ArcelorMittal Boosts Capital Spending for 2017 as U.S., European Steel Markets See Revival

Researched by Industrial Info Resources (Sugar Land, Texas)--Higher demand and prices for steel are reviving spirits at ArcelorMittal S.A. (NYSE:MT) (Luxembourg, Luxembourg), which has seen a sharp improvement in sales that executives expect to continue through 2017. But while the company has many expansion and refurbishment projects in the works worldwide, particularly in resurgent markets in Europe and the U.S., many of its big-ticket capital projects continue to face market-driven delays. Industrial Info is tracking more than $8.4 billion in active projects involving ArcelorMittal.

Late last month, World Steel Association (WorldSteel) said in a report that improving economic conditions in developed nations and rapid growth in some emerging and developing nations, particularly Russia and Brazil, would cause global steel demand to grow at a faster pace than it previously had forecast. Global demand probably will rise 2.4% this year, according to WorldSteel, compared with a 0.7% increase in 2016.

Capital expenditures narrowly dropped to $580 million, from $586 million in first-quarter 2016; full-year capital expenditures are expected to increase to $2.9 billion, compared with $2.4 billion in 2016. Among ArcelorMittal's projects proposed for the U.S. are the $100 million rebuild of a blast furnace at a steel works plant in Cleveland, Ohio; the $83 million renovation of an automotive steel tailored blanks plant in Detroit, Michigan; and the $80 million rebuild of a steel works plant in Burns Harbor, Indiana. All three projects aim to optimize performance at their respective facilities by making individual lines and components more efficient. For more information, see Industrial Info's project reports on the Cleveland, Detroit and Burns Harbor plans.

ArcelorMittal shipped 21 million metric tons of steel during the quarter, about 500,000 tons less than in first-quarter 2016. Shipments to Europe and Brazil declined on a year-over-year basis, but stronger steel prices made up for the difference. (Asset divestitures also were a factor in the drop in shipments.) In Spain, the company is at work on two major projects: the $145.7 million refurbishment of a steel mill in Gijon, and the $108.7 million expansion of a steel mill in Aviles. The Gijon project involves refurbishing and recommissioning two 45-furnace coke batteries with a combined capacity of 500,000 metric tonnes per year, to expand metallurgical coke production to 800,000 tonnes per year; the Aviles project involves replacing a continuous casting line to boost production to 5 million tonnes per year. For more information, see Industrial Info's project reports on the Gijon and Aviles facilities.

ArcelorMittal subsidiary Steelanol, which recycles carbon into bioethanol, expects to finish construction on a $94.6 million ethanol plant in Gent, Belgium, later this year, which is expected to produce 16,000 tons per year of ethanol from steel-mill waste. Steelanol also is considering a $104.4 million second phase, which, if approved, could take capacity up to 47,000 tons per year. For more information, see Industrial Info's project reports on Phase I and Phase II.

Market conditions, however, have delayed two major projects in Brazil: the $500 million second-phase expansion of a steel mill in Joao Monlevade, and the $300 million expansion of the Tubarao steel mill in Serra. The Joao Monlevade project is designed to increase capacity from 1.2 million to 2.4 million tonnes per year, while the Serra project would add a hot-strip rolling mill to increase capacity from 7.5 million to 10.5 million tonnes per year. For more information, see Industrial Info's project reports on the Joao Monlevade and Serra proposals.

In addition to growing global demand, ArcelorMittal and other major steel companies have benefited from curtailed production in China, which has faced a string of anti-dumping measures from the U.S. and other countries that have sharply diminished China's steel exports from record levels only two years ago. For more information, see April 21, 2017, article - U.S. Steelmakers Report Solid Results as Trump Launches Imports Probe, and May 11, 2017, article - U.S. Steel Companies Show Strong First Quarter, Praise 'Buy American' Policies.

ArcelorMittal's revenues for the first quarter stood at $16 billion, a 19.4% increase from the same period last year. Production of crude steel increased 8.25% to 23.6 million tonnes. Net income was reported to be a little more than $1 billion, compared with a $416 million loss in first-quarter 2016.

"Our mining segment benefitted from an increase in iron-ore shipped at market prices as well as the higher raw material price environment," said Lakshmi N. Mittal, the chairman and chief executive officer of ArcelorMittal, in a quarterly earnings-related press release. "Looking ahead, we expect market conditions to be broadly stable in the second quarter. While this is encouraging, the steel industry is still impacted by unfair imports in many of our key markets and we hope to see further progress in ensuring the necessary trade solutions."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.