Moody's cuts ArcelorMittal, cites steel weakness

NEW YORK, May 20 (Reuters) - Moody's Investors Service on Wednesday cut its ratings on ArcelorMittal (ISPA.AS: Quote, Profile, Research) to the lowest investment grade, citing concerns over the effect weak steel markets will have on the world's biggest steelmaker's credit profile.

Moody's cut ArcelorMittal's debt rating one notch to Baa3 and gave the company a stable outlook, indicating an additional downgrade is not anticipated over the coming 12-to-18 months.

Weak demand and falling steel prices is increasing ArcelorMittal's leverage in spite of the company's efforts to reduce debt and extend its debt maturities, Moody's said in a statement.

"If prices for steel products remain at the current levels, or even if they improve somewhat in 2009 from these levels, Moody's expects a high double-digit contraction in turnover in 2009 which will have a corresponding effect on ArcelorMittal's ability to generate cash flows and profits," Moody's analyst Matthias Hellstern said in the statement.

ArcelorMittal said earlier on Wednesday that it has delayed the launch of a planned $1.5 billion iron ore mine in Liberia as a result of falling demand. For details, see [ID:nLK981207] (Reporting by Karen Brettell; Editing by Leslie Adler)