World Economy

ArcelorMittal Profits Plunge

ArcelorMittal Profits PlungeArcelorMittal Profits Plunge

ArcelorMittal, the world’s largest steelmaker, launched plans on Friday to raise $3 billion from a share issue to reduce debt, as it continues to suffer from the Chinese industry’s overcapacity which it says has driven down world prices.

ArcelorMittal’s share price has dropped 60% in the past 12 months, cutting the group’s market value to just €6.2 billion ($6.94 billion). The shares were down a further 7.5% in early trading on Friday, making them by far the worst performer in the European FTSEurofirst300 index, CNBC reported.

The company, twice the size of its nearest rival, reported on Friday that its core profit dropped by 32% last year to $5.2 billion and warned the result this year would only be “in excess of” $4.5 billion as it sees little improvement in overall global demand for steel this year.

Chief Executive Lakshmi Mittal said that 2015 had been a very difficult year for the steel and mining industries even with some higher demand in Europe and the United States, where the company does the bulk of its business, due to Chinese exports depressing prices.

“Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China,” Lakshmi Mittal said.

China, which makes half the world’s steel, exported a record 112 million tons last year, equivalent to total North American output, upsetting trade partners who argue it is dumping on world markets.

Steel prices have slid to 12-year lows and global steelmakers appear set for another year of pain even as steel prices start to stabilize due to production cuts.

Along with the capital increase, the company said it was selling for €875 million ($979 million) its 35% stake in Spanish automotive steel specialist Gestamp Automacion to the majority shareholders, the Riberas family, ending a joint venture formed in 1998.