The company, which posts third-quarter earnings tomorrow, will reduce European and U.S. flat-steel output in the current quarter by 30 percent, Credit Suisse Group AG estimates. Luxembourg-based ArcelorMittal said in September it was prepared to cut production as much as 15 percent to support prices.
``The expansion plans will definitely be scaled down as it will be much harder to raise cash,`` said Charlie Dove-Edwin, an analyst at MF Global Securities in London, who has a ``sell`` recommendation on the shares.
ArcelorMittal may be forced postpone investments in new Indian steel mills after prices for hot-rolled steel coil dropped 11 percent from a record high two months ago. Chief Executive Officer Lakshmi Mittal, 58, whose Mittal Steel Co.`s $38.3 billion purchase of Arcelor SA in 2006 created the company, may join competitors in Russia, Japan and the U.K. in reducing production.
The company plans to build 12 million metric tons of steel capacity in India, including a $9 billion venture in the western state of Jharkhand.
``Mittal has been trying to shift to Asia but the cost of that is expensive,`` Dove-Edwin said. ``If he starts making less money from Europe and North America he won`t be able to fund these plans.``
Russian Cuts
Haroon Hassan, a spokesman for ArcelorMittal in London, declined to comment.
OAO Severstal, Russia`s largest steelmaker, and Moscow- based Evraz Group SA and OAO Mechel said last week they`re curbing spending. Evraz, the second-biggest producer, began cutting output in October and will probably extend the reduction to 25 percent of capacity in Russia and Ukraine, Chief Financial Officer Pavel Tatyanin said at a Moscow conference.
Corus Group, the U.K. unit of India`s Tata Steel, said last week it may prolong a 20 percent cutback through the second quarter of 2009.
``The most impacted sector in the U.K. is construction and automotive,`` Corus CEO Philippe Varin said at a plant opening in Shotton, North Wales.
U.S. car sales tumbled 27 percent in September, the steepest monthly decline since 1991, while European sales slid 8.2 percent.
Global Decline
Production of steel dropped 3.2 percent to 108.4 million tons in September, the Brussels-based World Steel Association said Oct. 22. Output in China, the world`s largest steelmaking nation, declined 9.1 percent. Global production will fall 5 percent in 2009, Peter Marcus, managing partner of research firm World Steel Dynamics, said Nov. 3 in Kaohsiung, Taiwan.
Hot-rolled coil, used in cars and construction, averaged 797.31 euros ($999) a metric ton in the third quarter in Europe, 61 percent higher than a year earlier, according to data compiled by Metal Bulletin. Global prices will average $550 in 2009, Johan Rode, an analyst at Citigroup in London, said Nov. 2. That`s 39 percent less than the bank`s previous estimate.
Europe`s economy probably entered a recession this year and will stagnate in 2009, the European Commission said yesterday. Economic growth in the euro area will slump to 0.1 percent next year, the worst performance since 1993, the Brussels-based commission said. The U.S. economy contracted at a 0.3 percent annual pace from July to September.
ArcelorMittal got 56 percent of its sales from Europe last year. Asia and Africa accounted for 11 percent and North and South America 33 percent. It produced 59 million tons of steel in the first half of 2008.
Mine Investments
The company has sought increased control over raw materials such as iron-ore and coking coal. ArcelorMittal has invested in mines in Russia and Africa and said in May that it was considering acquisitions or possible joint ventures in Indonesia, Thailand and Malaysia.
ArcelorMittal has dropped 59 percent this year in Amsterdam trading, valuing the company at 31.3 billion euros. That`s the fourth-worst performance among the 11 steelmakers in the Bloomberg Europe Steel Index.
ArcelorMittal may say third-quarter net income more than doubled to $5.72 billion, according to the median of three analyst estimates compiled by Bloomberg. ArcelorMittal will report third-quarter earnings at 7 a.m. Luxembourg time.
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