Het hardnekkige probleem bij de koersvorming van AM,veel meer nog dan vele sector
genoten,de mooie deal met Ilva heeft geen enkele inpact gehad,het is IRON_ORE wat
spijtig genoeg het aandeel in zijn greep heeft.
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PART 3
Trump, China, or Raw Materials: What Could Drive Steel Companies? PART 3 OF 12
Why ArcelorMittal Is Looking Weak after a Solid 1Q17
By Mark O'Hara | Jun 7, 2017 12:20 pm EDT
ArcelorMittal
ArcelorMittal (MT), the world’s largest steelmaker (X) (AKS), has fallen 4.9% in 2017 based on its May 6, 2017, closing price. One of the factors driving down the stock is falling iron ore prices (CLF). Remember, ArcelorMittal is among the top five iron ore miners globally. Since the company has integrated iron ore mining operations, its earnings tend to be negatively impacted when iron ore prices take a hit.
Why ArcelorMittal Is Looking Weak after a Solid 1Q17
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Mining operations
Iron ore prices were strong in 1Q17, which helped ArcelorMittal’s mining operations. Its mining segment generated adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $480.0 million in 1Q17, which was almost five times what it generated in the corresponding quarter last year. However, seaborne iron ore prices have now pared down their 2017 gains and are trading at six-month lows. Lower iron ore prices will not only dent the profitability of ArcelorMittal’s mining operations, but they could also impact steel prices (NUE).
Steel production is raw material–intensive, and steel prices tend to adjust to reflect the raw material pricing environment. You might recall that steel prices rose steeply last year. One of the factors that helped build momentum in steel prices was rising raw material prices.
Iron ore prices
We also saw a huge rally in spot coking coal prices last year. Seaborne iron ore prices also rose amid expectations of higher demand from China. However, we’ve seen an unwinding of some of those bullish drivers. Coking coal prices are now back to normal levels after temporary supply-side issues boosted prices earlier this year. Iron ore is also looking weak. Falling iron ore prices have been the key driver of the recent selling pressure in steel stocks.
In the next part of this series, we’ll look at the various challenges the steel industry could face in the second half of 2017.