ArcelorMittal Notches Highest Q3 Profits Since '08, Expands Americas Operations

The automotive industry has struggled with various supply chain issues, most notably – but not limited too – a global microchip shortage.

Lower shipments also resulted from production constraints and other delays, although the situation is expected to normalize in the fourth quarter, the Luxembourg-based steelmaker said in commentary released with earnings data on Thursday, Nov. 11.

“The outlook remains positive: underlying demand is expected to continue to improve; and, although marginally off the recent record highs, steel prices remain at elevated levels, something which will be reflected in the annual contracts for 2022,” ArcelorMittal CEO Aditya Mittal said in a statement.

SMU’s prices echo that sentiment. Our hot-rolled coil price currently stands at $1,855 per ton, down 5% from a 2020 high of $1,955 per ton in early September but up 161% from $710 per ton in November 2020.

And ArcelorMittal isn’t worried about weakening demand from the Chinese real estate sector potentially spreading elsewhere. The rationale: strict production constraints in China will lead to lower Chinese exports in the second half of 2021.

The Numbers

All told, ArcelorMittal recorded third-quarter net income of $4.62 billion after posting a loss of $261 million in the third quarter of last year on sales that rose 52% to $20.23 billion in the same comparison.

The gains came thanks to higher prices even as steel shipments fell to 14.6 million metric tonnes in the third quarter of this year, down 17% from 17.5 million metric tonnes in the third quarter of 2020.

A similar trend played out at ArcelorMittal’s North American operations, which recorded earnings before interest, taxes, depreciation and amortization (EBITDA) of $995 million in the third quarter of this year, up nearly ninefold from EBITDA of $112 million in the third quarter of 2020 on sales that rose 2% to $3.42 billion in the same comparison.

North American steel shipments were 2.28 million metric tonnes in the third quarter of this year, down 49% from 4.44 million tonnes in the third quarter of 2020.

The decline resulted from the sale of the former ArcelorMittal USA to Cleveland-Cliffs last year; from Hurricane Ida, which disrupted ArcelorMittal’s operations in Mexico; and from the broader automotive and production constraints impacting operations both globally and in North America, the company said.

A sauce of higher prices in North America made the bitterness of lower shipments easier to swallow. ArcelorMittal recorded average selling prices of $1,303 per tonne in the third quarter of 2021, up nearly 86% from $701 per tonne in the year-ago quarter.

Americas Expansions

On the operations side, ArcelorMittal continued to invest heavily in its North American footprint.

The capital expenditures in the region include, most recently, $163 million (Canadian $205 million) for upgrades to the company’s pellet plant in Port-Cartier, Quebec. The facility currently makes 10 million tonnes of pellets annually, seven million tonnes of which are blast furnace pellets and three million tonnes of which are direct-reduced iron (DRI) pellets.

The investment – made possible by a $63.6 million (C$80 million) electricity rebate from the provincial government in Quebec – will allow Port-Cartier to convert all of its output to DRI by the end of 2025. It will also significantly lower the plant’s carbon emissions, the company said.

A potential candidate for consuming those pellets would appear to be Canadian flat-rolled steelmaker ArcelorMittal Dofasco. ArcelorMittal has said it will invest $1.41 billion (C$1.77 billion) to decarbonize the Hamilton, Ontario, steel mill. The plan: To move away from making steel via traditional blast furnace and basic-oxygen furnaces – and related coke- and ironmaking operations – toward making metal from electric arc furnaces (EAFs) fed by DRI.

The federal government in Canada has committed $317.9 million (C$400 million) to the project, and ArcelorMittal said it was in talks with the provincial government in Ontario for additional support.

In Mexico, meanwhile, ArcelorMittal said it was “nearing completion” of a new hot strip mill (HSM) that will give the company additional capacity of approximately 2.5 million metric tonnes when it comes to flat-rolled steel. The HSM project, announced in the fourth quarter of 2017, should be completed by the end of this year, the company said.

ArcelorMittal is also adding a push-pull pickling line (PPPL) with capacity of up to 750,000 tonnes per year that will allow it to make hot rolled pickled and oiled (P&O) product. The first coils from that line are expected in the second half of 2024, ArcelorMittal said.

And with the completion of the new HSM in Mexico approaching, ArcelorMittal said it would shift its focus and its money – approximately $500 million – upstream to raw materials.

Namely, the company will invest at least $150 million at its Las Truchas mining operations to increase pellet feed production to 2.3 million tonnes per year, up 1 million tpy from current levels. It will also invest $350 million at its planned Serra Azul mine and processing plant in Brazil. The idea: To build a DR-grade pellet plant at Serra Azul with annual capacity of 4.5M tpy that will supply the company’s steelmaking complex in Lazaro Cardenas, a port city in Mexico’s Michoacan province.

In the U.S., ArcelorMittal continues work on a 1.5M tpy EAF and slab caster at is AMNS Calvert joint venture in Alabama. “The plan includes the option to add further capacity,” the company noted.

By Michael Cowden, Michael@SteelMarketUpdate.com