ArcelorMittal SA slashes prices

ArcelorMittal SA, the South African unit of the world’s number-one steel-maker, said on Monday it would cut prices for a third month running and repeated that it expected fourth-quarter earnings to fall.

Spokesperson Sven Lunsche said the company had informed customers it would cut prices on average by 12% to 16% in December from the previous month.

Lunsche said if the trend continued the company would only manage to break even in the fourth quarter.

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

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.

Steel-makers across the globe have been cutting production, delaying shipments and reassessing expansion and investment plans.

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

ArcelorMittal SA reiterated it expects 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% lower than in 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 will have to look at further cost-saving initiatives,” he said.

Shares in ArcelorMittal SA were up 2,7% at R64,78 – in line with most stocks as the blue chip top-40 index rose 4,2%. – Reuters

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