ArcelorMittal Flat Europe Europe's leading steel franchise
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Paradeep iron ore palletisation plant
ArcelorMittal Flat Europe
Geert van Poelvoorde,
Europe’s leading steel franchise CEO ArcelorMittal Europe Flat Products
March 19, 2019
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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
Safety is our priority
ArcelorMittal Europe Flat health & Safety Lost time injury frequency (LTIF) rate*
• ArcelorMittal Europe Flat 2018 LTIF rate
ArcelorMittal Europe Flat H&S priorities
2.16
• Continue the deployment of the safety
leadership training and “Take Care” training
• Integration of ArcelorMittal Italia in all H&S
programs and trainings to align the safety
1.55 culture
1.34 • Continue to reinforce the “Respect the Rules”
and “3-way communication” programs
1.05 1.04 1.07 • Strengthening of contractor’s management
0.99
0.92 0.92
• ArcelorMittal Flat Europe launched a program
to increase the barriers in all critical
installations to avoid employees entering these
places
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18**
* LTIF = Lost time injury frequency defined as Lost Time Injuries per 1.000.000 worked hours; based on own personnel and contractors; 2011 and 2012 presented on a comparable basis
** Figures exclude ArcelorMittal Italia 2
Europe: Short-term deceleration vs. mid-term growth
PMIs confirming current challenges but long-term prospects remains positive
• Eurozone PMI • EU-28 end market growth prospects (2007=100)
Construction Machinery Automotive
2019
130
120
110
100
90
80
70
60
2009
2007
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
• Slowdown in European automotive driven by • European ASC expected to grow +0.5% to
WLTP impact +1.0% in 2019; with notable weakness in
• Consistently lower PMI readings in the first automotive
months of 2019 • Long-term perspective still supportive
• Brexit concerns; lower Chinese steel prices
• Near term high volatility on raw materials and
price/spread on international markets
Source: Oxford Economics, LMCA, ArcelorMittal Corporate Strategy team analysis; Auto: light vehicle production in units rebased to 2007 = 100; Machinery and Construction: industrial output series
rebased to 2007 = 100 3
ArcelorMittal Flat Europe is the leading steel franchise
Unmatched scale and capacity to deliver HAV steel grades across
• European Flat steel players by shipments*
ArcelorMittal • Largest contributor to ArcelorMittal
Flat Europe
Europe 2018’s sales of $40.5bn and
EBITDA of $3.8bn
Competitor 1
• Crude steel production of over 31Mt
Competitor 2
• Steel shipments of 29.5Mt in 2018
• Industrial footprint across 7 countries
Competitor 3 comprising a portfolio of well invested
assets:
Competitor 4 ➢ 18 running blast furnaces
➢ 10 running hot strip mills / 2 plate
Competitor 5 mills
➢ 35 running galvanizing lines
* Shipments as per company’s disclosed figures 4
ArcelorMittal Flat Europe’s presence
Strong diversification in regional market with strong % of coated products
• ArcelorMittal Flat Europe sales by country 2018 ArcelorMittal Flat Europe product shipments product 2018
Others Germany Other products
10% 14% 2% Hot Rolled Products
38%
Other Europe* 24% 14% Spain
Coated products 45%
11%
4% Poland
Belgium
11% 11% 12%
4%
France Italy Cold Rolled Products
Heavy Plates
* Other Europe include UK, Netherlands, Czech Republic, Greece among others
5
Transformation Program
Projects identified beyond Action 2020 to generate further gains
ArcelorMittal Flat Europe transformation program
Transformation
Going Digital
1 Axis 1- BD, Cluster, Satellite:
Action 2020 - Transformation
2 Axis 2 - Procurement:
Projects
identified
Beyond 2020
3 Axis 3 - Commercial:
4 Axis 4 - Finance/Cost Optimization:
From 2015 2019-2020 … 2023
to 2018
6
ArcelorMittal Flat Europe cluster & plants
Further simplification of footprint direct connection of segment CEO & Clusters
Cluster Bremen
BD North Cluster Gent
Cluster Germany
Cluster Dunkerque
Cluster Belgium
Cluster France North
Cluster Fos
FLAT Europe CEO BD Southwest Cluster France South
Cluster Asturias
Cluster Italy
Cluster Spain
Cluster Krakow/Dabrowa
Cluster Poland
BD East Cluster Ostrava
Cluster Galati/Skopje
BD layer eliminated
Part of Remedies
7
Optimized footprint driving productivity gains
Asset optimization has re-established ArcelorMittal Flat Europe competitive position
ArcelorMittal Flat Europe ArcelorMittal Flat Europe
number of BF* crude steel production (Mt)**
• Following asset optimization Highest
-11
possible production with lowest number 29
+8.2%
of installations
18
• Improved balance of supply, allows us to
run all of our facilities on a consistent
basis which maximises efficiency 2011 2018 2011 2018
drives excellent fixed cost performance
• Well loaded assets with stable working ArcelorMittal Flat Europe productivity rate (Kt)***
points (lower variable cost, better
service and quality, reduced capex) Significant improvements
• Further improvement potential in
ArcelorMittal Italia
• Further optimization potential in finishing
* As at 2018 18 BFs running excluding Galati and including ArcelorMittal Italia.
** Crude steel figures includes Galati and excludes ArcelorMittal Italia
*** Productivity figures includes Galati and excludes ArcelorMittal Italia 2011 2018
8
Continuous shift towards higher added value
Improved product capabilities and further development of HAV
• Shipment increase inline with demand recovery; increasing finishing and value
added products
• Improved product capabilities and competitiveness
ArcelorMittal Flat Europe steel shipments* (Mt) ArcelorMittal Flat Europe Coated products** evolution (Mt)
+9.5%
16.5%
29.5
29.3
ArcelorMittal
0.6 Italia
28.2
28.0
27.6 28.9
26.9
FY’13 FY’14 FY’15 FY’16 FY’17 FY’18 2013 2018
* includes 2 months of operations in Italy
** includes HDG; EG and Organic Coated
9SSG&A savings
Significant SSG&A* savings since launch of Transformation project
ArcelorMittal Flat Europe SSG&A (€M)
Significant savings
• Savings generated from fewer satellite offices
and centralization of transversal functions
• Restructuring and centralization of purchasing
• Moving towards low cost share service center
• Automation and digitalization of back-office
activities
• Unified reports and reporting systems
2014 2018
* SSG&A refers to includes structure, sales, general and administration costs which includes plant support
10Backed by continuous investments
Well invested assets; operational investments to drive further contribution
• Belgium: Programs focused on reinforcing our
Automotive leadership
• New AHSS galvanizing line under construction
• Jet Vapor Deposition (JVD), a breakthrough
technology in metallic coating
• Poland: Completed the expansion of production
capacities in Krakow both for HRC (now with 3.3Mt)
and HDG (with an extra coating line 370Kt).
JVD, Gent
• Further finishing extension foreseen to capture higher
market growth in Eastern Europe.
• Spain: Ongoing upgrade of primary production Jet Vapor Deposition (JVD) line in Liège (Belgium)
assets with new BOFs and new casters at Asturias
steelshop and new coke plant in Gijón
• France: Transformation of electro-galvanizing line in
Florange to galvanizing line which will be able to
produce 800Kt to produce Usibor™ and Ductibor™
HDG, Krakpw
11Investments in Environmental projects
ArcelorMittal Flat Europe firm commitment to a greener future
• ArcelorMittal Flat Europe spent over €350 Million in
environment related projects in the last 5 years,
including:
➢ Dabrowa Górnicza new dedusting system
➢ Eisenhuttenstadt sinter plant dedusting upgrade
➢ Aviles BF gas cleaning water blowdown Dedusting system -
Dabrowa
treatment and tinning line#3 Cr free passivation
➢ Dunkerque IGAR innovative process (Injection of
Reformed Gas in blast furnace)
➢ Dunkerque BF sludge recycling, an innovative
process
➢ Fos coke plant new electrostatic tar precipitators
• Investments in environmental projects are expected to
be intensified in the coming years
Bag filter – Gijón
12New breakthrough technologies to tackle CO2 challenge
Ongoing development and implementation of breakthrough technologies
Steelanol is a €150 Million project between
ArcelorMittal & LanzaTech in Gent (started June 2018)
with a technology to potentially revolutionise the
capture of BF carbon gas and convert it into bioethanol
13Leadership through innovation continues
R&D strength to drive innovation and maintain industry leadership position
• Global 2018 R&D spend $0.3bn (Automotive ~1/3); 1,400 full time researchers; 10 research centres EU/Americas
• Majority of OEMs in EU rank ArcelorMittal #1 in Technology: Steel to remain material for body structure application
• Leader in AHSS in both EU & NAFTA with the broadest portfolio of AHSS grades
14Pioneering application of Digital Technology
Digitalization to take us to the next level in transformation of our business
Digitalization is helping to improve
safety
Digital twins - coils that communicate
Maintenance application – anticipating
motor defects; search engine for
maintenance documentation;
predictive maintenance for automatic
cranes
Use of analytics to improve production
cost, quality and productivity
15ArcelorMittal Italia
Complementary to ArcelorMittal Flat Europe’s strategy
• Keep focus on
increasing production
• Expand product range
• Improve quality &
Increase • Increase proportion of
service levels Product
shipments range HAV products
• Leverage our automotive
leadership
• Introduce specialty
products for construction
Market and energy sectors
• Recover historic market share in • Include pipe, tubes and
important local clients plates in our portfolio
• Leverage our sales and marketing
networks
• Potential sales in MENA region
leveraging on geographic position
• Logistics savings
16ArcelorMittal Italia turnaround opportunity
Unlocking the potential of tier 1 asset
• ArcelorMittal Italia now operating with 10,700 people
significant fixed cost savings vs. historical
• Driven to capture synergies and variable cost ArcelorMittal Italia steel flows with Europe (visa versa)
improvements, including:
➢ Logistics savings from improving steel flows
➢ Applying ArcelorMittal’s buying power to all of
ArcelorMittal Italia’s purchases
➢ Applying ArcelorMittal’s management and
benchmarking to improve variable costs,
including working points, energy, consumption,
and yield
• Several synergies coming from industrial, commercial
and procurement levers
• Post 2020, continue to improve the variable cost
position and by 2024 capture the benefits of restarting logistics savings from improving steel flows; ie
BF#5 which will increase crude output by 2Mt focus on servicing domestic markets
17EU Safeguard measures: HRC
• Following provisional measures from Jul’18, HRC annual quota (Mt)
the final measures were implemented on
+5%
Feb’19
8.3
• Quotas based on the 2015-2017 average 8.2
import level plus 5% rebalancing at time of
7.8
implementation; 25% tariff applied once
quotas have been reached
2015-2017 2018 imports Annualised
• Final measures are more supportive than average imports quota under
provisional measures, due to the country final measures
(Feb-19)
specific monitoring (with exception of HRC) on
HDG annual quota (Mt)
a quarterly basis per product
+5%
• Current quota levels are below 2018 levels;
5% quota relaxation in Jul’19 and Jul’20 5.0
• The quota relaxation can still be 3.9
4.1
challenged/discussed with EC both by
industry/users
2015-2017 2018 imports Annualised
average imports quota under
final measures
(Feb-19)
18Level playing field to avoid “carbon leakage”
Discussions on Carbon Inclusion Mechanism ongoing
Rationale The proposal
• ETS (Emission Trade System) growing
restriction to CO2 allocations access • For Europe’s climate policy to be both
significantly increasing price and affecting effective and credible, a carbon neutral
companies’ costs policy must avoid circumvention (“Carbon
• European steel players cannot pass-on their Leakage”)
cost as it would cause lack of • A Carbon Inclusion Mechanism would solve
competitiveness vs. Non-EU players which the problem in the short-rum, levelling
are not subject to ETS rules conditions for local European players and
• With higher costs, European players will those exporting to Europe
increase acquisition of slabs only relocating
the CO2 generation to countries not subject • Verification process would be allowed in
to ETS, i.e., causing carbon leakage with no case importer claims to have a lower CO2
significant impact to World’s CO2 emissions footprint even if not subject to ETS
• To level the playfield among European
• EUROFER is working with members states
players and foreign players selling in
Europe, the inclusion of CO2 cost in the • France at forefront supporting and
price of steel is indispensable advocating and several players adhering
19Key takeaways
• ArcelorMittal Flat Europe is the leading steel franchise in the region
• Unmatched scale; providing the most advanced applications to more demanding customers
• Portfolio of competitive and well invested assets with upgrades to primary steel operations and
improving mix
• On top of targeted emission reductions, adoption of breakthrough technologies to advance
environmental initiatives
• Transformation Program (Flat Europe’s contribution to Action 2020): Key to realized
outperformance vs peers
o Productivity improvement
o Clustering
o Purchasing centralization to further leverage on scale
o Commercial with improved service level
o SSG&A savings
• Digitalization driving the next stage of Transformation
• ArcelorMittal Italia fits perfectly into our Flat Europe strategy; tier 1 asset with excellent
turnaround potential and opportunity to be lowest cost steelmaking site in Europe
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