ArcelorMittal Posts Best Q2 Since '08, Sees Good Decade Ahead

And the good times should continue to roll into the second half thanks to strong demand and to the lagging impact of spot prices on contract deals, ArcelorMittal CEO Aditya Mittal said during a conference call with analysts on Thursday, July 29.

Contracts are based on spot prices. And average spot prices in the second quarter, for example, won’t be reflected in contract prices until the third quarter.

“Today, demand is robust in all the markets in which we operated,” Mittal said. “(And) we have not seen the real impact of spot prices.”

Steel Market Update’s benchmark hot-rolled coil price stands at $1,860 per ton ($93 per cwt), an all-time high and more than four times higher than spot prices were a year ago.

Changes to trade policies in China – such as the recent removal of export rebates on cold-rolled and galvanized product – should provide further support to global prices, as should efforts by the world’s largest steelmaking nation to reduce carbon emissions and capacity. Another tailwind comes from significant investments being made in infrastructure by governments across the world, Mittal said.

“We think the next 10 years should be better than what we saw in the last 10 years,” he said.

Mittal also hinted that typical pricing relationships – such as that between seaborne iron ore and finished steel prices – could break down because the changes in Chinese policies, for example, could lead to lower ore prices while increasing steel prices.

ArcelorMittal’s North American operations, meanwhile, posted operating income of $674 million in the second quarter of this year after suffering an operating loss of $342 million in the second quarter of 2020 on sales that rose 16% to $3.24 billion, according to earnings data.

The gains came thanks in part to a strong showing from ArcelorMittal’s AMNS Calvert joint venture in Alabama, the company said.

Also at Calvert, construction continues on a new $775 million electric-arc furnace and caster slated to have annual capacity of 1.65 million tons. The project is expected to be completed in the first half of 2023. The new EAF will give Calvert onsite steelmaking capacity – it currently relies on imported slabs or semifinished goods provided by third parties – and will also give it a reliable source of slabs compliant with terms of the U.S.-Mexico-Canada Agreement (USMCA), the company said.

And in Mexico, ArcelorMittal’s $1 billion hot strip mill at its Lázaro Cárdenas steel mill is expected to be completed by the end of this year. The new hot mill will allow the facility to supply approximately 2.75 million short tons of sheet to the Mexican market instead of selling slabs on the export market.

That will increase the profitability of the facility. “You guys know the price of hot band, you guys know the price of slab – so the margin would be quite significant,” Mittal said. “We’re focused on getting it up and running. … It’s a great project not only for this market but for the foreseeable future.”

ArcelorMIttal said the new hot strip mill will target imports into Mexico. And there should be plenty of room to take market share from imports given that the country currently relies on foreign steel for approximately 50% of its flat-rolled steel needs.

ArcelorMittal’s hot strip mill in Mexico is the second major project in the country. Ternium is also starting up a new hot strip mill with capacity of 4.4 million tons per year at its campus in Pesquería, Mexico.

In Canada, meanwhile, ArcelorMittal is replacing three old coilers with two new ones. It is also adding related equipment such as new coil inspection technology. That project is slated to be completed in the second half of 2022. The company is also continuing with upgrades to Dofasco’s No.5 continuous galvanizing line, which will be converted to make AluSi (aluminum silicon) instead of galvannealed material. That will make Dofasco only the second mill in North America capable of making AluSi. The first coil from the new line is expected in the second half of 2022, the company said.

ArcelorMittal, in comments released with earnings data, said it would also make a “significant” announcement regarding reducing CO2 emissions at its North American steelmaking operations. An ArcelorMittal spokeswoman did not respond to a request for more detail from Steel Market Update on Thursday.

Canadian Prime Minister Justin Trudeau earlier in the month said a big announcement on the carbon front was expected at Dofasco. 

By Michael Cowden, Michael@SteelMarketUpdate.com