(FROM THE WALL STREET JOURNAL 11/7/15) 
   By John W. Miller and Alex MacDonald 

LONDON -- Steelmaking giant ArcelorMittal reported a hefty quarterly loss on Friday, blaming in part Chinese steel exports, and said global prices might not recover next year without new U.S. trade tariffs and curbs in Chinese production.

Luxembourg-based ArcelorMittal, the world's biggest steelmaker by volume, was forced to take a $500 million charge on inventories in its latest quarter. Like peer U.S. Steel Corp., ArcelorMittal said an onslaught of Chinese steel in world markets was responsible.

"This is not an economic crisis, it is not a volume crisis, it is an import crisis," ArcelorMittal finance chief Aditya Mittal told reporters on Friday.

Chinese steel exports rose 27% to 83 million tons in the first nine months of 2015. But Chinese producers haven't benefited, losing $8 billion in the first nine months of 2015, Mr. Mittal said, citing figures from China's steel association.

ArcelorMittal, which accounts for more than 6% of global production, swung to a loss of $711 million in its third quarter from a profit of $22 million a year earlier. It was expected to lose $184 million, according to a FactSet poll of six analysts. Revenue fell 22% to $15.6 billion.

The pain in the steel industry has been sharp and widespread. U.S. Steel has reported $509 million in losses over three quarters this year.

The catalyst is steel prices, which were expected to recover in the second half of this year, but instead have continued to slide. The benchmark hot-rolled coil price in the U.S. stands at $393 per ton, down by more than a third for the year.

ArcelorMittal said operating conditions have deteriorated significantly, both in terms of international steel prices, driven by unsustainably cheap Chinese exports, and order volumes as customers hold off to see whether steel prices fall further.

The industry headwinds led ArcelorMittal on Friday to suspend its dividend and cut its full-year earnings outlook. Although it has logged a $1.3 billion loss for the first nine months, the company still plans to lower its net debt by $1 billion by year-end and said it expects to remain free cash-flow positive this year.

Increased Chinese exports have had spillover effects, such as depressing the price of scrap metal in the U.S. Chinese steel is so cheap that countries like Turkey are buying it instead of sticking with American scrap, ArcelorMittal said.

Chinese steel officials say there is nothing improper about their industry's approach to business and that their companies will become profitable when demand recovers.

Demand in the U.S. and Europe, ArcelorMittal's main markets, is already relatively strong, and the company expects improved demand next year, said Chief Executive Lakshmi Mittal. The difference will be supply, and how much China continues to export.

 

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(END) Dow Jones Newswires

November 07, 2015 02:47 ET (07:47 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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