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Why Ebola impacted ArcelorMittal’s profitability in the 3Q

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Nov. 27 2019, Updated 8:37 p.m. ET

Ebola impacts ArcelorMittal’s profits

We’ve seen how ArcelorMittal’s mining operations performed in the third quarter. It also operates iron ore mines in Liberia. Liberia has been impacted by the Ebola outbreak. The outbreak impacted ArcelorMittal’s operations in Liberia.

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Expansion in Liberia 

ArcelorMittal (MT) is completing second-phase expansion at its mine in Liberia. The expansion is progressing at a slower pace because the contractors declared force majeure. Please be aware that unforeseen circumstances, that prevent someone from fulfilling a contract, are known as force majeure.

The first-phase operations have been running smoothly. MT hopes to reach its target of producing five million tonnes of iron ore this year. However, the production costs increased ~$1.50 per ton.

Why the Liberia mine is important for ArcelorMittal

Over the long term, the cash costs form iron ore are expected to be $30 per ton in Liberia. MT expects the cost to be ~$38 per ton from other mines. This makes Liberia a low-cost production base for MT. It’s important because iron ore prices touched their five-year low.

The previous chart shows ArcelorMittal’s global mining portfolio. As a global company, ArcelorMittal is exposed to many global factors. Along with the Ebola crisis, it’s also exposed to the ongoing crisis in Ukraine. We’ll discuss this in the next part of the series.

Steel companies—like AK Steel (AKS), Steel Dynamics (STLD), and Nucor (NUE)—have their operations mainly in the US. Although the US steel industry is also exposed to global factors, the companies are less exposed to global factors—compared to MT.

Investors can also gain access to the metals industry through the SPDR S&P Metals and Mining ETF (XME).

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