ArcelorMittal plans steeper output cuts

BRUSSELS, Belgium - ArcelorMittal SA, the world's largest steelmaker, on Wednesday reported third-quarter profit rose 29 percent but said it would cut output by nearly a third as a sharp economic slowdown dampens demand for steel used in houses and cars.

Warning of tougher times, ArcelorMittal said it needed to "rebalance supply and demand," putting on hold an ambitious expansion plan that would have increased steel shipments by a fifth by 2010.

The news sent its share price plunging 16 percent to close at 20.60 euros ($26.70) in Amsterdam. ArcelorMittal shares are now 61 percent lower than they were at the start of the year.

The company posted third-quarter profit of $3.8 billion in the July-September period, up 29 percent from $3 billion a year ago. Sales surged 38 percent to $35.2 billion.

It has benefited from high steel prices earlier this year even though demand is now falling in lucrative core markets in Europe and the United States. Sales in emerging economies — Asia and Latin America — are more resilient, it said.

The production cut of 30 percent is double the 15 percent the company warned of last month. ArcelorMittal will start idling plants this month and next and could not say how long that might last.

"Things have worsened in the last three weeks and as a result we've had to accelerate our production cuts," Chief Financial Office Aditya Mittal told reporters on a conference call.

Business and consumer confidence plummeted in Europe and the U.S. last month, signaling slower growth ahead as shoppers reduce spending and companies shed jobs.

Mittal said he could see the steelmaker increasing output again when demand returns next year — but was cautious about saying when that might happen. The company does not plan major layoffs at this stage.

ArcelorMittal did not give details of the plants where it will reduce production but French and Belgian workers have said the company told them it will freeze output for at least a month this winter.

Chairman and CEO Lakshmi Mittal said in a statement that he was still optimistic about the steel industry's medium-term growth prospects "but it is appropriate to pause our growth strategy until we have a more settled economic outlook."

ArcelorMittal said it is selling off stocks of U.S. steel and expected the market to stabilize by the end of this year. But European prices would not calm until next year, it said, while worldwide demand for stainless steel would be flat during 2009.

The company also wants to pay off $10 billion of its debt by the end of 2009. That would cut the increasing cost of servicing the debt it took on to expand rapidly in the last two years and to help fund Mittal NV's purchase of Arcelor in 2006.

It also said it would try to save an extra $1 billion by streamlining its business costs over the next five years.

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