ArcelorMittal CEO mulls more steel capacity cuts in Europe
NEW YORK |
NEW YORK (Reuters) - ArcelorMittal (ISPA.AS) is considering cutting more capacity in Europe to tackle over capacity and shrinking demand in the troubled region, Chief Executive Lakshmi Mittal told Reuters on Tuesday.
"Demand (in Europe) was 200 million tonnes. Now it's 150 million. Clearly there is a need of some capacity adjustments. ArcelorMittal is looking at it," he said.
"In our business I see some overcapacity and we cannot produce what we cannot sell."
Head of the world's largest steel maker cautioned European demand will not return to the high levels seen before the 2008 global economic crisis for at least another four to five years.
"I do not see demand in Europe going back to pre-crisis levels in the next four to five years," he told Reuters on the sidelines of AMM's Steel Success Strategies conference in New York.
His comments come as steel prices are pressured by a glut of supply and weakening demand, particularly in Europe where the debt crisis is hurting consumption.
European apparent steel consumption is expected to contract by 1.2 percent this year to 150.9 million tonnes as the sovereign debt problems continue to drag on the region's economic activities, the World Steel Association predicted earlier this year.
This is well below Mittal's forecast for apparent global steel consumption to grow by 4 percent in 2012 and 2013.
Any changes to output would come on top of a swathe of cuts and plant closures ArcelorMittal has already implemented in Europe since last June. The region accounted for just under half of the company's total 2011 output of 91.9 million tonnes.
Other major producers have also taken action to try and curb oversupply, including ThyssenKrupp (TKAG.DE).
NOT THE TIME FOR M&A
The problem of oversupply extends beyond Europe though, with Mittal telling Reuters he sees over capacity in the global market.
Further signs of slowing demand from China, the world's biggest steel consumer, came last week when Baosteel announced plans to cut prices by around 4 percent in July, its first reduction this year.
The world's third-largest steel producer's pricing moves are considered an industry bellwether.
Mittal said he is not interested in making acquisitions given the oversupply of the global steel market and cautioned that collapsed RG Steel LLC may struggle to find a good buyer for its assets.
"This is not the time to acquire more growth. We are not in an acquisition mode. There is enough overcapacity in the world and there is enough capacity in ArcelorMittal," he said In a Q&A session following his presentation at the conference.
RG Steel filed for Chapter 11 bankruptcy protection at the end of May saying it could not overcome the deterioration of the steel market.
It announced plans to sell the three plants it bought from Russian steelmaker Severstal (SALZI.RTS) for $1.2 billion just a year ago.
"There may be some problems for assets of RG Steel, where investment has not been made. There could be some difficulties to find good buyers," he said.
(Reporting By Silvia Antonioli; Writing by Josephine Mason; editing by Sofina Mirza-Reid)
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