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Steel price boom propels ArcelorMittal to best quarterly profit since 2008

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ArcelorMittal has reported its highest quarterly profit since 2008 as the boom in steel prices helped the world’s largest producer shrug off weaker demand from carmakers.

The Luxembourg-based group made profits of $6.1bn in the third quarter, 19.9 per cent higher than in the second quarter, its previous record since 2008, although slightly below analysts’ expectations.

Net debt in the quarter fell to $3.9bn, its lowest level since 2008. Sales were also higher at $20.2bn.

The company is increasing its share buyback by a further $1bn, bringing capital returns announced since September 2020 to $6bn.

Shares in the company rose 2 per cent to €28 by mid-morning in Europe.

The strong results came despite total steel shipments in the latest three-month period falling 9 per cent to 14.6m tonnes compared with the second quarter this year due to weaker demand, in particular from automotive customers, as well as production constraints and order shipment delays. ArcelorMittal said it expected these to reverse in the fourth quarter.

Western steel producers have been enjoying their best year after a decade during which many closed plants and cut staff amid low demand. The global economic recovery following the pandemic has helped to drive demand for steel, while constraints on supply have also buoyed prices.

The high price of steel has fed through the supply chain and added to mounting costs of manufacturers in industries, including automotive and rail.

Although the price is down from peaks earlier this year, prices for some products are still close to 50 per cent higher than they were in January, according to data from commodities consultancy CRU.

The price of hot rolled coil in Germany, a benchmark product used to manufacture steel structures and pipes, began the year at €655 a tonne, peaked at just under €1,200 a tonne at the end of June and was trading at just under €1,000 at the start of November.

“The price of steel has come down. We are off the peak, but we are still extremely high by any historical standard,” said Matt Watkins, principal analyst at CRU.

Analysts expect the high prices to feed into supply contracts for next year, many of which are due to be renegotiated in the coming weeks.

The high prices will be a “massive tailwind for producers”, said Alan Spence, analyst at Jefferies.

Aditya Mittal, chief executive of ArcelorMittal, painted a bullish outlook on Thursday. “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,” he said.

The company also said it still expects steel consumption outside of China to rise by between 12 and 13 per cent this year. Chinese demand, however, is now expected to decline slightly, driven by a slump in real estate. The Asian country’s property and construction industries contracted in the third quarter for the first time since the start of the Covid-19 pandemic.

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