An Arcelor electric
arc furnace in operation
 
Johannesburg, South Africa — MININGREVIEW.COM — 25 November 2008 – ArcelorMittal SA – the South African unit of the world’s No. 1 steel maker – has announced that it is to reduce prices for a third month running, and repeated the expectation that the company’s fourth-quarter earnings will fall.

ArcelorMittal spokesman Sven Lunsche told Reuters that the company had informed customers that it would cut prices on average by 12 to 16% in December. He said if the trend continued, the company would only manage to break even in the fourth quarter.

“If things turn much worse than they are now, we will only break even,” he said, but added that the company did not anticipate a further slump.

Reuters reports that steel prices have collapsed as the global financial crisis shook global economies, slashing end-user demand for steel, while tight credit markets delayed construction projects. Steelmakers across the globe have been cutting production, delaying shipments and re-assessing expansion and investment plans.

The South African unit will cut base prices by R1 000 for all of its long and flexi products in December, after slashing prices on average by 10% in November and by 5% in October.

ArcelorMittal SA confirmed that it expected earnings in the fourth quarter to fall compared with the previous three months. The company had posted a 47% rise in third-quarter headline earnings on the back of strong demand, buoyant global steel prices and foreign exchange gains.

“Earnings in the fourth quarter will be substantially lower, and on the Johannesburg Stock Exchange substantially lower means more than 25% below the third quarter,” Lunsche said.

“The company will have to act again if prices fall further,” he added. “We are at the level now where we still have a positive operating margin, but if we go much beyond current levels, we would have to look at further cost saving initiatives,” Lunsche concluded.