ArcelorMittal Shares Plunge on $3 Billion, in the Hole, Offering

The world’s largest steel producer is doing a capital raise, reminiscent of the banks in 2008, in the hole–dilutive, in order to reduce debt.

Shares are down 7% in Europe on the news.

Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China,” Lakshmi Mittal said.

China, which makes half the world’s steel, exported a record 112 million tonnes last year, equivalent to total North American output, upsetting trade partners who argue it is dumping on world markets.

Steel prices have slid to 12-year lows and global steelmakers appear set for another year of pain even as steel prices start to stabilise due to production cuts.

EU ministers met last year to discuss Chinese overcapacity and the threat to EU industry, at the request of Britain where most of recent sector job cuts have taken place.

Along with the capital increase, the company said it was selling for 875 million euros ($979 million) its 35 percent stake in Spanish automotive steel specialist Gestamp Automacion to the majority shareholders, the Riberas family, ending a joint venture formed in 1998.

“This capital raise, combined with the sale of our minority shareholding in Gestamp, will accelerate the company’s debt reduction plans and enable us to reduce net debt to less than $12 billion,” Lakshmi Mittal said.

With the sale of Gestamp and the offering, debt will be reduced from $16 billion to just under $12.