ArcelorMittal, the Netherlands-listed steel producer, towers over its peers. It has twice the capacity of the global number two, Japan’s Nippon Steel. Yet that scale has not helped ArcelorMittal control costs, and it desperately needs to do so. Interest expense eats up a large portion of its profits and it has posted a net loss every year since 2011.
Steel prices have fallen over the past year. Chinese steelmakers, facing a 5 per cent fall in domestic demand, have been exporting instead. Six of the world’s top ten steel producers are Chinese. Price deflation shows no sign of abating soon.
To the company’s credit, its net debt has declined for several years in a row. Its ratio of net debt to earnings before interest, tax, depreciation and amortisation, at three times, is no higher than its largest peers.