ArcelorMittal Investing in NAFTA Operations

“Favorable market conditions have supported another solid quarterly performance with EBITDA for the first nine months considerably improved year-on-year,” commented ArcelorMittal Chairman and CEO Lakshmi N. Mittal. “Operating conditions continue to improve, with key indicators including the ArcelorMittal weighted PMI implying a positive outlook for 2018. While pleased with the progress that we are making, we operate in a competitive global environment, which is characterized by overcapacity and high levels of imports.”

ArcelorMittal expects 2017 global apparent steel consumption to grow by approximately 2.5 percent to 3.0 percent. By region, apparent steel consumption in the U.S. (excluding pipe and tube) is expected to grow 2.0 percent to 3.0 percent, reflecting higher machinery and construction demand offset by lower automotive production.

NAFTA Segment

ArcelorMittal’s NAFTA segment increased crude steel production by 2.5 percent to 5.9 million tons in the third quarter. Sales totaled $4.6 billion, relatively unchanged from the second quarter due to higher steel shipment volumes offset by lower average selling prices.

Shipments increased 4.3 percent to 5.7 million tons Average steel selling price was $741 per ton compared to $750 per ton in Q2 and $715 per ton in Q3 2016.

Installation of the new caster at the No .3 steel shop at Indiana Harbor is scheduled for completion in the fourth quarter. Restoration of the 80-inch hot strip mill and upgrades for finishing and logistics will be completed sometime in 2018.

Two new walking beam reheat furnaces will be installed at Burns Harbor. The project will improve hot rolling quality and productivity and help ArcelorMittal sustain market position while reducing energy consumption. The project is scheduled for completion in 2021.

The company is undertaking a $1 billion, three-year investment program at its Mexican operations that will realize ArcelorMittal Mexico’s production capacity of 5.3 million metric tons and increase the higher-value-added products mix. The main investment will be the construction of a new hot strip mill. Construction will take approximately three years and, upon completion, will enable ArcelorMittal Mexico to produce 2.5 million tons of flat rolled steel, 1.8 million tons of long steel, and the remaining tonnage in semi-finished slabs. Coils from the new hot strip mill will be supplied to domestic, non-auto and general industry customers.

During the earnings call presentation, Daniel Fairclough, Investor Relations, and Genuino Christino, Head of Finance, answered questions from analysts.

The performance at Calvert was very, very strong in the third quarter, said Fairclough, with two months of record production and capacity utilization rates at the hot strip mill consistently at the high 90 percent level.

On pricing, Fairclough noted there was a rise in global spread, but not in the U.S. markets. Part of that was due to weaker scrap where buyers wait to see where pricing will settle before placing orders. “It’s interesting to see that today U.S. pricing does look out of line with those global trends that we’ve observed over the past couple of months,” he said.

Commenting on the Mexican project, Fairclough said it is “a great opportunity for us to go downstream into value-added products, capitalize on the strength of our primary business and our low-cost production in Mexico, and take advantage of what is a high-growth market heavily dependent on imports for value-added steel.” ArcelorMittal Mexico will benefit from the investment being in the new special economic zone at Lazaro and the incentive of a 100 percent rebate on taxes for the first 10 years and then a 50 percent rebate for the following five years.

“In terms of Mexico, I think the economy is doing well,” added Christino. “We have seen the pricing consumption also growing. And we should also remember that in Q2 we have some maintenance in some of our facilities in Mexico, so as a result we see some higher shipments also this quarter.” Loans from the domestic markets as well as international markets are opening up some opportunities for the company to export volumes out of Mexico, he added.