ArcelorMittal: Don’t Rule Out UpsideMT) might have faced weakness in its financial performance in 2015, but the company is counting on certain positives in a few key markets to drive its growth in the long run. For example, the company is continuing to expand its presence in China with its joint venture VAMA.
Making the right moves for growth
This is a smart move from ArcelorMittal as VAMA is expected to represent about 10% of Chinese automotive steel market as it expects its steel consumption to grow from 17 million tons in 2014 to about 22 million tons by 2018, representing 29% growth in demand for its steel.
“As China’s automotive industry, particular in Hunan province continues to grow rapidly, and the demand for automotive steel is also rising both in terms of volume and quality. The automotive industry is one of the most important economic pillars in Hunan province. It is reported that the income of the industry there is expected to reach 200 billion Yuan in 2015.”
Likewise, the company is expanding its automotive markets in India. It has recently signed a memorandum of understanding with respect to automotive steel with SAIL to set up an automotive steel manufacturing facility as a part of a joint venture in India. ArcelorMittal, with this joint venture, is expected to construct a state of the art cold rolling mill and other downstream finishing facilities in the country to support the growing automotive sector in India. India’s automotive sales are expected to grow 7 million by 2020 from 3.5 million at present.
Moreover, ArcelorMittal is focused on debt reduction to improve its balance sheet. It has reduced its net debt by more than $900 million as compared to 2014 levels. As a result, ArcelorMittal has been able to generate positive free cash flow.
ArcelorMittal is a good investment if we consider the long-term viewpoint. The company is enhancing its operating efficiency by optimizing its cost structure for its iron ore mines. Also, it is expanding its auto markets with joint ventures across the world. These positive moves should help the company do well in the long run.
Published on Nov 9, 2015By Harsh Singh Chauhan