ArcelorMittal CFO Calls for 'More Comprehensive' Fight Against China Exports

By Alex MacDonald

LONDON--ArcelorMittal (MT) wants national governments and international governments to do more to counteract sustained Chinese steel exports, according to the chief financial Officer of the world's largest steelmaker by shipments.

Aditya Mittal told reporters that Chinese steel exports remain at very high levels despite signs of better-than-expected steel demand growth in the country, the world's largest consumer and producer of the metal used in skyscrapers, bridges and fridges.

Mr. Mittal called upon countries to find ways to make sure that China isn't able to circumvent steel tariffs by shipping steel through other countries. "We see that [Chinese steelmakers are] using Vietnam to continue to export steel into the United States. We need a resolution to make Vietnam a part of these trade cases" too, he said. "We need a comprehensive trade solution."

U.S. officials on Monday launched two new investigations into whether Chinese steelmakers are shipping metal to the U.S. through Vietnam to evade U.S. import tariffs.

Mr. Mittal also said tariffs need to be applied to more steel products since China has demonstrated agility in tweaking production to focus on steel products that don't have steel tariffs.

Lastly, governments should consider raising existing tariffs even more to make sure they remain relevant, given emerging trends in Chinese steel production, he said.

For instance, China limited coking coal production to only 276 days a year, thereby spurring a surge in coking coal prices. It also imposed a ban on coking coal exports. This resulted in cheaper domestic coking coal prices for Chinese steelmakers than for international steelmakers, he said.

Nevertheless, Mr. Mittal said he felt "comfortable" that his company would be able to pass along the recent rise in coking coal prices to customers, although it would likely impact its profit margin in the fourth quarter as the steel industry adjusts to higher production costs.

In ArcelorMittal's case, the company consumes about 35 million tons of coking coal a year and produces about 6 million to 7 million tons from its mines annually. Mr. Mittal wouldn't comment on whether current coking coal prices are unsustainable, a view buttressed by coal producer BHP Billiton Ltd (BHP) last week. "What we're focused on is passing on this cost increase to our end markets. We did that by leading a price increase a few weeks ago," Mr. Mittal said.

He also noted that the company has pushed for a steel price rise in the U.S. even as it warned of lower profitability at its U.S operations in the current quarter due to lower steel prices in the third quarter from the second quarter. "We have a lag effect in our revenue... The orders we booked in the second quarter, some of that gets shipped in the third quarter." The same applies to the third and fourth quarters, he said.

Looking at the U.S. presidential elections, Mr. Mittal said both U.S. presidential candidates, Hillary Clinton and Donald Trump, would be good for buttressing North American steel demand.

"The good thing is that both candidates have talked about [increasing] infrastructure spending and working on creating a fair level playing field in terms of trade."

-Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

November 08, 2016 05:41 ET (10:41 GMT)

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