ArcelorMittal, the world's largest steelmaker, proposes to cut production by up to 35 per cent as the global economic slow-down hits demand for steel, mainly in the construction and automobile sectors.
The production cut of 35 per cent is more than double the 15 per cent the company proposed last month and ArcelorMittal said it will start idling plants this month.
''Things have worsened in the last three weeks and, as a result, we've had to accelerate our production cuts,'' Aditya Mittal, chief financial officer, said, adding, the company planned to increase output again when demand returned.
The company said it planned to cut output of flat carbon steel in America, Asia, Russia and Africa by more than 35 per cent and by more than 30 per cent in Europe.
He said while the French and Belgian plants have been told to slow down for at least a month this winter, its US steel stocks are selling and the American market is expected to stabilise by the end of this year.
Lakshmi N Mittal, chairman and chief executive, said the company was making ''appropriate production cuts to seek to rebalance supply and demand," considering the market conditions. While, he said the company remained optimistic about the industry's medium-term growth prospects, ''it is appropriate to pause our growth strategy until we have a more settled economic outlook."
ArcelorMittal, which announced a 29 per cent increase in its third quarter net profit at $3.8 billion and a 38 per cent jump in sales revenue at $35.2 billion, also warned of tough times ahead and forecast a weak fourth quarter.
The increase in returns have been mainly due to high steel prices, even as demand fell in core markets in Europe and the US. Sales in emerging economies in Asia and Latin America, however, were encouraging, the company said in a release.
The production cuts represent a major reversal for ArcelorMittal, which had planned to increase steel shipments by a fifth by 2010.
Steel makers in Japan, China and Russia are cutting production as demand slows and inventories rise. The World Steel Association said global production fell 3.2 per cent in September from a year earlier, to 108.4 million tonnes. Production in China, the biggest producer of steel, fell 9 per cent in the month.
ArcelorMittal, which has 326,000 employees in more than 60 countries, did not provide a breakdown of how its steel factories would be affected.