ArcelorMittal Earnings Double on Strong Pricing
Steel giant reports strong 2Q, says steel prices are less likely to trend down despite slowing economies.
On the earnings call, CEO Lakshmi Mittal commented on global steel demand outlook given the current credit crunch, worldwide inflationary pressure, and possible global economic slowdown. Mr. Mittal expected steel demand to grow at 3% per year in his "pessimistic scenario," which assumes a 5% gross domestic product growth in China and other emerging-market countries and negative 1% GDP growth in the developed world. Nevertheless, he commented that steel prices are less likely to trend down due to production capacity constraints and higher input costs. Going forward, ArcelorMittal will be focusing more on backward integration into iron ore and coal resources rather than expanding steel production capacity. We expect to see stabilizing volume and more margin expansion down the road.