ArcelorMittal withdraws steel consumption forecast on coronavirus uncertainty

The world's largest steelmaker, ArcelorMittal, Thursday withdrew its forecasts for apparent steel consumption and said it expects steel shipments in 2020 to be below 2019's on the coronavirus pandemic.

The company said in its first-quarter earnings statement it expected the rest of 2020 to be challenging. Just three months ago, in its Q4 2019 earnings, it said it expected the coronavirus to have only a short-term impact on steel demand.

The steel maker has since responded swiftly by significantly cutting production (including temporarily idling steelmaking and finishing assets) globally in alignment with reduced demand and government requirements. As a result, "the company expects a significant negative impact on volumes until industrial activity normalizes."

Steel shipments for Q2 are expected to be 13.5 million-14.5 million mt, after Q1 shipments came in 1.2% lower on the quarter and down 10.7% on the year at 19.5 million mt. In Q1 sales shipments decreased primarily due to falls in steel shipments in Brazil (13.5%) as well as Africa and the Commonwealth of Independent States (12.4%), offset in part by a rise in NAFTA (10.1%) whilst Europe remained broadly stable. The company forecast EBITDA would drop to $400 million-$600 million, from $967 million in Q1.

Sales revenues in Q1 dropped 22.6% year on year to $14.8 billion due to lower average steel selling prices, lower market-priced iron ore shipments, and lower steel shipments due in part to the impact of the coronavirus.

"There are still too many uncertainties to accurately predict what the rest of the year holds. However, it seems likely that over the course of this month countries will start to announce details of their 'exit' strategies. Whilst these are likely to be an easing, not an immediate ending of lockdown, construction and manufacturing are expected to be among the first sectors to be permitted to re-start operations and indeed we are seeing signs of customers re-starting production," Chairman and CEO Lakshmi Mittal said in the statement.

"The remainder of this year will be challenging, but I am confident that ArcelorMittal has the experience and inherent resilience, to manage through these difficult times," he added.