Mittal, the world's largest steel supplier, cuts production storms
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As the world’s largest steel supplier, Mittal’s decision to increase production cuts has made the steel industry colleagues shudder: In the fourth quarter of this year, it plans to reduce production in the Americas by more than 35% and in Europe and Asia and Africa by more than 30%. It is expected that the reduction in production is likely to continue until 2009.
Although Mittal is still a very profitable company, sales revenue in the third quarter rose by 38% to US$35.2 billion, net profit increased by 29% to US$3.8 billion, but lower than the previous industry’s estimated sales of US$38.8 billion, 59 Billion U.S. dollar net profit.
According to Lakshmi Mittal, the company’s CEO, Mittal has no choice but to cut production: “In the past two weeks, demand in the European market has been accelerating, and now emerging markets have also been affected. With automobiles and buildings Demand has fallen, and the United States has seen similarly low demand. I hope it is now the lowest point."
The rate of decline in the global economy once again fell far beyond what Mittal expected. On October 17, company spokesperson Haroon Hassan stated that due to the decline in global steel demand, it will consider reducing global steel production by 15%, and stressed that the actual decline may not reach 15%.
Just 20 days later, Mittal has more than doubled its production cuts. The company's explanation is that the continuous deterioration of the global economic situation has forced the company to increase its production cuts.
Mittal's production cuts are the first of its kind in Europe, especially in France and Belgium. The company will reduce production by 3 million tons throughout Europe and temporarily shut down 12 of the 28 blast furnaces, and will continue until the end of the first quarter of 2009. Among them, starting in November, the reduction in production in France reached 50%, half of the blast furnace production stopped; Belgium factory has reduced production by 50%.
On September 25, Mittal shut down a D blast furnace at the Kenbra port plant and later closed its C6 blast furnace at the Cleveland plant.
In early October, Mittal said it will cut its production from 10% to 15% in Poland. The company owns four steel plants in Poland and is the largest steel producer in Poland. According to the 2007 steel output of 6.4 million tons, the output will be reduced by nearly 1 million tons; the company will also reduce production in Brazil by 20%; in Ukraine, the company has reduced steel production 50% will also reduce steel production in Kazakhstan by 20%.
In the fourth quarter, Mittal will reduce production by 2 million tons in the United States. However, the company said in its financial report that a reduction in U.S. inventory in the short term may mean that sales will increase in the coming months, even if the demand is lower than the level at the beginning of the year. Up to now, the operating conditions of US steel mills have been good, and the profits in the third quarter have all increased.
According to Mittal's annual production capacity of 120 million tons, the reduction will reach 9 million tons, and China's Shougang's normal annual production is only 8 million tons.
Regarding the reasons for the reduction of production, Mittal explained that due to the economic slowdown in various countries, the shrinking of real estate, automobile and other markets has greatly affected the demand for steel. Many customers of the company are reducing inventory and stop buying new products.
Keith Spence, President of Global Mining Corporation, said: “I am not surprised at the reduction in output of steel giant Mittal. The steel production capacity is already in surplus. Making timely adjustments is a timely move that may help stabilize steel prices and prevent profit from continuing. Slipped."
Mamadou Barry, manager of the Oil and Gas Mining and Chemicals Department at the World Bank Group’s Multilateral Investment Guarantee Agency, used “responsible actions†to evaluate Mittal's industry giants' production cuts, but he believes that “production cuts will not be too longâ€.
As Keith Spence said, the global steel mills have begun to reduce production.
South Korea's Posco, the world’s fourth-largest steelmaker, announced that it will cut production by 150,000 tons in the fourth quarter. The annual output will be reduced from 1.74 million tons to 1.54 million tons; Japan’s Nippon Steel plans to carry out three years from November The first reduction in production; Magnitogorsk Steel, one of Russia’s largest steel companies, reduced production by 15% from October; another steel company, Russia’s Severstal’s steel company, reduced its production at Russian steel mills in October. 25% of companies whose companies are located in the United States and Europe will also significantly reduce their production; China's Baosteel, Wuhan Iron and Steel, and Anshan Iron and Steel have all issued production plans at different levels.
Cost Savings Given the increasingly difficult operating environment in the fourth quarter and the uncertainty of economic development in 2009, Mittal plans to reduce the total sales management fee (SG&A) by 50% by the end of 2009.
The third quarter financial report shows that from January to September of this year, the company's SG&A totaled 5.2 billion U.S. dollars, and it is estimated that it will reach 6.9 billion U.S. dollars by the end of this year, 27% more than in 2007, all costs such as professional, consulting, IT hardware and software. The costs of tourism, advertising, and sales have all increased significantly compared to last year.
In addition to cutting production, Lakshmi Mittal did not disclose specific internal cost reduction measures at the performance announcement. However, according to Agence France-Presse (AFP), due to the financial crisis affecting steel demand, Mittal is prepared to suspend the reinvestment of all factories. In addition, it will stop recruiting workers and strictly review subcontracting costs and procurement expenses.
However, the company said in response to a reporter’s e-mail: “At present, there is no overall layoff plan.†Mittal currently employs more than 320,000 employees worldwide.
In addition, Mittal will adopt strategies such as adjusting production to maintain product price stability. For example, starting in 2008, the company reorganized flat steel production in Western Europe and redefined the production functions of each plant. The Luxembourg-based company will be responsible for strategy, procurement, sales and pricing.
The reporter learned from the videos posted on Mittal's website that a responsible person of the company stated that the purpose of reorganizing European flat steel is to “concentrate risk decision-making and strategy formulation to improve our customer service system and minimize the overall risk of flat steel operations in Europe. Will also gain additional profits."
However, the financial report shows that in the third quarter, Mittal sold about 8.2 million tons of flat steel in the European market, down 1.7 million tons from the second quarter; the US market flat steel sales of about 6.9 million tons, 500,000 tons less than the second quarter Compared with the first quarter, it will reduce 200,000 tons. In addition, compared with the second quarter, the net profit of the European and American markets decreased by 400 million U.S. dollars and 800 million U.S. dollars, respectively.
Mittal said that the reduction in flat steel net profit in Europe and the United States is caused by a reduction in market share and an increase in costs, especially in steel prices.
Mittal North America's responsible person for flat steel said at the press conference: “The current economic environment has many uncertainties. We should not be overly optimistic, but we cannot exaggerate the issue too much. We must see that many long-term optimistic factors remain. Existence, despite the decline in the demand of traditional European and American markets, the outlook for steel demand in developing countries is still good."
In addition, Ondra Otradovec, Mittal’s vice president of mergers and acquisitions, interviewed by our reporter on September 19, emphasized the company’s diversification strategy in responding to market risks.
Alexander Molyneux, general manager of Citibank Asia and director of the Bank of Metals and Mining Investment, believes that the financial crisis will restore scale, liquidity, and diversification. "This financial crisis will lead large-scale companies to use diversification strategies to open up more financing channels." "He stressed that a diversified company's share price performed better because its profitability was more stable than its value."
Opportunity for mergers and acquisitions According to Mittal's third-quarter financial report, the company's total profit for the period from June to September this year reached 3.8 billion U.S. dollars, up 29% over the same period of last year; total sales rose 38% year-on-year to 3.52 billion U.S. dollars. The company stated that the increase was due to the relatively high global steel prices, coupled with the stable demand in Asia and Latin America. Today, the reasons for the above-mentioned increase in growth have become the future.
In the face of a rapidly changing market, the company expects EBITDA to be in the range of 2.5 billion to 3 billion U.S. dollars in the fourth quarter of this year, which is a far cry from the 4.85 billion U.S. dollars in the same period last year. The company also hopes to pay off $10 billion in debt by the end of 2009.
In terms of market demand, the company expects stainless steel production in France and Belgium to quadruple in the fourth quarter; France’s output of stainless steel and flat steel will decline by 25% and 28% respectively in the fourth quarter.
Despite this, Lakshmi Mittal still encourages investors: “The steel industry must be able to emerge from the shadow of global financial turmoil, and the long-term outlook remains optimistic.â€
However, Lakshmi Mittal was reluctant to predict when the steel industry could recover, but cautioned that once steel customers digested existing stocks next year, market demand would soar again.
For Mittal and its counterparts, the most important thing right now is how to clench your teeth and get through this difficult time. Howard Balloch, director of the World Economic Forum's Global Agenda Council on Metals and Mining, was worried: “The stock price has achieved unprecedented declines, and the current solution to the metal and mining capital markets is still dead. I hope commercial banks will be in this crisis. Make a difference."
The steel industry is closely related to the trend of GDP, and China is the largest steel market. In this regard, Cheng Yan, Managing Director of BOCI Asia Limited, believes that the 8% increase in China's GDP in 2009 is "a great thing". Although China has introduced an economic stimulus plan, it will be at the end of 2009 and even 2010. Can show results."
Mittal, who has always been good at mergers and acquisitions, will also face the dilemma of postponing investment projects.
Alexander Molyneux expects that between 2009 and 2010, 40% of capital expenditures in the metals and mining industry may be reduced.
Ondulla once said: "In 2008, we will continue to carry out mergers and acquisitions in Mexico, Brazil, China, and Australia, in addition to the completed and ongoing mergers and acquisitions."
But in less than two months, Lakshmi Mittal regretfully announced that the company’s foreign investment will not be reduced. It will only suspend all investment projects in the current economic situation.
He also revealed that he is currently investing in establishing joint ventures in electronics and other areas in China, and once again expressed his regret that “but it is impossible to control the company in Chinaâ€.
Ondura also emphasized the company’s plans to expand its market share in Asia, but MF Global Securities analyst Donovan said in an interview with foreign media: “Mittal is trying to migrate to Asia, but the cost is very high. If they cannot With more money in Europe and North America, these plans cannot be funded."
Although the third-quarter financial reports were mixed, Lakshmi Mittal did not give up any opportunities for overseas mergers and acquisitions. Even many people in the industry believe that the financial crisis is a golden legacy for Mittal, which has always been very appetizing. M&A opportunities.
Alexander Molyneux said: "According to Citibank's database, the number of 'dangerous' companies in the industry has increased by more than 50%. There may be a bankruptcy trend in the future, and the acquisitions of metals and mining companies will continue to increase, especially those with Mergers and Acquisitions of Advantages Companies in trouble, consolidation may continue."
Mamadou Barry said: "For companies that are seriously undervalued and facing bankruptcy, Mittal's industry giants will not sit idly by and they are storing their strengths and looking for suitable opportunities for mergers and acquisitions."
As for when the best timing for mergers and acquisitions, Cheng Yan and Mamadou Barry both believe that the second half of next year will be the active period of mergers and acquisitions.
With the emergence of air conditioning, heating, geothermal and other good things, we can enjoy comfortable indoor temperature in both cold winter and hot summer, but followed by indoor drying. In summer, especially when it doesn't rain, it's easy to get dry indoors. My mouth and nose are very dry when I wake up every day. It's not only bad for my health, but also very uncomfortable
Indoor drying is easy to cause the spread of bacteria. Reforming the air is the main reason for the floating of dust and suspended particles, while bacteria can not exist alone and usually adhere to the dust. People with weak physical resistance are vulnerable to bacteria and viruses.
Indoor dryness can also lead to excessive loss of body water and accelerate aging. Our skin fibers are composed of a large amount of water-soluble collagen. Drying will make the muscle fibers lose water and contract rapidly. If the muscle fibers are dry for a long time, they may break, and the skin will have unrecoverable wrinkles. Especially, women are more likely to have wrinkles due to lack of water. At this time, we need an Aroma Diffuser are the hazards of indoor drying? What are the effects of humidification on human health?
With the emergence of air conditioning, heating, geothermal and other good things, we can enjoy comfortable indoor temperature in both cold winter and hot summer, but followed by indoor drying. In summer, especially when it doesn't rain, it's easy to get dry indoors. My mouth and nose are very dry when I wake up every day. It's not only bad for my health, but also very uncomfortable
Indoor drying is easy to cause the spread of bacteria. Reforming the air is the main reason for the floating of dust and suspended particles, while bacteria can not exist alone and usually adhere to the dust. People with weak physical resistance are vulnerable to bacteria and viruses.
