ArcelorMittal, the world’s largest steel maker, set out a new $3-billion (U.S.) savings plan to restore steel margins to levels unmatched since the crisis struck in 2008.
The new plan is the latest step in its aggressive response to steel sector problems that include a 9-per-cent slide in demand in the European Union last year.
The Luxembourg-based company has already sold assets, launched a rights issue, cut its dividend and closed some production since Standard & Poor’s cut its credit rating to junk status last August.
ArcelorMittal, more than double the size of its nearest rival, said on Friday it wanted to realize savings of $3-billion by the end of 2015 by improving the reliability, productivity and energy efficiency of its blast furnaces and mills and shifting to low-cost U.S. gas.
The new plan supplements $4.8-billion of savings in sales and administrative expenses and other costs achieved by the end of September 2012 and the idling and closing of facilities in Europe set to yield $1-billion per year.
The aim is to increase core profit per tonne of steel produced to $150. It dropped to $85 per tonne last year from $118 in 2011, the peak level of the past four years. In 2008, the figure was $241, driven by the commodity boom.
Chief financial officer Aditya Mittal said the improvement was realistic with a 15-per-cent market expansion and global shipments rising to around 95 million tonnes.
ArcelorMittal’s steel shipments were above 100 million tonnes in 2007 and 2008, but have been below 90 million since.
The company has raised $4-billion by selling shares and convertible bonds and assets including the $1.1-billion sale of a 15-per-cent stake in its Canadian mining business to POSCO and China Steel Corp.
The first $810-million part of the sale was concluded on Friday. The rest is set to be completed in the second quarter.
The $500-billion a year steel industry registered only modest 2 per cent growth last year as slowing Chinese growth compounded weak demand in austerity-hit Europe.
In a presentation to investors, the group said it expects global steel consumption between 3 and 3.5 per cent higher this year than last, slightly above the 3 per cent it forecast in February.
Steel demand in Europe would hit a low, falling by around 1 per cent this year, the group said.
Over the next five years, it envisages 20 million tonnes of demand recovery in North America and the EU, representing 3-per-cent average annual growth in the latter from 2012.
ArcelorMittal reiterated its financial guidance that this year’s core profit would be higher than in 2012 and repeated that it was on track to reduce net debt to $17-billion by the middle of 2013, with a medium-term goal of $15-billion.
The steel maker also said it was on course to have iron ore mining capacity of 84 million tonnes by 2015, with the expansion of operations in Canada and Liberia.