ArcelorMittal’s crude steel production dropped by 23pc in Q3 to 17.2mn mt from the prior year but increased by 19.4pc from Q2. Higher sales volumes and a pickup in the automotive segment across all markets improved the results.
The slower recovery in Europe and North America and higher input costs offset the gains, according to the company’s results update on Nov 5. In the first nine months of 2020, ArcelorMittal’s crude steel production fell by 24.8pc to 52.7mn mt from the prior period.
Outlook
Economic activities have improved since the second quarter but demand is below normal with an uncertain pace of recovery, according to the steelmaker. The company plans to adjust production in line with demand amid concerns around the second wave of the COVID-19 pandemic, and thus fixed costs per-ton are not expected to rise.
ArcelorMittal is focusing on cost reduction, which led to the permanent shutdown of the Kraków, Poland blast furnace. Further details of the plan will be disclosed in February during the full-year results.
Spreads and prices
Steel spreads have improved supporting capacity utilization mainly due to demand improvement in the automotive segment as lockdown restrictions eased. Signs of recovery have continued through the third quarter, ArcelorMittal indicated. Robust V-shaped recovery in China has boosted its expected apparent steel consumption in 2020 compared with 2019.
In Europe, the post-lockdown economic recovery supported furnace restarts, and auto demand recovered from a significantly low base. In Q3, steel spreads in Europe recovered from unsustainable lows in the previous quarter.
In the US, demand has improved and lean inventories have reduced order lead times. Supportive scrap prices have lifted prices of US flat steel prices since August 2020.
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| ArcelorMittal’s crude steel production in Q3 | |||||||
|---|---|---|---|---|---|---|---|
| Unit: mt | Q3 2020 | Q3 2019 | YoY Change | Q2 2020 | Jan-Sep 2020 | Jan-Sep 2019 | YoY Change |
| Crude steel production | 17.2 | 22.2 | -23% | 14.4 | 52.7 | 70.1 | -25% |
| Steel shipments | 17.5 | 20.2 | -13% | 14.8 | 51.8 | 64.8 | -20% |
| Own iron ore production | 14.8 | 13.6 | 8.8% | 13.5 | 42.7 | 42.3 | 0.9% |
| Crude steel production by region | |||||||
| NAFTA | 4.43 | 5.66 | -22% | 3.70 | 13.63 | 16.64 | -18% |
| Brazil | 2.30 | 2.67 | -14% | 1.69 | 6.67 | 8.51 | -22% |
| Europe | 7.90 | 10.43 | -24% | 7.07 | 24.89 | 34.88 | -29% |
| Africa & CIS | 2.54 | 3.45 | -26% | 1.96 | 7.50 | 10.03 | -25% |
Shipments
ArcelorMittal’s steel shipments in Q3 2020 fell by 13pc to 17.5mn mt from the prior year but rose by 17.5pc from Q2. All segments reported growth compared to the previous quarter with European shipments up by 20.1pc, Brazil 17.8pc, North America 16.8pc, and Africa & CIS up by 4.3pc. However, steel demand remains well below pre-pandemic levels. In January-September, steel shipment fell by 20pc to 51.8mn mt from the prior-year period.
In Q3 2020, sales fell by 19.8pc to $13.3bn compared to Q3 2019 and rose by 20.9pc from Q2. Sales revenue increased from the prior quarter aided by higher steel shipments and a better sales mix, which was offset by lower selling prices (caused by a lag effect), improved mining sales, and higher prices of ore shipments. Compared with Q3 2019, average steel selling prices decreased by 8.4pc offset by higher prices of iron ore, up by 16.8pc, and higher seaborne ore reference rates, up by 15.7pc.
Steel segment results
The steel segment’s EBITDA in Q3 2020 rose by 28.4pc to $0.4bn from Q2. EBITDA/mt stood at $23/mt down from $34/mt in the prior-year quarter. In North America, EBITDA was supported by higher steel shipments and better product mix, while in Africa and CIS, EBITDA improved due to a favorable price-cost effect by the faster transmission of higher spot prices aided by shorter order book and vertical integration. EBITDA improved by nearly 50pc in Brazil due to higher steel shipments, increased domestic sales, and an earlier recovery in product prices. In Europe, EBITDA declined marginally due to a favorable price-cost effect that resulted in a 3pc decline in selling prices in euros and higher raw material costs.
Key updates
* Deleveraging – Achieved $7bn net debt target
* $2bn asset sale – Completed the sales of ArcelorMittal USA to optimize its portfolio
* Repositioning – Maintained a presence in North America, with a plan to build an EAF for Calvert
* Green Steel – Offered customers green steel through a certification system
* 2050 net-zero: Committed to achieve a group-wide net-zero carbon emission target with a focus on Hydrogen-DRI and Smart technologies
ArcelorMittal reported a net loss of $300mn for Q3 compared to a loss of $600mn in Q2 (excluding impairment items offset in part by deferred tax expense towards the agreed sale of ArcelorMittal USA). Adjusted net loss for the quarter was $200mn compared to an adjusted loss of $300mn in 2Q 2020, excluding exceptional items.