ArcelorMittal is likely to have to make permanent cuts of up to 10 per cent in its steelmaking capacity as the industry reels from the impact of the worst global recession in decades, industry observers have warned.

Such a move would be a setback for Lakshmi Mittal, who in the past 10 years has built the company into the world's biggest steelmaker through a string of acquisitions.

The company has slashed output in recent months by nearly 50 per cent through the temporary closures of steel plants and by putting tens of thousands of its 300,000 workers on short-time working.

ArcelorMittal says it is not contemplating permanent shut-downs or divestments. But others in the steel industry think it may be pushed into taking such action.