ArcelorMittal says it doesn't need to raise cash to pay down its debt, although the steel company also admits it is considering “all options”. Given the state of current markets, that is prudent. Yet should one of those options to raise money be via a Rio Tinto-style deal with China, ArcelorMittal should think again.

Its balance sheet could certainly use a lift. Forecasts of a 20 per cent fall in world steel demand, while pessimistic, no longer seem impossible. For the company, that could translate into sales this year falling to $83bn. Assume an 8 per cent margin, and earnings before interest, tax, depreciation and amortisation would drop to $6.4bn. With net debt of $22bn, 3.4 times ebitda, ArcelorMittal would be perilously close to the 3.5 level that triggers debt covenants. ArcelorMittal therefore needs a back-up plan.

Cutting the dividend would save some $1bn – not enough. It is a lousy time to sell assets. Meanwhile Lakshmi Mittal, chairman and chief executive and with a 45 per cent stake, might prefer not to fund a rights issue. A final option might be something like Rio has done: sell part of the company to China.