ArcelorMittal fears sales, profitability getting impacted in 2020 on coronavirus spread

Amid deepening coronavirus crisis across the world, global steel giant ArcelorMittal has expressed apprehensions of its sales and profitability getting impacted in 2020 in case the virus spreads widely through Europe, particularly in Italy.

The Luxembourg-headquartered company is the world's largest steel producer with steel-making operations in 18 countries on four continents, including 46 integrated and mini-mill steel-making facilities. It recently completed the acquisition of debt-ridden Essar Steel in India for about Rs 42,000 crore and has announced plans to ramp up its finished steel-producing capacity in India to 8.5 million tonnes per annum by the end of 2024.

"The recent increase in cases outside China is worrying and increases the risk of a global pandemic and a much larger negative impact on global GDP. The Company is monitoring the situation closely and in particular in Italy, as should the virus spread more widely through Europe this will likely have a material impact on the Company’s sales and profitability in 2020," the steel behemoth said in its latest annual report.

In Italy, the epicentre of Europe's outbreak, the death toll has climbed to more than 230, and its confirmed cases to 5,800, third behind South Korea and China, where the virus was first detected in December.

The company said the epidemic may affect ArcelorMittal’s operations in certain regions and cited examples of how its projects were impacted in Liberia in 2014 and 2015 during the Ebola virus disease epidemic.

"There can be no assurance that other epidemics, including the recent outbreak of the coronavirus in China, will not adversely affect ArcelorMittal’s ongoing operations, production targets and expansion plans, if any, in other markets in which it operates," the company said.

The ADB has predicted global losses due to the deadly coronavirus outbreak at about USD 156 billion, of which China may account for USD 103 billion.

ArcelorMittal said it expected Chinese steel demand to grow in 2020 within a "range of +0.0% to +1.0% (versus estimated growth of +3.2% in 2019) driven by robust real estate activity and given the Company’s current view on the Coronavirus. This may be revised downward due to the impact of the Coronavirus on Chinese demand and the knock-on impact elsewhere."

It said the precise impact of the coronavirus is unknown but it has had a negative impact on Chinese prices and spreads, and the situation could continue if inventories keep rising at mills in China, putting downward pressure on pricing.

The company expects a significant negative impact on industrial output and steel demand during the first quarter of 2020 and added that both GDP and steel demand growth are likely to be weaker than earlier estimates.

Stressing that coronavirus is likely to have a negative impact elsewhere also, mainly Asia, through reduced goods exports to China and supply-chain disruptions due to shortages of Chinese intermediate goods.

In 2019, ArcelorMittal had revenues of USD 70.6 billion and crude steel production of 89.8 million tonnes (MT), while its own iron ore production reached 57.1 MT.

ArcelorMittal had a series of targeted acquisitions that include the Calvert plant in the US in 2014 and in 2018 the acquisition of AMSF in Brazil and ArcelorMittal Italia in Italy, Europe's largest single steel site.

In November 2018, ArcelorMittal completed the acquisition (via a long-term lease) of ArcelorMittal Italia, Europe’s largest single steel site and only integrated steelmaker in Italy with its main production facility based in Taranto. ArcelorMittal Italia also has significant steel finishing capacity in Taranto, Novi Ligure and Genova.

In 2019, the company completed its acquisition of ArcelorMittal Nippon Steel India (AMNS India), a 60:40 joint venture between ArcelorMittal and Japan-based Nippon Steel Corporation (NSC) that owns integrated Hazira steel facility of erstwhile Essar Steel.

Across the world, over 3,500 people have died from the virus with more than 1 lakh infection in 89 countries and territories.