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What to Watch for in ArcelorMittal’s 3Q16 Earnings Call

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ArcelorMittal’s 3Q16 earnings call

ArcelorMittal (MT) is the leading global steel supplier to the automotive sector. U.S. Steel (X), AK Steel (AKS), and Nucor (NUE) also supply steel to the automotive sector (F). Automotive companies typically roll some of their annual steel supply contracts on a yearly basis. Some of these annual contracts for 2017 could be coming up for negotiation in 4Q16.

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Contract pricing

During the 3Q16 earnings call, markets will wait for updates from ArcelorMittal on its negotiations with automotive customers. We should note that contract pricing would be crucial for ArcelorMittal because it would impact next year’s profitability.

Markets will also watch for an update on coking coal contracts in ArcelorMittal’s 3Q16 earnings call. We should note that although ArcelorMittal has captive iron ore and coal mines, it also sources these raw materials from third parties for some of its steel plants.

EBITDA guidance

During its 4Q15 earnings conference call, ArcelorMittal said that it expects to deliver EBITDA (earnings before interest, tax, depreciation, and amortization) above $4.5 billion this year. To arrive at its 2016 guidance, ArcelorMittal assumed that the prevailing raw material prices and spot steel prices will remain the same during the course of the year. The company said, “This guidance does not capture any upside to current market conditions.”

Despite steel prices staging a dramatic recovery globally, ArcelorMittal didn’t raise its 2016 EBITDA guidance. During its 3Q16 earnings call, markets will wait for fresh EBITDA guidance from the company.

Don’t forget to visit Market Realist’s Steel page for a detailed analysis of ArcelorMittal’s 3Q16 earnings.

You can also read A Closer Look at Factors Affecting the Steel Industry in 4Q16 to find out the steel industry’s near-term outlook.

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