ArcelorMittal SA reported yesterday a net loss of about US$8 billion for last year, pummelled by falling commodity prices, but the world’s largest steelmaker said it was making progress on cutting costs.
More than half of the loss was due to writing down in its books the value of its mining operations to reflect the currently lower value of its iron ore, but even excluding exceptional items ArcelorMittal was US$300 million into loss.
The net loss of US$7.95 billion compared with a net loss of US$1.86 billion in 2014.
Chief executive Makshmi Mittal acknowledged in a statement that “2015 was a very difficult year for the steel and mining industries... Prices deteriorated significantly during the year as a result of excess capacity in China”.
However, he said the mining business “is fully focused on adapting to this low price environment and has reduced cash costs by 20 percent compared with an initial target of 15 percent.”
Mittal said a further 10 percent reduction in costs is targeted for this year.
Sales dropped 20 percent to US$63.6 billion, which mostly reflects falling prices as the company’s iron ore production and steel shipments only dipped marginally. Earnings before taxes, depreciation and amortisation fell by 28 percent to US$5.2 billion.
Shares in ArcelorMittal have dropped 58 percent in the past year.
China plans to shut as much as 150 million tonnes of capacity under a five-year blueprint to stem industry losses and curb the deluge of exports that is hurting producers from India to the US and Europe.
However, analysts said the cuts, amounting to 13 percent of capacity at most, fall short of requirements.
Colin Hamilton, head of commodities research at Macquarie Group Ltd in London said the world needs 200 million tonnes to 250 million tonnes of capacity cuts.
“China’s still going to be exporting steel and associated deflationary pressures for a while,” Hamilton said by e-mail.
Caroline Bain, a London-based senior commodities analyst at Capital Economics Ltd, said the planned cut is actually a "disappointment.”
“Now that we know this is intended to happen over five years, the immediate market impact seems minimal and could actually be negative,” Bain said by e-mail.
Additional reporting by Bloomberg
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