November 8, 2016 / 6:47 AM / 2 years ago

UPDATE 1-ArcelorMittal sees weak last quarter as coal spike hits margins

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BRUSSELS, Nov 8 (Reuters) - ArcelorMittal, the world’s largest producer of steel reported third-quarter core profit below expectations on Tuesday and added that its final quarter would be weaker than the third as higher coal prices and lower U.S. steel prices hit margins.

While the group said steel prices would eventually align with more the sharply increased cost of coal, it added margins would be hit in the fourth quarter, when U.S. steel prices would also be lower.

Prices for Australian premium hard coking coal .PHCC-AUS=SI have surged from around $70 a tonne in February to more than $250 now.

ArcelorMittal increased its forecast for working capital to $1 billion from $500 million previously, adding it still expected to have positive cash flow for the year as a whole.

Core profit rose 40 percent year-on-year in the third quarter to $1.897 million, but was below the $1.966 billion expected in a Reuters poll of 11 analysts.

The group, which had guided for core profit (EBITDA) to be above $4.5 billion in 2016, compared with $5.2 billion in 2015, already crossed the guidance threshold at the end of the first nine months.

The group said average prices for steel rose 7.4 percent in the quarter, mainly driven by better prices in North America, Brazil and Europe.

ArcelorMittal also slightly improved its market outlook for China, the world’s largest producer and consumer of steel, where it now sees slight growth of apparent steel consumption.

Chinese prices for reinforcing bars used in construction rose to their highest level since September 2014 this month amidst tightening supply.

Overcapacity in the Chinese steel sector has led to a surge in exports which steelmakers in Europe and the United States have sought to counteract by lobbying for anti-dumping duties.

Last week, China’s Baosteel Group said it would cut steel production capacity by 11 million tonnes over 2016 and 2017, more than it had previously indicated. (Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop)

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