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ArcelorMittal Appoints Midrex to Design Hydrogen Steel Plant

Zacks Equity Research

ArcelorMittal MT recently announced that it has commissioned Midrex Technologies to design a demonstration plant at its Hamburg facility to make steel with hydrogen.

The companies have signed a Framework Collaboration Agreement (FCA) to cooperate on various projects that range from R&D to the implementation of new technologies. Moreover, the FCA is likely to be governed by numerous Project Development Agreements (PDA), which will incorporate the expertise of the companies.

The first PDA is expected to demonstrate the large-scale production and use of Direct Reduced Iron (DRI) made from 100% hydrogen as the reductant at the Hamburg facility. The demonstration plant will produce around 100,000 tons of DRI per annum in the coming years. It will be initially produced with grey hydrogen sourced from natural gas.

Notably, the facility will be the first direct reduction plant in the world that will be powered by hydrogen, operating on an industrial scale. ArcelorMittal Hamburg currently produces steel using DRI technology and is also the company’s most energy-efficient production facility.

ArcelorMittal’s shares have plunged 50.2% in the past year compared with 30.2% decline of the industry.

ArcelorMittal, in August, revised down its global apparent steel consumption (ASC) growth expectations for 2019, factoring year-to-date growth and the current economic outlook. It now projects global ASC to increase in the range of 0.5-1.5%, revised from 1-1.5% growth expected earlier.

In the United States, the company projects ASC growth of flat to 1% in 2019 compared with the previous view of 0.5-1.5% growth. Healthy growth in non-residential construction demand is likely to be offset by persistent weakness in automotive demand and a slowdown in machinery demand.  

In Europe, ongoing automotive demand weakness stemming from lower exports is expected to dent ASC growth. These factors are expected to lower ASC between 2% and 1% in 2019 compared with previous view of contraction of 1% to flat.

However, the company expects to witness higher steel shipments in 2019 on a year-over-year basis. Capital expenditure guidance for the year is trimmed to $3.8 billion for 2019 compared with $4.3 billion expected earlier.

Zacks Rank & Key Picks

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Alamos Gold Inc AGI and Arconic Inc ARNC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 160% for 2019. The company’s shares have surged 66.8% in the past year.

Alamos Gold has projected earnings growth rate of 320% for the current year. The company’s shares have rallied 33.6% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the current year. Its shares have moved up 20.9% in the past year.

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