Global credit rating agency Fitch Ratings has announced that it has upgraded the long-term credit rating of the global steel giant ArcelorMittal to 'BBB-' from 'BB+', with a stable outlook.
Fitch stated that the rating upgrade of ArcelorMittal reflects its improving balance sheet, its publicly stated commitment to debt reduction and successful cost optimization measures. The credit rating agency maintains its positive sector outlook for steel industry in the current year as capacity closures and extended output restrictions in China will continue to have a positive impact on the global steel market through improved market balance and product prices. Fitch expects that global apparent steel demand will be positive across most of ArcelorMittal’s main markets. Accordingly, Fitch projects that steel shipments of the company in 2018 will rise to 87 million mt.
Regarding the possible acquisition of the fourth-largest Indian steel player Essar Steel, Fitch stated that this acquisition would moderately enhance ArcelorMittal’s operating profile, giving it a foothold in a market with promising growth prospects.
Meanwhile, Fitch believes that the acquisition of Ilva will provide additional strength to ArcelorMittal’s European franchise, even though antitrust concerns led to the requirement to dispose of various flat steel assets, mostly located in eastern Europe. In the first two years post acquisition, Ilva would slightly reduce the operating margins of ArcelorMittal in Europe, but from year three Fitch expects a positive earnings contribution.