(BFM Bourse) – The steel group announced over the weekend that an accident had occurred in this coal mine causing the death of several employees. The group is in discussions with the Kazakh government with a view to nationalizing steel and coal producer ArcelorMittal Termitau.
A tragedy occurred on Saturday in a coal mine operated by ArcelorMittal in Kostenco, Kazakhstan. The steel group confirmed this in a press release published the same day.
According to AFP, this accident took the form of a firedamp explosion in this mine managed by the local subsidiary of ArcelorMittal, ArcelorMittal Temirtau. According to the news agency, 45 miners died during this accident.
ArcelorMittal also announced on Saturday that it was discussing with the Kazakh government to transfer ownership of ArcelorMittal Temirtau to it, which would therefore result in nationalization.
“This project on which both parties had been working for several months resulted on Saturday in a draft agreement which, according to our understanding, had no connection with the Kostenko disaster,” explains Oddo BHF in a note.
The President of Kazkakhstan, Kassym-Jomart Tokayev, in any case declared on Saturday that he wanted to end “cooperation” with the steel group “as quickly as possible”.
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An accident that damages the reputation
According to Oddo BHF, ArcelorTemirtau operates eight coal mines, four iron mines and has a steel production site with a capacity of 5 million tonnes, representing approximately 6% of the company’s total steel production.
On the Amsterdam Stock Exchange, ArcelorMittal, which is also listed in Paris and is also part of the CAC 40, recorded a drop of 4.94% this Monday around 12:10 p.m., the largest drop in the Parisian index.
According to Oddo BHF, Kazakhstan’s exit from ArcelorMittal is “in theory manageable” but is accompanied by certain prevailing uncertainties.
The research office estimates that the group’s activities in the country undoubtedly showed “limited profitability” due to the war in Ukraine but also “probably disruptions due to numerous accidents”. The sale would therefore have a limited impact in terms of loss on the company’s results strictly speaking.
But the operation could be accompanied by “financial impacts such as the provision of a balance (price supplement, Editor’s note) in cash or the assumption of certain liabilities, particularly environmental, but due to lack, at this stage, of communication of the group, it is difficult to evaluate them”, adds Oddo BHF.
The office estimates an approximate cost of 500 million euros. “Beyond that, the current situation is seriously harming the group’s reputation. Even if the security failures revealed seem limited to Kazakhstan, they do not help it in its projects. We are thinking in particular of the possible takeover of US Steel to which the group would be a candidate according to the press”, adds Oddo BHF.
Results on November 8
ArcelorMittal could give more information to the market on the impact of its exit from Kazakhstan or on the rumors of a takeover of United Steel Corp (which have not been the subject of comments from the company) during the publication of its third quarter results on November 8.
UBS bank expects the company to report a 31% drop in gross operating profit (Ebitda) to $1.8 billion, due to falling steel prices.
“We consider ArcelorMittal to be cheap compared to its history and its main competitors. However, the high level of Chinese exports and the weakness of demand do not suggest an imminent recovery in the price,” judged the Swiss bank in early October.
The latter saw swords of Damocles on the title, in particular potential external growth operations which would be poorly received by the market as well as…. Risks linked to Kazakhstan.
Julien Marion – ©2023 BFM Bourse
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