ArcelorMittal says recession-resistance has grown

ArcelorMittal, the world's largest steelmaker, said it would be better prepared to weather a new recession than in 2008/2009 because of savings already made and its expansion into mining.

The Luxembourg-based group said in presentations published for an investor day on Friday that its core profit would be higher than in 2009 if recession returned next year.

It repeated its forecast for third-quarter core profit to be between USD 2.4 billion and USD 2.8 billion and for second-half earnings to be greater than a year earlier, because of higher steel shipments and growth in iron ore and coal output.

In its first business review since last month's stock market crash, ArcelorMittal said orders were not showing signs that demand was deteriorating, raw material prices were stable and steel prices also stable in most markets.

Inventories, it said, were also supportive.

In recent weeks, the group has revealed plans to idle three blast furnaces in Europe -- in Belgium, France and Germany -- because of low demand.

It cut production by about half in the depths of the 2008/2009 downturn and, while few expect such a radical measure now, the company stressed its cost-saving plans, which had not been a central feature of presentations so far this year.

Global growth expectations have been cut sharply in the past two months. The International Monetary Fund cuts its forecast for global economic expansion to 4.0% this year and next from 4.3 and 4.5% respectively and warned Europe and the United States could slip into recession in 2012.

Current market consensus is for ArcelorMittal to report a core profit (EBITDA) at the upper end of its own USD 2.4-2.8 billion guidance range in the third quarter and for the same figure in the fourth, Thomson Reuters I/B/E/S data show.

However, customer destocking and a possible margin squeeze could yield a weaker final three months.

Hot-rolled steel cord prices in Europe continued their steady rise in August, but have come off 3% in the past two weeks, according to Steel Business Briefing. However, iron ore prices are up 2% in the same period, Metal Bulletin data shows.

ArcelorMittal shares have plunged 53% in the past two months, while the STOXX 600 index is down 22% and the index's basic resource components 33% lower.

Some analysts say this is pricing in a recession, which may be a step too far -- at least for now.