2018 Global Metals & Mining Conference - Daniel Fairclough - Member of the Group Management Committee - Head of IR Lisa Fortuna- IR Manager ...
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2018 Global Metals & Mining Conference
Daniel Fairclough - Member of the Group Management Committee - Head of IR
Lisa Fortuna– IR Manager
February 2018
Disclaimer
Forward-Looking Statements
This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries.
These statements include financial projections and estimates and their underlying assumptions, statements
regarding plans, objectives and expectations with respect to future operations, products and services, and
statements regarding future performance. Forward-looking statements may be identified by the words “believe”,
“expect”, “anticipate”, “target” or similar expressions. Although ArcelorMittal’s management believes that the
expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s
securities are cautioned that forward-looking information and statements are subject to numerous risks and
uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause
actual results and developments to differ materially and adversely from those expressed in, or implied or projected by,
the forward-looking information and statements. These risks and uncertainties include those discussed or identified
in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du
Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by
ArcelorMittal, including ArcelorMittal’s latest Annual Report on Form 20-F on file with the SEC. ArcelorMittal
undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information,
future events, or otherwise.
1
Positioned to deliver value
• Material improvement in results, reflecting strengthening market
backdrop
• Transformed balance sheet, with continued deleveraging bias
• Unique global portfolio of competitive well-invested assets
• Industry leader in product and process innovation
• Action 2020 continues to structurally improve profitability
• Investing with focus and discipline
• Reinstating base dividend with intention to increase capital returns
Capital allocation policy to maximise value for shareholders
2
Safety is our priority
Health & Safety Lost time injury frequency (LTIF) rate*
Mining & steel, employees and contractors
3.1
2.5
1.9
1.8
1.4
1.0
0.85 0.85 0.81 0.82 0.78
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Our goal is to be the safest Metals & Mining company
* LTIF = Lost time injury frequency defined as Lost Time Injuries per 1.000.000 worked hours; based on own personnel and contractors 3
Significantly improved results
• EBITDA +34.4% YoY to $8.4bn
• Steel shipments +1.6% YoY to 85.2Mt
• Marketable iron ore shipments +6.1% YoY
• Net income +156.7% YoY to $4.6bn
• Working capital investment of $1.9bn reflecting stronger markets
• Free cash flow* $1.7bn ($2.1bn excluding bond premia**)
• Net debt down to $10.1bn (despite $0.7bn FX headwind)
Significantly improved results
* Free cash flow refers to cash flow from operations less capex; ** includes one-time premium paid on early repayment of debt totalling $389m 4
2017 operating performance highlights
EBITDA 2014-2017 ($ billion)
34.4%
Europe: NAFTA:
EBITDA +42.3% to $3.6bn EBITDA -0.9% to $1.7bn
Shipments +1.7% to 40.9Mt Shipments +2.6% to 21.8Mt
EBITDA per tonne +39.8% to $87/t EBITDA per tonne -3.4% to $78/t
7.2 8.4
5.2 6.3
BRAZIL: ACIS:
EBITDA +13.5% to $1.0bn EBITDA +51.4% to $1.0bn
Shipments +0.8% to 10.8Mt Shipments -1.3% to 13.1Mt FY14 FY15 FY16 FY17
EBITDA per tonne +12.6% to $91/t EBITDA per tonne +53.4% to $78/t
2016 to 2017 EBITDA by segment ($ billion)
Mining: 0.6 8.4
EBITDA +84.7% to $1.4bn
Market-priced iron ore shipments +6.1% to 35.7Mt
FCF breakeven level remains at $40/t CFR China 62% Fe 1.1 0.1
0.3
6.3
0.0
FY16 NAFTA ACIS Europe Brazil Mining FY17
EBITDA impacted by improved ASP, steel volumes and Mining profitability
5
Delivering on Action 2020
• Europe: Transformation progressing well
• Action 2020 impacted 2017 savings in procurement/ productivity on track.
EBITDA by $0.6bn
• More integrated centrally co-ordinated
• Volume improvements of $0.3bn approach, further reducing costs
and cost/mix $0.3bn • Enhanced use of digitalisation in the
manufacturing process, supply chain and
Action 2020 cumulative EBITDA progress commercialisation
(2016-2020 Target) ($billion) • NAFTA: Asset optimisation complete; savings from
3.0 No 2 steel shop idling; headcount rationalisation;
Calvert utilisation increasing to 88%
• Brazil: HAV mix improvement
1.5
• ACIS: Kazakhstan record steel production; Ukraine
0.9 savings from new coke oven battery No.6
• Mining: Remained focussed on service, quality and
asset reliability. FCF breakeven level of $40/t China
2016 2017 2020 CFR 62% Fe
Target
Action 2020 driving structural EBITDA improvement
6
Continuous innovation
Jet Vapor Deposition (JVD) line : Jetgal ® Steel remains material of choice
• JVD line is a breakthrough technology to
produce Jetgal®, a new coating for AHSS steels
for automotive industry
New press hardenable steels (PHS) Usibor®2000 &
Ductibor®1000
• Bring immediate possibilities of 10% weight
saving on average compared to conventional
coated PHS produced by ArcelorMittal
3rd Generation AHSS products
CR980HF & CR1180HF • Electric vehicles (EV) to favour lightweight
• HF / Fortiform® provide additional weight
reduction due to enhanced mechanical properties
designs (similar to traditional vehicles)
compared to conventional AHSS • EV employ AHSS to achieve range goals
Electrical steels The mass-market Tesla Model 3 body and
iCARe®, 2nd Generation chassis is a blend of steel and aluminium,
• Family of electrical steels for electrified powertrain unlike the Tesla Model S which is an aluminium
optimization and enhanced machine performance, body (Source: Tesla website+)
Save*, Torque** and Speed*** are specifically
+ https://www.tesla.com/compare
designed for a typical electric automotive
http://automotive.arcelormittal.com/ElectricVehiclesImpactOnSteel
application.
Steel to remain material of choice for automotive
-
* Save (Steels with very low losses): Ideal for the efficiency of the electrical machine. Their key role is maximize the use of the current coming from the battery.
** Torque (Steels with high permeability): They achieve the highest levels of mechanical power output for a motor or current supply for a generator
*** Speed (Steels for high speed rotors): Specific high strength electrical steels which maintain high level of magnetic performance. They allow the machine to be more compact and have a higher power density. 7
Business outlook remains favourable
ArcelorMittal Global PMI* ArcelorMittal demand forecasts 2018
57
55
+1.5% to +2.5%
US
53
51 +1.0% to +2.0%
EU28
49
47 China -0.5% to +0.5%
45
43 Brazil +6.5% to +7.5%
41
CIS +2.0% to +3.0%
39
37 (latest data point: Jan-2018, 56.0)
Global Ex China +3.0% to +4.0%
35
Global +1.5% to +2.5%
Strong global economic fundamentals support further expected steel demand expansion in 2018
* ArcelorMittal estimates
8
Transformed balance sheet
Net Debt ($bn)
-53% • Net debt lowest since merger
21.8
16.1 15.8 15.7
11.1 10.1
• Investment grade rated (S&P)
• Interest costs declined by
2012 2013 2014 2015 2016 2017
~56% since 2012
Debt adjusted FCF ($bn) FCF*
Debt Adjusted FCF**
• Maximising ability to translate
3.0 EBITDA to FCF
2.0
1.0
0.0
$3bn cumulative FCF since 2012 increases to $8bn
-1.0 adjusting for 2018F cash interest expense
2012 2013 2014 2015 2016 2017
Maintain investment grade rating (through the cycle)
* Free cash flow refers to cash flow from operations less capex; ** Debt adjusted FCF refers to historical FCF adjusted to reflect 2018 forecast interest expense of $0.6bn
9Disciplined capital allocation
• Targeting $6bn net financial debt (NFD)
Building the strongest platform for consistent
➢ Positive FCF* in all market environments**
Robust balance sheet ➢ Investment grade metrics secure through the cycle
capital returns to shareholders
➢ Lower cost balance sheet Maximise FCF potential
➢ Position of strength to return capital to shareholders
• Investing in opportunities with focus and discipline
Invest in strengths ➢ To grow EBITDA and enhance future returns
Grow FCF potential of the business
Returns to • Reinitiating base dividend at $0.10/share
shareholders • Capital returns to shareholders will increase to a
portion of FCF once NFD target achieved
Deleveraging bias to continue until net debt target achieved
* Free cash flow refers to cash flow from operations less capex ** Refers to the post merger period
10Focused investment
Capex in 2018 ($ billion) • Italy: Restore ILVA as leading Italian steel
supplier
Primarily steel projects focusing on
downstream optimisation in Europe and
• Underperforming asset requiring turnaround
HAV in Canada & Europe
• Expanded product range with new HAV steel
0.1 3.8 grades
0.3 • Synergies €310m of which €50m to benefit
ArcelorMittal’s existing operations
• 2018 investment of ~$300m for environmental
0.5
capex (full year basis)
• Subject to regulatory approvals
• Mexico: $1.0bn three-year investment for
0.1
construction of a new 2.5Mt HSM
2.8
• High value return project improved HAV mix
FY17 2017 ILVA & Various Forex FY18F • Capex investment of ~$350m in 2018 commenced
carry Mexico strategic
over projects • Increase capability to serve domestic Mexican
industry
Capitalising on high-return opportunities; Capex increasing to $3.8bn in 2018
11Positioned to deliver value
Strategy delivering • ~50% of Action 2020 delivered
Transformed • Net debt / EBITDA down to 1.2x
balance sheet • Deleveraging to continue Building the
• Ex-China demand growth expected to
strongest
Industry outlook continue foundations for
improving sustainable
• Global capacity utilization improving
value creation
Investing with focus
• Leveraging strengths to grow returns
& discipline
Commitment to
return cash to • Dividends restarted
shareholders
Capital allocation policy to maximise value for shareholders
12Section 1 APPENDIX
Sustainable development - key to our resilience
• Embedding 10 sustainable development (SD) outcomes into the business gives us long term view
of risks and opportunities.
• We intend to publish our third step towards integrated reporting in April 2018 – an integrated
assessment of sustainable development within the ArcelorMittal group business in the short,
medium and long term
• Customers increasingly expect us to support their sustainability ambitions. We have made good
progress in 2017 with multiple stakeholders towards a comprehensive third-party certification
system (ResponsibleSteel™) to reassure steel customers of social and environmental standards
in their supply chains. We are preparing a number of European sites to comply.
• We are assessed and included in a number of sustainability leadership indices:
Leadership in our response to long term trends
14Key trade case update: EU & US
Europe Flat, Long and Tubes US Flat Rolled
Prod Exporter Status Timeline Prod Exporter Status Timeline
CRC AD • Definitive measures and retroactive • Measures in place Core AD/CVD • DOC final determination: Measures in
China implementation were voted in favour for the next 5 years China ─ CVD: China: 39.05 – 241.07%, India: 8% - 29.46%; place for the
Russia on July 7: China: 19.8% to 22.1%, India Italy: 0.07 – 38.15%; Korea: 0.72-1.19%; Taiwan – next 5 years
Russia: 18.1% to 35.9% Italy de minimus (no duty imposed)
Korea ─ AD: China 209.97%; India 3.05-4.44%; Italy 12.63-
Taiwan 92.12%; Korea 8.75-47.8.5%; Taiwan: 3.77%
• ITC voted affirmative on all countries – orders
issued
HRC AD • AD Provisional measures published
China on Oct 17 - duties from 13.2% to CRC AD/CVD • DOC final determinations: Measures in
22.6% Brazil ─ CVD: Brazil: 11.09%-11.31%; China: 256.44%; place for the
• AD final measures voted in favour on China India: 10%; Korea: 3.91%-58.36% next 5 years
the10th of Feb 2017 – duties from India ─ AD: Brazil:14.35%-35.43%; China: 265.79%; India:
18.1% to 36.6% Korea 7.6%; Japan: 71.35%; Korea: 6.32%-34.33%; UK:
5.4%-25.56%
AD only • ITC voted affirmative on Brazil, China, India, Korea,
Japan Japan and UK – orders issued
CVD • CVD China final measures approved 9th UK • ITC voted negative on Russia AD and CVD - no orders
China June 2017 will be issued
HRC AD/CVD • DOC final determination: Measures in
Korea ─ CVD: Brazil: 11.09%-11.30%; Korea: 3.89%- place for the
AD
Iran, Ukraine, • AD (5 Cs) Investigation started July 7, Brazil 57.04% next 5 years
Russia & Brazil 2016; the European Commission ─ AD: Australia: 29.37%, Brazil: 33.14%- 34.28%,
announced in Oct‘17 fixed AD duties on AD only
Australia Japan: 4.99%-7.51%, Korea: 3.89%-9.49%,
imports of HRC (duties from €17.6/t to Netherlands: 3.73%, Turkey: 3.66%-7.15%, UK:
€96.5/t) from Brazil, Iran, Ukraine and Japan
Netherlands 33.06%
Russia (Serbia excluded)
Turkey • ITC voted affirmative on all AD and Korea and Brazil
UK CVD – orders issued; the ITC voted negative on Turkey
CVD – no order issued
CRS AD • Initiation of investigation in December
(HDG – non China 2016; final duties against China QP AD/ CVD • DOC final determinations for cooperating countries: Measures in
auto) announced Dec’17 (duties from 17.2% China place for the
─ CVD: China: 210.50%; Korea 4.31%
to 27.9%) Korea next 5 years
─ AD: Austria: 53.72%, Belgium: 5.40%-51.78%,
AD Brazil: 74.52%, China: 68.27%, France: 8.62%-
QP AD • AD Provisional measures published Austria 148.02%, Germany: 5.38%-22.90%, Italy: 6.08%-
China on Oct 17 - duties from 65% to 74% Belgium 22.19%, Japan: 14.79%-48.67%, Korea: 7.39%,
• AD final measures voted in favour on Brazil South Africa: 87.72%- 94.14%, Taiwan 3.62%-
the 10 Feb 2017 – same level as France 6.95%, Turkey: 42.02%-50%
provisional measures Germany • ITC voted affirmative on all countries
Italy • Brazil, S. Africa and Turkey orders issued 26 Jan‘17;
─ Timelines provided are defined based on regulation maximum limits Japan China order issued 20 Mar’17; all others issued May
Notes: ─ Provisional AD duties vs Rebar LF from Belarus published 19 Dec at 12.5% South Africa 26
─ Provisional AD duties vs Seamless tubes (large diameter) from China published 11 th Nov Turkey
from 45.4% to 81.1% Taiwan 15Trade cases: Ongoing focus
• Anti-Dumping (AD) and Anti Subsidy (AS) duties are in place on all four flat product
categories: CORE, CRC, HRC, and plate from key importing countries measures in
place for five years from determination
• Anti-circumvention investigations initiated by the Department of Commerce (DOC)
for CRC and CORE imports from China (through Vietnam). DOC affirmative preliminary
US determination announced Dec 6, 2017. Importers will be required to post cash deposits for
potential AD/CVD duties. Final determination expected April 25, 2018
• Section 232: April 2017 - initiation of a national security investigation with respect to
steel imports:
• DOC report sent to Trump administration on January 11, 2018 and on February 16, 2018,
Secretary Ross announced the following recommended alternative remedies to address the
problem of steel imports:
o A global tariff of at least 24% on all steel imports from all countries, or
o A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica,
Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and
Vietnam) with a quota by product on steel imports from all other countries equal to
100% of their 2017 exports to the United States, or
o A quota on all steel products from all countries equal to 63% of each country’s 2017
exports to the United States.
• Each of these remedies is intended to increase domestic steel production from its present
73% of capacity to approximately an 80% operating rate
• Trump has until April 11, 2018 to decide what action to take, if any
16Trade cases: Ongoing focus
• Final AD duties on CRC imports from China & Russia
• Final AD duties on HRC and QP imports from China approved on Feb 10, 2017 by
the EU council
Europe • AS AD on HRC imports from China Approved by the EU Council June 9, 2017,
(duties aligned under the Lesser duty rule with the AD duties to final level from 18.1% to
35.9%)
• AD on HRC imports from four additional countries – the European Commission
announced in Oct‘17 fixed AD duties on imports of HRC (duties from €17.6/t to €96.5/t)
from Brazil, Iran, Ukraine and Russia (Serbia excluded)
• AD investigation started in December 2016 on imports from China of Corrosion
resistant steel (HDG non-auto) – final duties against China announced Dec’17 (duties
from 17.2% to 27.9%)
17Action 2020 Progress;$1.5bn achieved to date, half
way to $3.0bn target
Business Drivers 2016 progress 2017 progress
- Ramp-up of Calvert Indiana Harbor footprint optimization completed:
improved value added mix US footprint optimization underway* Headcount rationalization and efficiencies ✓
AMERICAS - US footprint optimization Calvert utilisation rate 79%
Portfolio optimized (Sale of LaPlace and
✓
following closure of its 84” HSM, idling of No.2
steel shop, benefits of new caster No.3 steel shop.
- Brazil value plan
Vinton, closure of Point Lisas) ✓
Calvert ramp up: cap. utilization (+10% YoY***).
Integrated centrally coordinated approach,
Procurement, reliability & productivity reducing costs ✓
savings on track Digitalization in the manufacturing process,
EUROPE - Transformation program Centralisation of key processes underway supply chain & commercialization. ✓
Portfolio optimized (closure Zumarraga, Volume gains & improved mix with higher HSM
partial shut down Sestao & Zaragoza sale) production offset lower volumes (longs) ✓
- New coke battery and
PCI usage in CIS
Capturing benefits of currency devaluation
and good operational performance in CIS
Ukraine: Construction of new coke oven
battery #6 & PCI/energy savings
✓
ACIS - New iron ore supply Quarterly production records achieved in
agreement and tariffs in the CIS (Combined Ukraine & Kazakhstan Record production in Kazakhstan offset by
South Africa production up +6.7% YoY**) lower shipment volumes in Ukraine ✓
MINING
- 10% reduction in average
10% YoY** reduction achieved
Cash breakeven level - $40/t CFR China ✓
unit iron ore cash costs 62% Fe maintained
Volume growth remains a key driver for outstanding Action 2020 gains
* #1 alum. line, 84” hot strip mill, and #5 continuous galv. line idled; new caster at No.3 steel shop complete and running; ** YoY refers to FY’16 v FY’15 *** refers to FY’17 v FY’16 18Section 2 FINANCIALS
Cash needs of the business
Cash needs of business ($ billion)
5.6
1.2 • Cash needs* to rise in 2018:
4.4
Taxes**, pension and other 0.8 0.6 – Increase of $1.2bn vs. 2017 reflects
Net interest 0.8 a) higher CAPEX (increase from $2.8bn to
$3.8bn largely reflecting Mexico project
3.8 and anticipated ILVA capex)
Capex 2.8
b) expected increases in cash taxes primarily
on account of timing impacts
2017 2018F
• Working capital requirements to be driven by market conditions
ArcelorMittal remains focussed on controlling its cash requirements
* Cash needs of the business defined as: capex, net interest, cash taxes, pensions and other cash costs but excluding working capital investment
** Estimates for cash taxes in 2018 largely reflect the taxable profits of 2017
20Liquidity and debt maturity profile
Liquidity at Dec 31, 2017 ($ billion) Debt maturities at Dec 31, 2017 ($ billion)
8.3
Other loans Commercial paper Bonds
Cash 2.8 0.5
0.8
0.2
0.4 0.2
1.1 2.8
Unused credit lines 5.5
0.3 1.9
1.4 1.5
0.9 0.9
Liquidity at 2018* 2019 2020 2021 2022 >2023
Dec 31, 2017
Liquidity lines: Debt maturity: Ratings:
• $5.5bn lines of credit refinanced and • Continued strong liquidity • S&P**: BBB-, stable outlook
extended in Dec 2016; two tranches: • Average debt maturity 4.6 Yrs • Moody’s: Ba1, positive outlook
• $2.3bn matures Dec 2019 • Fitch: BB+, positive outlook
• $3.2bn matures Dec 2021
Investment grade credit rating achieved
The 2018 maturities in “other loans” include an additional $298 million of a borrowing base facility in South Africa, which matures in 2020, ** S&P upgrade on 1 Feb’18
21Balance sheet structurally improved
Net debt* ($ billion) Average debt maturity (Years)
-22.4
32.5 4.6
2.6
10.1
3Q 2008 4Q 2017 3Q 2008 4Q 2017
Liquidity** ($ billion) Bank debt as component of total debt (%)
12.0 75%
8.3
10%
3Q 2008 4Q 2017 3Q 2008 4Q 2017
Balance sheet fundamentals improved
* Net debt refers to long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments (including those held as part of asset/liabilities held for sale); 22
** Liquidity is defined cash and cash equivalents plus available credit lines excluding back-up lines for commercial paper programEBITDA to free cash flow
2017 EBITDA to free cash flow analysis ($ million)
Includes $0.4bn
bond premium
(1,873)
(1,972)
8,408
(2,819)
4,563
1,744
EBITDA Change in Net financial cost, Cash flow from Capex Free cash flow
working tax and others operations
capital*
Strong free cashflow generation
* Change in working capital: cash movement in trade accounts receivable plus inventories less trade and other accounts payable 23Net debt analysis
Dec 31, 2016 to Dec 31 2017 ($ million)
Forex of $715m: Mainly
driven by USD depreciation
against the Eur 13.8%
(1,744)
758
11,059 (72) 141
10,142
Mainly dividends paid
to Posco (AMMC) and
Bekaert
Net debt at Free cash flow M&A * Dividend Forex and other Net debt at
Dec 31, 2016 Dec 31, 2017
Net debt reduction driven by positive free cash flow offset in part by forex
*On August 7, 2017 ArcelorMittal USA and Cliffs Natural Resources (“Cliffs”) agreed that Cliffs would acquire ArcelorMittal USA’s 21% ownership interest in the Empire Iron Mining Partnership for $133m plus assumptions of all 24
partnership liabilities. The payment of the $133m will be in 3 equal instalments with the 1st payment in August 2017 ($44m), with the 2 subsequent payments to be received in August 2018 and 2019.Section 3 ILVA
New ILVA – a tier 1 steel asset
• ILVA is the perfect opportunity for
97Mt
ArcelorMittal Novi Ligure: Cold rolling mill to serve end-users
Total European Flat
Steel demand in 2015
customers (e.g. packaging, white goods)
– Italy is the 2nd largest steel consuming
country in Europe (Mt)
– Large scale, underperforming asset
requiring turnaround
– Significant cost improvement potential
and synergies identified
– Opportunity to leverage AM strengths in
Taranto
R&D and product leadership and service
– Ilva will be re-established as a tier one Taranto: Integrated plant for production and sale
Genova: Cold rolling, hot dip galvanising and
supplier to European & Italian customers tin plate capacities
of HRC, plates, pipes and tubes
• Minimal balance sheet impact, EBITDA
accretive in Year 1
• Next step is regulatory approvals; European
Commission initiated a Phase II review on 8
Nov’17; regulatory approval expected
conclusion April 2018
ILVA is a strong fit within ArcelorMittal’s existing business & strategy
SOURCE: World Steel, Steel Statistical Yearbook 2015; Notes: *Iberia defined as Spain + Portugal 26Our vision for ILVA
ILVA Today ILVA’s Future
• Become a world-class player in terms
• Significant environmental issues – of competitiveness, sustainability,
need to bring ILVA up to and beyond EU environmental performance, value-add
environmental standards
• Leading presence in Italy, adding
• Industrial challenge: investment and value to the Italian industrial fabric
expertise to improve operational
performance of ILVA’s assets • A company recognised for
environmental performance
• Poor financial performance: material excellence: emissions to be reduced to
decline in revenue since 2011, loss- best practice levels, in line with and
making for the past 4 years beyond European environmental
• Low share of high-value added steels standards and legislation
in the portfolio of ILVA • A sustainably profitable company:
• Need to rebuild client confidence: one that creates value for all
product quality, innovation, supply chain stakeholders, and the Italian economy
A clear vision of long-term, sustainable success for ILVA
27Investment plan to revitalise ILVA
CAPEX commitments through 2024 (€bn)
• €1.15bn environmental investment
plan to materially improve
0.3 performance, including:
– €0.3bn stock pile coverage
1.15 – €0.2bn investment at coke ovens
– €0.2bn in waste water treatment
– €0.3bn environmental remediation
2.1 (clean-up) which will be financed with
2.4
funds seized from the Riva Group
• €1.25bn industrial investment plan to
1.25 rapidly restore and improve:
– ‘catch-up’ capex for delayed
maintenance
– capex program for blast furnaces
Industrial Environmental Total CAPEX Riva Funds Net CAPEX and steel plants
2018 - 2024 2018 - 2023 2018 - 2024 utilised
– includes full €0.2bn re-vamping of
BF#5
Commitment to invest €2.4 billion over the next 7 years
28Industrial plan to restore ILVA’s market
position
Restart
BF#5
alongside,
Operating BF#1, BF#2, BF#4 supplemented by imported slabs/coils BF#1, BF#4
9.5
8.5
8.0
6.0 6.0 6.0 6.0 6.0 6.0
2018 2019 2020 2021 2022 2023 2024
2018 2019 2020 2021 2022 2023 2024
Production (Mt crude steel) Shipments (Mt finished steel)
Crude steel production is limited to 6Mt until environmental capex plan completed
29ILVA impact on ArcelorMittal financials
• Acquisition will “complete” following receipt of EU Merger Regulation approval;
European Commission initiated a Phase II review on 8 November 2017 with
expected conclusion in April 2018
• Following completion ArcelorMittal will fully consolidate ILVA
• Purchase price of €1.8bn, will be recognized on the BS as a payable, reduced by
the quarterly instalments of €45mn that will flow through investing activities in CF
• New ILVA will be transferred with circa €1bn of net working capital and free of long
term liabilities and financial debt
• New ILVA will be transferred to ArcelorMittal with a re-calibrated labor force
• ArcelorMittal will immediately commence the environmental capex plan and other
investments
• ILVA is expected to be accretive to ArcelorMittal EBITDA in Year 1 and
accretive to ArcelorMittal cash flow in Year 3 (based on 2016 steel spreads)
On completion ILVA will be fully consolidated by ArcelorMittal
30Section 4 STEEL INVESTMENTS
Investments completed in 2017
Furthering our downstream capabilities for
automotive and industrial applications
• Calvert: Phase 2: Slab yard expansion Bay 5
Increase coil production from 4.6mt/pa to Calvert: Slab Yard bay 5
5.3mt/pa (completed 2Q’17)
• Dofasco: increased shipments of galvanized
sheets by ~130ktpy, along with improved mix
and optimized cost (completed 2Q’17)
Dofasco galvanizing line
• Poland: Investment in the downstream
operations:
➢ Increase of the HSM mill capacity by 0.9Mtpa
(completed 2Q’17)
➢ Increasing the HDG capacity by 0.4Mtpa
(completed 2Q’17)
HDG2 Krakow
Continuous shift towards higher added value products
32Europe: UHSS Automotive Program
Upgrade of capabilities to produce new steels
Fortiform® grades offer a 20% weight saving on identified application
Commercial benefits of additional ~400kt UHSS (Ultra High Strength Steel)
The project is executed in several sub projects in Gent cluster (Liège and Gent plants):
Gent:
• Upgrade of Gent HSM completed end 2016
• Erection of new furnace for Gent HDG expected completion in 1Q’18
Liège:
• 1st step of annealing line transformation (cooling zone) - completed 3Q’15
• JVD 1st trial coils were produced in 3Q’16
• Second step of annealing line transformation - completed 1Q’17
• Remaining process optimizations & modifications on CAL expected completion in 1Q’18
Top rolls of new direct flaming New stand F1 in front of line – Cooling water plant -
furnace - Liege Gent HSM Gent
Investments to enhance UHSS capabilities
33ArcelorMittal Differdange: Investing in Grey mill:
Modernization of rolling mill
• ArcelorMittal Differdange Grey Mill (Luxembourg) ranks among the
leader for heavy and jumbo beams.
• It produces a unique portfolio of heavy sections. Contribute to some
of the most prestigious landmarks over the world (ie. Manhattan
skyline in New York)
• Aim to supply the most advanced structural steel products and
solutions for construction and high rise buildings
• We are installing the largest straightener in the world for sections in
Luxembourg
Freedom Tower-
• Investment features: New York
– new cooling bed; new cold saw; new gag press No. 3SP: New #2 Caster
• Customer benefits:
Indiana Harbor Plant
– improved service in terms of lead time and reliability
– highest quality for the most demanding grades & largest
sizes thanks to improved straightness and surface
quality
• Expected completion in 1Q 2018
Roller straightener in pre-assembly stage
One Bank street construction: October 2017, U.K One Bank street after completion in 2018
Improving and growing high added value products
34Kryvyi Rih - New LF&CC 2&3
• Facilities upgrade to switch from ingot to continuous casting route; additional billets capacity of
290kt/y
• Industrial target: Step-by-step steel plant modernization with state-of-art technology:
– Product mix development
• Supportive target:
– Cost reduction
– Billet quality improvement for sustaining customers
– Better yield and productivity
• Project completion expected in 4Q’18
AM Kryvyi Rih LF&CC 1
Site
preparation for
LF&CC 2&3
Entry section o Continuous Annealing Line
Kryvyi Rih investments to ensure sustainability & improve productivity
35Indiana Harbor - USA Footprint
Indiana Harbor “footprint optimization project”:
• Current configuration uncompetitive structural changes
required across all cost elements
• #1 aluminize, 84” hot strip mill (HSM), #5 continuous galvanizing
line (CGL), and steel shop No.2 now idled; all planned asset
consolidation now complete
• Planned investments totalling ~US$200m:
− New caster at No.3 steelshop installed & commissioned 4Q’16
− Restoration of 80” hot strip mill and IH finishing, and logistics
ongoing
− Project completion expected in 2018 No. 3SP: New #2 Caster
Indiana Harbor Plant 80”HSM: 5 Walking Beam Furnace No. 3SP: New #2 Caster
No. 3SP: New commissioning
Downcomer
ArcelorMittal USA progressing with a “footprint optimization project” at Indiana Harbor
36ArcelorMittal Poland Sosnowiec - Wire Rod Mill
modernization
• Sosnowiec is a double strand rolling mill located in
Sosnowiec, Poland.
• The investment will introduce new and innovative
techniques for the production of high quality wire rod for high
demanding applications (automotive app., steel cords,
welding wires, cold heading screws, suspension springs,
special ropes)
• Detailed engineering for the installation of the new
equipment is expected in 1H 2018
• Full project completion expected in 2019.
Investment features and benefits:
• New independent stands with motors & drives avoiding
material twisting
• Modernized finishing blocks for improvement of final product
diameter tolerance
• New state of art air & water cooling system with accurate
process control
• Project implementation will result in increased production
of high quality wire rod for demanding applications.
Long products strategy to grow HAV grades
37Disciplined capital allocation focused on value
driven strategic initiatives: Mexico HSM
• US$1.0 billion three-year investment
commitment
➢ Construction of a new 2.5Mt hot strip mill
initiated late 4Q 2017
➢ Investments to sustain the competitiveness
of mining operations
➢ Modernizing its existing asset base
ArcelorMittal Mexico:
➢ Estimated ~$350m capex in 2018 • Current production 4Mt increasing to ~5.3Mt
• Enable full production capacity to be (2.5Mt flat; 1.8Mt long and 1Mt semi-finished
achieved and significantly enhance proportion slabs)
of HAV mix • Vertically integrated with flat and long product
capabilities
• Will benefit from Lázaro Cárdenas designation
• ArcelorMittal Lazaro Cardenas’s raw materials
as one of 5 new Special Economic Zones in
and slabs shipped through a dedicated port
Mexico
facility (Mexico’s largest bulk handling port)
• In-line with Action 2020 plan
Mexico currently heavily reliant on imports of value-added steel; high growth expected
38Burns Harbor - New Walking Beam Furnaces
Burns Harbor Hot Mill - New Walking Beam
Furnaces:
• Install 2 latest generation walking beam
furnaces, including recuperators & stacks,
building extension & foundations for new units
• Benefits associated to the project:
• Hot rolling quality and productivity
• Sustaining market position
• Reducing energy consumption
• Project completion expected in 2021
AM USA expands surface critical capability at Burns Harbor to provide a sustained automotive footprint
39Section 5 MACRO HIGHLIGHTS
Demand in core markets is growing
Steel shipment split by segment FY’17 End market growth prospects in US (2007=100)
120
110
100
Brazil 90
ACIS 80
70
12% 15% 60
50
40
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Construction* Machinery** Auto***
25% NAFTA
End market growth prospects in EU28 (2007=100)
47% 110
105
Europe 100
95
90
85
75% of shipment to 80
75
developed markets 70 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Demand recovery in core markets has been offset by high imports…
Source: * & ** Oxford Economics Global Industry Forecasts; *** Oxford Economics Global Industry Forecasts, and LMC Automotive Global Car and Truck Forecasts; (latest update: 2Q 2017)
41Global steel demand for 2017
Global ASC 2017 v 2016* ArcelorMittal ASC demand estimates 2017
• Global apparent steel consumption 1.3%
US**
increased by +3.2% in 2017
• Healthy demand backdrop maintained in EU28 1.5%
Europe and US
• China: Positive demand growth due to China 3.5%
strength in automotive and machinery
• Brazil: Positive demand with growth in Brazil 4.6%
automotive offset by ongoing weakness
in construction CIS 5.4%
• CIS: Reflecting stronger economic growth
in Russia Global 3.2%
2017 ASC growth of +3.2%; positive outlook for 2018
Source: *ArcelorMittal estimates ** Excludes tubular demand. ASC growth in 2017 in the US including pipes and tubes of +6.1% 42Global ASC rates
Global apparent steel consumption (ASC)* (million US and European apparent steel consumption
tonnes per month) (ASC)* (million tonnes per month)
China Developing ex-China Developed
19 US EU28
65
17
60
15
55
50 13
45 11
40 9
35
7
30
5
25 (latest data point: Dec-2017)
(latest data point: Dec-2017)
20 3
• Global ASC -3.9% in 4Q’17 vs. 3Q’17 • US** ASC -5.2% in 4Q’17 vs. 3Q’17
• Global ASC +2.6% in 4Q’17 vs. 4Q’16 • US** ASC +6.3% in 4Q’17 vs. 4Q’16
• Global ASC +3.2% in 12M’17 vs. 12M’16 • US** ASC +6.1% in 12M’17 vs. 12M’16
• China ASC -5.9% in 4Q’17 vs. 3Q’17 • EU ASC +2.9% in 4Q’17 vs. 3Q’17
• China ASC +1.7% in 4Q’17 vs. 4Q’16 • EU ASC +1.6% in 4Q’17 vs. 4Q’16
• China ASC +3.5% in 12M’17 vs. 12M’16 • EU ASC +1.5% in 12M’17 vs. 12M’16
Global ASC improvement of +3.2% 2017 vs 2016
* Source: AISI, Eurofer and ArcelorMittal estimates; ** includes pipes and tubes 43Construction markets in developed market
United States US residential and non-residential construction
indicators (SAAR) $bn*
• 2017 housing permits increased to 3.9% from 2.0% in Residential
2016, boding well for residential construction in 2018. 700 Non residential
• Although non-residential construction spending slowed 600
in 2Q’17 - 3Q’17, it showed signs of recovery in 4Q’17.
500
• Architecture Billings Index (ABI) for 2017 came in
strong, with 10 out of 12 months reading >50 and 400
4Q’17 at 53.2. 300
• Continued uncertainty over the ability of the new (latest data point: Nov-2017)
200
administration to pass an infrastructure bill means the
pick-up in infrastructure spending delayed until 2019
Europe Eurozone and US construction indicators**
• European construction accelerated to an estimated 65 Architecture Billings Index (USA)
3.5% in 2017 from 1.8% in 2016. 60 Eurozone construction PMI
• Growth in construction was led by Eastern European 55
countries, particularly Poland and Hungary, with both 50
growing double digits. 45
• Overall, construction activity in 2017 was supported by 40
the fastest GDP growth in a decade at 2.5% yoy. 35 (latest data point: Dec-2017)
• Eurozone construction PMI now >50 for 14 months 30
Construction growth accelerating in 2017
* Source: US Census Bureau; ** Source: Markit and The American Institute of Architects
44Regional inventories
German inventories (000 Mt)* US service centre total steel inventories (000 Mt)
Germany flat stocks
Months Supply (RHS) (latest data point: Jun 2017) (latest data point: Dec-2017)
13,000 3.6
2,200 4.5 12,000 3.4
USA (MSCI)
11,000 3.2
2,000 4.0 Months Supply (RHS)
10,000 3.0
1,800 3.5
9,000 2.8
1,600 3.0 8,000 2.6
1,400 2.5 7,000 2.4
6,000 2.2
1,200 2.0
5,000 2.0
Brazil service centre inventories (000 Mt) China service centre inventories** (Mt/mth) with
Flat stocks at service centres (latest data point: Dec 2017)
ASC% (latest data point: Dec-2017)
1,400 Months Supply (RHS) 7.0 Flat and long
25 50%
% of ASC (RHS)
1,200 6.0
20 40%
1,000 5.0
15 30%
800 4.0
600 3.0 10 20%
400 2.0 5 10%
200 1.0 0 0%
Inventory trends
* Last source updated Jun 2017 45
** Source: WSA, Mysteel, ArcelorMittal Strategy estimatesChina overview
China China construction % change YoY, (3mth moving av.)*
• GDP growth slowing gradually after a modest 100% Residential floor space sold (6 month lag)
tightening of monetary conditions, as the government Residential floor space started
80%
seeks to control financial risks but valuing stability,
60%
no major policy change
40%
• Non-financial corporate debt remains an issue
(>150% of GDP), mainly SOE’s – therefore the 20%
government will continue to focus on capacity cuts of 0%
heavy industry to improve profitability and reduce -20%
environmental concerns (latest data point: Nov-2017)
-40%
• Despite slowing as expected in 3Q’17, real estate 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
sales and new starts growth rebounded in Nov/Dec, Crude steel finished production and inventory (mmt)
potentially leading to stronger real estate demand in
Steel inventory at warehouses (RHS)
2018 75
Steel inventory at mills (RHS)
25
• 2018 ASC to be broadly stable with machinery Finished steel production (LHS) 20
65
helped by rising exports due to strong global demand
15
and without a drag from declining construction
55
• Chinese exports down over 30% in 2017; we expect 10
production cuts to constrain exports in the short term 45
5
• Inventories lower than usual due to policy restricted (Latest data point: Dec-2017)
output 35 0
China ASC demand grow 3.5% in 2017; more stable in 2018 with growth of -0.5% to +0.5%
* Source: China National Bureau of Statistics, China Real Estate Index System (via Haver) and ArcelorMittal estimates; Source: NBS, CISA, WSA, Mysteel, ArcelorMittal Strategy estimates 46China supply reform ahead of schedule
• Chinese government committed to tackle overcapacity
115Mt permanent capacity
and environmental issues closed further 25Mt
targeted in 2018
• Capacity reduction ahead of expectations: net capacity
reduction achieved vs. 140Mt target
• Steel replacement policy in favour of EAF v BF; no Additional ~120Mt illegal
induction furnace capacity
new capacity to be built ratio 1:1 for EAF and 1:1.25 closed
for BF-BOF
• Industry operating at high rates of capacity utilisation
higher domestic steel spreads Industry capacity
utilization
• Stronger domestic fundamentals plus global trade ~85-90% today
restrictions reduced incentive to export
• “Winter shutdowns” supporting fundamentals through Steel exports reduced
seasonally weaker demand period
• Domestic capacity must reflect demand outlook
Supply side reform progressing well; China ahead of initial plans to close steel capacity
47China addressing its excess capacity
11th 5-year plan 2009 12th 5-year plan 2013 September 2016 February 2018 January
• Eliminate capacity • Eliminate capacity • Eliminate capacity • Reduce 80mt • Reduce 100-150mt • 115Mt net capacity
below following below following below following capacity capacity over 5 years reduction of the
standard: standard by 2011: standard : • Increase financial • No projects of new 140Mt target (65Mt
- BF < 300m3 - BF < 400m3 - BF < 400m3 incentives in capacity in 2016 and 50Mt in
- BOF < 20t - BOF < 30t - BOF < 30t capacity reduction • There will be a 2017)
- EAF < 20t - EAF < 30t - EAF < 30t or volume swap “mandatory” part and • In 2018, ~25Mt left to
• By 2005, overall • By 2011, overall • By 2015, overall proposals a “voluntary” part be cut
energy consumption energy consumption energy • Implement • The “mandatory” part • Elimination of
< 0.76 tons of coal < 0.62 TCE; water consumption < 0.58 penalties through uses same criteria as ~120Mt induction
equivalent; water consumption < 5t per TCE; water high electricity & earlier policy but furnaces (IF) in June
consumption < 12t ton; dust emission consumption < 4 water prices for adds criteria for 2017
per ton per ton < 1 kilogram; m3; SO2 emission those companies product quality and • Winter shut downs
• By 2010, overall CO2 emission per per ton < 1 that fail to meet for safety from Nov’17 to
energy consumption ton < 1.8 kilogram kilogram environmental • The “voluntary” part Mar’18; utilization
< 0.73 TCE; water standard will rely upon rates cut to 50% in 2
consumption < 8t financial incentives to + 26 cities
• By 2012, overall cut capacity. Special • Steel replacement
energy consumption funds will be used policy in favour of
< 0.7 TCE; water for redeployment EAF v BF; no new
consumption < 6t incentives and debt capacity to be built
restructuring ratio 1:1 for EAF and
1:1.25 for BF-BOF
for key areas*
Previous capacity closures more than offset by rapid capacity additions
China steel capacity rationalisation will take time… trade action to protect during this transition
* *The ratio 1:1.25 BF-BOF is for so-called “the environmentally-sensitive areas”, which means population-intensive and pollution-intensive as well, including Beijing-Tianjin-Hebei area, Yangtze-River-Delta
area (Shanghai, Jiangsu Province and Zhejiang Province) and Zhujiang-River-Delta area (9 key cities including Guangzhou in Guangdong province). 48Lower Chinese exports
• Full year 2017 finished steel exports were ~76Mt, approx. 31% below 2016 levels
(109Mt) and 33% below the 2015 peak (112Mt)
• January 2018 exports down 18% MoM and 37% YoY, lowest since February 2013
• Production cuts should constrain exports in short term
2017 exports lower by ~31% YoY
Source: ArcelorMittal Corporate Strategy team analysis Highly Restricted
49
49Section 6 AUTOMOTIVE
No1 in automotive steel: Maintaining
leadership position
S-In-Motion SUV/Mid-Size Sedans
• ArcelorMittal is the global leader in steel for
automotive 40% market share in our core markets
• Global R&D platform sustains a material
competitive advantage
• Proven record of developing new products and
affordable solutions to meet OEM targets
• Advanced high strength steels used to make
AM/NS Calvert
vehicles lighter, safer and stronger
• Automotive business backed with capital with
ongoing investments in product capability and
expanding our geographic footprint:
• AM/NS Calvert JV: Break-through for NAFTA
automotive franchise
• VAMA JV in China: Auto certifications progressing
• Dofasco: Galvanizing line expansion
Continue to invest and innovate to maintain competitiveness
51Global presence and reach
Automotive production facilities
Alliances & JVs
Commercial teams
R&D centres
Vehicle production 2017
> 20 M veh
> 15 M veh & < 20 M veh
> 10 M veh & < 15 M veh
> 5 M veh & < 10 M veh
> 2.5 M veh & < 5 M veh
> 1 M veh & < 2.5 M veh
< 1 M veh
Global supplier with increasing emerging market exposure
Source: LMC figures for Western and Eastern Europe and Russia; IHS figures for all other regions; personal cars and light commercial vehicles < 6t 52Automotive growth in developed world
USA / Canada and EU28 + Turkey vehicles production
million units
• USA and Canadian automotive
23
20.5
production stabilized
21
19 • Stability supported by replacement
17
13.2
(average age of fleet 11.5 years),
15
continued economic and population
13
11
growth
9
• EU28 and Turkey production reached
7
record highs in 2017 and further growth
5
expected
USA+CANADA (LMC) USA+CANADA (IHS) EU28+Turkey (LMC)
USA/Canadian production stable, EU28 & Turkey continue to recover
53Automotive emerging market growth
China vehicle production (‘000s)
40,000 33,506
35,000
China • China production to grow steadily by +6mvh
27,636
30,000
25,000 in 2017 to ~33mvh by 2025
20,000
15,000 • India production to increase ~80% by 2025
10,000
5,000 (from 4.5mvh in 2017 to 8mvh in 2025)
0
• Mexico production is expected to increase
Brazil, India, Russia & Mexico vehicle production (‘000’s) by 6.3% (2017 vs 2025)
9,000
8,000
Russia India Brazil Mexico 8,027 • Brazil production growth expected to
7,000
6,000
continue and reach 3.9mvh in 2025
4,456 4,193
5,000
4,000 • Russia production is expected to recover
3,946
3,000 3,928
2,000 2,637 and reach 2013 level in 2022
1,000 2,327
1,446
0
Strong growth expected in India, China and Brazi
Source: IHS 54ArcelorMittal’s S-in motion®
Demonstrating the weight saving potential of new products
ArcelorMittal generic steel solutions includes body-in-white, closures, and chassis parts
From steel provider to global automotive solutions provider
55Continued investment in R&D supports
Portfolio of Next Generation Auto Steels
Fortiform® Third-generation UHSS for cold MartINsite® A family of cold rolled fully
martensitic steels with current
HF Grades stamping. Fortiform® and HF steel
grades allow OEMs to realize tensile strengths from 900 to 1700
lightweight high-strength structural MPa. ArcelorMittal’s martINsite®
elements using cold forming cold roll family of fully martensitic
methods such as stamping. steels is perfect for anti-intrusion
Commercially launched in Europe parts such as bumper and door
in 2014 and available in North beams. Some are also available
America at Calvert undergoing in with an electrogalvanized
customer qualifications coating (ArcelorMittal’s
Electrosite® family of martensitic
steels) or with Jetgal®.
Press hardenable steels (PHS) / hot JVD is a breakthrough process, In
Usibor® 2000 stamping steels offer strengths up to JVD® -Jetgal® production and product
development.
2000 MPa. Usibor® 2000 and
Ductibor®1000 Ductibor® 1000 can also be Jetskin™ Jetgal®: JVD zinc coating applied
combined thanks to laser welded to steel grades for the automotive
blanks (LWB) to reduce weight while industry. Developed for steels
achieving optimal crash behavior. including UHSS Fortiform®;
Both currently available in Europe; Jetskin™: JVD zinc coating
Usibor ® 2000 is commercially applied to steel grades for
available in Europe and available for industrial applications such as
qualification testing in North America household appliances, doors,
; Ductibor® 1000 is commercially drums and interior building
available in Europe and Nafta applications.
Widest offering of AHSS steel grades which can be implemented into production vehicles
56Automotive Industry Leadership
Audi coming
back to steel
Over 40% of the
materials in the
2018 Audi A8
body structure
will be steel, of
which 17% will
be press
hardenable steel
The head of Audi’s ‘Lightweight Construction Centre’ is quoted as saying that “There will be no cars made of
aluminium alone in the future. Press hardened steel will play a special role in this development. If you compare the
stiffness to weight ratio, PHS is currently ahead of aluminium”.
Leveraging R&D for new products, solutions and processes
57ArcelorMittal preferred AHSS supplier
AHSS evolution* ArcelorMittal market share**
40%
AHSS share of total steel
35%
30%
25%
demand
20%
15%
10%
5%
NAFTA
0%
2005 2010 2015 2020 2025
• ArcelorMittal is maintaining overall market share
in Europe, and increasing in NAFTA
• Our AHSS share is higher than overall market
share
• As the technology requirements to develop and
Europe
produce new AHSS like Fortiform® are higher,
our share in these products has further growth
potential
Market share in AHSS exceeds overall share
* Source: Ducker **Source: Regional ArcelorMittal Marketing Intelligence
58VAMA greenfield JV facility in China
• 1.5 MT state-of-the-art production facility
VAMA: Valin ArcelorMittal Automotive target
• Well-positioned to serve growing automotive market areas and markets
• China 2017 output 27.6mvh (IHS) +3.2% YoY
• VAMA has successfully completed homologation on FAW-VW &
BMW
UHSS/AHSS with key tier 1 auto OEMs (~60% complete)
Daimler &
Nissan
Latest development:
• Strong sales & order book for licensed USIBOR 1500 Beijing
• VAMA started the first commercial supply of exposed
products in 4Q 2017
• Start of production ceremony for downstream ATSs BYD, Changan,
Geely, VW, GM, KIA,
SAIC & Chery
Suzuki, CFMA &
project in 4Q 2017 FAW-VW Shanghai
Changfeng, Fiat,
DPCA, Dongfeng,
VAMA Honda, JMC & Suzuki
Loudi
SAIC, Toyota, GM,
Honda, Nissan & BYD Guangzhou
Furnace of CGL and CAL on both sides VAMA HQ in Loudi city, Hunan Province • Central office in Changsha with satellite offices in proximity
to decision making centers of VAMA’s customers
VAMA well positioned to supply growing Chinese auto market
BYD: Build Your Dreams; CFMA: Changan Ford Mazda Automobile; SAIC: Shanghai Automotive Industry Corporation; JMC: Jiangling Motors Corporation 59INDIA auto JV with SAIL
Passenger vehicles AHSS++ penetration
production (%) INDIA AUTO OUTLOOK
Million
30 ▪ 2017-2025: India passenger vehicle segment is
28% expected to grow at 8-8.5% CAGR
10
▪ New safety regulation would accelerate
25 penetration of AHSS+ UHSS steel in passenger
23%
8.2 vehicles and LCV to meet safety norms*
8
2.2 20 PV
exports INDIA AUTO JV with SAIL
6 5.8 ▪ ArcelorMittal & SAIL entered into a MoU on May
14% 15 22, 2015 for setting up an automotive steel
1.0
facility under a joint venture agreement.
4 10% 3.8 ▪ Venture to offer technologically advanced steel
3.2 0.6 5.1 10 PV
domestic products to rapidly growing automotive industry
0.5 4.0 in India.
2 2.2 2.7 5 ▪ Feasibility study currently underway for 1.5Mtpa
in phase 1 incl. PLTCM, CAL & CGL (Pickling
0.6 0.5 0.7 0.9 LCV Line & Tandem Cold Mill, Continuous Annealing
0 0 Line, Continuous Galv. Line)
2010 2015 2020 2025
2.4 2.7 4.2 5.8
Medium to high grade steel demand from auto sector, MT
Robust automotive growth / new regulation will drive demand for high grade automotive steel
*(BNVSAP) & emission standards (BS VI): Bharat New Vehicle Safety Assessment Program is a proposed new car assessment program for India; BS-VI is the last norm on emission standard (Bharat Stage Emission Standards BSES) 60Section 7 GROUP HIGHLIGHTS
Steel demand by end market
China steel demand split US steel demand split
Machinery and equipment
10% Other
Shipbuilding 3%
Railway Energy
1%
1% Construction 10%
Machinery
19% 40%
Automobiles
8% Automobile
Defense & Homeland Security
Household appliances 26%
3%
2% Container
Appliances
Construction 4%
Metal goods 4%
68% Europe & NAFTA
14%
Other
Construction 2%
35%
Tubes
13%
Europe steel demand split
Other transport
2%
Domestic appliances
3%
Mechanical enginering Automobiles
14% 18%
Regional steel demand by end markets
Sources: China-Bloomberg, Europe: Eurofer, US: AISI 62Global scale, regional leadership
Key performance data 12M 2017
NAFTA Brazil* Europe Mining ACIS
Revenues ($bn) 18.0 7.8 36.2 4.0 7.6
% Group** 24% 11% 49% 6% 10%
EBITDA ($bn) 1.7 1.0 3.6 1.4 1.0
% Group** 20% 11% 41% 16% 12%
Shipments (M mt) 21.8 10.8 40.9 57.4*** 13.1
% Group 25% 12% 48% 15%
~197,100 employees serving customers in over 160 countries
Global scale delivering synergies
* Brazil includes neighboring countries ** Percentage calculation for Revenue and EBITDA exclude others and eliminations; *** Iron ore shipments only (market price plus cost plus tonnage) 63Group performance FY17 v FY16
FY17 v FY16 analysis: EBITDA ($ Millions) and EBITDA/t
$83/t $89/t $102/t $75/t $99/t
• Crude steel production increased 2.6% to 93.1Mt with increases in
NAFTA (+5.7%), BRAZIL (+0.7%) and Europe (+2.7%) offset in part 11.2% +34.4%
by a decline in ACIS (-0.8%)
• Steel shipments increased 1.6% primarily due to increases in 1,661 1,924 2,141 8,408
6,255
NAFTA (+2.6%), BRAZIL (+0.8%) and Europe (+1.7%) offset in part
4Q’16 3Q’17 4Q’17 FY’16 FY’17
by a decline in ACIS (-1.3%)
• Sales increased 20.9% to $68.7bn vs. $56.8bn for FY’16, primarily Average steel selling price $/t
due to higher average steel selling prices (ASP) (+20.4%), higher +2.7% +20.4%
steel shipments (+1.6%), higher seaborne iron ore reference prices
(+22.3%) and higher marketable iron ore shipments (+6.1%). 589 690 709 567 682
• EBITDA improved 34.4% primarily due higher volumes and ASP in
the steel and mining businesses as well as the benefits of Action 4Q’16 3Q’17 4Q’17 FY’16 FY’17
2020 cost savings Steel shipments (000’t)
-3.3% +1.6%
20,045 21,705 20,996 83,934 85,242
4Q’16 3Q’17 4Q’17 FY’16 FY’17
Group profitability increased YoY
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