Optimize the asset structure, dominate the high-end market, and strengthen the global layout.

On [date], ArcelorMittal (hereinafter referred to as AM) released its annual performance forecast on its official website. On the same day, Genuino Christino, AM's Chief Financial Officer, stated in an interview with Reuters that the company is calling on the European Union to strengthen trade protections and increase support for green investments. Additionally, Luxembourg media reported on [date] that Alain Legrix de la Salle (hereinafter referred to as de la Salle), head of AM France, warned during a hearing at the French National Assembly's Economic Affairs Committee that without effective protective measures from the EU, all steel plants in Europe could face shutdown risks by [year]. Is the predicament faced by AM and the European steel industry truly as severe as described? This article will analyze the situation by examining AM’s latest annual performance forecast, historical financial data, and relevant statistics from the European steel industry, aiming to provide insights for Chinese steel enterprises and policymakers.

Optimizing asset structure during downturns to enhance shareholder returns Industrial integration, as a significant trend in modern economic development, is profoundly reshaping the landscape of various industries. This concept refers to the dynamic process of mutual penetration and intersection between different industries or sectors within the same industry, ultimately merging into a unified whole. ArcelorMittal (AM) is the world's second-largest steel producer, trailing only China's Baowu Group. The company was formed in 2006 through the merger of India's Mittal Steel and the Western European steel giant Arcelor (renamed ArcelorMittal post-merger). Following the merger, AM once accounted for 10% of global steel production, becoming the world's largest steel company. However, amid shifting global market conditions, AM's business experienced several fluctuations, particularly during the downturn from 2015 to 2016, when it reported consecutive annual losses. To address these challenges, AM implemented multiple measures to drive transformation, including raising capital, reducing debt, cutting costs, and shifting its focus toward high-value-added steel products. In 2017, AM achieved its first annual profit since the downturn. That same year, the company began optimizing its footprint in the Indian market, laying a solid foundation for sustainable future growth. Through continuous asset optimization and a globalized strategy, AM has further solidified its market leadership position.

Since [year], ArcelorMittal (ArcelorMittal or "the company") has continuously optimized its asset structure, improved asset quality, and effectively reduced its debt-to-asset ratio. The company's net assets increased from approximately $[X] billion in [year]–[year] to around $[Y] billion in [year]–[year]. Meanwhile, its total liabilities dropped from nearly $[Z] billion to less than $[W] billion. By [year], ArcelorMittal's debt-to-asset ratio had decreased by nearly [A]% compared to [previous year], significantly lowering its financial leverage. When market demand is strong, companies often increase leverage to enhance asset utilization efficiency. However, during periods of weak demand or declining profitability, reducing financial leverage becomes particularly crucial. Cutting debt helps enterprises effectively reduce interest expenses, thereby alleviating financial cost pressures. ArcelorMittal's competitive edge in recent years stems from its precise asset adjustments over the past [B] years. Between [year] and [year], the company divested underperforming assets in the U.S., Italy, and Kazakhstan while strengthening its core business and market positioning through strategic acquisitions. These optimizations in asset structure yielded strong operational results, particularly in Return on Equity (ROE). ROE is a key metric that measures the ratio of net profit to shareholders' equity, reflecting a company's ability to generate profits using its own capital. In [year], ArcelorMittal's ROE stood at -[C]%, indicating ineffective use of shareholder capital, as net profit failed to cover shareholder investments. By [year], however, its ROE surged to [D]%, demonstrating robust recovery and a substantial improvement in capital efficiency. This turnaround not only highlights ArcelorMittal's successful navigation through challenges but also underscores its enhanced profitability and capital efficiency through cost reductions, optimized asset allocation, and a focus on high-value-added steel businesses. These strategic adjustments have not only boosted shareholder returns but also strengthened the company's competitiveness in the global market.

Adhering to the principle of "not putting all eggs in one basket," the strategy of diversification is particularly evident in ArcelorMittal's global layout. As a key player in the global steel industry, ArcelorMittal is headquartered in Luxembourg, with steel production facilities in multiple countries and a workforce totaling nearly tens of thousands. The company's global operating metrics reflect its performance at the group level. In recent years, the issue of overcapacity in the global steel market has significantly impacted ArcelorMittal, leading to a sharp decline in its overall profit margin. By [specific year], the company's overall EBITDA margin had dropped to just one-third of its level in [earlier year], while the selling price per ton of steel fell by [X]%, and profit per ton of steel plummeted by [Y]%. *Note: EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is primarily used to evaluate a company's profitability by excluding non-operational factors related to financing, tax policies, and accounting treatments (such as depreciation and amortization), thereby providing a clearer reflection of the company's core operational performance.*

European countries are a crucial production base for ArcelorMittal (AM), accounting for over % of its global crude steel output, followed by Brazil and North American countries. As AM executives have repeatedly pointed out, the struggles of its European operations have become a major drag on the company's overall performance. Compared to the previous year, AM Europe saw a % drop in steel prices per ton and a % decline in crude steel production in the current year, leading to a % reduction in total sales. More critically, AM's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in Europe has fallen by % over the past years, with profit margins shrinking from % in to just %. In contrast, operations in North America, Brazil, and India, despite significant declines, maintained profit margins above %, partially offsetting the negative impact from Europe. Global steel overcapacity has had a profound impact on steel industries worldwide. However, the EU's "Steel Import Quota Policy," implemented since , has provided some buffer for European steelmakers. By setting import quotas and imposing excess tariffs (typically %), the policy effectively shields the EU's domestic steel industry. In , the EU decided to extend this policy until and adjusted quota limits for major product categories. Nevertheless, AM's profit margins in Europe remain significantly lower than the global average, reflecting not only the impact of global overcapacity but also its high operational costs, particularly energy expenses. Since the outbreak of geopolitical conflicts, Europe's energy costs have surged, posing a major challenge to AM's business in the region. During a hearing at the French National Assembly's Economic Affairs Committee, AM executive Aditya Mittal noted, "Europe's energy costs are among the highest in the world, with natural gas prices – times higher than those in the U.S."

European Investment Steadily Increases, Optimistic About High-End Steel and Low-Carbon Demand In its investor report released in [specific month and year], ArcelorMittal highlighted its core strategic advantages in two key areas: First, its dominance in high-end markets such as automotive manufacturing, which is supported by its leading R&D capabilities and continuous technological innovation. Second, through full vertical integration across the industrial chain, the company controls the entire process from raw material supply to production, ensuring both product quality and cost competitiveness.

During a hearing at the French National Assembly's Economic Affairs Committee, de La Salle warned, "We have repeatedly pointed out to the European Commission that factories across Europe, including France, face the risk of shutdown." However, ArcelorMittal's financial reports reveal that its capital expenditures in Europe (typically considered part of fixed investments and sometimes including other long-term investments) have consistently remained at a level proportionate to its business scale, accounting for a certain share of its global operational expenditures. Although profits declined in certain years, its capital expenditures increased compared to the previous two years, with notable rises in investments in sustainable solutions and mining operations. According to past financial reports, ArcelorMittal's capital expenditures in Europe over the past two years have primarily focused on the Mardyck project in France and the Gijón project in Spain. The Mardyck project is a new electrical steel production facility with an annual output of 200,000 tons of non-oriented electrical steel, of which 150,000 tons are designated for the automotive sector. It is expected to commence production in the second half of 2024. The Gijón project, on the other hand, involves an electric arc furnace (EAF) steel production facility with an annual capacity of 1 million tons, aimed at manufacturing low-carbon emission steel primarily for the long products industry, particularly railway tracks and wire rods. It is slated for production in the first half of 2024. This demonstrates that despite market fluctuations, ArcelorMittal remains optimistic about Europe's high-end steel market, particularly the demand for automotive steel and low-carbon steel products.

Call for the EU to Increase Support in Strengthening the Low-Carbon "Moat" Delasalle stated, "We are not against imports, but we are calling for restrictions to avoid their devastating impact on our industry. We demand fair competition, especially in terms of CO2 emission reductions." Eurofer has also requested the EU to reduce quotas under the steel import safeguard system. While EU steel demand is declining, the EU Carbon Market (EU ETS) plans to phase out free carbon allowances for domestic steel companies starting from 2026. Given that ArcelorMittal's crude steel production and investments are concentrated in Europe, if production costs cannot be significantly reduced, coupled with carbon cost pressures, profit margins will face further compression. In the first half of last year, ArcelorMittal suspended some of its European decarbonization plans due to high energy costs, policy uncertainties, and weak demand. Against this backdrop, the European steel industry is under tremendous pressure. According to Eurofer's annual report data, Europe's apparent steel consumption declined for two consecutive years in 2022 and 2023, with 2023 reaching 129 million tons—even lower than the 2020 figure (130 million tons) impacted by the pandemic. In 2023, the construction sector accounted for 35% of Europe's steel consumption, followed by the automotive industry (16%), machinery manufacturing (14%), metal products (8%), and pipe industries (5%). Data from ArcelorMittal's steel production and sales in Europe show that flat products make up over 60% of its European output. Therefore, the increasing market share of imported flat products has directly impacted ArcelorMittal's European operations. ArcelorMittal has repeatedly urged the EU to enhance support by leveraging trade tools such as the Carbon Border Adjustment Mechanism (CBAM) to strengthen carbon emission management on imported steel products, thereby building a stronger "moat" in the European market. Some economic analysts suggest that ArcelorMittal may seek funding support from the EU's "Green Deal" to upgrade less efficient European plants.

Establishing deep collaborations with Nippon Steel and Japanese banks Amid the fierce competition in the global steel industry, ArcelorMittal has formed deep partnerships with Nippon Steel and several Japanese banks. Through these...