ArcelorMittal Hit Hard On Weakening Spreads And Evidence Of Demand Erosion

This has been a rough year for ArcelorMittal (NYSE:MT), as weakening demand and higher production costs have started to squeeze steel spreads more intensely. Macro concerns continue to dominate and overshadow the underlying operating improvements at this global steel giant, sending the shares down about 25% since the start of the year.

It’s hard for me to see significantly more downside in U.S. or EU steel prices from here, but commodity markets have a way of surprising in both the good and bad times, and even if prices stabilize near current levels, spreads are going to remain under pressure. As far as positive drivers go, I like ArcelorMittal’s opportunities in India and its focus on returns in mature markets, but those drivers likely won’t do much to offset the difficult macro environment.

ArcelorMittal shares look undervalued by all of the approaches I use, but sentiment on most segments of the steel sector is pretty poor now, and I don’t expect a particularly strong macro backdrop for 2023. This may be a name for more contrarian investors to consider as a longer-term rebound play, but it’ll take patience to work out.

 

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ArcelorMittal Hit Hard On Weakening Spreads And Evidence Of Demand Erosion