[miningmx.com] — DEMAND for steel in the developed world will only return to pre-crisis levels in 2015, the head of the world’s largest steelmaker said on Tuesday.
Lakshmi Mittal, speaking after an investor meeting to approve the spin-off of ArcelorMittal’s stainless business, said he believed global growth in output would slow to 6% to 6.5% this year, from some 15% in 2010.
Chinese growth would temper to 6.5% to 7% from some 9% last year.
Demand in the developed world shot up by some 20% last year but only from very depressed levels in 2009.
“To come back to before the 2008 crisis, it will not be before 2015. The developed market demand still has a long way to go,” Mittal said. “In 2009, steel demand dropped by almost 50%.
“I think American demand will improve more than the European demand.”
Mittal spoke after ArcelorMittal shareholders backed the spin-off of its stainless steel division, creating a company called Aperam hoping to profit from surging emerging market for cutlery and other rust-free products.
“The spin-off will enable the stainless steel business to profit from better visibility in the market and to better carry out its growth strategy,” said Mittal, who will be chairman of the new company and whose family will hold a 40.8% stake.
Aperam, which will be the world’s sixth largest stainless steel producer, is due to list in Amsterdam, Paris and Luxembourg. ArcelorMittal investors will receive one new Aperam share for every 20 ArcelorMittal shares they hold. ArcelorMittal says that global stainless steel demand is expected to rise by some 6% per year until 2015 after a 20% bump last year.
Mittal said he believed emerging market growth would be some 7% to 8% and developed world expansion around 4%.
Growth of demand for stainless steel, linked more to consumer needs, comes later in a country’s economic development cycle than steel, used principally for construction and in cars.
Steel comsumption per capita in China, for example, is just 30% below developed world levels, but Chinese stainless steel consumption is about half the developed level, ArcelorMittal has said.
Rust-resistant stainless steel is used for cutlery and cookware, in outdoor structures such as bus shelters and for a variety of industrial uses, from pumps to aerospace components.
Stainless steel makes up only 2% of all steel and for ArcelorMittal just 5% of core profit (EBITDA).
Aperam, with close to 10,000 employees, will offer investors some 30% of sales in emerging markets, principally Latin America, where it is the market leader, and a pledge to save $250m by 2012.
MUST HAVE
Societe Generale analyst Alain William says Aperam is the “must have” company in the sector due to its leadership in Latin America, above average profitability and room to cut costs.
Principal European competitors are ThyssenKrupp, Acerinox and Outokumpu.
On the downside, despite rising demand, overcapacity remains a sector challenge, with utilisation rates only set to return to pre-crisis levels of 80% of more by 2015.
Speculation driving up the price of nickel, used in stainless alloys, emerging market competition and the financial crash have all depressed the market in recent years.
A number of observers believe the sector is rife for consolidation to address overcapacity.
Goldman Sachs is the lead financial advisor to ArcelorMittal, and Deutsche Bank is also acting as financial advisor to ArcelorMittal. Financial advisors of Aperam are Credit Agricole CIB, Societe Generale and ING Belgium NV.
ArcelorMittal also announced on Tuesday that shareholders representing 61% of Baffinland shares had tendered to the bid for the giant Arctic iron ore deposit, and that it had extended the C$1.50-a-share offer until February 4.
