StockBeat - ArcelorMittal Warning Deepens Market's Trade Fears

By Geoffrey Smith

Investing.com -- President Donald Trump may put his trust in tariffs as an instrument for good, but the world’s biggest steelmaker isn’t so sure.

ArcelorMittal SA (AS:MT) shares have fallen 4.5% in early trading on Thursday after the company announced weaker-than-expected earnings and cut its forecast for steel demand outside China this year. It blamed the global economic slowdown and higher input costs – notably from an iron ore market suffering from supply bottlenecks in Brazil and Australia.

ArcelorMittal’s warning plays to a general mood of doom and gloom in Europe this morning, dominated by fears that the U.S. -China trade war is about to escalate. Beijing on Thursday threatened retaliation if the U.S. actually implements the tariff increase on imports from China that it has now formally announced for Friday. Analysts see the trade conflict as one of the biggest risks to global economy in the near term.

At 4:15 AM ET (0815 GMT), the benchmark Euro Stoxx 600 was down 4.12 points, or 1.2% at 378.36, its lowest in six weeks. France’s CAC 40 was the worst hit, falling 1.5% not least due to ArcelorMittal’s heavy weighting in the index. Germany’s Dax was down 1.0% while the U.K. FTSE 100 was outperforming, down only 0.6%.

ArcelorMittal said earlier this week it was ‘temporarily’ shutting steel mills in Poland and Spain, not least because the European Commission’s ‘safeguard tariffs’ of 25%, imposed in February, had failed to stop higher imports into the EU.

The only bright spot in the global market, according to CEO Lakshmi Mittal, remains China, where government stimulus programs rolled out earlier this year have supported prices.

“Although we are somewhat encouraged by the firmer price environment in China, this is not being reflected in Europe,” Mittal said as he unveiled a weak set of first-quarter results.

ArcelorMittal’s revenue was flat at $19.2 billion, as sales of its own iron ore offset lower prices for finished steel. But its basic operating earnings (before interest, taxes, depreciation and amortization) fell 15% to $1.65 billion, below estimates.

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