ArcelorMittal Posted Net Loss of $780 Million in the Fourth Quarter of 2010

ArcelorMittal, the world’s largest steel maker, posted a net loss of $780 million in the fourth quarter of 2010 due to higher raw material prices and the cost of spinning off its stainless steel unit.

A year earlier ArcelorMittal had recorded a profit of $1.11 billion. Prices for key raw materials like iron ore and coking coal have been rising over the past year, hurting ArcelorMittal’s bottom line.

In addition, the company recorded a $547 million loss at Aperam, its stainless steel unit that it spun off last month. The loss was caused by $598 million in charges related to the spinoff. A sharp increase in financing costs further hit fourth quarter results.

Sales meanwhile rose to $20.7 billion from $17.43 billion in the same period a year earlier thanks to higher shipments. The company is still recovering from a collapse in demand for steel, used in buildings, bridges and cars, during the recession. Capacity utilization decreased to 69 percent in the fourth quarter from 71 percent in the third quarter due to weak market demand, ArcelorMittal said,

In its outlook for the first quarter of 2011, the Luxembourg-based company struck a more positive note. Shipment volumes and average steel prices are likely to rise, pushing earnings before interest, taxes, depreciation and amortization up to between $2 billion and $2.5 billion compared with $1.85 billion in the fourth quarter, the company said.

However, ArcelorMittal said it expects raw material costs to continue rising, while increased investment activity will also add to costs.

The company is in the process of working with Nunavut Iron Ore Acquisition to acquire Baffinland Iron Mines Corp., which owns large iron ore reserves in Canada.

The takeover is part of ArcelorMittal’s efforts to build up its iron-ore reserves as it seeks to protect itself against price increases in the metal.

The world’s three biggest iron ore suppliers decided in 2009 to price their contracts on a quarterly basis rather than an annual one, making steel producers more vulnerable to sudden price changes.