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Steelmaker ArcelorMittal says it's turning corner as earnings rise

* World's biggest steelmaker says prospects brighter for 2014

* Q3 core profit $1.71 billion, beating forecasts

* Repeats sees 2013 core profit of more than $6.5 bln

* Says through bottom of cycle

* Ups global steel consumption forecast to +3.5 pct from +3 pct

* Shares up 5.5 pct to nine-month high

By Philip Blenkinsop

BRUSSELS, Nov 7 (Reuters) - ArcelorMittal, the world's largest steelmaker, said on Thursday its two-year slump was over and prospects for 2014 were looking up, after higher U.S. steel shipments and mining output boosted third-quarter profits.

The company, which makes 6-7 percent of global steel and is a broad gauge for the health of the global manufacturing industry, said it believed it had passed the low point of the economic cycle.

Its profits have been eroded in recent years by the protracted debt crisis in the euro zone and a slowdown in China, the world's largest producer and consumer of steel.

"The economic indicators do suggest that we are turning a corner and we are cautiously optimistic on the prospects for 2014," Chief Financial Officer Aditya Mittal told a conference call, adding that the firm's own composite index of manufacturing surveys was at a two-year high.

ArcelorMittal, in steel terms double the size of its nearest rival, reported a net loss for the fifth quarter running, this time of $193 million.

But core profit (EBITDA) of $1.71 billion was well above the average $1.56 billion forecast in a Reuters poll of analysts, and also the first year-on-year increase in two years.

The company repeated its forecast that core profit for 2013 would be more than $6.5 billion, with profit in the normally weaker second half at least equal to that of the first.

It said an improvement in underlying profitability this year would be driven by a 1-2 percent increase in steel shipments, a 20 percent rise in iron ore shipments sold at market prices and gains from various cost saving plans.

ArcelorMittal shares rose as much as 5.5 percent to 12.61 euros, a nine-month high, and were among the strongest in the leading European FTSEurofirst 300 index. That pushed their gain over the past three months to 36 percent.

Ingo Schachel, steel analyst at Commerzbank, said the third-quarter results would probably prompt market upgrades of core profit forecast by between 2 and 4 percent.

"My confidence in my estimates for 2014 has increased in the past couple of months and with today's results. From a valuation point of view, though, they are starting to look expensive," he said.


ArcelorMittal predicted global steel consumption including changes to inventories would rise by about 3.5 percent this year, up from an earlier forecast of 3 percent.

The rise was due to an acceleration in China to consumption growth of 6.5-7.5 percent from 4.5-5.5 percent before.

However, it also trimmed its forecast for U.S. steel consumption to between flat and a 1 percent decline, from between flat and 1 percent growth before. This was partly due to destocking and should be positive in the second half, with non-residential construction picking up.

ArcelorMittal still sees a 1.5-2.5 percent contraction in the European Union this year, but forecast growth in 2014.

About 44 percent of ArcelorMittal's crude steel production capacity is in Europe and 39 percent in the Americas.

European steel federation Eurofer said last month that steel-using sectors are overall set to return to slight growth in the fourth quarter, despite a continued contraction of the heaviest-using industry, construction.

Korean rival POSCO last month cut is 2013 sales target as it struggles to win orders in an oversupplied Asian market.

Japan's Nippon Steel & Sumitomo Metal Corp, the world number two, raised its full-year profit forecast last week due to cost cuts and strong steel demand in Japan.