ArcelorMittal chief sees steel order pickup

ArcelorMittal Chairman and CEO Lakshmi Mittal said he expected orders at the world's largest steel company to rise toward the end of the third quarter this year as global demand grows.

He also told a steel industry gathering on Tuesday that demand from the construction sector in the developed economies remains weak, although total steel demand in China should grow 7% this year.

The economies in the developed world may not return to the pre-financial crisis levels until 2015, he said, while the rising prices for steel-making raw materials remains among the biggest threats to global economic growth.

Mittal noted that his company's profitability had shown year-on-year improvement since the 2008 recession.

"We don't expect as strong a seasonal downturn as we did last year, and believe that given the relatively low inventories and rising underlying demand, orders should pick up towards the end of the third quarter," he said in an address.

Mittal later told Reuters on the sidelines of the Steel Success Strategies conference that the fundamentals for steel were solid, even though demand had not come back as quickly as the industry had hoped after the recession.

"The global recovery is gradual and there is nervousness in the markets," he said, citing the debt crisis in Europe, the impact of the Japanese earthquake and a slowdown in US Gross Domestic Product from 3.1% to 1.8% the first quarter of 2011.

"But apart from non-residential construction, we are seeing underlying steady steel demand growth," said Mittal.

According to the World Steel Association, global steel consumption reached a record 1.4 billion tonnes in 2010 and this year is expected to increase by 6.5% to 7%.

Stock in the Europe-based steelmaker closed 1.85% higher in Amsterdam and was up 3% at $32.54 in New York after Mittal spoke.

During his speech, Mittal said steelmakers face plenty of challenges, even though key economic indicators continue to rise "even if not at the speed we might like.

"Real demand continues to gradually improve" especially in the automobile sector, he said. "(But) the global economy is still in a fragile state, especially in the developed world.

"The construction sector, which drives over 40 percent of world steel demand, remains weak, especially in developed markets," Mittal said,

ArcelorMittal, he said, is well on its way to meeting its goal of producing 100 million tonnes of iron ore for its steel mills by 2015. But he also said recent iron ore and coking coal price hikes represented a challenge for the industry.

"Rising commodity prices are among the biggest threats to global economic growth."

Mittal said the global consumption pattern showed a definitive shift in the steel industry toward China and other growth markets.

Since 2008, China's steel consumption has grown by 38%, although the Beijing government was trying to slow growth as the country consolidates its steel-making companies.

"They want their top 10 companies to produce 75% of their steel, but after consolidation, I think they may become more global," said Mittal.

Asked if ArcelorMittal saw itself playing a bigger role in China, he said the company already had two joint ventures there. But under government rules, he did not envisage China allowing foreign companies to hold a controlling interest in steelmakers.

Asked about the possibility of a futures market for steel -- something which has been mooted to offset market volatility, Mittal repeated his opposition.

"All I have been hearing is futures, futures, futures. But after five years, I have not seen a future for futures!"