ArcelorMittal H1 crude steel output falls 13% on year

ArcelorMittal's January-June crude steel production fell 12.7% year on year to 30.9 million mt, the Luxembourg-based steelmaker said July 28.

The results came as second-quarter output fell to 14.6 million mt from 17.8 million mt in Q2 2021 and 16.3 million mt in Q1 2022.

The lower production followed lower steel shipments, "largely reflecting the impact of the conflict in Ukraine and weaker shipments in Europe," it said.

Steel shipments in the first half of the year stood at 29.7 million mt, down from 32.6 million mt in H1 2021 while Q2 shipments shrank to 14.4 million mt from 16.1 million mt a year earlier and 15.3 million mt in Q1 2022.

ArcelorMittal's European operations produced 16.95 million mt of crude steel in the first half, down 11.2% year on year, while Q2 output fell 12% to 8.26 million mt.

For its Asia and Africa operations, H1 production of crude steel dropped 34.4% year on year to 3.71 million mt, "primarily due to the ongoing reduction of production in Ukraine and the impacts from a two-week labour action and logistical issues in South Africa," it said.

ArcelorMittal Kryvyi Rih shut its blast furnaces at the onset of Russia's invasion of Ukraine. On April 11, it restarted one of three furnaces, BF No. 6, with low levels of pig iron production, and ran it at 55% of capacity in the second quarter.

"Globally the conflict is impacting growth and adding further inflationary pressure, which is spilling over into weakening of demand," CEO Aditya Mittal said.

Slowing economic activity and inflationary concerns have resulted in lower global demand for steel, and steelmakers have considered cutting production to prevent oversupply.

Platts assessed hot-rolled coil in Northwest Europe stable July 27 at Eur855/mt ($866.20/mt) ex-works Ruhr, according to data from S&P Global Commodity Insights. The price has plunged from a March 18 peak of Eur1,460/mt after Russia's invasion of Ukraine sparked temporary supply concerns.

Nevertheless, ArcelorMittal plans to debottleneck operations at AM/NS India to achieve 8.8 million mt/year of capacity, with further plans to boost that to 14 million mt/year and subsequently to 18 million mt/year.

Flat steel producer AM/NS India, a joint venture between ArcelorMittal and Japan's Nippon Steel, operates a hot-rolled coil mill at Hazira with output of 8.6 million mt/year.

AM/NS India is expected to start up a new cold-rolling mill at Hazira by July 2024 with 1.92 million mt/year capacity.

ArcelorMittal recorded Q2 net income of $3.92 billion, above the $3.72 billion forecast by a consensus of 15 analysts on July 20. However, the result was down from $4 billion in the same period of 2021, and from $4.12 billion in Q1 2022.

'Wait and see mode' for Q3

The pace of demand recovery following the COVID-19-related market slump has moderated, according to an ArcelorMittal results presentation.

"Slowing activity and price normalization led to destocking; customers are in wait and see mode ahead of a seasonally weak third quarter", it said. "Steel prices have declined faster than raw material, leading to normalization of spreads."

The outlook remains uncertain due to the duration of the Russia-Ukraine war and concerns over energy supply restraints; implications of higher energy prices and inflationary pressures on economic activity and consumer confidence, particularly in the EU; the potential for gas supply restrictions in Europe and implications of COVID-19 on the Chinese economy and the extent to which this will be offset by stimulus actions, ArcelorMittal said.

Nonetheless, "the longer-term fundamental outlook for steel is positive.... due to steel's inherent role in the transition to a low carbon, circular economy," it said. "China's focus on decarbonization and removal of VAT rebates on steel exports are encouraging; so too are the actions taken by governments to protect against the threats of unfair trade."

Renewables push boosting steel demand

Beyond 2022, energy transition will be a key demand driver, as steel intensity in the energy sector is increasing with the transition to low carbon sources of energy generation, ArcelorMittal said.

Annual steel consumption in Europe to build wind and solar capacity will increase four-fold over 2021-2030 relative to 2016–2020, boosting European flat steel demand by an additional 4%-5%, the steelmaker estimates.

"EU wind and solar power capacity is expected to increase rapidly over the next 10 years triggered by the REPowerEU Plan," it said.

REPowerEU was recently introduced with the aim of making the EU independent of imports of oil and gas from Russia by 2030 in light of Russia's invasion of Ukraine.

ArcelorMittal itself is well placed to manage potential gas supply risks as it has multi-site operations across nine countries in Europe and is therefore able to meet market demand from its pan-European footprint, it said.