Mexican strike hits Arcelor's Q2 results

Luxembourg-based ArcelorMittal reported that its North American operating income suffered a significant drop in 2Q24, largely due to a two-month strike and picket at its facilities in Michoacán in southwest Mexico and a negative price-cost impact.

The steelmaker reported that operating income was US$338 million in the quarter, down 48.9% year-on-year and falling 42.1% compared with 1Q24. Ebitda for the quarter was US$467mn, down 40.8% from 2Q23 and -33.8% lower than in 1Q24.  

Despite the drops, Reuters noted that the global Ebitda of the world's second-largest steelmaker reached US$1.86 billion, higher than the company-compiled consensus of US$1.77bn, thanks to higher steel shipments and lower costs, which that reduced the impact of lower steel prices. 

Arcelor recalled that from May 24 to July 19, its steel plant in Lazaro Cardenas and mine in Tenencia La Mira, Michoacán state, were impacted by an illegal blockade by a group of workers who were dissatisfied with the company's profit-sharing distribution. 

Arcelor added in its Q2 results report that to maintain safety within and outside the plant, the company halted blast furnace and mining operations and has undertaken mitigation measures to continue to serve customers. 

On July 19, its Mexican subsidiary announced that it had reached a settlement with unions with an agreement to end the strike, leading to a gradual restart of production/shipments.

“The impact (of the blockade) is an estimated loss of ~0.4Mt volume and US$0.1 billion Ebitda in 2Q 2024,” ArcelorMittal said in its Q2 report. 

According to company information previously shared with BNamericas, as of July 18, the steelmaker’s subsidiary estimated that the stoppage resulted in lost production of 1Mt of steel, consisting of 800,000t during the strike and 200,000t due to the startup process.

During the firm's earnings call, Arcelor CFO Genuino Christino said that its most important business in Michoacán, the steel plant, is currently up and running. “Of course, as we highlighted in our earnings release, we will see an impact in quarter three as well, but that business is up and running.” 

The blast furnace, which is dedicated to long steel, will take “a little bit longer to restart,” according to the CFO. “It should take us about two months to restart that part of the business,” he added.

Daniel Fairclough, VP of corporate finance and head of investor relations at ArcelorMittal, said during the call that Mexico's impact in Q3 is expected to be the same as in Q2. 

“In terms of the volume, we would expect a similar impact in Q3 and Q2 from the blockade to about 400,000t, and therefore, the same profitability impact of about US$0.1 billion. So, there is no delta quarter-on-quarter,” the executive added.