(Reuters) - ArcelorMittal (ISPA.AS), the world's largest steelmaker, trimmed its forecast for global steel demand on Friday due to a sharper Chinese slowdown and weakness in Russia, though it expressed optimism about its core European and U.S. markets.
The company, which makes about 6 percent of world steel and is a broad gauge for the health of global manufacturing, said apparent steel consumption - which includes inventory changes - should increase by between 3.0 and 3.5 percent in 2014.
That compared with its previous forecast, given in February, for growth of between 3.5 and 4 percent and last year's 3.5 percent expansion.
ArcelorMittal itself, which sells about 85 percent of its steel in Europe and the Americas, retained its own forecast that it would report a core profit of about $8.0 billion in 2014, up from $6.9 billion in 2013.
It said this was predicated on a 3 percent increase in steel shipments, a moderate pick-up of steel margins, 15 percent higher iron ore sales and average ore prices of about $120 per tonne. They have fallen to about $105 now.
ArcelorMittal shares were trading down 2.5 percent at 1010 GMT at 11.61 euros, making them among the weakest performers in the FTSEurofirst 300 index .FTEU3 of leading European stocks.
Analysts said first-quarter results were broadly in line with expectations, with solid numbers in Brazil and Europe and weakness in a weather-hit United States and its mining business, where ArcelorMittal is seeking to increase iron ore output.
Seth Rosenfeld of Jefferies, with a "Buy" rating and 15 euro price target, believes ArcelorMittal is well placed to benefit from rising steel demand in Europe and the United States, which would expand margins due to a relatively high fixed costs.
"What may be weighing on shares today is that fact that, while reiterating their guidance, it is within a framework of an iron ore price well above where it is trading at present," he said.
ArcelorMittal, more than double the size of its nearest rival by output, reported first-quarter core profit (EBITDA) of $1.75 billion, the same as the average expectation in a Reuters poll of brokers. Last year, the figure was $1.57 billion.
CHINA SLOWDOWN, RUSSIA WEAK
The company said its steel earnings per tonne increased in every segment except North America, which was hit by an extremely cold winter.
"If it were not for the weather we would have had an environment in which profitability would have risen in the NAFTA (North American Free Trade Agreement) region as well," said Chief Financial Officer Aditya Mittal.
The company said prospects for Europe and the United States were encouraging and it was cautiously optimistic for the rest of 2014, raising its forecast for EU steel consumption growth by 0.5 percentage points to 2-3 percent.
It sees the U.S. market growing by 4 percent this year.
Overall, demand from automakers is good, with EU car registrations up 8.4 percent in the first quarter. The construction sector, which uses about half of the world's steel, is gradually improving, the company said.
However, the steelmaker cuts its forecast for consumption growth in China to 3-4 percent in 2014, from 3.5-4.5 percent previously, due to a drop in housing construction. Growth in the country was 7 percent last year.
ArcelorMittal sells less than 2 percent of its steel in China, but the country is both the world's largest steel producer and consumer, and growth there has supported both steel and iron ore prices.
The company also trimmed its expectations for consumption in the former Soviet states to between a contraction of 2 percent and zero. It had previously forecast expansion of 1.5-2.5 percent.
Russia only takes up about 2 percent of ArcelorMittal's steel, but its weakness removes a source of expected growth. The steelmaker also has a large plant in Ukraine, which the company said was selling more into export markets than last year.
Aditya Mittal said ArcelorMittal expected the Russian machinery, auto and construction sectors to stagnate, while in Ukraine, already weak before the recent crisis, the economy could contract by 5 percent this year.
The International Monetary Fund last week slashed its already modest 2014 growth forecast for Russia, warning that Ukraine-related Western sanctions were scaring off investors and were pushing the economy towards recession.