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London - ArcelorMittal cut its annual profit target as decade-low iron ore prices overwhelm a recovery in steel.
The world’s biggest steelmaker expects $6bn to $7bn of earnings before interest, taxes, depreciation and amortization this year, down from the $6.5bn to $7bn it forecast earlier. It’s the fifth-largest iron-ore producer.
“We faced a number of headwinds in the first quarter, including a declining iron-ore price, a stronger dollar and surge of imports in the United States,” chief executive officer Lakshmi Mittal said in a statement on Thursday.
The price slump is submerging rising demand for steel in Europe, the company’s biggest market. Iron ore, the main raw material in steelmaking, tumbled after producers such as BHP Billiton Ltd. expanded output, exacerbating a glut.
ArcelorMittal fell as much as 3.4% in Amsterdam and traded down 2.7% at €9.312 by 09:44.
The company reported a 21% drop in first-quarter profit on Thursday. Ebitda declined to $1.38bn from $1.75bn a year earlier, Luxembourg-based ArcelorMittal said. That missed the $1.42bn average of 12 analyst estimates compiled by Bloomberg. The steelmaker also reported a net loss of $728m after a $205m loss a year earlier.
Demand Rising
While the company still sees steel demand rising much as 2.5% in Europe, it was less optimistic elsewhere.
ArcelorMittal lowered its expectations for growth in global steel use to 0.5% to 1% this year from 1.5% to 2%. It expects US demand to contract as much as 3% and Chinese sales to expand as little as 0.5%.
“Europe remains a bright spot,” Aditya Mittal, the chief financial officer, said on a call with reporters. “Europe has been performing well compared to past periods.”
Steel shipments were little changed at 21.6 million metric tons for the quarter. Iron-ore output was 15.6 million tons.
Mining unit profit fell 74% from a year earlier.
The CFO said the lower end of guidance was based on iron ore below $50 a ton, while the upper end was based on prices near current levels and a recovery in US steel demand. Ore with 62%content at Qingdao gained 3.7% to $60.89 a dry ton on Wednesday, data from Metal Bulletin show.
Net debt rose to $16.6bn in the quarter. The company is trying to reduce borrowings to about $15bn after its credit rating was cut to below investment grade by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
