ArcelorMittal says Calvert CR outage over, floats buying Nippon's stake in JV

Company executives also said that production problems on the cold mill at AM/NS Calvert, its 50-50 joint venture sheet mill in Alabama with Japan’s Nippon Steel, had been resolved.

They in addition said ArcelorMittal could buy Nippon’s stake in Calvert if the Japanese steelmaker were required to divest it as part of its nearly $15-billion bid for U.S. Steel.

The big picture

“Overall economic sentiment remains subdued with customers maintaining a ‘wait-and-see’ approach with no restocking yet apparent,” company CEO Aditya Mittal said in a statement released with earnings data on Thursday.

“Nevertheless, sentiment appears to have reached a floor and, given the low inventory environment (particularly Europe), as soon as real demand begins to gradually improve, apparent demand is expected to rebound,” he added.

The Luxembourg-based steelmaker also predicted that global steel consumption would grow by 3-4% in 2024. (Note that figure does not include China.)

By the numbers

All told, ArcelorMittal reported net income of $938 million in Q1’24. That’s down 14% from nearly $1.1 billion in Q1’23 on net sales that fell 12% to approximately $16.3 billion.

But it compares favorably to a $2.97-billion loss in Q4’23. The huge Q4 loss stemmed primarily from a coal mine disaster in Kazakhstan.

“The improving pricing environment combined with recovering volumes resulted in sequentially stronger quarter results,” Mittal said.

ArcelorMittal shipped 13.5 million metric tons (mt) of steel in Q1’24. That’s up 1.5% from 13.3 million mt in the previous quarter but down nearly 7% from 14.5 million mt in Q1’23.

North American results

Better times in Q1’24 came thanks in part thanks to higher steel selling prices at ArcelorMittal’s North American operations. Details are here:

The upward trend in prices probably resulted from higher spot prices in Q4’23 flowing through to contracts in Q1’24.

SMU’s spot HR price stood at $897 per short ton (st) on average in Q4’23, up 16% from $771/st on average in Q3’23. (You can calculate those averages on your own with our interactive pricing tool.)

And while prices have slipped recently, Q1’24 spot HR prices averaged $913/st – potentially boding well for Q2’24 contracts.

Calvert

AM/NS Calvert also reported better EBITDA:

On the operations side, ArcelorMittal said it remains on track to start up a new electric-arc furnace (EAF) at Calvert in the second half of this year. And the company continues to plan to double capacity at its hot-briquetted iron (HBI) plant in Texas.

As also regards Calvert, company executives said on the earnings call on Thursday that production issues at the mill were largely behind it.

Note that market participants had been telling SMU for some time that Calvert had been having problems with its pickling line and tandem cold mill (PLTCM).

“We did face some operational issues with our cold rolled mill in Calvert during the quarter,” chief financial officer Genuino Christino confirmed.

“We believe that this has been resolved now. So we are in dialogue with our customers, and we should see improvements as we speak,” he added.

Company executives in addition reiterated that ArcelorMittal could buy Nippon’s stake in Calvert if that were necessary to facilitate a transaction for U.S. Steel.

“It’s very difficult to comment on the whole process. But should Nippon be forced to divest, then of course we are buyers. We would be the natural buyers of this stake,” Christino said.

Recall that acquisition, while approved by U.S. Steel shareholders, has been loudly contested by Cleveland-Cliffs and the United Steelworkers union. President Joe Biden and former President Donald Trump have also criticized the deal.