International credit rating agency Standard & Poor's Ratings Services has announced that it has lowered its long-term corporate credit rating for Luxembourg-registered
steel group
ArcelorMittal to 'BB' from 'BB+', with the outlook being stable.
According to S&P, the downgrade of
ArcelorMittal reflects the agency's assumption that the group is unlikely to achieve and sustain credit metrics consistent with a higher rating following the downward revision of S&P's
iron ore price assumption to $65/mt in 2015 and 2016.
S&P believes that currently lower raw material prices may not result in sustainably higher margins because the supply-demand balance in the steel industry remains relatively weak. Despite the solid order book for automotive steel, notably in
Europe, where the major part of
ArcelorMittal's steel shipments is to the auto industry; a supportive market environment in the U.S., and the likely benefits of the continued weakening of the Brazilian real, improvements in the steel segment profit are unlikely to fully compensate for weaker mining profits.
Although not anticipated in the near term,
ArcelorMittal's rating could be further lowered if there is a sharp drop in demand for steel in the steelmaker's core markets.