UPDATE 2-ArcelorMittal sees steel slowdown extending to Q4

* Sees Q4 core profit $1.5-$1.9 bln vs $2.4 bln forecast

* Q3 core profit (EBITDA) $2.27 bln vs forecast $2.26 bln

* Expects lower Q4 steel prices, higher raw materials costs

* China slowdown hit Q3 steel demand

* Shares open down 4.9 percent
(Updates with comments from CFO)

By Philip Blenkinsop

BRUSSELS, Oct 26 (BestGrowthStock) – ArcelorMittal (ISPA.AS: ), the
world’s largest steelmaker, forecast extended softness for the
sector on Tuesday with muted demand and a margin squeeze set to
depress profit at the end of 2010 after a weak third quarter.

Analysts were expecting a marginal overall improvement from
the July-September period when slowing growth in China combined
with weak construction in the United States and thin demand in
southern Europe.

“Clearly this is the big news of this call, how the demand
remains muted into the fourth quarter of this year,” Chief
Financial Officer Aditya Mittal told a conference call.

ArcelorMittal shares opened down 4.9 percent at the onset,
among the weakest stocks on the FTSEurofirst 300 index (.FTEU3: )
of leading European shares.

The company, whose output is more than double that of its
nearest rival, said its shipments would pick up slightly in the
final three months, average steel prices would be lower than in
the third quarter and iron ore and coal costs would be higher.

CFO Mittal said ArcelorMittal had shipped lower volumes of
steel and faced weaker spot prices and higher costs in the third
quarter — with core profit in line with market expectations.

“Our outlook for the fourth quarter remains cautious because
higher costs due to raw materials are still working their way
through… There are some regional differences, but overall the
demand picture remains muted on a global basis,” he said.

He added ArcelorMittal expected global demand to rise by 6
percent next year, in line with the forecast of the World Steel
Association, an easing from the 13 percent expansion this year.

ArcelorMittal said its much-watched core profit (EBITDA)
would be between $1.5 billion and $1.9 billion in the fourth
quarter, implying a 25 percent decrease from the third quarter.

The market had on average forecast a figure of $2.4 billion,
based on a Reuters poll of 10 analysts.

The third-quarter $2.27 billion, albeit in line with
expectations, was a 25 percent slide from the April-June period.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a spreadsheet comparing European steel firms:

http://r.reuters.com/zem79p

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SLOWING DEMAND GROWTH IN CHINA

The $500 billion steel industry, a bellwether for the
broader economy, profited in the second quarter from a strong
auto sector and booming demand in China, but since then the
latter in particular has cooled.

Iron ore and coal costs rose, but steel prices did not.

Christian Obst, analyst at UniCredit, said that while third
quarter figures were in line, the outlook was disappointing.

“Going forward, I expect consensus to head lower,” he said.

ArcelorMittal said that capacity utilisation dropped to 71
percent in the third quarter from 78 percent in the second and
would remain at around that level in the final three months,
albeit with slightly higher shipments.

In China, Aditya Mittal said that apparent demand, which
includes the effect of stocking and destocking, had contracted
in the third quarter due to monetary tightening, although
economic growth and real demand remained fundamentally strong.

North America experienced a strong recovery in the first
half but an overall slowdown in the second half, with a strong
auto sector and a weak construction.

In Europe, the north and Germany in particular were doing
well, but demand was weak in the south, where ArcelorMittal has
greater exposure than European competitors, such as Germany’s
largest steelmaker ThyssenKrupp (TKAG.DE: ).

They also produce more flat steel used principally for cars
and relatively less long steel, used mainly in construction.

ArcelorMittal shares are 25 percent down this year and
around 32 percent off a peak hit in April. The STOXX European
basic resources index (.SXPP: ) has risen 11 percent so far this
year and is just 5 percent off its April high.

Rivals such as world number three POSCO (005490.KS: ) and
Nucor Corp (NUE.N: ) have already reported lower-than-expected
third-quarter results, the former cutting its 2010 forecast, the
latter warning of uncertainty. [ID:nTOE69900A][ID:nN21263262]

U.S. Steel (X.N: ) and AK Steel (AKS.L: ) report third-quarter
results later on Tuesday and world number four Nippon Steel
(5401.T: ) quarterly figures on Wednesday.
(Additional reporting by Robert-Jan Bartunek; Editing by David
Cowell)

UPDATE 2-ArcelorMittal sees steel slowdown extending to Q4