ArcelorMittal posts $7.9-billion net loss as Chinese glut hits prices

The scale of the crisis confronting the global steel industry was put in sharp relief on Friday as the world’s largest steelmaker, ArcelorMittal, reported a net loss of $7.9 billion for the year ended December, hit by declines in steel and iron ore prices amid a glut of Chinese products.

Shares of the Luxembourg-based company fell over 7 per cent on Friday as it unveiled plans to raise $3 billion of capital from investors and €875 million from the sale of its 35 per cent stake in Spanish engineering firm Gestamp Automacion to the majority shareholder.

The Mittal family, which owns around 37.4 per cent of the company, will fully participate in the rights issue, paying $1.1 billion.

“2015 was a very difficult year for the steel and mining industries. Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China,” said Chairman and CEO Lakshmi Mittal. He warned that despite the recovery in Chinese steel spreads, and capacity closures, 2016 would remain challenging. He sought further implementation of anti-dumping levies.

Steelmakers across the world have been struggling to contend with cheap Chinese exports that have flooded the market. Authorities in the US and Europe have introduced levies on certain categories, but steelmakers want more action.

Share prices across the sector have fallen sharply in the last year — ArcelorMittal’s share price is down 60 per cent.

On Thursday, Tata Steel announced a ₹2,127 crore loss for the quarter ended December as sales slumped and it took restructuring charges in its European business. Last week South Korean steelmaker Posco reported a sharp drop in profits for 2015.

ArcelorMittal will cut its net debt by $4 billion to below $12 billion through the capital raising and sale of the stake in Gestamp Automacion. It has also unveiled a five-year plan ‘Action 2020’, which covers each of its five business segments, with the aim of improving EBITDA.

In 2015, EBITDA fell to $5.2 billion from $7.2 billion the year before, and the company expects it to fall even further to around $4.5 billion.

During the year, the company was hit by a $4.8-billion impairment charge, mainly related to mining operations, and $1.4 billon of exceptional charges relating to the write-down of its inventory following the rapid decline of global steel prices.

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