Business World

Sunday 21 January 2018

ArcelorMittal raises €830m from Canadian sell-off to pay down debt

Joyce Lee and Robert-Jan Bartunek

ARCELORMITTAL, the world's biggest steelmaker, will sell a 15pc stake in one of its Canadian iron ore operations, raising $1.1 billion (€830m) to help pay off debt at a time of sluggish demand.

The group, which makes about 6-7pc of the world's steel, will sell the stake in ArcelorMittal Mines Canada to a consortium including South Korean steelmaker POSCO and Taiwan-listed China Steel.

It is the latest in a series of steps to raise funds as slow global economic growth and spending cuts in Europe dampen demand for steel used in the car and construction industry.

"It's one of the more readily disposable parts of the business, and given they need to reduce debt I don't think its a massive surprise they are selling it," said Nomura analyst Neil Sampat.

ArcelorMittal wrote down the value of its European business by $4.3 billion last month and has had its credit rating cut to non-investment grade by all credit rating agencies.

Its net debt rose by $1.2 billion during the third quarter to $23.2 billion at the end of September.

The World Steel Association in October forecast steel demand would rise 2.1pc in 2012, down from 6.2pc in 2011.

ArcelorMittal Mines Canada operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.

ArcelorMittal also owns the huge Mary River iron ore project in Canada's arctic, in which it sold a 20pc stake to joint venture partner Nunavut last month.

As part of the deal announced today POSCO, China Steel and ArcelorMittal Mines Canada will enter into long-term iron ore supply agreements, ArcelorMittal said.

ArcelorMittal's shares rose 3.7pc in early trading today after the deal was announced, while POSCO shares were up 2.6pc and China Steel rose 0.9pc.

The group needs the funds to help compensate a slump in Europe, where demand is estimated to have fallen about 8pc in 2012 and 29pc since the start of the financial crisis in 2007.

ArcelorMittal has already announced the closure of blast furnaces in Belgium and France, with other operations on the continent also being temporarily idled due to overcapacity.

The Canadian deal will give POSCO, the world's fourth-biggest steelmaker, increased access to iron ore. POSCO currently imports nearly all of its key raw materials and owns a 12.5pc stake in Australia's $10 billion Roy Hill project.

Earlier today, a South Korean wire service Yonhap Infomax reported China Steel and POSCO would jointly contribute $540 million, while the remainder was expected to be paid by financial investors including South Korea's National Pension Service.

A POSCO spokeswoman confirmed a consortium involving POSCO signed a stock purchase agreement to acquire a stake in the iron ore mine operator, but declined to give details.

ArcelorMittal is one of Canada's top exporters of iron ore to steel markets around the world and its operations account for about 40pc of Canada's iron ore output.

The transaction is subject to approval from the Taiwanese government, and is expected to close in two instalments in the first and second quarters of 2013.

Goldman Sachs and RBC Capital Markets were advising ArcelorMittal on the deal, while Morgan Stanley is advising the POSCO consortium.

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