ArcelorMittal slightly more upbeat about steel market

Brussels - World's largest steelmaker sticks to full-year target for core profit

ArcelorMittal, the world's largest steelmaker, said on Friday it was slightly more positive about the steel market, helped by a modest improvement in prospects for China, though it kept its forecast for 2016 earnings unchanged.
Steelmakers worldwide have been battered by a plunge in prices due to overcapacity and a slowdown in economic growth in China, the world's largest consumer and producer of steel.
ArcelorMittal said it still expected global apparent steel consumption, which includes changes to inventories, to be flat to up 0.5 per cent this year compared to last. But for China, it nudged up its forecast to between flat and down one per cent from a previous drop of 0.5 to 1.5 per cent.
Chief executive Lakshmi Mittal said the very tough operating conditions of the second half of 2015 had continued into the first quarter. "Since that time we have seen a recovery in spreads in our core markets to more sustainable levels, which is expected to result in improved results in the coming quarters," he said, referring to the difference between iron ore and steel prices.
He added, though, that the market needed to be cautious given the threat of cheap imports flooding in from China.
Finance chief Aditya Mittal told a conference call that in January and February Chinese steel exports were up eight per cent.
ArcelorMittal repeated its 2016 guidance for core profit of above $4.5 billion. The group said an improved steel market would mean it needed more working capital, but it would still have a positive cash flow at the end of the year.
Its shares were down 3.1 per cent in early trade as analysts said the group's unchanged guidance appeared conservative. The stock is up more than 50 per cent this year.
"We believe the fact that the company is unwilling to raise the bottom of its guidance range implies either a lack of confidence... or that cost savings are not coming through as quickly as we had envisaged," JPMorgan analysts wrote in a note to clients. They have an "underweight" rating on the stock.
ArcelorMittal joined the ranks of international companies sounding more downbeat about the Brazilian economy, expecting steel demand there to decline by as much as 12 per cent, from an expected fall of six to seven per cent previously.
For the group as a whole, core profit fell by about a third in the first quarter to $927 million, just above the $919 million expected in a Reuters poll of 11 analysts.