By Alistair MacDonald
ArcelorMittal SA, the world's largest steelmaker, posted its highest annual profit in almost decade on Thursday, helped by the U.S. steel tariffs that boosted revenue in the company's large North American business.
ArcelorMittal predicted growth in global steel consumption would fall this year and many analysts believe that the industry faces challenges as the global economy slows. Demand in China, in particular, is expected to contract, which could also mean the country's own steel products will end up competing abroad.
Lakshmi Mittal, the company's chairman and CEO, said he remains confident that measures put in place by the U.S. and Europe will continue to protect those markets from excess imports.
Mr. Mittal said President Trump's 25% tariff on steel imports, enacted last March, improved pricing in the U.S., where the Luxembourg-based company is the second-largest steel producer.
He added there is little reason for the U.S. or Europe to remove protections on their steel industries, given other markets have unfair advantages, such as state subsidies.
"This (global steel) overcapacity will always be a challenge...this has to be addressed all the time," Mr. Mittal said.
U.S. steel prices rose by as much as 41% from the start of 2018 when buyers began to anticipate tariffs, according to S&P Global Platts. ArcelorMittal said the average selling price of steel in North America was $852 a ton, up 15% from the year before.
"ArcelorMittal is a leading (U.S.) steelmaker and therefore has clear direct benefit from the higher U.S. steel price, aided by trade protections," said Seth Rosenfeld, a senior research analyst covering European and U.S. steel at the investment bank Jefferies in London.
ArcelorMittal reported full-year earnings of $10.3 billion before interest, taxes, depreciation and amortization, an increase of 22% from the year before. Annual net income was $5.1 billion, up 12.7% on 2017.
Operating income in the company's North American business, which includes the U.S., Canada and Mexico, was up almost 60% in 2018. Around two thirds of steel production in the region is in the U.S., the company said.
The company's Mexican and Canadian businesses, though, have had to pay the 25% tariff on some products being exported into the U.S., offsetting at least some of the benefits in the U.S.
The increases in steel prices have made the tariffs unpopular with manufacturers and foreign steel producers.
Mr. Mittal, though, said steel was a small component of his customers' costs.
The company was also boosted by increased demand in Brazil, one of its core markets.
For 2019, the company predicted global apparent steel consumption, which doesn't take into account changes in stocks, would be 0.5 to 1%, versus 2.8% last year.
Although the company's quarterly results aligned closely with analysts' consensus, ArcelorMittal's share price was down 3.35% at midday in London.
"Following very robust recent days of equity performance, we are not wildly surprised by the modest pullback in (the company's) shares on the back of relatively uneventful results today," said Mr. Rosenfeld.
Some analysts complained that the company had not managed to reduce its net debt, which was $10.2 billion.
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