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ArcelorMittal to Shutter Coke Plant

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Steel giant ArcelorMittal (MT - Analyst Report) has announced its plans to permanently close its factory in Liege, Belgium, given slack demand and weakening European economy.

The company, in Oct 2011, announced the idling of its liquid phase due to structural over-capacity in Northern Europe. The production halt at the Liege plant was done to ensure better focus on the company’s downstream activities, operating five core lines and seven flexible lines.

However, economic conditions worsened since then and demand for steel in Europe declined 8%-9% in 2012 and is currently 29% below pre-crisis levels. The Leige business is heavily dependant on the automotive sector, which faced a major downturn in 2012. As a result, there is not enough demand to support the facility and ArcelorMittal stated that it will close six production lines at Liege that manufacture finished steel products for the auto industry. It is also closing a coke plant, which produces fuel for blast furnaces.

The closures are expected to put 1,300 jobs at risk, but ArcelorMittal said it is committed to finding a socially acceptable solution, which could involve redeploying the employees to other operations.

ArcelorMittal, in Nov 2012, posted a net loss of $709 million or 46 cents per share in the third quarter of 2012 compared with a net income of $659 million or 19 cents per share a year ago. The bottom line was hurt by the challenging economic conditions including the slowdown in China as well as lower steel pricing and shipments. The company’s adjusted loss of 31 cents a share missed the Zacks Consensus Estimate of earnings of 6 cents. Revenues declined 18.5% year over year to $19,723 million, trailing the Zacks Consensus Estimate of $21,189 million. Sales also declined 12.3% on a sequential basis due to lower steel shipment volumes and lower average steel selling prices. Shipments declined 5.7% to 19.9 million metric tons in the quarter.

ArcelorMittal currently maintains a Zacks Rank #3 (Hold). Other companies in the steel industry having favorable Zacks Rank are Gibraltar Industries, Inc. (ROCK - Analyst Report) with a Zacks Rank #1 (Strong Buy), Commercial Metals Company (CMC - Snapshot Report) with a Zacks Rank #2 (Buy) and POSCO with a Zacks Rank #2 (Buy).
 

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