The world's biggest steelmaker, ArcelorMittal reported its first ever loss of $2.6 billion in the last quarter as it wrote down the value of assets, inventories and raw-material contracts amid plunging demand from the global construction and automobile industry.

The Luxembourg-based company said its net loss was $2.63 billion, compared with net income of $2.44 billion a year earlier, after taking one-off writedown charges of $ 4.4 billion.

The company has also halved its annual dividend to $0.75 per share from the previously committed $1.50 and warned that due to low demand coupled with price cuts of up to 40 per cent and production capacity trimmed down to 55-60 per cent, the earnings could fall further in next three months to $1 billion.

ArcelorMittal cut production by up to 35 per cent in November (See: Slowdown forces ArcelorMittal to cut output by up to 35 per cent) and had plans to raise production in the first quarter of this year. (See: Steel production may rise in early 2009: ArcelorMittal)

But with excess stock and demand for steel still very low as the car industry is also facing unprecedented slump in new vehicle sales, while construction and machinery industry orders have declined sharply, the steel maker is planning to cut production by 45 per cent in this quarter.

It has already closed down its plants in France, Germany and Belgium during the winter months.

Steel makers in Japan, China and Russia have cut 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.

China's minister of industry and information technology, Li Yizhong had said in December that he would encourage mergers in the iron and steel industry in a move to offset the adverse impact of the global financial turmoil.

The Chinese steel industry is also operating below capacity. Last year, steel output was 480 million to 490 million tonnes, against total capacity of 600 million tones.

Chief executive Lakshmi Mittal told reporters that the steel industry would take between "two and two and a half years to come back to normalcy."

Mittal said: "Our generally excellent performance in 2008 was overshadowed by the considerable slowdown in the world economy in the last quarter of the year ... While the operating climate is likely to remain challenging for the first quarter, we are starting to see some signs of improvement."

But he was optimistic about sales picking up in the second quarter and expected global demand to fall only 7-10 per cent this year and said that the steel industry will see a small rise in the second quarter when existing stocks lying with manufacturers are exhausted.

He also said that the company was on track of meeting its target of reducing its debt by $10 billion from $32 billion to $22 billion by the end of this year.

The steel maker will also initiate job cuts to reduce cost and the cuts could exceed the initially planned figure of 9,000 as it was extending a voluntary departure scheme to production workers.

The writedown charges of $ 4.4 billion also includes $900 million related to job losses said Chief Financial Officer Aditya Mittal.

About 1,000 employees of the company across Europe held a demonstration yesterday in the Belgian capital against job cuts and wanted the steelmaker to not pay dividends while it plans to lay off thousands of workers.