ArcelorMittal's sale of a controlling share in Global Chartering Ltd (GCL) to Peter Livanos-controlled DryLog has turned the steel and mining giant's shipping business from a negative to a positive in its results.
In the first full year after the sale, shipping turned in $6m towards ArcelorMittal's 2020 operating profit.
That is a sliver of the world's largest steel maker's total operating profit of $2.11bn, but a turnaround from a $19m operating loss from shipping in 2019.
On the last day of that year, ArcelorMittal sold DryLog a "50% controlling interest" in Mauritius-based shipowning and chartering subsidiary GCL. The sale cut corporate debt by an expected $530m as part of ArcelorMittal's overall debt reduction target of $2bn.
DryLog bought the controlling GCL share for just $6m with extensive support from the seller.
The steel maker granted GCL a 10-year freight contract covering 16.8m tonnes per year, equal to 80% of its fleet capacity.
The deal also involved a $127m short-term loan and an operating joint venture with DryLog.
GCL has since paid off the loan through sale-and-leaseback deals for three ships that were previously jointly owned. The ships are unidentified, but broker reports list the 81,800-dwt AM Umang (built 2017) and the 180,000-dwt AM Tarang and AM Kirti (both built 2019) as sold to Bank of Communications Financial Leasing for an unknown price in January 2020.
Previous reports also linked GCL and ArcelorMittal to joint ownership of the 176,300-dwt Bulk Mexico (built 2010) and Bulk Spain (built 2011), held through Mauritius-based Trademost Bulk Carriers.
At the time of the sale, GCL operated some 28 supramax, panamax and capesize bulkers. Since then, the company has been spotted at the beginnings of a newbuilding programme.
In January, TradeWinds reported that GCL was in talk with Yangzi-Mitsui Shipbuilding (Yamic) for six kamsarmaxes and four mini-capesize bulkers valued at about $302m. In November 2020, GCL had already been reported as the charterer behind a capesize newbuilding order by Japan's Lepta Shipping at Yangzijiang Shipbuilding.
DryLog's acquisition of the GCL stake from its long-term customer also immediately lightened ArcelorMittal's depreciation load.
The company reports that from 2019 to 2020, GCL's depreciation and impairments fell from $155m to $43m. Of the 2019 figure, $94m was "depreciation of right-of-use assets recognised in property, plant and equipment" in the form of GCL's shipping leases.
Sliding steel volumes
Although ArcelorMittal is a significant player in shipping markets, marine transport accounts for a fraction of a percent of its operating result. In 2020, the Luxembourg-registered company, led by major shareholder Lakshmi Mittal, reported $2.11bn in operating profit in 2020 on $53.27bn in sales.
That sales figure represented a Covid-related shrinkage from $70.6bn in 2019, or 24.6%. But the operating profit was still an improvement on the 2019 operating loss of $627m.
Steel shipments were down 18.2% in 2020 because of reduced demand during the pandemic, to 69.1m tonnes compared to 84.5m tonnes in the prior year. The company said the drop in shipments adjusts to 15.8% after excluding effects of corporate acquisitions.
DryLog and ArcelorMittal officials were not immediately available for comment.
