* Says European steel demand down 8 percent this year
* Writedown to be taken in Q4 2012
* Represents 87 percent of European goodwill
* Fitch downgrades company to junk status
* Shares down 2.7 percent
(Adds detail on Fitch downgrade to junk status)
By Ben Deighton
BRUSSELS, Dec 21 ArcelorMittal, the
world's biggest steelmaker, is to write down the value of its
European business by $4.3 billion, underscoring gloom about
prospects for the region's recession-hit manufacturers.
The group, formed in 2006 when India-born Lakshmi Mittal's
steel business bought European peer Arcelor for $33 billion,
said on Friday demand had fallen about 8 percent in Europe this
year and there was no sign of a quick recovery.
As a result, it will write down the goodwill - the value of
intangible assets such as brands rather than physical assets
such as machinery - of its European operations by 87 percent.
"It is negative, but it should not really be a big surprise
that the book value of its European business was too high," said
a London-based analyst who asked not to be named.
ArcelorMittal shares were down 2.7 percent at 12.85 euros at
1300 GMT, one of the biggest falls by a European blue-chip stock
and reversing gains made earlier this week.
Credit agency Fitch cut ArcelorMittal's long-term issuer
default rating to BB+, just below investment grade, due to the
challenging outlook for Western European steel markets in 2013.
The $500-billion-a-year steel industry, a gauge of the
global economy, has slowed sharply this year as a moderation in
China's economic growth has compounded weak demand from
The World Steel Association in October forecast steel demand
would rise 2.1 percent in 2012, down from 6.2 percent in 2011.
It had forecast 3.6 percent growth in April.
Last month, Moody's cut the company's senior unsecured notes
to Ba1 from Baa3, joining Standard & Poor's in rating
ArcelorMittal one notch below investment grade.
Other steelmakers are hurting too. Earlier this month,
Germany group ThyssenKrupp posted a full-year net loss
of 4.7 billion euros ($6.2 billion).
Europe is a particular weak point, as austerity drives aimed
at tackling a sovereign debt crisis have cut demand for cars and
construction - steel's largest markets. Euro zone manufacturing
has contracted for 17 straight months.
ArcelorMittal, which makes about 6-7 percent of the world's
steel, said demand in Europe had fallen 29 percent since 2007
when the financial crisis started.
It highlighted better trends in the United States where, it
said, demand was up 8 percent this year and is now 10 percent
lower than in 2007.
ArcelorMittal, whose output is more than double that of its
nearest rival, has already announced the closure of blast
furnaces in Belgium and France, with other operations
temporarily idled due to overcapacity.
The writedown represents over a third of ArcelorMittal's
overall goodwill of $12.5 billion as of end-2012. The group,
around 40-percent owned by the Mittal family, took on $6.6
billion goodwill when it bought Arcelor.
It said the writedown would be a non-cash charge in
fourth-quarter results and would not affect net debt or core
Before the writedown, analysts had, on average, forecast the
group would make $529.5 million net profit this year, and $7.1
billion core profit, according to StarMine.
($1 = 0.7555 euro)
(Additional reporting by Philip Blenkinsop; Editing by Mark
Potter and Dan Lalor)