ArcelorMittal cuts outlook as ore prices hit mining

Says it now expects core profit to be above $7 billion

ArcelorMittal , the world's largest steelmaker, cut its forecast for earnings this year after lower than anticipated iron ore prices ate into the profit of its mining business.

The company, which makes about 6% of world steel and is a broad gauge for the health of global manufacturing, said it now expected core profit to be above $7 billion, having previously given a figure of about $8 billion for the full year.

ArcelorMittal, more than double the size of its nearest rival, nevertheless said its steel business was faring well and that it had increased demand forecasts for Europe and the United States, which account for about two-thirds of its shipments.

The company retained its forecast that global steel consumption would rise by between 3 and 3.5%, with slightly lower growth in China, now a modest decline seen in Brazil and a drop for Russia and surrounding states.

Russia only takes up about 2% of ArcelorMittal's steel, but its weakness removes a source of expected growth.

The International Monetary Fund last week slashed its global economic growth forecast and said geopolitical risks from crises in the Middle East and Ukraine could dent growth further.

ArcelorMittal also sells less than 2% of its steel in China, but the country is both the world's largest steel producer and consumer, and growth there has supported both steel and iron ore prices.

ArcelorMittal said it had adjusted its assumption for iron ore prices to $105 per tonne from $120 per tonne before and implying a second-half average of $100.

The company reported second-quarter core profit (EBITDA) of $1.76 billion, below the average $1.83 billion expectation in a Reuters poll of brokers. Last year, the figure was $1.70 billion.

Overall for steel, demand from automakers is good, with EU car registrations up 6.5% in the first half. The construction sector, which uses about half of the world's steel, is gradually improving.