Last week, ArcelorMittal (MT) completed the pricing of its 30-year, $1 billion aggregate principal amount of 7% bonds due in 2039. The yield of the bonds is 7.4%. Net proceeds from the transaction will be $943.3 million (before expense), which will be used for general corporate purpose.
The offering is scheduled to close on Oct 6, subject to satisfaction of customary conditions.
ArcelorMittal expects a surge in steel demand in the coming months largely due to the technical recovery that is taking place as inventory de-stocking nears completion.
According to the data issued by the World Steel Association last week, global crude steel production dropped more than 10% year-on-year in July but was at its highest level in 2009. Production totaled 103.9 million tons, down 11.1% from July 2008 but up from 99.7 million tons in June 2009.
Although the steel sector scenario remains unpredictable, we also expect gradual sales recovery in the next couple of quarters. However, we do not expect demand to return to the levels of 2008 in the medium term.
A reversal of global economic activity triggered by the intensification of the credit crisis last September led steelmakers to stop operations at several plants, lay off staff and refinance debt. The U.S. steelmakers are still operating at almost half their capacity. According to the American Iron and Steel Institute, U.S. plant capacity is at 53.9%, below the 90.4% a year ago.
Global steel prices have fallen more than 70% in July in some regions from their peak in mid-2008, as a recession in three of the four major world economies demand reduced in sectors such as construction and automotives. We believe this will continue in the very near term.
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