The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
Trefis ) --
is currently the largest steel manufacturer in the world, formed by the merger of two steel giants, Arcelor and Mittal in 2006. The company competes with other international Steel giants like
Our price estimate for Arcelor Mittal stands at $40.67, roughly 10% above market price.
Slow and Steady Growth Recorded in 2010
ArcelorMittal recently announced its results for the fourth quarter and full year 2010. The company reported total revenues of $78 billion for the year, a 20% increase over the $65 billion recorded in 2009. This revenue is, however, still far below the $125 billion generated in 2008 -- before the steel industry was hit by the global economic downturn. Consequently, ArcelorMittal's net income for 2010 stood at about $3 billion, significantly below values in excess of $11 billion for 2007 and 2008.
ArcelorMittal Chairman and CEO Mr. Lakshmi N. Mittal aptly describes the performance as indicative of a "slow and progressive recovery" in the steel industry. The company's steel shipments fell from more than 100 million tons in 2007 to less than 70 million tons in 2008, to reach 85 million tons in 2010. With ArcelorMittal being the biggest steel player in the world, this trend gives a relatively accurate picture of the world's steel demand.
ArcelorMittal produces over 100 million metric tons of steel annually and has operations in 20 countries on four continents. We believe that the Long Carbon Americas and Europe division will continue to be the most valuable division for ArcelorMittal, primarily because of the positive outlook for the price of long carbon steel in the years to come.
Long carbon steel refers to tubular steel and steel rods, which are used almost completely for the construction of buildings and bridges. The Long Carbon Americas and Europe division generated about $21 billion in sales in 2010, which is similar to revenues from the other divisions. But the expected increase in the average price of long carbon steel, and the considerably higher profit margins for this division, is what leads to this division's notable 31% contribution to the company's total value (by our estimates).
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.