International credit ratings agency Fitch Ratings has affirmed Luxembourg-based global steel giant ArcelorMittal's rating at 'BB+', with the outlook being stable.
Fitch stated that the credit rating affirmation and the stable outlook reflect its view that steel market conditions have bottomed this year and should show a modest improvement in 2014 and beyond. The rating agency warned that, if the steelmaker's profitability remains at current levels throughout 2014, Fitch is likely to downgrade ArcelorMittal.
For 2014, Fitch expects steel markets generally to show a modest improvement with steel consumption rising by 2-3 percent. This reflects improving confidence but also a modest pick-up in demand from key steel consuming sectors, such as automotive and construction. This should allow a limited increase in steel prices in the coming year given that the inventory levels at service centers and at end-users remain low.
Additionally, Fitch expects ArcelorMittal to continue to expand its high-margin mining operations, notably through investments in iron ore in Liberia and Canada. Despite the high-margin nature of the company's mining business, Fitch expects the effect on the company's profitability that could be derived from expansion to be offset by the forecast gradual decline in market prices for iron ore.