closures in Brazil.
Earlier this month, regional lobby group Eurofer warned the industry is on the cusp of a crisis. As domestic demand falls, imports are compounding the challenges for European steelmakers. While the US has been very aggressive in shutting out foreign steel -- using a Cold War-era law -- Europe has been slower to respond. Its now put in place safeguard measures, designed to cap flows, but the industry says more needs to be done.
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