The ratings agency said the downgrade reflects weaker steel industry environment and economic prospects globally, and particularly in Europe, which has led to downward revision of ArcelorMittal's profits
Mumbai: On the back of the weak European economic environment coupled with sluggish steel demand globally, rating agency Standard & Poor's (S&P) on Friday downgraded the long-and short-term ratings of ArcelorMittal, reports PTI.
"We are lowering the long-and short-term ratings on ArcelorMittal to 'BB+/B' from 'BBB-/A-3'," the agency said, adding the outlook is negative on the back of prevailing environment.
It also said the downgrade reflects the weaker steel industry environment and economic prospects globally, and particularly in Europe, which has led to downward revision of ArcelorMittal's profits for the rest of 2012 and 2013.
According to the report, purchasing manager indices have weakened, which is likely to translate into lower steel demand in 2012-13.
"Furthermore, the 20% decline in steel and raw material prices over the past two months indicates that the industry environment is currently weaker than we previously expected," it said.
The rating agency, however, said the world's largest steel company's business risk profile remained satisfactory and financial risk profile as 'significant' as it met the criteria of S&P.
ArcelorMittal generated 20% of its operating profit in Europe in 2011, 17% in North America, 33% from emerging markets. Referring to liquidity situation in the company, S&P said it is satisfactory.
"We continue to assess ArcelorMittal's liquidity as 'adequate' under our criteria. We estimate that the ratio of sources of liquidity to uses is above 1.2x for the next 12 months," it said.
The rating agency also said that group's bonds and key bank facilities don't contain rating triggers. Earlier, another rating agency Fitch has said despite a slowdown in growth of steel demand, outlook for the Fitch-rated domestic steel producers will remain stable in the second half of the current financial year.
As per the rating agency, demand for steel in the country is likely to be in the range of 6-7% in 2012, with the higher activity during post-monsoon period.