ArcelorMittal SA’s business update tells of a woeful year, which it describes as unexpectedly being the most challenging for the world’s steel industry since the global financial crisis.
Against this toxic backdrop you can add a raft of issues particular to the SA economy and to ArcelorMittal SA itself, and the whole picture adds up to some spectacular losses.
The company was forced to launch a review to identify areas where it could look to establish a competitive advantage that could give it a long-term future.
What it coyly describes as a large-scale employee reorganisation has resulted in the loss of over 1,000 jobs. In addition, it is launching a significant repricing and rescoping of subcontractor services.
ArcelorMittal has started the wind-down of its operations at Saldanha, which was formerly one of the biggest employers in the West Coast region, and this is expected to be completed by the end of the first quarter.
Next the spotlight will move to its other operations, with a view to improving their cost position and service offering.
Fortunately Lakshmi Mittal has deep pockets, though his position on the Sunday Times Rich List has been bouncing around all over the place since his net worth peaked at £27.7bn in 2008. As of 2019 he is down to his last £10.7bn, which might make him think twice before any extravagance like the $60m he is estimated to have dropped on his daughter’s wedding back in 2004.
This is unlikely to elicit too much sympathy from retrenched workers.
Tesla: Hoping the wheels stay
Tesla’s share price has been doing a serviceable impression of a SpaceX rocket since it bottomed out at $179 in June last year, taking its market capitalisation to $100bn. This eye-watering number shifts the company to No 2 in the league table of car manufacturers, north of the combined market caps of General Motors and Ford, ahead of Volkswagen, which churns out 30 times as many vehicles as the upstart, and behind only the mighty Toyota.
It’s not Tesla’s fault that the market is happy to pay over 100 times projected 2020 earnings for the stock, but it certainly seems to be pricing in perfection ahead of its upcoming earnings release. Any disappointments will result in a mighty rout. The valuation has attracted more shorts than a boy scouts’ convention, and those traders have been haemorrhaging cash as they wait for a correction. Meanwhile the optimists point to the opening of the Shanghai Gigafactory, which is expected to help the company go deep in the Chinese market by producing vehicles cheaply and in volume.
Next up is the opening of its German Gigafactory, where construction is scheduled to start in March in order to begin production next year.
The price run has coincided with an uncharacteristically quiet period from Elon Musk, who hasn’t inserted foot into mouth for months and even received a ringing endorsement from President Donald Trump, in a typically rambling comment suggesting for some reason that it was imperative to protect Thomas Edison and the people who came up with the wheel.
Tesla may not be the smoothest ride, but it’s never dull.
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