Fitch Ratings has downgraded the long-term Issuer default rating (IDR) at ArcelorMittal SA and senior unsecured ratings from "BBB-" to "BB +". The Outlook on the long-term IDR remains negative. Short-term IDR downgraded to "B" from "F3".
the Agency believe that ArcelorMittal has all the capabilities in order to cope with the impact of the pandemic coronavirus, with very strong liquidity of $ 10.4 billion dollars and allocation of credit lines against short-term debt of 2.6 billion dollars. The company has a proven history of taking strong measures for managing crises and business, which is intrinsically counter-cyclical working capital cycle, which Fitch considers will allow him to have a positive free cash flow (FCF) even in the most difficult quarter of this year.
"However, due to the fact that in 2019, the company has significantly exceeded negative sensitivity rating and our basic assumption that the economic consequences of coronavirus will continue for the most part 2021, which will lead to significant pressure on the steel industry, including automotive and construction, we now expect that the company will be out of the old negative sensitivity rating of "BBB-" by 2022, despite the fact that we have no doubt that the company will receive a convincing answer. This is reflected in the downgrade," - said the Agency.
Fitch expects steel demand will decrease, since the major industries that consume steel in large affected by the quarantine measures across the globe. Analysts expect that steel prices will decline in 2020, despite some growth in the first quarter, mainly due to the weakening demand and also due to the expected decline in underlying commodity prices.
"However, the inventory reduction achieved last year in Europe and the United States, should provide some support. Even if the crisis in healthcare will cover the second quarter, we expect that demand will return to pre-crisis level only by the end of 2021," - said Fitch.
ArcelorMittal is the largest steel producer in the world in terms of actual production and the largest for rated output with strong geographical diversification in the main steelmaking regions, with the exception of China.
