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ArcelorMittal’s 2015 Outlook: Will Steel Shipments Rise?

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ArcelorMittal’s 2015 outlook

So far in this series, we’ve discussed ArcelorMittal’s (MT) 2014 earnings. But prudent investing warrants an analysis of future earnings too. In this part, we’ll analyze ArcelorMittal’s 2015 outlook.

ArcelorMittal has given a guidance of earnings before interest, taxes, depreciation, and amortization (or EBITDA) of between $6.5 billion and $7 billion in 2015. It delivered EBITDA of $7.2 billion in 2014.

ArcelorMittal also expects to incur capital expenditure of $3.4 billion in 2014, down from $3.7 billion last year. It expects its annual interest expense to drop by $100 million this year. This is due to lowering its debt levels, as we saw in our previous parts.

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Outlook for end markets

ArcelorMittal expects global steel demand to grow between 1.5% and 2% this year. Among its major markets, it expects European Union steel demand to grow between 1.5% and 2.5%. However, the outlook for US markets isn’t bright, as ArcelorMittal expects US steel demand to be lower in 2015 compared to last year. This could be due to lower steel demand from the energy sector. Major energy companies like ConocoPhillips (COP) have reduced their capital expenditure targets for 2015.

This lower steel demand would be a negative for U.S. Steel (X), which gets almost one-quarter of its revenue for tubular products. Please note that the steel products that the energy industry uses are also known as “oil country tubular goods” (or OCTGs). AK Steel (AKS) has a minimal exposure to OCTG products. Currently, AK Steel forms 3.87% of the SPDR S&P metals and Mining ETF (XME).

ArcelorMittal, however, expects its steel shipments to increase by more than double the global average. We’ll discuss this expectation in detail in our next part of this series.

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