ArcelorMittal, which announced its third quarter results on Thursday, said the company still has a long way to go in India before it takes a final view on the construction of the proposed steel plants.
L N Mittal, CEO, ArcelorMittal, the world's largest steelmaker, did not sound very enthusiastic about the progress of the company in India. In a select media call, he said: "We have got mining leases/licences, which are in different stages of progress. Some are prospecting licences, some are exploration, but we haven't got mining operation approvals yet."
He said the mining allocations to ArcelorMittal were done long before so there was some progress. "But it's still a long way to go before we take a final view on construction."
The company reported a sharp drop in net profit, from $1.4 billion in the third quarter last year to just $700 million, in the third quarter ended September. The company has been eyeing countries like Brazil and India for expansions and its growth drivers in newer markets. However, the market uncertainties has forced it to cut down on its planned steel investments. The 2011 capex will now be below the earlier announced $5.5 billion.
"In light of recent market uncertainty, the company is focusing on core growth capex," he said. The company has also put two of its projects in Brazil on hold.
ArcelorMittal has also kick started its asset optimisation plan in September and hopes to save $1 billion annualised through the plan.
Under the plan, ArcelorMittal will idle blast furnaces in regions where there is lack of demand and will raise production in places where there is activity.
The company hopes to maintain its market share in Europe even after concluding the said plan. It has already decided to shut its two blast furnaces of a combined capacity of 3.1 million tonnes at Liege, Belgium.
All this is happening at a time when the company is yet to make any significant investments in India even after signing memorandum of understandings with state governments as early as 2005.
Mittal, last year, had said the company was looking to build smaller modules of steel plants in the emerging markets.
According to the company's India spokesperson, the land acquisition in Jharkhand is slow but is in progress. The company is also expecting land allocation from the Karnataka government. Officials have visited the site in Karnataka and are closely watching the iron ore mining ban issue, which is currently the epicentre of the steel sector in India.
The spokesperson said the company will take decision on its six million tonne Karnataka plans only after there is some clarity on the iron ore issue. ArcelorMittal maintains that the 12 million tonne Orissa plant remains a non-starter till date.
Mittal said the leading indicators of the global economy are declining and it was clear the economic momentum was slowing down. He said the European Union was the biggest cause of concern at the moment and the PMI (purchasing managers index) data for the region has also contracted for the third straight month.
The company expects the steel sector growth to be 7-7.5 per cent in the current year and at 4.5-5 per cent in 2012. It reported a sharp drop in net profit, from $1.4 billion in the third quarter last year to just $700 million this year. "However, the core business continues to be strong," Mittal said.
However, the company expects steel shipments in the fourth quarter to be lower sequentially reflecting customers' "wait and watch" approach. Sales decreased by 3.6 per cent (sequentially) in the third quarter to $24.2 billion, but were higher by 22.6 per cent when compared against the same three months last year.
