Saturday, January 30, 2016

Collapse Spreading: World’s largest steelmaker kicked out of credit markets, begins closing plants in Europe. US next.

ArcelorMittal Seen Locked Out of Markets as Steel Punishes Bonds
  • Company faces $15 billion repayment bill over next six years
  • Steelmaker struggling to cope with metals-price plunge
ArcelorMittal SA, the steelmaker facing almost $15 billion of bond repayments over about six years, has been locked out of credit markets, according to money managers.
Bonds of the world’s largest producer of the alloy have fallen to levels that make an immediate return to the market too costly, said Olivier Monnoyeur, a high-yield portfolio manager at BNP Paribas Investment Partners. Thirteen of ArcelorMittal’s 16 notes due by 2022 have fallen this year, with some quoted at as low as 75 percent of face value, and with some yields as high as 12 percent, according to data compiled by Bloomberg.
“Yields in the market for ArcelorMittal are not sustainable and restrict their access to the bond market,” said Monnoyeur at BNP Paribas Investment Partners, which oversees about 509 billion euros. “I am not sure the appetite to invest will be there.”
A spokesman for ArcelorMittal in London said the company had a “very strong liquidity” position. He declined to comment on refinancing activity. The company saidon Jan. 19 it had cut its 2016 cash needs by $1 billion and identified $1 billion of structural improvements.
Steel crisis spreads to Europe as Arcelor Mittal shuts Spanish plant
Steelmaker mothballs Spanish plant, showing crisis that has cost 5,000 UK jobs is spreading to Europe
Fresh evidence of how the steel crisis is intensifying has come from Spain, with Arcelor Mittal mothballing a plant in Sestao.
The company blamed record steel imports from China at “below production prices” and “falling selling prices” for the decision to shut the electric arc furnace plant near Bilbao in northern Spain, which produces slab and coil steel.
European steel companies are under intense pressure from Chinese rivals, who are flooding the market with cheap steel as demand falls in their home market.
Most of China’s steel industry is government backed, with Beijing subsidising production so that plants can run at a loss.
China lost 500,000 jobs in steel recently (all the ones it added in the boom over the last decade)… and is expected to lose another 1,000,000 this year… this is a global problem. Did you see the advert for the Vietnamese name around the pitch at a recent Premier League match? It was a steel company. While China factory wages are about $3.60ph (compared to $36 in Europe) Vietnam is just $1.50…. and Indonesia comes in at $0.60 ph… there is a massive capacity glut and a whole new generation of cheap production sites to contend with. We need a “health & safety tax to equalise the difference between standards – not one on the wage difference but the extra risks those people take we would not impose on our own people to make the price a little less noncompetitive & encourage take up of better working standards in places that supply our demand.