keywords :
ArcelorMittal, the largest steelmaker outside China, registered its strongest quarter in a decade in Q1 as demand for steel bounced back after a long destocking period, with steel prices at historic highs. Spreads were seen very positive and the company benefited from its iron ore vertical integration, it said in a May 6 results statement.
For the whole of 2021, the company forecasts apparent steel consumption, ASC, to be at or above the upper end range of its February outlook, growing between +4.5% to +5.5%. Overall, in the world ex-China, ASC in 2021 is expected to grow within the range of +8.5% to +9.5%, supported by a strong rebound in India.
In India, ASC growth in 2021 is expected to recover to within a range of +16% to +18%. In the US, ASC is forecast to grow within a range of +10.0% to +12.0% in 2021, with stronger ASC in flat products driven by the automotive sector while construction demand (non-residential) remains weak. Strong automotive demand also will drive ASC in Europe, where it is expected to grow within a range of +7.5% to +9.5% in 2021. Here also a recovery in infrastructure and residential demand will sustain growth, the steelmaker said.
In Brazil, ASC is expected to continue to expand in 2021 with growth expected in the range of +6.0% to +8.0%, supported by ongoing construction demand and recovery in the end markets for flat steel. In the CIS, ASC growth in 2021 is seen recovering to within a range of +4.0% to +6.0%. In China, overall demand is expected to continue to grow in 2021 by +1.0% to +3.0%, supported by ongoing stimulus.
Positive market dynamics
“The first quarter of this year has been our strongest in a decade. While this is naturally a very welcome development following a highly challenging 2020, we are mindful that Covid continues to be a health challenge across the world especially in developing economies,” said Aditya Mittal, ArcelorMittal Chief Executive Officer.
“We are seeing a continuation of the positive market dynamics of the fourth quarter and have been steadily bringing back production in-line with the demand recovery, which is supported by low inventory levels through the value chain,” Mittal stated, outlining that the company’s priorities for the rest of the year are “to continue to maintain a competitive cost advantage, to grow through high-return projects in high-growth markets, whilst leveraging existing infrastructure to develop our iron-ore resource as well as continue on the company sustainable development journey.”
The steelmaker registered a Q1 EBITDA of $3.24 bn, up by 88% from Q4 2020 and more than triple the year-ago figure of $967 million. Net income almost doubled from the previous quarter to $2.3 bn from $1.2 bn, beating analysts’ estimates. This compared to a net loss of $1.12 bn for Q1 2020.
According to Jefferies Equity Research, drivers of the better than expected result came primarily from Brazil and the ACIS (Africa and CIS region) region. Jefferies’ analysts said the outlook indicates a favorable supply/demand balance and low inventories following prolonged destocking.
ArcelorMittal posted a significantly improved operating performance in Q1 2021, reflecting the continued demand recovery which supported a 6.5% sequential increase in its total steel shipments to 16.5 million mt versus 15.5 million mt in Q4 2020 on a scope-adjusted basis (excluding the shipments of ArcelorMittal USA, which was sold to Cleveland Cliffs on December 9, 2020). Shipments were nonetheless lower than the 19.5 million mt of Q1 2020.
Q2 to be even stronger
Q2 is likely to be even stronger, ArcelorMittal reported. “The continued positive evolution of steel spreads currently at multi-year highs are not fully reflected in segment performance. Given order book and contract lags, this was only partially reflected in results for the 1Q’21 and will be more fully reflected in the 2Q’21,” it stated.
In Q1 all segments experienced quarter-on-quarter shipment growth: Europe +5.2%, Brazil +11.4%, ACIS +9.3% and NAFTA +7.3% (on a scope-adjusted basis).
Sales revenues in 1Q 2021 rose by 14.2% from Q4 2020 to $16.2 billion, and up by 9.1% compared to Q1 2020, driven primarily by the higher realized average steel selling prices and increased mining sales revenue on higher seaborne iron ore prices.
The company continued to benefit from its vertical integration in iron ore and expects FY’21 market-priced iron ore shipments to increase to approximately 39 million mt (from 38.2 million mt in FY’20), it said.
Source: Platts