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Top Steelmaker’s Q3 Profit Jumps

ArcelorMittal is the world’s leading steel and mining company.ArcelorMittal is the world’s leading steel and mining company.

The world’s biggest steelmaker posted its highest quarterly profit since 2014 as prices of the metal rebounded, but warned that a dramatic surge in coal prices would crimp earnings for the last three months of the year.

ArcelorMittal reported third-quarter earnings before interest, taxes, depreciation and amortization of $1.9 billion on Tuesday, the highest in two years and 40% more than 12 months earlier. The company cautioned that profitability would fall in the last three months of the year amid a decline in US steel prices and a surge in coking coal, a key steelmaking ingredient, Bloomberg reported.

The stock slipped 5.1% to €5.819 ($6.54) in Amsterdam for the biggest intraday loss since mid-September. The shares almost doubled in value this year as deep cost cuts paid off and raw-material prices rebounded.

“While real demand remains stable, we will be impacted by the unexpected significant increase in the price of coal,” Chief Executive Officer Lakshmi Mittal said in the statement Tuesday. “While expectations are for steel prices to align with the increased costs in the interim, the higher coal price will impact steel spreads and fourth-quarter performance.”

Coking coal, also known as metallurgical coal, has more than tripled this year after top producer China curbed output. The subsequent price surge surprised analysts, investors and producers in an industry where many had expected extended surpluses. At the same time, steelmakers’ earnings have been boosted by an increase in steel prices as China’s economy stabilized and policymakers around the world pledged to back growth. European steel prices have rallied 47% this year.

While ArcelorMittal’s third-quarter sales declined 6.8% from a year earlier to $14.5 billion, its Ebitda per metric ton of steel jumped 46% to $83. The company reported steel production of 22.6 million tons and iron-ore output of 13.7 million tons. Net debt fell to $12.2 billion from $12.7 billion at the end of June. Earnings missed the $1.95 billion average of nine analysts’ estimates compiled by Bloomberg.

Hard coking-coal prices jumped 7% Monday to $289.30 per ton. Chinese President Xi Jinping’s administration earlier this year ordered mining companies to lower coal output in an effort to revitalize the industry and give a lifeline to the country’s miners, many of them government-controlled. Authorities have now started to fine tune the output policy, allowing some miners to increase production to alleviate the recent tightness ahead of peak winter demand.

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