ArcelorMittal's Q3 crude steel output falls 3% from Q2 on weaker demand

ArcelorMittal produced 17.2 million mt of crude steel in the third quarter, down 3.4% from 17.8 million mt in the second quarter and flat year on year, as weak demand from the auto sector weighed on sales, the Luxembourg-based steelmaker said Nov. 11.

Q3 steel shipments fell 9% to 14.6 million mt versus 16.1 million mt in Q2, which the company said was "due to weaker demand (in particular automotive) as well as production constraints and order shipment delays which are expected to reverse in Q4 2021."

In September, passenger car registrations in the EU fell 23.1% to 718,598 units, the lowest registrations for the month of September since 1995, data from the European Automobile Manufacturers' Association showed, and marking a third month in a row of year-on-year declines.

Nearly all of ArcelorMittal's production regions posted quarterly falls for Q3 except for its ACIS (Asia and Africa) operations, which grew 1.3% from Q2 to 3.01 million mt "primarily due to increased Ukrainian production during Q3 2021," the company said.

The steelmaker's ArcelorMittal Nippon Steel India venture (AMNS India) boosted its Q3 output to 1.89 million mt from 1.83 million mt in Q2.

"AMNS India was able to maintain robust production levels and utilize its coastal location and divert tons from the domestic to the export market," the parent company said.

Compared with Q2, the company's North American crude steel production decreased 12.2% to 1.99 million mt in Q3, while its Brazilian operations produced 1.2% less at 3.11 million mt and in Europe output was down 3.1% to 9.09 million mt.

Over the first nine months of 2021, ArcelorMittal's total crude steel production stood at 52.6 million mt, more or less unchanged from 52.7 million mt in the year-ago period.

Strong steel prices meanwhile pushed its Q3 net profit to $4.6 billion, the strongest quarterly performance since 2008 and up from $4.0 billion in Q2.

"The outlook remains positive: underlying demand is expected to continue to improve; and, although marginally off the recent record highs, steel prices remain at elevated levels, something which will be reflected in the annual contracts for 2022," CEO Aditya Mittal said.

The steelmaker expects weakening demand in China, mainly due to issues in the real estate market there, with a slight contraction seen in Chinese apparent steel demand in 2021.

"However, the impact on ex-China steel markets is expected to be limited given that strict production constraints are expected to lead to lower Chinese net exports in the second half of 2021 overall as compared to the first half of 2021," it added.

Commitment to iron ore

The Q3 results were also buoyed by iron ore shipments which rose 53.5% on the quarter to $1.15 billion, offset in part by iron ore reference prices which were 18.5% lower than in Q2, when they reached an all-time peak, and higher freight costs.

Iron ore production grew 40.7% to 6.8 million mt in Q3, mainly due to recovery from a Q2 strike at ArcelorMittal Mines Canada (AMMC), although output from Liberia fell due to locomotive incidents and heavy seasonal monsoon rains, and overall output was 4.2% lower than in Q3 2020, the company said.

In a presentation, ArcelorMittal said it proceeded with strategic growth projects in Q3, apparently strengthening its commitment to iron ore production, particularly of high-Fe content. High-grade iron ore is increasingly sought after in the market as its usage may allow steelmakers to use less coking coal, thus facilitating decarbonization.

ArcelorMittal approved brownfield projects in Brazil and Mexico, including stepping up regional iron ore supplies to its strengthening steel operations in those countries: it expects the new projects in future to add $350 million to normalized EBITDA at a capex investment of $1 billion.

It also agreed to accelerate construction of its 15 million mt/year iron ore concentrator plant project in Liberia, with further expansion opportunities to 30 million mt/year, while its AMNS India iron ore pellet capacity project has been completed, reaching 20 million mt/year capacity. It also commenced operations at the Ghoraburhani-Sagasahi iron ore mine in Odisha with 7.2 million mt/year capacity.

"The company continues to benefit from its vertical integration in to iron ore," it said.

Jefferies International analyst Alan Spence noted the Q3 EBITDA of $6.1 billion came in just below analysts' consensus expectations. Spence said the steelmaker's Europe and seaborne iron ore results had exceeded expectations, with weaker results in the other divisions (NAFTA, Brazil and ACIS).