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An undated photo of an ArcelorMittal steel worker.The Associated Press

ArcelorMittal, the world's biggest steel maker, is writing down the value of its European business by $4.3-billion (U.S.), underscoring its gloom about prospects for the region's recession-hit manufacturers.

The group, formed in 2006 when the steel business of India-born Lakshmi Mittal bought Europe's Arcelor for about $33-billion, said on Friday steel demand had fallen about 8 per cent in Europe this year and there was no sign of a quick recovery.

As a result, it was writing down the goodwill – the value of intangible assets like a brand rather than physical assets like machinery – of its European operations by 87 per cent.

"It is negative, but it shouldn't really be a big surprise that the book value of its European business was too high," said a London-based analyst who asked not to be named.

The $500-billion-a-year steel industry, a gauge of the global economy, has slowed sharply this year from last as a moderation in China's economic growth has compounded weak demand from austerity-ravaged Europe.

The World Steel Association in October forecast steel demand would rise by 2.1 per cent in 2012, down from 6.2 per cent in 2011. It had forecast 3.6 per cent growth in April.

Other steel makers are hurting too. Earlier this month, Germany's ThyssenKrupp posted an annual net loss of €4.7-billion.

Europe is a particular weak point, as austerity drives aimed at tackling a sovereign debt crisis have cut demand for construction and cars, the steel sector's largest markets. The euro zone's manufacturing sector has contracted for 17 straight months.

ArcelorMittal, which makes about 6-7 per cent of the world's steel, said steel demand in Europe had fallen about 29 per cent since 2007, when the financial crisis started.

But it highlighted better trends in the United States, where it said demand was up almost 8 per cent this year and is now about 10 per cent lower than in 2007.

ArcelorMittal, whose output is more than double that of its nearest rival, has already announced the closure of blast furnaces in France and Belgium, with other operations temporarily idled due to overcapacity.

The writedown represents over a third of ArcelorMittal's overall goodwill of $12.5-billion reported at the end of last year. The group, around 40-per cent owned by the Mittal family, took on about $6.6-billion of goodwill when it bought Arcelor.

It said the writedown would be a non-cash charge in its fourth quarter results and would not affect net debt or core profit. Before the writedown, analysts had on average forecast the group would make $529.5-million in net profit this year, and $7.1-billion in core profit, according to StarMine.

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