ArcelorMittal reports first ever loss of $2.63 billion

11 February 2009

The world's biggest steelmaker, ArcelorMittal reported its first ever loss of $2.6 billion in the last quarter as it wrote down the value of assets, inventories and raw-material contracts amid plunging demand from the global construction and automobile industry.

The Luxembourg-based company said its net loss was $2.63 billion, compared with net income of $2.44 billion a year earlier, after taking one-off writedown charges of $ 4.4 billion.

The company has also halved its annual dividend to $0.75 per share from the previously committed $1.50 and warned that due to low demand coupled with price cuts of up to 40 per cent and production capacity trimmed down to 55-60 per cent, the earnings could fall further in next three months to $1 billion.

ArcelorMittal cut production by up to 35 per cent in November (See: Slowdown forces ArcelorMittal to cut output by up to 35 per cent) and had plans to raise production in the first quarter of this year. (See: Steel production may rise in early 2009: ArcelorMittal)

But with excess stock and demand for steel still very low as the car industry is also facing unprecedented slump in new vehicle sales, while construction and machinery industry orders have declined sharply, the steel maker is planning to cut production by 45 per cent in this quarter.

It has already closed down its plants in France, Germany and Belgium during the winter months.

Steel makers in Japan, China and Russia have cut production as demand slows and inventories rise. The World Steel Association said global production fell 3.2 per cent in September from a year earlier, to 108.4 million tonnes. Production in China, the biggest producer of steel, fell 9 per cent in the month.

China's minister of industry and information technology, Li Yizhong had said in December that he would encourage mergers in the iron and steel industry in a move to offset the adverse impact of the global financial turmoil.