Steelmakers forge profit from soaring prices
Last Updated: Wednesday, July 30, 2008 | 2:04 PM ET
CBC News
ArcelorMittal SA, the world's largest steel producer, posted quarterly profits that blasted past analysts' forecasts and continued a trend of stellar news in the white-hot steel sector.
Luxembourg-based ArcelorMittel earned $5.8 billion US for the second quarter of 2008, more than double the $2.7 billion it made in the same three-month period last year.
On a per-share basis, ArcelorMittal posted a gain of $4.20 in the latest quarter versus $1.97 for the second quarter of last year.
"This reflects the diversity and strength of the ArcelorMittal business model, in particular the significant diversification of our value chain including our considerable mining operations," said Lakshmi Mittal, the company's chairman and chief executive officer.
ArcelorMittal's earnings showing was 45 per cent greater than what industry analysts had predicted the company would post.
The company's quarterly sales ran 27 per cent ahead of revenue for the same period last year, reaching $37.8 billion.
Interestingly, the company only shipped marginally more steel in this period compared to last year, 29.8 million metric tonnes versus 29.2 million metric tonnes in the second quarter of 2007. That means almost all of the company's revenue increase was due to spiking steel prices.
That result should not be surprising since global demand for steel is driving prices higher, analysts said.
For example, the price per metric tonne of cold rolled steel coil, $985 US, soared 41 per cent between April 2007 and this April. The same is true for hot rolled steel plate, which recently hit $1,065 per tonne, 35 per cent more expensive than last April.
Some steel experts argue that these prices could slide by as much as 10 per cent by year's end.
Still, ArcelorMittal is not the only steelmaker benefiting from popping steel prices.
Earlier in the week, United States Steel posted record net income for the second quarter, earning $668 million, or $5.65 a share. The large U.S. steel producer made $302 million, or $2.54 for the same period one year earlier.
Industry watchers had expected US Steel to make $3.84 a share for the April-to-June period.
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