$8.5bn writedowns by metal firms


ArcelorMittal and Vale, two of the world’s largest metals groups, have been forced to make writedowns adding up to a combined $8.5 billion amid weak economic conditions in Europe.

ArcelorMittal, the world’s biggest steelmaker by sales, yesterday said it would have to take a goodwill impairment charge of about $4.3 billion in its fourth-quarter accounts.

The company, which is led by Indian billionaire Lakshmi Mittal and has just resolved a bitter dispute with the French government over the future of one of its plants, blamed a “weaker macroeconomic and market environment in Europe”.

Steel demand in Europe had fallen 8 per cent this year, it said, bringing the cumulative decline since 2007 to 29 per cent.

Europe accounted for almost half of ArcelorMittal’s total steel output last year.

“This weaker demand environment, and expectations that it will persist over the near and medium term, led to a downward revision of cash flow expectations underlying the valuation of the European businesses,” said ArcelorMittal.

In the first nine months of this year, ArcelorMittal’s main European plants accounted for a cumulative operating loss of $823 million.

Meanwhile, Vale, the world’s second-largest mining company by market value, announced late on Thursday that it was taking $4.2 billion in writedowns linked to its ferronickel business in Brazil and aluminium assets in Europe.

The company said the impairment reflected the “current market environment for ferronickel” and the need to rebuild a furnace at its Onça Puma mine and processing plant in Brazil.

The moves could herald a round of writedowns and impairments by the world’s largest mining and metals groups as they grapple with an ailing outlook for some key commodities, weighing on asset valuations. – Copyright The Financial Times Limited 2012