Is The Chinese Slowdown Set To Eat Over $2.5 Billion From ArcelorMittal’s Revenue Base?

ArcelorMittal (NYSE: MT) has successfully added more than $19 billion to its revenue base from 2016 to 2018, driven by increased steel shipments and higher price realization. However, with China going through a slowdown, steel demand from China is expected to decline by 0.5% – 1.5% in 2019, in contrast to a demand growth of 3.5% in China during 2018. Though ArcelorMittal has minimal exposure to China, a slowdown in Chinese demand is having an adverse impact on global steel prices, which in turn led to a revenue decline of close to 2% in the first six months of 2019. Continued slowdown in the pricing environment is expected to lead to ArcelorMittal’s Revenue base to shrink by over $2.5 billion by the end of 2020.

Company Overview

ArcelorMittal is currently the largest steel manufacturer in the world and was formed by the merger of steel giants Arcelor and Mittal in 2006, with the following operating divisions:

  • NAFTA: This includes the Flat, Long, and Tubular operations of the USA, Canada, and Mexico.
  • Brazil: This includes the Flat operations of Brazil, and the Long and Tubular operations of Brazil and its neighboring countries including Argentina, Costa Rica, Trinidad and Tobago, and Venezuela.
  • Europe: This comprises the Flat, Long, and Tubular operations of the European business, as well as ArcelorMittal Distribution Solution (AMDS).
  • ACIS (Africa and Commonwealth of Independent States): This includes sale of steel sheets and plates as well as tubular items like pipes, that are made by rolling processes in ACIS.
  • Mining: This consists of iron ore and coal operations. ArcelorMittal owns mines in various countries including Canada, the U.S., Brazil, Russia, Ukraine, and Algeria.

You can view the Trefis interactive dashboard – ArcelorMittal Revenues: How Does ArcelorMittal Make Money? – to better understand the company’s offerings, customers, segment-wise revenue performance, and total revenue trends. In addition, here is more Materials data.

Decrease In Steel Prices

  • Slowdown in Chinese demand for steel is primarily driven by declining machinery output and lower construction rate.
  • This has led to a fall in global steel prices.
  • ArcelorMittal’s price realization for steel decreased by 10% in a year, from $868.5/ton in Q2 2018 to $783.2/ton in Q2 2019.
  • In addition to decreased pricing, a sharp rise in iron ore prices has further affected the profitability of steel makers, many of whom have cut back on capacity.

Segment-Wise Revenue Performance


  • Revenue increased over recent years due to higher shipments, driven by improvement in flat steel business, offset by weaker long steel shipments.
  • Revenue is expected to decline in the near term due to a decline in global average steel prices.


  • Revenue increased in recent years due to higher shipments and prices, along with Votorantim acquisition benefits.
  • However, revenue has started to drop since the beginning of 2019, due to lower shipments, led by lower export volumes for both flat and long products.


  • Despite a lower demand and price environment, Europe revenues are not expected to see a major drop in revenues in the near term, mainly due to the benefits of the Ilva acquisition.


  • ACIS revenue is set to decline sharply in the near term, due to a decrease in price realization, which is likely to be partially offset by flat shipments with the restarting of production in Temirtau (Kazakhstan).

Full Year Outlook

  • For the full year, we expect revenue to decline by about 2.7% to $74 billion in 2019, and further by 0.7% to $73.5 billion in 2020, primarily driven by a sharp drop in price realization.
  • Trefis estimates the company’s revenues to decline by $2.5 billion in 2019 and 2020.

As per ArcelorMittal Valuation by Trefis, we have a price estimate of $26 per share for ArcelorMittal’s stock. Despite the drop in revenues, we believe that the share repurchase program (announced in February 2019), ongoing successful debt-reduction program, increased dividend, and inorganic growth could support growth in the stock price through 2020.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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