ArcelorMittal cuts 2022 global steel consumption outlook because of Ukrainian war

ArcelorMittal expects 2022 global steel consumption to contract 0%-1% as Russia's military invasion of Ukraine disrupts supply chains, stoking inflation, while China's COVID-19 lockdowns dampen economic activity, the world's second biggest steelmaker said May 5.

The company had previously estimated 2022 global steel consumption to rise 0%-1%. Long-term steel market fundamentals remain positive, ArcelorMittal said, after posting first-quarter results that beat analysts' estimates on high steel prices.

"Our first quarter performance was overshadowed by the war in Ukraine," ArcelorMittal CEO Aditya Mittal said. "Notwithstanding this backdrop, further aggravated by rising inflationary pressures across the world, ArcelorMittal produced a strong first quarter performance. This is testimony to the resilience of our business model, characterized by diversity of geography, product category and vertical integration."

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ArcelorMittal expects steel consumption in Europe -- where the company has its main assets -- to decline 2%-4% in 2022, compared with its prior outlook for a 0%-2% growth, due to the negative impact of rising inflation.

The company is forecasting demand in the Commonwealth of Independent States, which include Ukraine, to slump 10% during the year, compared with a prior estimate of 0%-2% growth.

ArcelorMittal has estimated China's full-year demand toward the bottom end of its previous forecast of 0%-2% growth because of stringent coronavirus-led lockdowns in the country.

The company continues to expect India to grow at 6%-8% in 2022, the US at 1%-3%, and Brazil to contract by 8%-10%.

Mittal said the company has approved investments in support of its decarbonization plan, while funding high-return projects in growth markets.

"This is achieved without compromising our balance sheet strength or returns to shareholders," Mittal said.

China's focus on decarbonization and removal of value added tax rebates on steel exports were encouraging, ArcelorMittal said, adding that steel would play a critical role in the transition to a decarbonized and circular economy.

Steel shipments fall

ArcelorMittal's Q1 steel shipments fell 7% year on year and 2.7% quarter on quarter to 15.3 million mt, due to the war in Ukraine.

Shipments to the ACIS region -- Asia and Africa, including Kazakhstan, Ukraine, and South Africa -- plummeted 20.3% year on year in the quarter, and were partially offset by a 11.4% rise in shipments to countries part of the North American Free Trade Agreement.

ArcelorMittal's Q1 sales rose 34.8% year on year and 5% quarter on quarter to $21.8 billion, due to higher average steel selling prices, which climbed 7.5% year on year supported by positive automotive contract resets.

The company's quarterly EBITDA of $5.08 billion handily beat analysts' average estimate of $4.57 billion.

Platts assessed Northwest European hot-rolled coil at Eur1,260/mt, or $1,330.43/mt, ex-works Ruhr May 4, up 36.7% since the start of 2022.