The Luxembourg-based company on Tuesday posted a net loss of $780 million for the final three months of 2010, compared with a year-earlier profit of $1.11 billion.
Prices for key raw materials like iron ore and coking coal as well as financing costs 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.
Sales, however, 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 the recession's collapse in demand for its steel used in buildings, bridges and cars. Capacity utilization decreased to 69 percent in the fourth quarter from 71 percent in the third quarter due to weak market demand, ArcelorMittal said.
While the results deteriorated in the second half of 2010, full-year results were still much better than in 2009, ArcelorMittal's Chief Financial Officer Aditya Mittal told journalists. Net profit for all of 2010 jumped to $2.92 billion from just $157 million a year earlier, while sales rose to $78.03 billion from $61.02 billion.
"Overall, we expect 2011 to be better than 2010," said Mittal. Steel prices have been adjusting to higher raw material costs and capacity utilization should rise to 76 percent in the first quarter, Mittal said.
Shipment volumes and average steel prices are likely to increase further, pushing earnings before interest, taxes, depreciation and amortization - or Ebitda - up to between $2 billion and $2.5 billion in the first quarter, compared with $1.85 billion in the fourth quarter, the company said.
ArcelorMittal said it expects raw material costs to continue rising, while increased investment activity will also add to costs.
"The results were good," said Maarten Bakker, an analyst at ABN Amro in the Netherlands. Both Ebitda and the outlook beat expectations, as ArcelorMittal's expanding mining operations and higher spot prices for steel helped cushion some of the effects of higher raw-material costs, Bakker said.
"I feared that it would take longer for spot prices to feed through to results," Bakker said.
ArcerlorMittal's shares gained 4.1 percent in early-morning trading in Amsterdam.
ArcelorMittal has been building up its mining operations as it seeks to protect itself against increases in the price of iron ore and coking coal.
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 the Arctic region of Canada.
"We've tried the iron ore in our furnaces," said Mittal, adding that the company was happy with its quality. However, he cautioned that mining and shipping condition in the Arctic region were very difficult and that much of 2011 would be devoted to conducting feasibility studies on the Baffinland reserves.
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.