ArcelorMittal doubles production cuts

ArcelorMittal, the world’s biggest steelmaker, fell in Amsterdam trading after it doubled production cuts and said earnings will drop as an economic slowdown erodes demand from builders and carmakers.

The company dropped as much as 15 per cent after saying on Wednesday that its global output will drop by more than 30 percent. Third-quarter profit missed analyst estimates and the Luxembourg-based company forecast earnings will drop as much as 48 per cent to $2.5 billion in the fourth quarter.

ArcelorMittal, founded by Chief Executive Officer Lakshmi Mittal, 58, joins Russian, South Korean and Japanese competitors in curtailing production only two months after prices rose to a record. Steel demand will decline next year, according to forecasts by Citigroup Inc analyst Johan Rode and Peter Marcus, the managing partner of research firm World Steel Dynamics.

“These cuts were slightly higher than expected,” Charlie Dove-Edwin, an analyst at MF Global Securities in London who has a “sell” recommendation on the shares, said in an interview. “It's going to be difficult for demand to pick up as there's no reason to believe that car sales or construction will improve in 2009.”

ArcelorMittal tumbled as much as ¤3.74 , or 15 per cent, to ¤20.80, and traded at ¤21.92 in Amsterdam at 9:33 am local time. The stock has lost 59 percent this year, slashing the company's market value to 31.6 billion euros ($40.5 billion). It's the fourth-worst performer among the 11 steelmakers in the Bloomberg Europe Steel Index.

‘Situation Worsened’: Output of flat carbon steel will fall by more than 35 perc ent in the US and by more than 30 percent in Europe, the company's biggest markets, ArcelorMittal said in a presentation on its Web site. A global reduction of more than 30 per cent was confirmed by London-based spokesman Haroon Hassan. ArcelorMittal said in September it may cut production as much as 15 per cent to support prices.

“The cuts are expected to remain in place until early 2009,” Chief Financial Officer Aditya Mittal said on Wednesday in a conference call. “The situation has worsened in the past few weeks, but demand will come back in 2009.”

Third-quarter net income rose 29 per cent to $3.82 billion, or $2.78 a share. Earnings before interest, tax, deprecation and amortisation climbed 76 percent to $8.58 billion, missing the $8.7 billion median of six analyst estimates. Sales gained 38 per cent to $35.2 billion.

“We remain optimistic about the industry's medium-term growth prospects, but it is appropriate to pause our growth strategy until we have a more settled economic outlook,” Lakshmi Mittal said in the company's earnings statement.