ArcelorMittal: Gauging the Positives

ArcelorMittal (MT) is reeling under the pressure of lower iron ore prices as the company has widened its loss this year. Along with weak pricing, it is also affected by a strong U.S. dollar, coupled with surging steel imports in the U.S. As a result of these headwinds, its stock has receded in the past one year. However, despite these challenges, its cost cutting measures and increased shipments could act as a tailwind going forward.

ArcelorMittal’s moves

ArcelorMittal is working hard to offset the headwinds that it is facing.

For instance, its steel and mining business in Europe has done remarkably on account of positive macroeconomic cues from the continent. According to a recent report from the World Steel Association, steel demand in Europe is expected to increase 2.1% in the current fiscal and 2.8% in 2016. Further, Europe is pressing hard to curtail large steel imports from China, which will prove extremely beneficial for domestic steel makers and ArcelorMittal would be one of them. Additionally, the strength in auto sales is also picking up and a rebound in business confidence will support future investment.

Brazil, on the other hand, remains a concern for the industry on account of a weak consumer market, cuts in government spending and rising interest rates, which led to a decline in real steel demand. Consumption in the region is expected to decline in 2015 as the economy re-enters recession. Although low oil prices and financial sanctions are negatively impacting recession but it will be a matter of time until the economy gets back to its normal state.

However, going forward, analysts are positive about ArcelorMittal. Bank of America/Merrill Lynch has upgraded it to “buy” from “neutral” and said, “ArcelorMittal gives leverage to the unfolding margin recovery story in European steel and we think valuation is supportive.” It also expects the steel producer’s earnings to remain stable on a sequential basis led by cost cuts and increased shipments.


There are positive cues about ArcelorMittal that investors need to focus on. Its stock market performance might not have been good, but recent developments indicate that ArcelorMittal can do well in the long run.

Published on Oct 28, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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