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What ArcelorMittal Has to Say about the Industry Outlook

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Industry outlook

Previously, we saw that ArcelorMittal’s (MT) 4Q15 revenues nosedived due to a mix of fewer shipments and falling average steel selling prices. However, during its 4Q15 earnings conference call, the company’s management seemed somewhat optimistic, at least about 2016 shipments. Let’s see why.

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Trade actions

During its 4Q15 earnings call, ArcelorMittal acknowledged that the proposed capacity curtailments in China “will not happen short term and will take time to be effective.”

The company’s Chairman Lakshmi N. Mittal also expressed optimism. He said, “In the interim, though, I’m also highly confident that the governments in our various operating jurisdictions will provide the necessary protection to domestic industries as China makes this transition.”

ArcelorMittal is expecting trade protectionism in developed markets such as the United States and Europe to support its 2016 shipments. Apparently, other steel companies, including AK Steel (AKS), U.S. Steel Corporation (X), and Nucor (NUE), are also banking on trade cases in 2016.

Demand growth

ArcelorMittal expects global apparent steel demand to stabilize in 2016 after falling 2.2% year-over-year (or YoY) last year. In its major end markets, MT expects apparent steel demand to grow by 3%–4% in the United States. In Europe, the company expects a more modest demand growth of between 0% and 1% YoY. ArcelorMittal is expecting a restocking activity in the United States this year, which will support the apparent steel demand.

In Brazil (EWZ), the third-largest market for MT after Europe and North America, the company expects apparent steel demand to fall between 6% and 7% in 2016. According to ArcelorMittal, apparent steel demand in Brazil fell 15.6% YoY last year as well.

Meanwhile, the impact of demand weakness and lesser realized prices was visible in MT’s 4Q15 earnings, as we’ll explore in the next part of the series.

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