MOODY'S has downgraded ArcelorMittal's long-term credit rating by one notch to BA1, putting it into speculative or "junk" territory.
Moody's says the deterioration in steel markets means the company can no longer reduce its debt enough to keep an investment-grade mark.
"The downgrade reflects the deterioration in global steel markets over the last six months," said Moody's, pointing to the company posting its worst performance in three years last quarter.
ArcelorMittal, the world's top steelmaker, had an operating loss and its gross debt rose in the third quarter.
"As a result, the amount of debt reduction the company must realise in order to hold a BAA3 rating is so large as to be unachievable..." said Steve Oman, senior vice president and lead analyst for the EMEA steel industry at Moody's.
The BAA3 rating is the lowest investment-grade rating at Moody's.
If ArcelorMittal tried to reduce its debt ratio by asset disposals Moody's said that would materially impact the core operations and earnings of the company.
"We see challenging conditions continuing for ArcelorMittal over several quarters with its operating environment more likely to get worse before it gets better," added Oman.
Moody's also warned ArcelorMittal was at risk of breaking covenants on its revolving credit facilities that limit its debt to its operating profit, although it said planned debt reduction should relieve concerns.
However Moody's said the announced measures by the company to preserve cash and reduce leverage, including a dividend cut, have been modest.
Last month ArcelorMittal reported a third quarter net loss of $US709 million ($A687.38 million) and said that cutting debt was now a priority.
The company said it anticipates an operating profit of about $7.0 billion for all of 2012, while its net debt was expected to rise to $22.0 billion at the end of the year.
The board recommended a cut in the dividend from next year to 0.20 US cents per share from 0.75 cents.
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