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UPDATE 2-ArcelorMittal forecast of steel pick-up, debt drop lifts shares

Philip Blenkinsop

* Q4 core profit $925 mln vs consensus $858 mln

* Net debt falls to $9.3 mln, lowest since company formed

* Sees steel demand back to growth in U.S, Europe, Brazil

* Shares up 10.8%, top performer in FTSEurofirst 300 (Adds CFO, shares, analyst comment)

BRUSSELS, Feb 6 (Reuters) - ArcelorMittal, the world's largest steelmaker, forecast increased demand and a drop in its debt levels this year after earnings beat forecasts at the end of 2019, lifting its shares.

Market conditions remained challenging, Chief Financial Officer Aditya Mittal told a conference call, although there were early signs of improvement, particularly in ArcelorMittal's core markets of the United States, Europe and Brazil.

The Luxembourg-based group's stock rose as much as 11% in early trading and was the strongest performer in the FTSEurofirst 300 index of leading European shares.

Mittal said destocking accounted for at least half of the demand declines from its three main markets last year. Now, with inventories at very low levels, customers were returning to the market, supporting prices.

For now at least, the company forecast the coronavirus health crisis would lead to a weak first quarter in China but a rebound in the second half of the year, leading to a muted overall impact, he added.

ArcelorMittal ships almost half its steel to European customers, around a quarter to the United States and has just one joint venture automotive steel plant in China, which is the world's largest steel producer and consumer.

Even in China and despite the coronavirus outbreak, ArcelorMittal saw overall steel demand growing by up to 1%.

DEBT DROP

After a very tough 2019, when the company made a net loss of $2.45 billion, the steelmaker had made strides towards its goal of bringing net debt below $7 billion.

"We're now focused on achieving that by the end of 2020," Mittal said.

Net debt fell to $9.3 billion at the end of 2019, the lowest level since the company was formed in 2006 through the merger of Arcelor and Mittal Steel.

The company said fourth-quarter core profit (EBITDA), the figure most watched by the market, was $925 million, compared with the average forecast of $858 million in a company poll.

"The profit figure was slightly positive but the narrative here is that of the first signs of improvement of steel consumption and also the low impact of the coronavirus," Ingo Martin Schachel, an analyst at Commerzbank told Reuters.

ArcelorMittal said global steel consumption, including the impact of inventory changes, would grow in 2020 by 1-2% after an expansion of 1.1% in 2019.

In the United States, steel consumption would be up to 1% higher than in 2019, when it dropped 1.7%, while in Europe, consumption would grow by between 1% and 2% after a 4.3% slump last year, although the automotive sector would remain weak.

Steel demand in Brazil would also return to growth this year, ArcelorMittal said. (Reporting by Philip Blenkinsop, additional reporting by Marine Strauss, Editing by Sherry Jacob-Phillips and Alexander Smith)