The largest steel company on the planet reported its first quarter earnings this morning. ArcelorMittal of Luxembourg posted a net loss of $345 million during the first quarter of 2013.
There’s a lot working against the steel business these days, starting with the weak global economy. Companies just aren’t building as many office towers or cars, especially in Europe, where ArcelorMittal is based.
“They’ve got a very large segment of the business in Europe, and that’s not looking too pretty,” says analyst Chuck Bradford with Bradford Research.
The bigger problem, though, is China, says Michelle Applebaum with research firm Steel Market Intelligence. With weaker demand there, too, China is producing far more steel than it can use and exporting it.
“That kind of creates this tsunami of overcapacity in the rest of the world from their exports,” says Applebaum.
That’s driving global steel prices down, which isn’t great for steel company profits. But how about for consumers? Applebaum says in a $25,000 car, the steel might cost just $1,200. It’s such a small part of the overall cost, she says customers won’t see a big difference.