Volkswagen 20-F 2010
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the fiscal year ended December 31, 2009
Commission file number 333-146371
(Exact name of Registrant as specified in its charter)
(Translation of Registrants name into English)
Grand Duchy of Luxembourg
(Jurisdiction of incorporation or organization)
19, Avenue de la Liberté, L-2930 Luxembourg,
Grand Duchy of Luxembourg
(Address of Registrants principal executive offices)
Henk Scheffer, Company Secretary, 19, Avenue de la Liberté, L-2930 Luxembourg,
Grand Duchy of Luxembourg. Fax: 011 352 4792 89 3937
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Securities for which there is reporting obligation pursuant to Section 15(d) of the Act:
Indicate the number of outstanding shares of the issuers classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards
Board x Other ¨
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
TABLE OF CONTENTS
Definitions and Terminology
Unless indicated otherwise, or the context otherwise requires, references herein to ArcelorMittal, we, us, our and the Company or similar terms are to ArcelorMittal, formerly known as Mittal Steel Company N.V. (Mittal Steel), having its registered office at 19, avenue de la Liberté, L-2930 Luxembourg, Grand Duchy of Luxembourg, and, where the context requires, its consolidated subsidiaries. ArcelorMittals principal subsidiaries, categorized by operating segment and location, are listed below.
All references herein to Arcelor refer to Arcelor, a société anonyme incorporated under Luxembourg law, which was acquired by Mittal Steel on August 1, 2006.
For the purposes of this annual report, the names of the following ArcelorMittal subsidiaries as abbreviated below will be used where applicable.
In addition, unless we have indicated otherwise, or the context otherwise requires, references in this annual report to:
This annual report contains the audited consolidated financial statements of ArcelorMittal (of which Mittal Steel Company N.V. is the predecessor) and its consolidated subsidiaries, including the consolidated statement of financial position as of December 31, 2008 and 2009, and the consolidated statements of operations, changes in equity and cash flows for each of the years ended December 31, 2007, 2008 and 2009. ArcelorMittals consolidated financial statements were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
ArcelorMittals significant acquisitions in 2007, 2008 and 2009 have been accounted for using the purchase method of accounting, with ArcelorMittal as the acquiring entity in accordance with IFRS 3, Business Combinations.
The financial information and certain other information presented in a number of tables in this annual report have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this annual report reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.
This annual report includes industry data and projections about our markets obtained from industry surveys, market research, publicly available information and industry publications. Statements on ArcelorMittals competitive position contained in this annual report are based primarily on public sources including, but not limited to, publications of the International Iron and Steel Institute. Industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions. We have not independently verified this data or determined the reasonableness of such assumptions. In addition, in many cases we have made statements in this annual report regarding our industry and our position in the industry based on internal surveys, industry forecasts and market research, as well as our own experience. While these statements are believed to be reliable, they have not been independently verified, and we do not make any representation or warranty as to the accuracy or completeness of such information set forth in this annual report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report and the documents incorporated by reference in this annual report contain forward-looking statements based on estimates and assumptions. This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among other things, statements concerning the business, future financial condition, results of operations and prospects of ArcelorMittal, including its subsidiaries. These statements usually contain the words believes, plans, expects, anticipates, intends, estimates or other similar expressions. For each of these statements, you should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although it is believed that the expectations reflected in these forward-looking statements are reasonable, there is no assurance that the actual results or developments anticipated will be realized or, even if realized, that they will have the expected effects on the business, financial condition, results of operations or prospects of ArcelorMittal.
These forward-looking statements speak only as of the date on which the statements were made, and no obligation has been undertaken to publicly update or revise any forward-looking statements made in this annual report or elsewhere as a result of new information, future events or otherwise, except as required by applicable laws and regulations. In addition to other factors and matters contained or incorporated by reference in this annual report, it is believed that the following factors, among others, could cause actual results to differ materially from those discussed in the forward-looking statements:
These factors are discussed in more detail in this annual report, including under Item 3DKey InformationRisk Factors.
A. Selected Financial Data
The following tables present selected consolidated financial information of ArcelorMittal and, where relevant, of its predecessor company Mittal Steel Company N.V., as of and for the years ended December 31, 2005, 2006, 2007, 2008 and 2009, prepared in accordance with IFRS. This selected consolidated financial information should be read in conjunction with ArcelorMittals consolidated financial statements, including the notes thereto, included elsewhere herein.
Consolidated Statements of Operations
(Amounts in $ millions except per share data and percentages)
D. Risk Factors
Our business, financial condition, results of operations or prospects could be materially adversely affected by any of the risks and uncertainties described below.
Risks Related to the Global Economy and the Steel Industry
The downturn in the global economy during 2008 and 2009 caused a sharp reduction in worldwide demand for steel. Should the global economy or the economies of ArcelorMittals key selling markets fail to recover or enter a protracted period of weak growth, this would have a material adverse effect on the steel industry and ArcelorMittal.
ArcelorMittals activities and results are substantially affected by international, national and regional economic conditions. Starting in September 2008 and lasting through much of 2009, a steep downturn in the global economy, sparked by uncertainty in credit markets and deteriorating consumer confidence, sharply reduced demand for steel products worldwide. This had, and to some extent continues to have, a pronounced negative effect on ArcelorMittals business and results of operations.
Although the global economy showed signs of recovery by the end of 2009, should the incipient recovery falter, the outlook for steel producers will again worsen. See Item 5Operating and Financial Review and ProspectsOverviewEconomic Environment. In particular, a renewed recession or period of below-trend growth in the United States and Europe, or slow growth in emerging economies that are substantial consumers of steel (such as China, Brazil, Russia and India, as well as emerging Asian markets, the Middle East and the Commonwealth of Independent States (CIS) regions) would have a material adverse effect on the steel industry. Continued weakness in sectors of the economy that are substantial consumers of steel products, such as the automotive industry (to which ArcelorMittal shipped approximately 9.8 million tonnes of steel in 2009 after having shipped 15.0 million tonnes in 2008) and the construction industry, or additional bankruptcies of large companies in such industries, would also hurt steel producers. Notwithstanding ArcelorMittals size and global presence, protracted declines in steel consumption caused by poor economic conditions in any major markets or by the deterioration of the financial condition of any key customers would have a material adverse effect on demand for, and prices of, its products and hence its results. An uneven recovery, with positive growth limited to certain regions, or excluding key markets such as the European Union and the United States, which respectively accounted for 46% and 15% of the Companys sales in 2009, would also have an adverse effect on ArcelorMittals results of operations and prospects.
In response to the market downturn and the fall in demand for steel products towards the end of 2008 and the first half of 2009, the Company announced and began implementing several measures, including reducing capital expenditures, cutting costs, improving productivity, cutting steel production and reducing debt. See Item 5Operating and Financial Review and ProspectsOverviewKey Factors Affecting Results of OperationsInitiatives in Response to Changing Market Conditions and Item 5Operating and Financial Review and ProspectsLiquidity & Capital Resources. Although these measures helped the Company to weather the crisis, and while demand, production levels and prices have started to recover in certain segments and markets, the extent, timing and duration of the recovery remains uncertain. The extent to which the rebound in the steel market can be ascribed to a recovery in real underlying demand, as opposed to apparent demand resulting from de-stocking, remains uncertain. An unsustainable recovery and persistent weak economic conditions in any of the Companys key markets would adversely affect operational results, and could necessitate the extension or expansion of the conservative measures undertaken during the crisis, which in itself could have a material adverse effect on the Companys results of operations and growth prospects.
Excess capacity and oversupply in the steel industry globally and particularly in China may hamper the steel industrys recovery and prolong the downward cycle.
In addition to economic conditions, the steel industry is affected by global production capacity and fluctuations in steel imports/exports and tariffs. The steel industry has historically suffered from structural over-capacity. The industry is currently characterized by a substantial increase in production capacity in the developing world, particularly in China, but also in India and other emerging markets. China is now the largest global steel producer by a large margin, with the balance between its domestic production and consumption being an important factor in global steel prices. Chinese steel exports, or conditions favorable to them (excess steel capacity in China and/or higher market prices for steel in markets outside of China) can have a significant impact on steel prices in other markets, including the U.S. and Europe. Over the short to medium term ArcelorMittal is exposed to the risk of steel production increases in China and other markets outstripping increases in real demand, which may weigh on price recovery.
Protracted low steel prices would have a material adverse effect on the results of ArcelorMittal, as could price volatility.
Steel prices are volatile, reflecting the highly cyclical nature of the global steel industry. After rising steadily during 2007 and into the third quarter of 2008, global steel prices fell sharply, as the credit crisis led to a collapse in global demand. Prices remained depressed during the first half of 2009, despite widespread production cuts. During the second half of 2009 a gradual recovery was seen in certain segments and markets. See Item 5Operating and Financial Review and ProspectsOverviewKey Factors Affecting Results of OperationsSteel Prices. Lower prices have had an adverse effect on steel producers in general, including ArcelorMittal, due to lower revenues, margins and writedowns of finished steel products and raw material inventories.
Significant price decreases during periods of economic weakness have historically not been balanced by a commensurate price increases during periods of economic strength. Although prices have recovered and stabilized since the crisis to a certain degree, the timing and extent of the recovery and potential return to pre-crisis price levels remains uncertain. The initial rebound in the international steel market was due in part to a rebound in apparent demand resulting from de-stocking. However, the extent of the recovery in real demand remains uncertain. A sustained price recovery will most likely require a broad economic recovery, in order to underpin an increase in real demand for steel products by end users.
In addition to macroeconomic trends, steel prices are sensitive to developments in particular industries, such as the automotive, construction, appliance, machinery, equipment and transportation, which are the main markets for ArcelorMittals products. A resumed downturn in steel prices would materially and adversely affect ArcelorMittals revenues and profitability, including because of potential further write-downs of steel products and raw materials inventories.
See Item 5Operating and Financial Review and ProspectsOverviewKey Factors Affecting Results of Operations.
Volatility in the prices of raw materials, energy and transportation, including mismatches between trends in prices for raw materials and steel, as well as limitations on or disruptions in the supply of raw materials, could adversely affect ArcelorMittals profitability.
Steel production requires substantial amounts of raw materials and energy, including iron ore, coking coal and coke, scrap, electricity and natural gas, which are subject to significant price volatility. In 2006, 2007, and through the first half of 2008, the prices of most commodities used in the steel-making process rose sharply before collapsing in late 2008 as a result of the global economic crisis. In May 2009, the annual benchmark price of iron ore for 2009 was set at a level 28-33% below the 2008 benchmark price. Prices on the spot market have since recovered significantly, and it is likely that benchmark iron prices for 2010 and 2011 will reverse some or all of the declines experienced during the height of the economic crisis. The prices of coking coal, zinc and nickel, as well as scrap, have followed a similar trend. See Item 5Operating and Financial Review and ProspectsOverviewKey Factors Affecting Results of OperationsRaw Materials.
The availability and prices of raw materials may be negatively affected by, among other factors; new laws or regulations; suppliers allocations to other purchasers; business continuity of suppliers; interruptions in production by suppliers; accidents or other similar events at suppliers premises or along the supply chain; wars, natural disasters and other similar events; fluctuations in exchange rates; consolidation in steel-related industries; the bargaining power of raw material suppliers and the availability and cost of transportation. Although ArcelorMittal has substantial captive sources of iron ore and coal from its own mines and is expanding output at such mines and also has new mines under development, it still obtains a significant portion of its raw materials requirements under long-term supply contracts (such as the Brazilian mining company Vale). The raw materials industry is highly concentrated and suppliers in recent years have had significant pricing power, as was the case during 2007 and the first half of 2008, when demand peaked at record levels. Further consolidation among suppliersfor example, the announced iron ore joint venture between mining companies BHP Billiton and Rio Tintowould exacerbate this trend. Should raw materials suppliers move toward sales based on spot prices rather than long-term fixed price contracts, steel producers would face increased exposure to production cost and price volatility, which may in turn reduce their access to reliable supplies of raw materials. Any prolonged interruption in the supply of raw materials or energy, or increases in costs which ArcelorMittal cannot pass on to its customers, could adversely affect its business, financial condition, results of operations or prospects.
Energy costs, including the cost of electricity and natural gas, represent a substantial portion of the cost of goods sold by steel companies. Historically, energy prices have varied significantly, and this trend may continue due to market conditions and other factors beyond the control of steel companies. Because the production of direct reduced iron and the re-heating of steel involve the use of significant amounts of energy, steel companies are sensitive to natural gas prices and are dependent on having access to reliable supplies.
Despite the fact that steel and raw material prices are historically highly correlated with both having experienced significant declines during the crisis, this correlation is not guaranteed. In addition, ArcelorMittal sources a substantial portion of its raw materials through annual fixed price contracts, thereby creating the risk of adverse differentials between its own production costs and steel price trends, as was the case during the fourth quarter of 2008 and the first half of 2009, when the Company experienced a margin squeeze and recorded significant write-downs and provisions on raw material supply contracts. If raw materials and energy prices rise significantly (either as a result of supply constraints or other reasons) but prices for steel do not increase commensurately, it would have a negative effect on ArcelorMittals business, financial condition, results of operations and prospects.
Unfair trade practices in ArcelorMittals home markets could negatively affect steel prices and reduce ArcelorMittals profitability, while trade restrictions could limit ArcelorMittals access to key export markets.
ArcelorMittal is exposed to the effects of dumping and other unfair trade and pricing practices by competitors. Moreover, government subsidization of the steel industry remains widespread in certain countries, particularly those with centrally-controlled economies such as China. As a consequence of the recent global economic crisis, there is an increased risk of unfairly-traded steel exports from such countries into various markets including North America and Europe, in which ArcelorMittal produces and sells its products. Such imports could have the effect of reducing prices and demand for ArcelorMittal products.
In addition, ArcelorMittal has significant exposure to the effects of trade actions and barriers due the global nature of its operations. Various countries have in the past instituted, or are currently contemplating the implementation of, trade actions and barriers, which could materially and adversely affect ArcelorMittals business by limiting the Companys access to steel markets.
See Item 4BInformation on the CompanyBusiness OverviewGovernment Regulations.
Developments in the competitive environment in the steel industry could have an adverse effect on ArcelorMittals competitive position and hence its business, financial condition, results of operations or prospects.
The markets in which steel companies operate are highly competitive. Competitionin the form of established producers expanding in new markets, smaller producers increasing production in anticipation of demand increases, amid an incipient recovery, or exporters selling excess capacity from markets such as Chinacould cause ArcelorMittal to lose market share, increase expenditures or reduce pricing. Any of these developments could have a material adverse effect on its business, financial condition, results of operations or prospects.
Competition from other materials could reduce market prices and demand for steel products and thereby reduce ArcelorMittals cash flow and profitability.
In many applications, steel competes with other materials that may be used as substitutes, such as aluminum (particularly in the automobile industry), cement, composites, glass, plastic and wood. Government regulatory initiatives mandating the use of such materials in lieu of steel, whether for environmental or other reasons, as well as the development of other new substitutes for steel products, could significantly reduce market prices and demand for steel products and thereby reduce ArcelorMittals cash flow and profitability.
ArcelorMittal is subject to strict environmental laws and regulations, including with respect to greenhouse gas emissions, that could give rise to a significant increase in costs and liabilities.
ArcelorMittal is subject to a broad range of environmental laws and regulations in each of the jurisdictions in which it operates. These laws and regulations impose increasingly stringent environmental protection standards regarding, among others, air emissions, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination. The costs of complying with, and the imposition of liabilities pursuant to, environmental laws and regulations can be significant. Failure to comply can result in civil and or criminal penalties being imposed, the suspension of permits, requirements to curtail or suspend operations, and lawsuits by third parties. Despite ArcelorMittals efforts to comply with environmental laws and regulations, environmental incidents or accidents may occur that negatively affect the Companys reputation or the operations of key facilities.
Compliance with new and more stringent environmental obligationsparticularly those arising from policies limiting greenhouse gas emissionsmay require additional capital expenditures or modifications in operating practices, as well as additional reporting obligations. The integrated steel process involves carbon and creates carbon dioxide (CO2), which distinguishes integrated steel producers from mini-mills and many other industries where CO2 generation is primarily linked to energy use. The European Union has already established greenhouse gas regulations and many other countries, including the United States, are in the process of doing so. Such regulations, whether in the form of a national or international cap-and-trade emissions permit system, a carbon tax, or other regulatory initiative, could have a negative effect on ArcelorMittals production levels, income and cash flows. Such regulations could also have a negative effect on the Companys suppliers and customers, which could result in higher costs and lower sales.
Moreover, many developing nations, including China, have not yet instituted significant greenhouse gas regulations. It is possible that any international agreement to regulate emissions (including any pact that emerges in the aftermath of the December 2009 UN Climate Change Conference in Copenhagen) may provide exemptions and lesser standards for developing nations. In such case, ArcelorMittal may be at a competitive disadvantage relative to steelmakers having more or all of their production in such countries.
ArcelorMittal also incurs costs and liabilities associated with the assessment and remediation of contaminated sites. In addition to the impact on current facilities and operations, environmental remediation obligations can give rise to substantial liabilities in respect of divested assets and past activities. This may be also the case for acquisitions when liabilities for past acts or omissions are not adequately reflected in the terms and price of the acquisition. ArcelorMittal could become subject to further remediation obligations in the future, as additional contamination is discovered or cleanup standards become more stringent.
Costs and liabilities associated with mining activities include those resulting from tailings and sludge disposal, effluent management, and rehabilitation of land disturbed during mining processes. ArcelorMittal could become subject to unidentified liabilities in the future, such as those relating to uncontrolled tailings breaches or other future events or to underestimated emissions of polluting substances.
ArcelorMittal operations may be located in areas where communities may regard its activities as having a detrimental effect on their natural environment and conditions of life. Any actions taken by such communities in response to such concerns could compromise ArcelorMittals profitability or, in extreme cases, the viability of an operation or the development of new activities in the relevant region or country.
See Item 4BInformation on the CompanyBusiness OverviewGovernment RegulationsEnvironmental Laws and Regulations and Item 8AFinancial InformationConsolidated Statements and Other Financial InformationLegal Proceedings.
ArcelorMittal is subject to stringent health and safety laws and regulations that give rise to significant costs and liabilities.
ArcelorMittal is subject to a broad range of health and safety laws and regulations in each of the jurisdictions in which it operates. These laws and regulations, as interpreted by relevant agencies and the courts, impose increasingly stringent health and safety protection standards. The costs of complying with, and the imposition of liabilities pursuant to, health and safety laws and regulations could be significant, and failure to comply could result in the assessment of civil and criminal penalties, the suspension of permits or operations, and lawsuits by third parties.
Despite ArcelorMittals significant efforts to monitor and reduce accidents at its facilities (see Item 4BBusiness OverviewGovernment RegulationsHealth and Safety Laws and Regulations), there remains a risk that health and safety incidents may occur, which may result in costs and liabilities and negatively impact ArcelorMittals reputation or the operations of the affected facility. Such incidents could include explosions or gas leaks, fires or collapses in underground mining operations, vehicular accidents, other incidents involving mobile equipment, or exposure to radioactive or other potentially hazardous materials. Some of ArcelorMittals industrial activities involve the use, storage and transport of dangerous chemicals and toxic substances, and ArcelorMittal is therefore subject to the risk of industrial accidents which could have significant adverse consequences for the Companys workers and facilities, as well as the environment. Such incidents could lead to production stoppages, loss of key personnel, the loss of key assets, or put at risk employees (and those of sub-contractors and suppliers) or persons living near affected sites.
ArcelorMittal may continue to be exposed to increased operational costs due to the costs and lost time associated with the HIV/AIDS and malaria infection rates within our workforce in Africa and other regions. ArcelorMittal may also be affected by potential H1N1 outbreaks in any of the regions in which it operates.
Under certain circumstances, authorities could require ArcelorMittal facilities to curtail or suspend operations based on health and safety concerns. For example, following accidents in 2006 and 2007 that resulted in numerous fatalities, the Kazakh government threatened to revoke the operating license of ArcelorMittal Temirtau unless additional safety measures were implemented. Since then, ArcelorMittal has cooperated with authorities to implement these measures or otherwise reach agreement on necessary remedial action. Nevertheless, the episode remains illustrative of risks presented by health and safety issues, from both a reputational and operational standpoint.
See Item 4BInformation on the CompanyBusiness OverviewGovernment RegulationsEnvironmental Laws and Regulations and Item 8AFinancial InformationConsolidated Statements and Other Financial InformationLegal Proceedings.
Risks Related to ArcelorMittal
ArcelorMittal has a substantial amount of indebtedness, which could make it more difficult or expensive to refinance its maturing debt, incur new debt and/or flexibly manage its business.
As of December 31, 2009, ArcelorMittal had total debt outstanding of $25 billion, consisting of $4 billion of short-term indebtedness (including payables to banks and the current portion of long-tem debt) and $21 billion of long-term indebtedness. As of December 31, 2009, ArcelorMittal had $6 billion of cash and cash equivalents, including short-term investments and restricted cash, and $11 billion available to be drawn under existing credit facilities. Substantial amounts of indebtedness mature in 2010 ($4.1 billion), 2011 ($4.3 billion), 2012 ($1.5 billion), 2013 ($4.1 billion) and 2014 ($4.0 billion). See Item 5BOperating and Financial Review and ProspectsLiquidity and Capital Resources.
In response to the downturn in the global steel market and difficult credit market conditions in late 2008, ArcelorMittal reduced its net debt (i.e., long-term debt plus short-term debt less cash and cash equivalents and restricted cash) by approximately $13.7 billion at the end of 2009 from September 30, 2008. This reduction, as well as an extension of ArcelorMittals debt maturity profile, resulted in part from a series of debt, equity and convertible bond offerings in 2009 totaling approximately $13.1 billion. Although these transactions improved the Companys liquidity position, debt maturity profile and gearing, its financing costs have generally risen due to the higher interest rates paid on recent financings. See Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancingsDebt Securities and Other Loans, Convertible Bonds and Equity Financings2009 Capital Markets Transactions.
Although the global financial crisis eased during the second half of 2009, conditions in global capital and credit markets generally remain volatile and uncertain, particularly for companies with high leverage or in sectors that have been especially affected by the global economic downturn, including steel and other basic material producers. Conditions in global financial markets could conceivably relapse and deteriorate sharply as they did in September 2008, including in response to political or financial news such as significant credit losses at a systemically important financial institution, company or sovereign country (many of which accumulated large amounts of debt during the 2008-2009 recession as a result of decreased tax revenues and increased spending to finance economic stimulus and bailouts). ArcelorMittal could, in order to increase financial flexibility during a period of reduced availability of credit, implement capital raising measures such as equity offerings or asset disposals, which could in turn create a risk of diluting existing shareholders, receiving relatively low proceeds and/or causing substantial accounting losses (particularly if done in difficult market conditions).
ArcelorMittals principal credit facilities (described under Item 5BOperating and Financial Review and ProspectsLiquidity and Capital Resources) contain restrictive covenants. These covenants limit, inter alia, encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittals subsidiaries to incur debt and the ability of ArcelorMittal and its subsidiaries to dispose of assets in certain circumstances. The Companys principal credit facilities also include the following financial covenant: the Company must ensure that the ratio of Consolidated Total Net Borrowings (consolidated total borrowings less consolidated cash and cash equivalents) to Consolidated EBITDA (the consolidated net pre-taxation profits of the ArcelorMittal group for a Measurement Period, subject to certain adjustments as defined in the facilities) does not, at the end of each Measurement Period (each period of 12 months ending on the last day of a financial half-year or a financial year of the Company), exceed a certain ratio. In August 2009, the Company signed agreements with the lenders under its principal credit facilities to amend this ratio, referred to as its Leverage Ratio, from 3.5 to one as originally provided, to 4.5 to one as of December 31, 2009, to 4.0 to one as of June 30, 2010, and reverting to 3.5 to one as of December 31, 2010. ArcelorMittal also agreed to the imposition of certain additional temporary restrictive covenants on its activities if the Leverage Ratio exceeds 3.5 to one for any Measurement Period. These include restrictions on dividends and share reductions, acquisitions, capital expenditure and the giving of loans and guarantees. As of December 31, 2009, the Leverage Ratio stood at approximately 3.2 to one, up from 1.1 to one as of December 31, 2008 and 1.7 to one as of June 30, 2009.
Limitations arising from the restrictive and financial covenants described above could limit ArcelorMittals operating and financial flexibility, including to distribute dividends, make capital expenditures or engage in strategic acquisitions or investments. Failure to comply with any covenant would enable the lenders to accelerate ArcelorMittals repayment obligations. Moreover, ArcelorMittals debt facilities have provisions whereby certain events relating to other borrowers within the ArcelorMittal group could, under certain circumstances, lead to acceleration of debt repayment under such credit facilities. Any invocation of these cross-acceleration or cross-default clauses could cause some or all of the other debt to accelerate, creating liquidity pressures. ArcelorMittals high level of debt outstanding could have adverse consequences more generally, including by impairing its ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, and limiting its flexibility to adjust to changing market conditions or withstand competitive pressures, resulting in greater vulnerability to a downturn in general economic conditions.
Furthermore, a significant part of ArcelorMittals debt is at variable rates of interest and thereby exposes ArcelorMittal to interest rate risk (i.e., if interest rates rise, ArcelorMittals debt service obligations on its variable rate indebtedness would increase). Depending on market conditions, ArcelorMittal may use interest-rate swaps or other financial instruments to hedge a portion of its interest rate exposure either from fixed to floating or floating to fixed. As of December 31, 2009, approximately 64% (61% after taking swaps into account) of the outstanding indebtedness of ArcelorMittal and its subsidiaries was at fixed rates of interest.
ArcelorMittals long-term corporate credit rating is currently BBB according to Standard & Poors Ratings Services and Fitch Ratings, and Baa3 according to Moodys Investors Service. ArcelorMittal experienced credit rating downgrades in 2009. On May 20, 2009, Moodys Investors Service downgraded ArcelorMittals Baa2 rating to Baa3 and assigned a stable outlook. On June 5, 2009, Standard & Poors Ratings Services downgraded the Companys BBB+ long-term corporate credit rating to BBB, and kept its outlook negative. On July 31, 2009, Fitch Ratings changed ArcelorMittals outlook to negative from stable. See Item 5BOperating and Financial Review and ProspectsLiquidity and Capital Resources. The ratings agencies could downgrade ArcelorMittals ratings either due to factors specific to ArcelorMittal, a prolonged cyclical downturn in the steel industry, or trends in credit and capital markets more generally. Any decline in ArcelorMittals credit rating would increase its cost of borrowing and could significantly harm its financial condition, results of operations and profitability, including its ability to refinance its existing indebtedness.
ArcelorMittal has grown through acquisitions and will likely continue to do so. Failure to manage external growth and difficulties integrating acquired companies could harm ArcelorMittals future results of operations, financial condition and prospects.
ArcelorMittal results from Mittal Steel Company N.V.s 2006 acquisition of, and 2007 merger with, Arcelor, a company of approximately equivalent size. Arcelor itself resulted from the combination of three steel companies, and Mittal Steel had previously grown through numerous acquisitions over many years. ArcelorMittal made numerous acquisitions in 2007 and 2008 before curtailing M&A activity in 2009. Its strategy going forward includes external growth through acquisitions.
The Companys past growth through acquisitions has entailed significant investment and increased operating costs, as well as requiring greater allocation of management resources away from daily operations. Managing growth has required the continued development of ArcelorMittals financial and management information control systems, the integration of acquired assets with existing operations, the adoption of manufacturing best practices, attracting and retaining qualified management and personnel as well as the continued training and supervision of such personnel, and the ability to manage the risks and liabilities associated with the acquired businesses. Failure to continue to manage such growth could have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects. In particular, if integration of acquisitions is not successful, ArcelorMittal could lose key personnel and key customers, and may not be able to retain or expand its market position.
Mr. Lakshmi N. Mittal has the ability to exercise significant influence over the outcome of shareholder votes.
As of December 31, 2009, Mr. Lakshmi N. Mittal (along with his wife, Mrs. Usha Mittal) own 637,504,863 of ArcelorMittals outstanding common shares, representing approximately 40.84% of ArcelorMittals outstanding voting shares. Consequently, Mr. Lakshmi N. Mittal has the ability to significantly influence the decisions adopted at the ArcelorMittal general meetings of shareholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, issuances of equity and the incurrence of indebtedness. Mr. Lakshmi N. Mittal also has the ability to significantly influence a change of control of ArcelorMittal.
The loss or diminution of the services of the Chairman of the Board of Directors and Chief Executive Officer of ArcelorMittal could have a material adverse effect on its business and prospects.
The Chairman of the Board of Directors and Chief Executive Officer of ArcelorMittal, Mr. Lakshmi N. Mittal, has for over a quarter of a century contributed significantly to shaping and implementing the business strategy of Mittal Steel and subsequently ArcelorMittal. His strategic vision was instrumental in the creation of the worlds largest and most global steel group. The loss or any diminution of the services of the Chairman of the Board of Directors and Chief Executive Officer could have a material adverse effect on ArcelorMittals business and prospects. ArcelorMittal does not maintain key man life insurance on its Chairman of the Board of Directors and Chief Executive Officer.
ArcelorMittal is a holding company that depends on the earnings and cash flows of its operating subsidiaries, which may not be sufficient to meet future operational needs or for shareholder distributions.
Because ArcelorMittal is a holding company, it is dependent on the earnings and cash flows of, and dividends and distributions from, its operating subsidiaries to pay expenses, meet its debt service obligations, pay any cash dividends or distributions on its common shares or conduct share buy-backs. Some of these operating subsidiaries have outstanding debt obligations or are subject to acquisition agreements that impose restrictions or prohibitions on such operating subsidiaries ability to pay dividends. Under the laws of Luxembourg, ArcelorMittal will be able to pay dividends or distributions only to the extent that it is entitled to receive cash dividend distributions from its subsidiaries, recognize gains from the sale of its assets or record share premium from the issuance of shares.
If earnings and cashflows of its operating subsidiaries are substantially reduced, ArcelorMittal may not be in a position to meet its operational needs or to make shareholder distributions in line with announced proposals.
Changes in assumptions underlying the carrying value of certain assets, including as a result of adverse market conditions, could result in impairment of such assets, including intangible assets such as goodwill.
At each reporting date, ArcelorMittal reviews the carrying amounts of its tangible and intangible assets (excluding goodwill, which is reviewed annually or whenever changes in circumstances indicate that the carrying amount may not be recoverable) to determine whether there is any indication that the carrying amount of those assets may not be recoverable through continuing use. If any such indication exists, the recoverable amount of the asset is reviewed in order to determine the amount of the impairment, if any. The recoverable amount is the higher of its net selling price (fair value reduced by selling costs) and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, an impairment loss is recognized. An impairment loss is recognized as an expense immediately as part of operating income in the statement of operations.
Goodwill represents the excess of the amounts ArcelorMittal paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is reviewed for impairment annually at the cash generating unit level or whenever changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of the cash generating units are determined from value in use calculations, which depend on certain key assumptions. These include assumptions regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market rates for investments of similar risk. The growth rates are based on the Companys growth forecasts, which are in line with industry trends. Changes in selling prices and direct costs are based on historical experience and expectations of future changes in the market. See Notes 2 and 8 to ArcelorMittals consolidated financial statements.
If managements estimates change, the estimate of the fair value of goodwill could fall significantly and result in impairment. While impairment of goodwill does not affect reported cash flows, it does result in a non-cash charge in the consolidated statement of operations, which could have a material adverse effect on ArcelorMittals results of operations or financial position. Based on its impairment review in connection with the preparation of its 2009 financial statements, the Company did not record any impairment of goodwill at December 31, 2009. Management believes, however, that reasonably possible changes in key assumptions used in assessing value in use would cause an impairment loss to be recognized in respect of the Companys AACIS and Stainless Steel segments, which account for approximately $1.5 billion and $1.8 billion of goodwill, respectively. At December 31, 2009, the Company had $14.8 billion of goodwill and $2.2 billion of other intangibles, compared to $14.2 billion of goodwill and $2.5 billion of other intangibles at December 31, 2008. See Note 8 to ArcelorMittals consolidated financial statements.
The Company also analyzes at each reporting date the recoverable amount of its manufacturing property, plant and equipment based on its value in use, and records an expense to the extent that the recoverable amount is less than the carrying amount. For the year ended December 31, 2009, the Company recorded an impairment loss of $564 million in this respect.
No assurance can be given as to the absence of significant further impairment charges in future periods, particularly if market conditions deteriorate again as they did in 2008-2009.
Capital expenditure commitments and other undertakings arising from past investments may limit ArcelorMittals operational flexibility, add to its financing requirements and adversely affect its results of operations and prospects.
In connection with the acquisition of certain operating subsidiaries and other investments, ArcelorMittal has committed itself to significant capital expenditures and other undertakings. See Item 5FOperating and Financial Review and ProspectsTabular Disclosure of Contractual Obligations and Note 21 to ArcelorMittals consolidated financial statements. ArcelorMittal expects to fund these commitments primarily through internal sources, but it cannot provide assurances in this regard or guarantee that these projects will be completed on time if at all. Failure to comply with commitments in connection with past growth projects may result in forfeiture of a part of ArcelorMittals investment, the loss of tax and regulatory benefits, and/or disputes that could have a material adverse effect on ArcelorMittals financial condition or results of operations.
ArcelorMittals growth strategy includes greenfield and brownfield projects that are inherently subject to completion and financing risks, which, if realized, could adversely affect ArcelorMittals results of operations and financial condition.
As a part of its future growth strategy, the Company plans to expand its steel making capacity and raw materials self-sufficiency through a combination of brownfield growth, new greenfield projects and acquisition opportunities, mainly in emerging markets such as India, Africa and Brazil. See Item 4Information on the CompanyBusiness OverviewBusiness Strategy. To the extent that these plans proceed, these projects would require substantial capital expenditures (with the attendant risks noted above), and timely completion may be affected by factors beyond the control of ArcelorMittal. These factors include receiving financing on reasonable terms, obtaining or renewing required regulatory approvals and licenses, local opposition to land acquisition or project development (as experienced, for example, in connection with the Companys projects in India), demand for the Companys products and general economic conditions. Any of these factors may cause the Company to delay, modify or forego some or all aspects of its expansion plans. The Company cannot guarantee that it will be able to execute these projects, and to the extent that they proceed, that it will be able to complete them on schedule, within budget, or achieve an adequate return on its investment.
ArcelorMittals mining operations are subject to mining risks.
ArcelorMittal operates mines and has substantially increased the scope of its mining activities in recent years. Mining operations are subject to hazards and risks usually associated with the exploration, development and production of natural resources, any of which could result in production shortfalls or damage to persons or property. In particular, hazards associated with open-pit mining operations include, among others:
Hazards associated with underground mining operations, of which ArcelorMittal has several, include, among others:
ArcelorMittal is exposed to all of these hazards. Among other accidents experienced over recent years, in January 2008, a methane gas explosion at ArcelorMittals Abaiskaya underground mine in Kazakhstan resulted in 30 fatalities and a cessation or disruption of operations for six months. On June 2, 2008 a coal and gas explosion caused by an unpredictable geological failure took place at the Tentekskaya mine in Kazakhstan and claimed the lives of five miners. Since then, the development roadway has been recovered and operations have resumed. The reoccurrence of any of these events, or the occurrence of any of those listed above, could delay production, increase production costs and result in death or injury to persons, damage to property and liability for ArcelorMittal, some or all of which may not be covered by insurance, as well as substantially harm ArcelorMittals reputation as a company focused on ensuring the health and safety of its employees.
Underfunding of pension and other post-retirement benefit plans at some of ArcelorMittals operating subsidiaries could require the Company to make substantial cash contributions to pension plans or to pay for employee healthcare, which may reduce the cash available for ArcelorMittals business.
ArcelorMittals principal operating subsidiaries in Brazil, Canada, Europe, South Africa and the United States provide defined benefit pension plans to their employees. Some of these plans are currently underfunded. At December 31, 2009, the value of ArcelorMittal USAs pension plan assets was $2.1 billion, while the projected benefit obligation was $3.3 billion, resulting in a deficit of $1.1 billion. At December 31, 2009, the value of the pension plan assets of ArcelorMittals Canadian subsidiaries was $2.4 billion, while the projected benefit obligation was $2.9 billion, resulting in a deficit of $492 million. At December 31, 2009, the value of the pension plan assets of ArcelorMittals European subsidiaries was $644 million, while the projected benefit obligation was $2.5 billion, resulting in a deficit of $1.9 billion. ArcelorMittal USA also had a partially underfunded post-employment benefit obligation of $4.0 billion relating to life insurance and medical benefits as of December 31, 2009. The value of ArcelorMittal USA post-employment benefit plan assets were $559 million, resulting in a deficit of $3.4 billion. ArcelorMittals Canadian subsidiaries also had an under-funded post-employment benefit obligation of $778 million relating to life insurance and medical benefits as of December 31, 2009. ArcelorMittals European subsidiaries also had a partially under-funded post-employment benefit obligation of $564 million relating to life insurance and medical benefits as of December 31, 2009. See Note 22 to ArcelorMittals consolidated financial statements.
ArcelorMittals funding obligations depend upon future asset performance, the level of interest rates used to discount future liabilities, actuarial assumptions and experience, benefit plan changes and government regulation. Because of the large number of variables that determine pension funding requirements, which are difficult to predict, as well as any legislative action, future cash funding requirements for ArcelorMittals pension plans and other post-employment benefit plans could be significantly higher than current estimates. In these circumstances funding requirements could have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects.
ArcelorMittal could experience labor disputes that may disrupt its operations and its relationships with its customers.
A majority of the employees of ArcelorMittal and of its contractors are represented by labor unions and are covered by collective bargaining or similar agreements, which are subject to periodic renegotiation. Strikes or work stoppages could occur prior to, or during, the negotiations preceding new collective bargaining agreements, during wage and benefits negotiations or during other periods for other reasons. ArcelorMittal periodically experiences strikes and work stoppages at various facilities prolonged strikes or work stoppages, which may increase in their severity and frequency and may have an adverse effect on the operations and financial results of ArcelorMittal.
ArcelorMittal is subject to economic policy risks and political, social and legal uncertainties in some of the developing countries in which it operates or proposes to operate. Any deterioration or disruption of the business environment in those countries may have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects.
ArcelorMittal operates, or proposes to operate, in a large number of developing countries. In recent years, many of these countries have implemented measures aimed at improving the business environment and providing a stable platform for economic development. ArcelorMittals business strategy has been developed partly on the assumption that this modernization, restructuring and upgrading of the business climate and physical infrastructure will continue, but which cannot be guaranteed, particularly in light of the recent global economic crisis. Risks of widespread insolvency, mass unemployment and the deterioration of various sectors of the economies where ArcelorMittal operates increased during crisis. Any slowdown in the development of these economies could have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects, as could insufficient investment by government agencies or the private sector in physical infrastructure. For example, the failure of a country to develop reliable electricity and natural gas supplies and networks, and any resulting shortages or rationing, could lead to disruptions in ArcelorMittals production.
Moreover, some of the countries in which ArcelorMittal operates have been undergoing substantial political transformations from centrally-controlled command economies to market-oriented systems. Political, economic and legal reforms necessary to complete such transformation may not continue. On occasion, ethnic, religious, historical and other divisions have given rise to tensions and, in certain cases, wide-scale civil disturbances and military conflict. The political systems in developing countries are vulnerable to their populations dissatisfaction with reforms, social and ethnic unrest and changes in governmental policies, any of which could have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects and its ability to continue to do business in these countries.
In addition, the legal systems in some of the countries in which ArcelorMittal operates remain less than fully developed, particularly with respect to property rights, the protection of foreign investment and bankruptcy proceedings, generally resulting in a lower level of legal certainty or security for foreign investment than in more developed countries. ArcelorMittal may encounter difficulties in enforcing court judgments or arbitral awards in some countries in which it operates among other reasons because those countries may not be parties to treaties that recognize the mutual enforcement of court judgments. Assets in certain countries where ArcelorMittal operates could also be at risk of expropriation or nationalization, and compensation for such assets may be below fair value. For example, the Venezuelan government has announced a policy of selective nationalization of companies operating in the country, and has effected a number of nationalizations. Although ArcelorMittal believes that the long-term growth potential in developing markets is strong, and intends them to be the focus of the majority of its near-term growth capital expenditures, legal obstacles could have a material adverse effect on the implementation of ArcelorMittals growth plans and its operations in such countries.
ArcelorMittals results of operations could be affected by fluctuations in foreign exchange markets, as well as by exchange controls imposed by governmental authorities in the countries where it operates.
ArcelorMittal operates and sells products globally, and, as a result, its business, financial condition, results of operations or prospects could be adversely affected by fluctuations in exchange rates. A substantial portion of ArcelorMittals assets, liabilities, operating costs, sales and earnings are denominated in currencies other than the U.S. dollar (ArcelorMittals reporting currency), fluctuations in exchange rates to the U.S. dollar, could have an adverse effect on its business, financial condition, results of operations or prospects.
ArcelorMittal also operates in several countries whose currencies are, or have in the past been, subject to limitations imposed by those countries central banks, or which have experienced sudden and significant devaluations, such as occurred in Venezuela in January 2010. Currency devaluations, the imposition of new exchange controls or other similar restrictions on currency convertibility, or the tightening of existing controls, in the countries in which ArcelorMittal operates could adversely affect its business, financial condition, results of operations or prospects. See Item 4BInformation on the CompanyBusiness OverviewGovernment RegulationsForeign Exchange.
Disruptions to ArcelorMittals manufacturing processes could adversely affect ArcelorMittals operations, customer service levels and financial results.
Steel manufacturing processes are dependent on critical steel-making equipment, such as furnaces, continuous casters, rolling mills and electrical equipment (such as transformers), and such equipment may incur downtime as a result of unanticipated failures or other events, such as fires or furnace breakdowns. ArcelorMittals manufacturing plants have experienced, and may in the future experience, plant shutdowns or periods of reduced production as a result of such equipment failures or other events. To the extent that lost production as a result of such a disruption could not be compensated for by unaffected facilities, such disruptions could have an adverse effect on ArcelorMittals operations, customer service levels and financial results.
Natural disasters could significantly damage ArcelorMittals production facilities.
Natural disasters could significantly damage ArcelorMittals production facilities and general infrastructure. For example, ArcelorMittal Lázaro Cárdenass production facilities are located in Lázaro Cárdenas, Michoacán, Mexico and ArcelorMittal Temirtau is located in the Karaganda region of the Republic of Kazakhstan, both these areas are prone to earthquakes of varying magnitudes. ArcelorMittal Point Lisas is located in Trinidad, which is vulnerable to hurricanes. Extensive damage to these facilities or any other major production complexes and staff casualties whether as a result of floods, earthquakes, hurricanes, tsunamis or other natural disasters, could, to the extent that lost production as a result of such a disaster could not be compensated for by unaffected facilities, severely affect ArcelorMittals ability to conduct its business operations and, as a result, reduce its future operating results.
ArcelorMittals insurance policies provide limited coverage, potentially leaving it uninsured against some business risks.
The occurrence of an event that is uninsurable or not fully insured could have a material adverse effect on ArcelorMittals business, financial condition, results of operations or prospects. ArcelorMittal maintains insurance on property and equipment in amounts believed to be consistent with industry practices but it is not fully insured against all business risks. ArcelorMittals insurance policies cover physical loss or damage to its property and equipment on a reinstatement basis arising from a number of specified risks and certain consequential losses, including business interruption arising from the occurrence of an insured event under the policies. Under these policies, damages and losses caused by certain natural disasters, such as earthquakes, floods and windstorms, are also covered. Each of the operating subsidiaries of ArcelorMittal also maintains various other types of insurance, such as workmens compensation insurance and marine insurance.
In addition, ArcelorMittal maintains trade credit insurance on receivables from selected customers, subject to limits that it believes are consistent with those in the steel industry, in order to protect it against the risk of non-payment due to customers insolvency or other causes. Not all of ArcelorMittals customers are or can be insured, and even when insurance is available, it may not fully cover the exposure.
As a result of the 2008-2009 economic downturn, which has had a particularly severe impact on certain countries and industries, including the automobile industry, insurers no longer provide coverage for certain customers or impose trade credit insurance limits that are not sufficient to cover the Companys exposure to certain customers.
Notwithstanding the insurance coverage that ArcelorMittal and its subsidiaries carry, the occurrence of an accident that causes losses in excess of limits specified under the relevant policy, or losses arising from events not covered by insurance policies, could materially harm ArcelorMittals financial condition and future operating results.
Product liability claims could adversely affect ArcelorMittals operations.
ArcelorMittal sells products to major manufacturers engaged in manufacturing and selling a wide range of end products. ArcelorMittal also from time to time offers advice to these manufacturers. Furthermore, ArcelorMittals products are also sold to, and used in, certain safety-critical applications. There could be significant consequential damages resulting from the use of such products. ArcelorMittal has a limited amount of product liability insurance coverage, and a major claim for damages related to ArcelorMittal products sold and, as the case may be, advice given in connection with such products could leave ArcelorMittal uninsured against a portion or all of the award and, as a result, materially harm its financial condition and future operating results.
ArcelorMittal is subject to regulatory risk, and may incur liabilities arising from investigations by governmental authorities and litigation, among others, regarding its pricing and marketing practices or other antitrust matters.
ArcelorMittal is the largest steel producer in the world. As a result of this position, ArcelorMittal may be subject to exacting scrutiny from regulatory authorities and private parties, particularly regarding its trade practices and dealings with customers and counterparties. As a result of its position in the steel markets and its historically acquisitive growth strategy, ArcelorMittal could be the target of governmental investigations and lawsuits based on antitrust laws in particular. These could require significant expenditures and result in liabilities or governmental orders that could have a material adverse effect on ArcelorMittals business, operating results, financial condition and prospects.
ArcelorMittal and certain of its subsidiaries are currently under investigation by governmental entities in several countries, and are named as defendants in a number of lawsuits relating to various antitrust matters. For example, in December 2008 the French Competition Council ruled that subsidiaries of ArcelorMittal had agreed with their competitors to fix prices and allocate markets and customers during the 1999 to 2004 period and imposed a fine of 301.78 million, although the fine was subsequently reduced on appeal in January 2010 to 42 million. Also, in September 2008, Standard Iron Works filed a class action complaint in U.S. federal court against ArcelorMittal, ArcelorMittal USA Inc. and other steel manufacturers, alleging on behalf of direct purchasers that the defendants conspired since 2005 to restrict the output of steel products in order to affect steel prices. Since the filing of the Standard Iron Works lawsuit, other similar lawsuits, including a lawsuit on behalf of indirect purchasers, have been filed and have been reassigned to the court overseeing this lawsuit. A motion by the defendants in the case to dismiss the complaint was denied in June 2009. Antitrust proceedings and investigations involving ArcelorMittal and its subsidiaries are also currently pending in Brazil, Europe and South Africa.
Because of the fact-intensive nature of the issues involved and the inherent uncertainty of such litigation and investigations, negative outcomes are possible. An adverse ruling in the proceedings described above or in other similar proceedings in the future could subject ArcelorMittal to substantial administrative penalties and/or civil damages. In cases relating to other companies, civil damages have ranged as high as hundreds of millions of U.S. dollars in major civil antitrust proceedings during the last decade. With respect to the pending U.S. federal court litigation, ArcelorMittal could be subject to treble damages. Although ArcelorMittal has established reserves for certain antitrust claims (see Item 8AFinancial InformationLegal ProceedingsLegal ClaimsCompetition/Antitrust Claims), unfavorable outcomes in current and potential future litigation and investigations could reduce ArcelorMittals liquidity and negatively affect its financial performance and its financial condition.
In addition to regulatory risk relating to antitrust, ArcelorMittal has been, and to some degree remains, subject to regulatory risk relating to state aid received in past years in connection with its acquisitions of certain steel facilities in Eastern Europe that were privatized. A breach or purported breach of the European Unions rules and transitional arrangements governing this state aid could result in a decision by the European Commission ordering relevant government authorities to take measures to recover the aid that was granted. In Romania, compliance with the transitional arrangements is currently being reviewed.
ArcelorMittals governance and compliance processes may fail to prevent regulatory penalties and reputational harm.
ArcelorMittal operates in a global environment, and its activities straddle multiple jurisdictions and complex regulatory frameworks at a time of increased enforcement activity worldwide. The Companys governance and compliance processes, which include the review of internal control over financial reporting, may not prevent all future breaches of law, accounting or governance standards. ArcelorMittal may be subject to breaches of its Code of Business Conduct, business conduct protocols and instances of fraudulent behavior and dishonesty by its employees, contractors or other agents. The Companys failure to comply with applicable laws and other standards could subject it to fines, loss of operating licenses and reputational harm.
The income tax liability of ArcelorMittal may substantially increase if the tax laws and regulations in countries in which it operates change or become subject to adverse interpretations or inconsistent enforcement.
Taxes payable by companies in many of the countries in which ArcelorMittal operates are substantial and include value-added tax, excise duties, profit taxes, payroll-related taxes, property taxes and other taxes. Tax laws and regulations in some of these countries may be subject to frequent change, varying interpretation and inconsistent enforcement. Ineffective tax collection systems and continuing budget requirements may increase the likelihood of the imposition of arbitrary or onerous taxes and penalties, which could have a material adverse effect on ArcelorMittals financial condition and results of operations. In addition to the usual tax burden imposed on taxpayers, these conditions create uncertainty as to the tax implications of various business decisions. This uncertainty could expose ArcelorMittal to significant fines and penalties and to enforcement measures despite its best efforts at compliance, and could result in a greater than expected tax burden. See Note 18 to ArcelorMittals consolidated financial statements.
In addition, many of the jurisdictions in which ArcelorMittal operates have adopted transfer pricing legislation. If tax authorities impose significant additional tax liabilities as a result of transfer pricing adjustments, it could have a material adverse effect on ArcelorMittals financial condition and results of operations.
It is possible that tax authorities in the countries in which ArcelorMittal operates will introduce additional revenue raising measures. The introduction of any such provisions may affect the overall tax efficiency of ArcelorMittal and may result in significant additional taxes becoming payable. Any such additional tax exposure could have a material adverse effect on its financial condition and results of operations.
ArcelorMittal may face a significant increase in its income taxes if tax rates increase or the tax laws or regulations in the jurisdictions in which it operates, or treaties between those jurisdictions, are modified in an adverse manner. This may adversely affect ArcelorMittals cash flows, liquidity and ability to pay dividends.
If ArcelorMittal were unable to utilize fully its deferred tax assets, its profitability could be reduced.
At December 31, 2009, ArcelorMittal had $4.8 billion recorded as deferred tax assets on its statement of financial position. These assets can be utilized only if, and only to the extent that, ArcelorMittals operating subsidiaries generate adequate levels of taxable income in future periods to offset the tax loss carry forwards and reverse the temporary differences prior to expiration.
At December 31, 2009, the amount of future income required to recover ArcelorMittals deferred tax assets was approximately $16.4 billion at certain operating subsidiaries.
ArcelorMittals ability to generate taxable income is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. If ArcelorMittal generates lower taxable income than the amount it has assumed in determining its deferred tax assets, then the value of deferred tax assets will be reduced.
U.S. investors may have difficulty enforcing civil liabilities against ArcelorMittal and its directors and senior management.
ArcelorMittal is incorporated under the laws of the Grand Duchy of Luxembourg with its principal executive offices and corporate headquarters in Luxembourg. The majority of ArcelorMittals directors and senior management are residents of jurisdictions outside of the United States. The majority of ArcelorMittals assets and the assets of these persons are located outside the United States. As a result, U.S. investors may find it difficult to effect service of process within the United States upon ArcelorMittal or these persons or to enforce outside the United States judgments obtained against ArcelorMittal or these persons in U.S. courts, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it may also be difficult for an investor to enforce in U.S. courts judgments obtained against ArcelorMittal or these persons in courts in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It may also be difficult for a U.S. investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against ArcelorMittals directors and senior management and non-U.S. experts named in this annual report.
A. History and Development of the Company
ArcelorMittal is the worlds largest and most global steel producer. It results from the combination in 2006 of Mittal Steel and Arcelor, which were at the time the worlds largest and second largest steel companies by production volume respectively.
ArcelorMittal had sales of approximately $65.1 billion, steel shipments of approximately 71 million tonnes and crude steel production of approximately 73 million tonnes for the year ended December 31, 2009, as compared to sales of approximately $124.9 billion, steel shipments of approximately 101.7 million tonnes and crude steel production of approximately 103.3 million tonnes for the year ended December 31, 2008.
ArcelorMittals net income attributable to equity holders of the parent for the year ended December 31, 2009, was $0.1 billion, or $0.08 per share, as compared with net income attributable to equity holders of the parent of $9.5 billion, or $6.84 per share, for the year ended December 31, 2008.
As of December 31, 2009, ArcelorMittal had equity of $65.4 billion, total debt of $24.8 billion and cash and cash equivalents, including restricted cash, of $6.0 billion as compared to equity of $59.3 billion, total debt of $34.1 billion and cash and cash equivalents, including restricted cash, of $7.6 billion as of December 31, 2008.
ArcelorMittal has been built on a management strategy that emphasizes size and scale, vertical integration, product diversity and quality, continuous growth in higher value products, and a strong focus on employee well-being and customer service. The Companys three-dimensional strategy, as described below, is its key to sustainability and growth. ArcelorMittal has unique geographical and product diversification coupled with upstream and downstream integration designed to minimize risk caused by economic cycles.
Geography: ArcelorMittal is the largest steel producer in the Americas, Africa and Europe, and is the second largest producer in the CIS region, with a growing presence in Asia, particularly China. ArcelorMittal has steel-making operations in 20 countries on four continents, including 65 integrated, mini-mill and integrated mini-mill steel-making facilities. As of December 31, 2009, ArcelorMittal had approximately 282,000 employees.
ArcelorMittal operates its business in six reportable operating segments: Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and CIS; Stainless Steel; and ArcelorMittal Steel Solutions and Services. ArcelorMittals steel-making operations have a high degree of geographic diversification. Approximately 35% of its steel is produced in the Americas, approximately 47% is produced in Europe and approximately 18% is produced in other countries, such as Kazakhstan, South Africa and Ukraine. In addition, ArcelorMittals sales are spread over both developed and developing markets, which have different consumption characteristics.
Products: ArcelorMittal produces a broad range of high-quality finished and semi-finished products. Specifically, ArcelorMittal produces flat products, including sheet and plate, long products, including bars, rods and structural shapes, and stainless steel products. ArcelorMittal also produces pipes and tubes for various applications. ArcelorMittal sells its products primarily in local markets and through its centralized marketing organization to a diverse range of customers in approximately 177 countries including the automotive, appliance, engineering, construction and machinery industries.
As a global steel producer, the Company is able to meet the needs of different markets. Steel consumption and product requirements clearly differ between developed markets and developing markets. Steel consumption in developed economies is weighted towards flat products and a higher value-added mix, while developing markets utilize a higher proportion of long products and commodity grades. To meet these diverse needs, the Company maintains a high degree of product diversification and seeks opportunities to increase the proportion of its product mix consisting of higher value-added products.
Value Chain: ArcelorMittal has significant raw material and mining assets, as well as certain strategic cost-plus based long-term contracts with external suppliers. In 2009 (assuming full production of iron ore at ArcelorMittal Mines Canada, Serra Azul and full share of production at Pena Colorada for captive use), approximately 64% of ArcelorMittals iron-ore requirements and approximately 21% of its coal requirements were supplied from its own mines or from long-term contracts at many of its operating units. The Company currently has iron ore mining activities in Algeria, Brazil, Bosnia, Canada, Kazakhstan, Mexico, South Africa, Ukraine and the United States and has projects under development or prospective development in Liberia, Senegal, Mauritania and India. The Company currently has coal mining activities in Kazakhstan, Russia, South Africa and the United States. It has projects under prospective development in India and has a strategic investment in an Australian pulverized coal producer. ArcelorMittal also has made strategic investments in order to secure access to other raw materials including manganese, molybdenum and ferro alloys.
In addition, ArcelorMittal produces substantial amounts of direct reduced iron, or DRI, which is a scrap substitute used in its mini-mill facilities to supplement external metallics purchases. ArcelorMittal is also a significant producer of coke, a critical raw material for steel-making produced from metallurgical coal, and it satisfies over 93% of its coke needs through its own production facilities. ArcelorMittals facilities have good access to shipping facilities, including through ArcelorMittals own 14 deep-water port facilities and linked railway sidings.
ArcelorMittal has its own downstream steel distribution business, primarily run through its Steel Solutions and Services segment. It also provides value-added and customized steel solutions through further processing to meet specific customer requirements.
ArcelorMittal is a successor to Mittal Steel, a business founded in 1989 by Mr. Lakshmi N. Mittal, the Chairman of the Board of Directors and Chief Executive Officer of ArcelorMittal. It has experienced rapid and steady growth since then largely through the consistent and disciplined execution of a successful consolidation-based strategy. Mittal Steel made its first acquisition in 1989, leasing the Iron & Steel Company of Trinidad & Tobago. Some of its principal acquisitions since then include Sibalsa (Mexico) in 1992, Sidbec Dosco (Canada) in 1994, Hamberger Stahlwerk (Germany) and Karmet (Kazakhstan) in 1995, Thyssen Duisburg (Germany) in 1997, Inland Steel (USA) in 1998, Unimetal (France) in 1999, Sidex (Romania) and Annaba (Algeria) in 2001, Nova Hut (Czech Republic) in 2003, BH Steel (Bosnia), Balkan Steel (Macedonia), PHS (Poland) and Iscor (South Africa) in 2004, ISG (USA) and Kryvorizhstal (Ukraine) in 2005, three Stelco Inc. subsidiaries (Canada) and Arcelor in 2006.
Arcelor was created in February 2002 by the combination of three steel-making companies: Aceralia Corporación Siderúrgica (Aceralia), Arbed and Usinor. At the time of its acquisition by Mittal Steel in 2006, Arcelor was the second largest steel producer in the world in terms of production, with 2005 production of 46.7 million tonnes of steel and 2005 revenues of 32.6 billion. It operated in all key end markets: the automotive industry, construction, household appliances, packaging and general industry. Arcelor enjoyed leading positions in Western Europe and South America, in particular due to its Brazilian operations. The process of integrating Arcelor and Mittal Steel, including the realization of the targeted $1.6 billion in synergies from the merger, was completed on schedule by the end of 2008.
In 2007, ArcelorMittal continued to pursue a disciplined growth strategy, with a total of 35 transactions announced in Argentina, Austria, Canada, China, Estonia, France, Germany, Italy, Mexico, Poland, Russia, Slovakia, South Africa, Turkey, the United Kingdom, Uruguay, the United States and Venezuela, a number of which were completed in 2007. During 2007, ArcelorMittal also announced or completed buy-out offers for non-controlling interests in certain of its subsidiaries in Argentina, Brazil and Poland. ArcelorMittal also initiated development plans for greenfield projects in India, Liberia and Senegal and announced new prospective development projects in Mauritania, Mozambique, Nigeria, Russia, Saudi Arabia and Turkey.
During the first eight months of 2008, ArcelorMittal continued making investments, with significant transactions announced in Australia, Brazil, Canada, Costa Rica, France, Russia, South Africa, Sweden, Turkey, United Arab Emirates, the United States, and Venezuela, the majority of which were completed. During the remainder of 2008 and all of 2009, ArcelorMittal largely suspended mergers and acquisitions and other investment activities in light of the deteriorating economic and market environment.
The steel-making and other assets acquired as described above now constitute ArcelorMittals major operating subsidiaries. In 2007 and in the first three quarters of 2008, ArcelorMittals acquisitions also concentrated on vertical integration (i.e., acquisitions of raw material producers or production sites).
In response to the deep slump in demand for steel products in the last quarter of 2008 and into 2009, the Company sharply curtailed its M&A and investment activities and re-examined its investment projects involving significant capital expenditure including those announced in prior years. As discussed more fully in Item 5Operating and Financial Review and ProspectsOverviewInitiatives Taken in Response to Changing Market Conditions, the Company sharply reduced its capital expenditures for 2009 to $2.8 billion, of which $2.1 billion was for maintenance. For 2010, ArcelorMittal expects higher levels of capital expenditure than in 2009, with growth-oriented capital expenditure (focused mainly on emerging markets and mining operations) expected to resume gradually.
Investments, Acquisitions and Disposals in 2009
ArcelorMittals principal investments, acquisitions and disposals for the year ended December 31, 2009 are summarized below.
Other Key Events in 2009
Updates on Previously Announced Investment Projects
India Greenfield Projects. In 2005 and 2006, ArcelorMittal announced plans to build integrated steel plants in the Indian States of Jharkhand and Orissa, each with a capacity of 12 million tonnes of liquid steel production per year and each at a cost in excess of $10 billion. Implementation of these projects remains contingent on securing necessary mining rights, land and construction permits and necessary regulatory approvals. In late 2009 and early 2010, the Company also took preliminary steps with authorities in the state of Karnataka in South India in view of the construction of a six-million tonne steel plant with a captive 750 megawatt power plant, representing a potential aggregate investment of $6.5 billion. The Company fully intends to participate in the growth of the Indian steel industry.
Kazakhstan. On June 10, 2008, ArcelorMittal announced plans to invest approximately $1.2 billion in improvements in health and safety and technological upgrades at its integrated steel plant and coal mines in Kazakhstan. This investment program is proceeding as announced. ArcelorMittal also announced possible investments to expand steelmaking capacity in Kazakhstan from five to ten million tonnes over a five to nine year period. The implementation of this expansion project has been postponed due, among other things, to the subsequent change in market conditions.
Brazil. On November 30, 2007, ArcelorMittal announced plans to expand capacity at its Monlevade integrated long products plant in the state of Minas Gerais with the construction of a second blast furnace that would add one million tonnes per annum of additional capacity. Implementation of the project, estimated to entail an investment of $1.2 billion, was delayed in 2008/2009 due to market conditions but is expected to start in 2010. In August 2008, ArcelorMittal announced additional plans to expand steel production capacity in the long carbon sector in Brazil, but the timing and scope of this other investment, initially estimated at $1.6 billion, are currently under review.
China. In 2008, ArcelorMittal announced the establishment of two joint venture projects in China with Hunan Valin Iron & Steel Group Co., Ltd. one related to electrical steel in which each party holds 50%, and the other related to automotive steel, in which each party holds a 33% stake and Hunan Valin Steel Tubes & Wire Co., Ltd. holds 34% stake. The automotive steel joint venture, Valin ArcelorMittal Automotive Steel, would build facilities with an annual production capacity of 1.2 million tonnes of products including cold rolled steel, galvanized steel and galvanealed steel, with an estimated investment amount of RMB 4.5 billion ($660 million). The electrical steel joint venture, Valin ArcelorMittal Electrical Steel Co., Ltd., would build cold rolling and processing facilities with annual production capacity of 200,000 tonnes for non-grain oriented (NGO) steel and 100,000 tonnes for grain oriented (GO) electrical steels, with an estimated investment amount of RMB $3.9 billion ($570 million). Implementation of both projects is advancing including with respect to the regulatory approval process.
Saudi Arabia. In 2007, Mittal Steel signed a joint venture agreement with the Bin Jarallah Group of companies for the design and construction of a seamless tube mill in Saudi Arabia. This facility will be located in Jubail Industrial City, north of Al Jubail on the Persian Gulf. ArcelorMittal currently holds 51% and Bin Jarallah Group holds 49% of the joint venture company. The joint venture has arranged financing and construction is commencing with a target to complete by 2012.
Other Investments. ArcelorMittal announced a number of other investment projects in recent years, several of which have been delayed for project-specific reasons (such as delays in obtaining required permits) and/or whose scope and timing have been put under review by management as a result of changed market conditions in the wake of the economic crisis in late 2008 and 2009. With respect to prospective investments in upstream assets, such projects include the integrated iron ore mining and related infrastructure project in Senegal for a total investment of $2.2 billion and with respect to which the Company is in discussions with the State of Senegal, the Kalagadi manganese ore project in South Africa, and the development of iron ore mining in Mauritania. With respect to steel production initiatives, such projects include the prospective $600 million investment to construct a new steel mill in Mexico, and the plans to expand its joint venture partnership with Nippon Steel Corporation by building a new continuous galvanizing line at the I/N Kote facility in New Carlisle, Indiana with an annual capacity of 480,000 tonnes. Certain other previously announced projects, such as the agreement with Canadian-based Adriana Resources Inc. for the development of an iron ore port facility in the State of Rio de Janeiro, Brazil and the agreement to acquire a 49% stake in the share capital of MPP - Mineração Pirâmide Participações Ltda in Brazil, have been terminated.
ArcelorMittal is a public limited liability company (société anonyme) that was incorporated under the laws of Luxembourg on June 8, 2001. ArcelorMittal is registered at the R.C.S. Luxembourg under number B 82.454.
The mailing address and telephone number of ArcelorMittals registered office are:
19, Avenue de la Liberté
Grand Duchy of Luxembourg
Telephone: +352 4792-2652
ArcelorMittals agent for U.S. federal securities law purposes is:
ArcelorMittal USA Inc.
1 South Dearborn Street, 19th floor
Chicago, Illinois 60603
United States of America
Telephone: + 1 312 899-3400
ArcelorMittal shares are listed and traded on the NYSE (symbol MT), ArcelorMittals principal United States trading market are admitted to trading outside the United States on the Luxembourg Stock Exchanges regulated market and listed on the Official List of the Luxembourg Stock Exchange (MT) and are listed and traded (on a single order book as from January 14, 2009) on the NYSE Euronext European markets (Paris, Amsterdam and Brussels) (MT) and the stock exchanges of Madrid, Barcelona, Bilbao and Valencia (the Spanish Stock Exchanges) (MTS).
Arcelor became a subsidiary of Mittal Steel in August 2006 and its results of operations have been included in Mittal Steels (the predecessor entity to ArcelorMittal) consolidated results of operations from that date. Arcelor was created in February 2002 by the combination of three steel-making companies, Aceralia Corporación Siderúrgica, Arbed and Usinor. Prior to its acquisition by Mittal Steel (the predecessor entity to ArcelorMittal), Arcelor operated in four market sectors: flat carbon steel, long carbon steel, stainless steel and Arcelor Steel Solutions and Services. In 2005, the last full year prior to Arcelors acquisition by Mittal Steel, it produced 46.7 million tonnes of steel and had revenues of 32.6 billion and net income of 3.8 billion.
Summary of the Mittal Steel-Arcelor Combination and Merger
On August 1, 2006, Mittal Steel acquired 91.9% of the share capital of Arcelor (on a fully diluted basis). Through subsequent transactions Mittal Steel increased its ownership to 94.2%, which included the issued and outstanding shares of Arcelor and all of Arcelors convertible bonds, which were acquired in exchange for approximately 680 million Mittal Steel class A common shares and approximately 8.0 billion ($10.4 billion) in cash. On August 1, 2006, Arcelor became a subsidiary of Mittal Steel and its results of operations were included in Mittal Steels consolidated results of operations from that date. The acquisition was accounted for using the purchase method of accounting, which requires that the assets acquired and liabilities assumed be recorded at their estimated fair values as of the acquisition date.
In a Memorandum of Understanding entered into among Mittal Steel, Arcelor and the Significant shareholder on June 25, 2006, (the Memorandum of Understanding or MoU), Mittal Steel agreed that it would merge into Arcelor as soon as practicable following completion of its revised offer for Arcelor, and that the combined entity would be incorporated, domiciled and headquartered in Luxembourg. Following discussions at a meeting held on April 27, 2007, the Mittal Steel Board of Directors decided to organize a two-step process pursuant to which Mittal Steel would first be merged into ArcelorMittal, which would subsequently be merged into Arcelor as the ultimate surviving entity.
ArcelorMittal was incorporated on August 13, 2004 under the name Verger Investments S.A. It was a wholly-owned subsidiary of Mittal Steel from April 24, 2007 and was renamed ArcelorMittal on April 26, 2007. It did not conduct any operations prior to the merger summarized below. Effective September 3, 2007, Mittal Steel merged into ArcelorMittal, by way of absorption by ArcelorMittal of Mittal Steel and without liquidation of Mittal Steel, and the combined company was renamed ArcelorMittal.
On September 25, 2007, ArcelorMittal and Arcelor entered into a merger agreement providing for the merger of ArcelorMittal into Arcelor by way of absorption by Arcelor of ArcelorMittal and without liquidation of ArcelorMittal. On November 13, 2007, the merger became effective and shareholders of ArcelorMittal became shareholders of Arcelor, which was subsequently renamed ArcelorMittal. No additional consideration in cash or in kind was paid by Arcelor to the shareholders of ArcelorMittal in connection with the merger.
ArcelorMittal maintains an Internet site at www.arcelormittal.com. Information contained in or otherwise accessible through this Internet site is not a part of this annual report. All references in this annual report to this Internet site are inactive textual references to this URL and are for your information only.
B. Business Overview
We believe that the following factors contribute to ArcelorMittals success in the global steel industry:
Market leader. ArcelorMittal is the worlds largest steel producer, with an annual production capacity of approximately 130 million tonnes of crude steel for the year ended December 31, 2009. Steel shipments for the year ended December 31, 2009 totaled approximately 71 million tonnes.
ArcelorMittal is the largest producer of steel in North and South America and Africa, the second largest steel producer in the CIS region, and has a growing presence in Asia, including investments in China. It is also the largest steel producer in the European Union, with significant operations in France, Germany, Belgium, Spain, Luxembourg, Poland, the Czech Republic and Romania. In addition, many of ArcelorMittals operating units have access to developing markets that are expected to experience, over time, above-average growth in steel consumption (such as Central and Eastern Europe, South America, Africa and CIS).
ArcelorMittal has a diversified portfolio of products to meet a wide range of customer needs across all steel-consuming industries, including the automotive, appliance, engineering, construction, energy and machinery industries. The Company sells its products in local markets and through a centralized marketing organization to customers in approximately 177 countries. ArcelorMittals diversified product offering, together with its distribution network and research and development (R&D) programs, enable it to build strong relationships with customers, which include many of the worlds major automobile and appliance manufacturers. With approximately 19% of the worldwide market share of flat steel sheets for the automotive industry, ArcelorMittal is a strategic partner for the major original equipment manufacturers (OEMs), and has the capability to build long-term contractual relationships with them based on early vendor involvement, contributions to global OEM platforms and common value-creation programs.
With a portfolio of assets that is diversified across product segments and geographic regions, ArcelorMittal benefits from a number of natural hedges designed to foster relatively stable cash flows in normal economic circumstances and protect it over time from weaknesses in any one particular country or region, as well as volatility in commodity and currency markets.
Research and Development. R&D supports ArcelorMittals business units in process and product improvement to produce the best quality steel at a low cost and with a limited impact on the environment. With 15 major research centers, ArcelorMittal possesses an R&D capability unique in the steel industry. Their locations worldwide enable quick transfers of know-how to ArcelorMittal plants across the world. In addition, ArcelorMittals close relationship with its customers enables it to foster innovation and work with them to meet their evolving needs and develop new steel products and solutions. To improve its research efficiency and achieve a high level of scientific knowledge, ArcelorMittal maintains strong academic partnerships with world-class scientific and technical universities.
The main focuses of ArcelorMittals R&D are:
For the year ended December 31, 2009, ArcelorMittals R&D expense was approximately $253 million.
Diversified and efficient producer. As a vertically-integrated global steel manufacturer with a leading position in many markets, ArcelorMittal benefits from scale and production cost efficiencies in various markets and a measure of protection against the cyclicality of the steel industry and raw materials prices
Business improvement through company-wide Knowledge Management Program. Knowledge sharing and implementation of best practices are an integral part of ArcelorMittals management philosophy. Through its global Knowledge Management Program (KMP), ArcelorMittal shares, develops and utilizes its knowledge and experience across its facilities to accelerate improvement in business performance. The KMP covers all key functional areas, such as procurement, marketing, logistics and health and safety, as well as the main steps in steel production and processing. The KMP includes ongoing detailed benchmarking, regular technical meetings and information-sharing at the corporate, regional and operating levels and inter-plant expert and operational support to drive performance improvement. The KMP enables each business unit to benefit from the scale and reach of ArcelorMittals global presence and access the best practices and experience within the Company. ArcelorMittal believes that the KMP provides a differentiating advantage to ArcelorMittals business performance by continuously contributing to reduced procurement and conversion costs and enhancing safety, quality, productivity and profitability.
Dynamic responses to steel market challenges and opportunities. ArcelorMittals management team has a strong track record and extensive experience in the steel industry. Management had the vision to recognize and take full advantage of the strong steel market trend from 2004 to mid-2008. By responding quickly and decisively to opportunities, management succeeded in building the worlds largest steel company. Even as ArcelorMittal grew in recent years (in large part due to its expertise in acquisitions and turnarounds as described below), it put itself on stronger footing to weather the current market downturn. In addition, the consolidation in the sector over the past decade led by ArcelorMittal has created an industry with fewer, stronger and more disciplined companies and the industry therefore adjusted more rapidly to the collapse in demand in late 2008/early 2009 than in past downturns. ArcelorMittals management has shown similar dynamism in response to the current market downturn. Following the sudden collapse of the market in September 2008, ArcelorMittal took an aggressive response to the crisis, swiftly implementing production cuts, cost-cutting measures and debt reduction to help it weather the downturn and maintain its leading position. Planned cost savings of $5 billion over five years are in process, and debt reduction (including a net debt reduction of $13.7 billion at the end of 2009 from third-quarter 2008 levels) has been achieved. Managements flexibility and agility have allowed ArcelorMittal to shift quickly from the growth-oriented approach that prevailed in early 2008 to a crisis response in 2008 and into 2009 that focused on prudent deployment of cash and reduction of costs, while continuing to provide customers with superior value-added steel products and solutions.
Proven expertise in steel acquisitions and turnarounds. ArcelorMittals management team has proven expertise in successfully acquiring and subsequently integrating operations, as well as turning around underperforming assets within tight timeframes. The Company takes a disciplined approach to investing and uses teams with diverse expertise from different business units across the Company for evaluating any new asset, conducting due diligence and monitoring integration and post-acquisition performance. Since the inception of ArcelorMittals predecessor company Mittal Steel in 1989, the Company has grown through a series of acquisitions and by improving the operating performance and financial management at the facilities that it has acquired. In particular, ArcelorMittal seeks to improve acquired businesses by eliminating operational bottlenecks, addressing any historical under-investments and increasing acquired facilities capability to produce higher quality steel. The Company introduces focused capital expenditure programs, implements company-wide best practices, balances working capital, ensures adequate management resources and introduces safety and environmental improvements at acquired facilities. ArcelorMittal believes that these operating and financial measures have reduced costs of production, increased productivity and improved the quality of steel produced at these facilities.
Employees. Recognizing them as the Companys most valuable assets, ArcelorMittals management devotes considerable effort towards securing the right people and enhancing their productivity in four key ways: (1) organizational effectiveness, which aligns the organizational structure and size with the Companys goals and operations; (2) resourcing, workforce planning, skill gaps identification and training which ensures that the right people are in the right roles; (3) succession planning and development; and (4) performance management through measures such as management review and incentive programs.
Corporate responsibility. In recognition of the significance that ArcelorMittal places on corporate responsibility (CR) as an element of its core business strategy, a revised CR strategy has been developed and communicated to employees, investors and other stakeholders. Based on ArcelorMittals values and vision, the CR strategy is concentrated on the areas of safety, employee development and social dialogue; channeling the Companys expertise to develop cleaner processes and create more environmentally sound products; and enriching and engaging local communities; all of which are underpinned by a commitment to transparent governance practices.
ArcelorMittals success has been built upon a consistent strategy that emphasizes size and scale, vertical integration, product diversity, continuous growth in higher value products and a strong customer focus. We intend to continue to be the global leader in the steel industry, in particular through the following:
Three-dimensional strategy for sustainability and growth. ArcelorMittal has unique geographical and product diversification, coupled with upstream and downstream integration that reduces exposure to risk and cyclicality. This strategy can be broken down into its three major elements:
Geography: ArcelorMittal is the largest producer of steel in Europe, North and South America, Africa, the second largest steel producer in the CIS region, and has a growing presence in Asia, particularly in China. ArcelorMittal has steel-making operations in 20 countries on four continents, including 65 integrated, mini-mill and integrated mini-mill steel-making facilities which provide a high degree of geographic diversification. Approximately 35% of its steel is produced in the Americas, approximately 47% is produced in Europe and approximately 18% is produced in other countries, such as Kazakhstan, South Africa and Ukraine. ArcelorMittal is able to improve management and spread its risk by operating in six segments (Flat Carbon Americas, Flat Carbon Europe, Long Carbon Americas and Europe, AACIS, Stainless Steel, and Steel Solutions and Services) reflecting its geographic and product diversity.
Worldwide steel demand in recent years has been driven by growth in developing economies, in particular in the BRICET countries. The Companys expansion strategy in recent years has given it a leading position in Africa, Central and Eastern Europe, South America and Central Asia. The Company is also building its presence in China and India and recently made its first strategic investment in India in Uttam Galva.
Products: As a global steel producer, ArcelorMittal is able to meet the needs of diverse markets. Steel consumption and product requirements are different in mature economy markets and developing economy markets. Steel consumption in mature economies is weighted towards flat products and a higher value-added mix, while developing markets utilize a higher proportion of long products and commodity grades. As these economies develop, local customers will require increasingly advanced steel products as market needs evolve. To meet these diverse needs, ArcelorMittal maintains a high degree of product diversification and seeks opportunities to increase the proportion of its product mix consisting of higher value-added products. The Company produces a broad range of high-quality finished, semi-finished carbon steel products and stainless steel products.
Value chain: ArcelorMittal has access to high-quality and low-cost raw materials through its captive sources and long-term contracts. ArcelorMittal plans to continue to develop its upstream and downstream integration in the medium-term, following a return to a more favorable market environment. Accordingly, the Company intends in the medium-term to increase selectively its access to and ownership of low-cost raw material supplies, particularly in locations adjacent to, or accessible from, its steel plant operations.
Downstream integration is a key element of ArcelorMittals strategy to build a global customer franchise. In high-value products, downstream integration allows steel companies to be closer to the customer and capture a greater share of value-added activities. As its key customers globalize, ArcelorMittal intends to invest in value-added downstream operations, such as steel service centers and building and construction support services for the construction industry. In addition, the Company intends to continue to develop its distribution network in selected geographic regions. ArcelorMittal believes that these downstream and distribution activities should allow it to benefit from better market intelligence and better manage inventories in the supply chain to reduce volatility and improve working capital management. Furthermore ArcelorMittal will continue to expand its production of value-added products in developing markets, leveraging off its experience in developed markets.
Growth Prospects. Notwithstanding the difficult market conditions of 2008/2009, ArcelorMittals management believes that there will be strong global steel demand growth in the medium to long term. The Company will continue to invest opportunistically in expanding the production capacity of its existing facilities depending on market conditions and projected global and regional demand trends.
Mergers and acquisitions have historically been a key pillar of ArcelorMittals strategy to which it brings unique experience, particularly in terms of integration. Instead of creating new capacity, mergers and acquisitions increase industry consolidation and create synergies. ArcelorMittal has also placed strong emphasis on growth in emerging economies through greenfield developments. In light of the difficult economic and market conditions prevailing in late 2008 and 2009, ArcelorMittal curtailed M&A and greenfield investment activity. To the extent market conditions continue to improve, however, the Company gradually expects to resume M&A and other investment activity in order to take advantage of selected growth opportunities, mainly in emerging markets. In addition the Company remains focused on pursuing its greenfield growth opportunities.
ArcelorMittal reports its operations in six operating segments: Flat Carbon Americas, Flat Carbon Europe, Long Carbon Americas and Europe, Asia, Africa and CIS (AACIS), Stainless Steel and Steel Solutions and Services.
The following table sets forth selected financial data by operating segment.
See also Note 24 to ArcelorMittals consolidated financial statements
ArcelorMittal has a high degree of product diversification relative to other steel companies. Its plants manufacture a broad range of finished and semi-finished steel products of different specifications, including many difficult and technically sophisticated products that it sells to demanding customers for use in high-end applications.
ArcelorMittals principal products include:
Historically, primary steel producers have been divided into integrated and mini-mill producers. Over the past few decades, a third type of steel producer has emerged that combines the strengths of both the integrated and the mini-mill processes. These producers are referred to as integrated mini-mill producers.
In integrated steel production, coal is converted to coke in a coke oven, and then combined in a blast furnace with iron ore and limestone to produce pig iron, which is subsequently combined with scrap in a converter, which is generally a basic oxygen or tandem furnace, to produce raw or liquid steel. Once produced, the liquid steel is metallurgically refined and then transported to a continuous caster for casting into a slab, bloom or billet, which is then further shaped or rolled into its final form. Various finishing or coating processes may follow this casting and rolling. Recent modernization efforts by integrated steel producers have focused on cutting costs through eliminating unnecessary production steps, reducing manning levels through automation, and decreasing waste generated by the process. In recent years, integrated steel production has declined as a proportion of total steel production due to the high costs of building, operating and maintaining integrated steel operations, including lost production time associated with periodic blast furnace relinings. This reduction in integrated production capacity has increased the market share of the remaining producers of the highest value-added products that require the cleanest steel.
A mini-mill employs an electric arc furnace to directly melt scrap and/or scrap substitutes such as direct reduced iron, thus entirely replacing all of the steps up to and including the energy-intensive blast furnace. A mini-mill incorporates the melt shop, ladle metallurgical station, casting, and rolling into a unified continuous flow. Mini-mills are generally characterized by lower costs of production and higher productivity than integrated steel-makers. These attributes are due in part to the lower capital costs and lower operating costs resulting from the streamlined melting process and more efficient plant layouts of mini-mills. The quality of steel produced by mini-mills is primarily limited by the quality of the metallic raw materials used in liquid steel-making, which in turn is affected by the limited availability of high-quality scrap or virgin ore-based metallics for use in the electric arc furnaces. Mini-mills are substantially dependent on scrap, which has been characterized by price volatility, generally rising prices and limited availability in recent years.
Integrated mini-mills are mini-mills that produce their own metallic raw materials consisting of high-quality scrap substitutes, such as direct reduced iron. Unlike most mini-mills, integrated mini-mills are able to produce steel with the quality of an integrated producer, since scrap substitutes, such as direct reduced iron, are derived from virgin iron ore, which has fewer impurities. The internal production of scrap substitutes as the primary metallic feedstock provides integrated mini-mills with a competitive advantage over traditional scrap-based mini-mills by insulating the integrated mini-mills from their dependence on scrap, which is generally more expensive and has been subject to price volatility, generally rising prices and limited availability. The internal production of metallic feedstock also enables integrated mini-mills to reduce handling and transportation costs. The high percentage use of scrap substitutes such as direct reduced iron also allows the integrated mini-mills to take advantage of periods of low scrap prices by procuring a wide variety of lower-cost scrap grades, which can be blended with the higher-purity direct reduced iron charge. Because the production of direct reduced iron involves the use of significant amounts of natural gas, integrated mini-mills are more sensitive to the price of natural gas than are mini-mills using scrap.
Steel-makers primarily produce three types of steel products; flat products, long products and stainless steel. Flat products, such as sheet or plate, are produced from slabs. Long products, such as bars, rods and structural shapes, are rolled from blooms and/or billets. Stainless steel products include austenitic stainless, ferritic stainless and martensitic stainless.
Slab. A slab is a semi-finished steel product obtained by the continuous casting of steel or rolling ingots on a rolling mill and cutting them into various lengths. A slab has a rectangular cross-section and is used as a starting material in the production process of other flat products (e.g., hot-rolled sheet).
Hot-Rolled Sheet. Hot-rolled sheet is minimally processed steel that is used in the manufacture of various non-surface critical applications, such as automobile suspension arms, frames, wheels, and other unexposed parts in auto and truck bodies, agricultural equipment, construction products, machinery, tubing, pipe and guard rails. All flat-rolled steel sheet is initially hot-rolled, a process that consists of passing a cast slab through a multi-stand rolling mill to reduce its thickness to less than 12 millimeters. Flat-rolled steel sheet that has been wound is referred to as coiled.
Cold-Rolled Sheet. Cold-rolled sheet is hot-rolled sheet that has been further processed through a pickle line, which is an acid bath that removes scaling from steels surface, and then successively passed through a rolling mill without reheating until the desired gauge, or thickness, and other physical properties have been achieved. Cold-rolling reduces gauge and hardens the steel and, when further processed through an annealing furnace and a temper mill, improves uniformity, ductility and formability. Cold-rolling can also impart various surface finishes and textures. Cold-rolled steel is used in applications that demand higher surface quality or finish, such as exposed automobile and appliance panels. As a result, the prices of cold-rolled sheet are higher than the prices of hot-rolled sheet. Typically, cold-rolled sheet is coated or painted prior to sale to an end-user.
Coated Sheet. Coated sheet is generally cold-rolled steel that has been coated with zinc, aluminum or a combination thereof to render it corrosion-resistant and to improve its paintability. Hot-dipped galvanized, electro-galvanized and aluminized products are types of coated sheet. These are also the highest value-added sheet products because they require the greatest degree of processing and tend to have the strictest quality requirements. Coated sheet is used for many applications, often where exposed to the elements, such as automobile exteriors, major household appliances, roofing and siding, heating and air conditioning equipment, air ducts and switch boxes, as well as in certain packaging applications, such as food containers.
Plates. Plates are produced by hot-rolling either reheated slabs or ingots. The principal end uses for plates include various structural products such as for bridge construction, storage vessels, tanks, shipbuilding, line pipe, industrial machinery and equipment.
Tinplate. Tinplate is a light-gauge, cold-rolled, low-carbon steel usually coated with a micro-thin layer of tin. Tinplate is usually between 0.14 millimeters and 0.84 millimeters thick and offers particular advantages for packaging, such as strength, workability, corrosion resistance, weldability and ease in decoration. Food and general line steel containers are made from tinplate.
Billets/Blooms. Billets and blooms are semi-finished steel products. Billets generally have square cross-sections up to 180 millimeters by 180 millimeters, and blooms generally have square cross-sections greater than 180 millimeters by 180 millimeters. These products are either continuously cast or rolled from ingots and are used for further processing by rolling to produce finished products like bars and wire rod sections.
Bars. Bars are long steel products that are rolled from billets. Merchant bar and reinforcing bar (rebar) are two common categories of bars. Merchant bars include rounds, flats, angles, squares, and channels that are used by fabricators to manufacture a wide variety of products such as furniture, stair railings, and farm equipment. Rebar is used to strengthen concrete in highways, bridges and buildings.
Special Bar Quality (SBQ) Steel. SBQ steel is the highest quality steel long product and is typically used in safety-critical applications by manufacturers of engineered products. SBQ steel must meet specific applications needs for strength, toughness, fatigue life and other engineering parameters. SBQ steel is the only bar product that typically requires customer qualification and is generally sold under contract to long-term customers. End-markets are principally the automotive, heavy truck and agricultural sectors, and products made with SBQ steel include axles, crankshafts, transmission gears, bearings and seamless tubes.
Wire Rods. Wire rod is ring-shaped coiled steel with diameters ranging from 5.5 to 42 millimeters. Wire rod is used in the automotive, construction, welding and engineering sectors.
Wire Products. Wire products include a broad range of products produced by cold reducing wire rod through a series of dies to improve surface finish, dimensional accuracy and physical properties. Wire products are used in a variety of applications such as fasteners, springs, concrete wire, electrical conductors and structural cables.
Structural Sections. Structural sections or shapes is the general term for rolled flanged shapes with at least one dimension of their cross-section of 80 millimeters or greater. They are produced in a rolling mill from reheated blooms or billets. Structural sections include wide-flange beams, bearing piles, channels, angles and tees. They are used mainly in the construction industry and in many other structural applications.
Rails. Rails are hot-rolled from a reheated bloom. They are used mainly for railway rails but they also have many industrial applications, including rails for construction cranes.
Seamless Tube: Seamless tubes have outer dimensions of approximately 25 millimeters to 508 millimeters. They are produced by piercing solid steel cylinders in a forging operation in which the metal is worked from both the inside and outside. The final product is a tube with uniform properties from the surface through the wall and from one end to the other.
Welded Pipes and Tubes: Welded pipes and tubes are manufactured from steel sheet that is bent into a cylinder and welded either longitudinally or helically.
Stainless steel is steel with a carbon content less than or equal to 1.2%, together with a chromium content of at least 10.5%, possibly with additional alloying elements. The alloying elements most commonly used in stainless steels are chromium, nickel, molybdenum, titanium, niobium, manganese, nitrogen, copper, silicon, aluminum and vanadium. The addition of other elements provides further advantages, such as resistance to corrosion in highly aggressive media; resistance to oxidation at high temperatures; toughness and ductility at very low temperatures; high mechanical strength; and fabricability (including drawing, bending, hydroforming, welding and brazing). The following are main classifications of stainless steel:
There are three principal types of electrical steel: grain-oriented steels, non-oriented fully processed steels and non-oriented semi-processed steels:
Direct Reduced Iron
Direct reduced iron, also known as DRI, is produced by removing the oxygen from iron ore without melting it. DRI is used as feedstock for electric arc furnaces and is a high-quality substitute for scrap. In 2009, ArcelorMittal produced 5.2 million tonnes of DRI. Direct reduced iron enables ArcelorMittal to control the quality and consistency of its metallic input, which is essential to ensure uniform high quality of the finished products. Direct reduced iron has historically given ArcelorMittal a cost advantage compared to scrap.
Raw Materials and Energy
ArcelorMittals principal raw material input items are iron ore, solid fuels (coke and coking coal), metallics, alloys, metals, energy and industrial gases.
ArcelorMittals raw materials supply strategy consists of:
Faced with rising and more volatile raw materials prices in recent years and in light of the concentrated nature of the mining industry (in particular iron ore), ArcelorMittal has pursued a strategy of selectively acquiring mining assets that are complementary to its steel producing activities and making substantial investments in the development of its captive raw material base in order to raise its self-sufficiency level. These acquisitions and investments have focused mainly on iron ore and coking coal, which are the two most important inputs in the steel-making process, but have also included investments to secure access to other raw materials such as molybdenum and manganese. ArcelorMittal has exploration and evaluation mining projects in India, Africa and South America that have not yet reached the development and production stages, and whose advancement was delayed in late 2008 and 2009 due to the global economic crisis. See Item 4Information on the CompanyUpdates on Previously Announced Investment Projects. ArcelorMittal also holds stakes in a few joint ventures and other entities with substantial mining assets. As the global economic crisis took hold in late 2008 and 2009, ArcelorMittal focused on optimizing output and production from its existing captive sources rather than on further expanding its portfolio of mining assets. In 2009, ArcelorMittal sourced approximately 64% of its iron ore requirements and about 21% of its metallurgical coal requirements from its own mines and other captive sources, including cost-plus contracts.
ArcelorMittal also has in place contracts with mining companies that provide long-term, stable sources of raw materials. The largest of these contracts are iron ore supply contracts with Vale that were entered into in 2008 and amended in 2009 in response to changed market conditions in order to reduce and introduce a greater level of flexibility with respect to ArcelorMittals purchasing requirements and Vales supply requirements. ArcelorMittals other principal international suppliers include Cleveland-Cliffs Inc. in the United States, Metalloinvest in Russia, Société Nationale Industrielle et Minière (S.N.I.M.) in Mauritania, Luossavaara-Kiirunavaara AB (LKAB) in Sweden and Rio Tinto Ltd. in Australia. ArcelorMittal believes that these contracts play an important role in preventing disruptions in the production process, thereby enhancing operational efficiency. In 2009, ArcelorMittal sourced substantially all of its external iron ore requirements and coking coal requirements under such long-term contracts. ArcelorMittal did not purchase significant amounts of iron ore and coking coal on the spot market in 2009.
Although the fall in spot market prices for raw materials in late 2008 and into 2009 temporarily reduced the cost advantages of proprietary mining assets and long-term supply contracts, ArcelorMittal believes that securing access to raw materials is essential and that self-sufficiency will continue to be a strategic goal for the Company over the medium and long term. Information on raw materials price trends affecting ArcelorMittal in 2009 is set forth under Item 5Operating and Financial Review and ProspectsOverviewRaw Materials).
The table below sets forth information regarding ArcelorMittals raw material production and consumption in 2009.
ArcelorMittal sources significant portions of its iron ore needs from its own mines in Kazakhstan, Ukraine, Bosnia, Algeria, Canada, the United States, Mexico and Brazil. ArcelorMittal is also expanding capacity of existing mines in Mexico and Ukraine. In addition, the Company has announced prospective mining developments in India, Africa and South America. See Item 4Information on the CompanyUpdates on Previously Announced Investment Projects. Several of ArcelorMittals steel plants also have in place off-take arrangements with mineral suppliers located near its production facilities, some of which supply the relevant plants iron ore requirements on a cost-plus basis. Taking into account these arrangements, ArcelorMittals captive sources of iron ore accounted for approximately 64% of ArcelorMittals 2009 requirements.
The following table sets forth information on ArcelorMittals principal iron ore mining operations and production in 2009:
For further information on each of ArcelorMittals principal iron ore mining operations, see Item 4DProperty, Plant and Equipment.
Coking Coal. As with iron ore, ArcelorMittal sources a percentage of its coking coal from captive coal mines in Kazakhstan, Russia, the United States and South Africa. The Companys mines in Kazakhstan supply substantially all the requirements for its steel making operations at ArcelorMittal Temirtau, while the mines in Russia and the United States supply other steel plants within the ArcelorMittal group.
The following table sets forth information on ArcelorMittals principal coking coal mining operations and production in 2009:
For additional information on each of these mines, see Item 4DProperty, Plant and Equipment. ArcelorMittal also has captive steam coal mines in South Africa that are used for thermal application at ArcelorMittal South Africas plants.
Where ArcelorMittals coke-making facilities do not have access to internal captive sources of coking coal, they buy it from mostly regional or seaborne sources under supply contracts.
Coke. ArcelorMittal has its own coke-making facilities at most of its integrated mill sites, including in Algeria, Bosnia, United States, Canada, Mexico, Brazil, Spain, France, Belgium, Poland, Czech Republic, Kazakhstan, South Africa, Romania and Ukraine. While ArcelorMittal meets most of its own coke requirements, certain of ArcelorMittals operating subsidiaries buy coke from mostly domestic or regional sources to optimize cost savings from transport efficiencies, and certain of its subsidiaries also sell excess coke at market prices to third parties. The remainder of the spot purchases of coke is made from China and Japan.
In the United States, ArcelorMittal USA produces part of its coke requirement in its own batteries, with the bulk procured under long-term contracts from dedicated coke batteries owned by third parties. These contracts have formula-based pricing arrangements.
ArcelorMittal procures the majority of its scrap requirements locally and regionally to optimize transport costs, or under short-term contracts. Within its U.S. operations, there are no long-term scrap contracts available as purchases tend to be made in the spot market on a monthly basis. In Europe, ArcelorMittal has entered into contracts for scrap recycling.
ArcelorMittal purchases its requirements of bulk and noble alloys from a number of global, regional and local suppliers on contracts that are linked to generally-accepted indices or negotiated on a quarterly basis. The Companys prospective joint venture with Kalagadi Manganese in South Africa is expected to provide an additional source of manganese alloys in the future.
The majority of the Companys base metal needs, including zinc, tin and aluminum for coating, as well as nickel for stainless steel production, are purchased under annual volume contracts. However, given the uncertain market conditions during 2009 a significant part of ArcelorMittals nickel requirements were purchased on a spot basis. Pricing is based on the market-accepted indices. Material is sourced from both local and global producers.
ArcelorMittal generally procures its electricity through tariff-based systems in regulated areas such as parts of the United States and South Africa, or through bilateral contracts. The duration of these contracts varies significantly depending on the various areas and types of arrangements.
For integrated steel mills, plant off-gases from various process steps are utilized to generate a significant portion of the plants electricity requirements and lower the purchase volumes from the grid. This is either produced by the plant itself or with a partner in the form of a co-generation contract.
ArcelorMittal procures much of its natural gas requirements for its U.S., Canadian and Mexican operations from the natural gas spot market or through short-term contracts entered into with local suppliers, with prices fixed either by contract or tariff-based spot market prices. For its European operations, ArcelorMittal sources its natural gas requirements under prevailing oil-based pricing systems. The remainder of ArcelorMittals natural gas consumption represents less than 20% of the ArcelorMittals total consumption and is generally based in regulated markets.
ArcelorMittal procures its industrial gas requirements under long-term contracts with various suppliers in different geographical regions.
ArcelorMittal Shipping Limited (AMS) provides ocean transportation solutions to ArcelorMittals manufacturing subsidiaries and affiliates. AMS determines cost-efficient and timely approaches for the transport of raw materials, such as iron ore, coal, coke and scrap, and semi-finished and finished products. It maintains an office in London, a key hub of the global shipping business.
In 2009, AMS arranged transportation for approximately 47.9 million tonnes of raw materials and about 13.6 million tonnes of finished products. The key objectives of AMS are to ensure cost-effective and timely shipping services to all units. AMS also acts as an agent for a Mauritius-based shipping company, Global Chartering Ltd. (GC). GC handles shipping of approximately 20% of the Companys raw materials, which are transported by sea by chartering vessels on a short- to long-term basis. It wholly owns two Handymax, and has three bareboat-chartered Panamax and many Panamax vessels on a medium-to-long-term charter. GC expects to have six Capesize vessels on long-term charter by 2011, as well as four Supramax on charter by 2012 (two of which were already delivered in 2009). AMSs strategy is to cover 50-60% of the cargo requirements of the group on a medium to long-term basis, and to arrange remaining transportation requirements on a spot basis.
AMS is also responsible for providing shipping services to the Companys sales organizations. This includes forwarding services and complete logistics services through ArcelorMittal Logistics, which maintains offices throughout Western Europe and provides complete logistics solutions from plants to customer locations using various modes of transport, including ships.
ArcelorMittal has implemented a global purchasing process for its major procurement requirements, including raw materials, industrial services, industrial equipment, spares and maintenance as well as capital expenditure items, energy and shipping. ArcelorMittals centralized purchasing teams also provide services such as optimization of contracts and the supply base, logistics and optimizing different qualities of materials suitable for different plants and low cost sourcing.
In doing so, ArcelorMittal seeks to benefit from economies of scale in a number of ways, including by establishing long-term relationships with suppliers that sometimes allow for advantageous input pricing, pooling its knowledge of the market fundamentals and drivers for inputs and deploying specialized technical knowledge especially for the acquisition of industrial services and plant equipment and facilities. This enables ArcelorMittal to achieve a balanced supply portfolio in terms of diversification of sourcing risk in conjunction with the ability to benefit from a number of captive raw materials sources.
During 2007, a global and integrated Total Cost of Ownership project was launched that builds on previous expertise employed in a number of sites. This project seeks to change the business approach from unit price-based decision-making to total cost of ownership-based decision making, with the goal of lowering the total cost of production through minimization of waste, improved input material recovery rates and higher rates of recycling.
Sales and Marketing
In 2009, ArcelorMittal sold approximately 71 million tonnes of steel products.
The majority of steel sales from ArcelorMittal are destined for domestic markets. For these domestic markets, sales are usually approached as a decentralized activity that is managed at the production unit level. In instances where production facilities are in relatively close proximity to one another, and where the market requirements are similar, the sales function is aggregated to serve a number of production units. Sales are conducted principally with the customer. In the EU region, ArcelorMittal owns a large number of service and distribution centers. Depending on the level of complexity of the product, or the level of service required by the customer, the service center operations form an integral part of the supply chain to our customers. Distribution centers provide access to our products to smaller customers that cannot or do not want to buy directly from the operating facility.
Export sales are by preference executed through the activities of the in-house export trading arm to ensure coordinated market entry into the country of destination for all ArcelorMittal products.
Globally, all salesthough executed at local levelare coordinated strategically to ensure harmonized contract, price, rebate and payment conditions for the ArcelorMittal group as a whole.
For some global industries, with customers in more than one of the geographical areas that ArcelorMittal services, dedicated sales and service organizations have been put in place. This is most notably the case for the automotive industry and the packaging markets. The sales through these channels are also subject to global coordination with respect to contract, price, rebate and payment conditions.
Marketing follows the sales activity very closely and is by preference executed at the local level. In practice, this leads to a focus on regional marketing competencies, particularly where there are similarities among regional markets in close geographical proximity. At the global level, the objective is to share marketing intelligence with a view towards identifying new opportunities, either in new products or applications, new product requirements or new geographical demand. Where new product application is involved, the in-house research and development unit of ArcelorMittal is involved in developing the appropriate products.
An important part of the marketing function at ArcelorMittal is to develop short-range outlooks that provide future perspectives on the state of market demand and supply. These outlooks are shared with the sales team in the process of finalizing the sales strategy for the immediate future and with senior management when market conditions call for production adjustments.
Globally, sales and marketing activities are coordinated to ensure a harmonized approach to the market. The objective is to provide similar service experiences to all customers of ArcelorMittal in every market.
ArcelorMittal maintains insurance on property and equipment in amounts believed to be consistent with industry practices. ArcelorMittal insurance policies cover physical loss or damage to its property and equipment on a reinstatement basis arising from a number of specified risks and certain consequential losses, including business interruption arising from the occurrence of an insured event under these policies.
ArcelorMittal also maintains various other types of insurance, such as comprehensive construction and contractor insurance for its greenfield and major capital expenditures projects, public and products liability, directors and officers liability, credit, commercial crime, transport, and charterers liability, as well as other customary policies such as car insurance, travel assistance and medical insurance.
Each of the operating subsidiaries of ArcelorMittal also maintains various local insurance policies that are mandatory at the local level, such as employer liability, workers compensation and auto liability, as well as specific insurance such as public liability to comply with local regulations.
ArcelorMittal owns and maintains a patent portfolio covering processes and steel products, including uses and applications that it creates, develops and implements in territories throughout the world. Such patents and inventions primarily relate to steel solutions with new or enhanced properties, as well as new technologies that generate greater cost-efficiencies.
ArcelorMittal also owns trademarks, both registered and unregistered, relating to the names and logos of its companies and the brands of its products. ArcelorMittal has policies and systems in place to monitor and protect the confidentiality of its know-how and proprietary information. The Company applies a general policy for patenting selected new inventions, and its committees organize an annual patent portfolio screening by individuals from the Companys R&D and business sectors in order to optimize the global efficiency of the Companys patent portfolio. The Companys patent portfolio includes more than 5,300 patents and patent applications, mostly recent and middle-aged, for more than 500 patent families, with more than 26 inventions newly-protected in 2008 and 22 inventions newly-protected in 2009. Because of this constant innovation, the Company does not expect the lapse of patents that protect older technology to materially affect current revenue.
In addition to its patent portfolio, technical know-how and other unpatented proprietary information, ArcelorMittal has also been granted licenses for technologies developed by third parties in order to allow it to propose comprehensive steel solutions to customers. ArcelorMittal is not aware of any pending lawsuits alleging infringement of others intellectual property rights that could materially harm its business.
See Item 3DKey InformationRisk Factors and Item 8AFinancial InformationConsolidated Statements and Other Financial InformationLegal Proceedings.
ArcelorMittals operations are subject to various regulatory regimes in the regions in which it conducts its operations. The following is a discussion of the principal features of selected regulatory regimes that affect or are likely to affect its operations.
Environmental Laws and Regulations
ArcelorMittals operations are subject to a broad range of laws and regulations relating to air emissions, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, the remediation of environmental contamination, and other aspects of the protection of the environment at its multiple locations and operating subsidiaries. As these laws and regulations in the United States, the European Union and other jurisdictions continue to become more stringent, ArcelorMittal expects to expend substantial amounts to achieve or maintain ongoing compliance. Furthermore, as an owner and operator of a significant number of mining assets, these operations will require rehabilitation expenditure upon closure. In addition to capital investments required for additional controls and other improvements, ArcelorMittal had provisions of approximately $743 million at December 31, 2009 for environmental remedial activities and liabilities (excluding asset retirement obligations).
With regard to climate change, ArcelorMittals activities in the EU are subject to the EU Emissions Trading Scheme, and it is likely that requirements relating to greenhouse gas emissions will become more stringent and will expand to Canada and other jurisdictions in the future. In the United States, the U.S. Environmental Protection Agency (EPA) has taken the first steps towards implementing a comprehensive greenhouse gas policy. The post-2012 carbon market is very uncertain and ArcelorMittal is closely monitoring international negotiations, regulatory and legislative developments and is endeavoring to reduce its own emissions where appropriate.
Our operating subsidiaries in the United States are subject to numerous environmental laws and regulations including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, also known as Superfund, the Safe Drinking Water Act, and the Toxic Substances Control Act, as well as applicable state and local environmental requirements.
ArcelorMittal USA has established provisions of $210 million (exclusive of asset retirement obligations) to address existing environmental liabilities associated with its operations. The environmental provisions include anticipated spending of approximately $17 million in 2010. Most of these provisions relate to significant remedial activities at various facilities. In some cases, soil or groundwater contamination requiring remediation is present at ArcelorMittals USA facilities. In other cases, it is present at former facilities or third-party waste disposal sites. All of ArcelorMittal USAs major operating and inactive facilities are or may be subject to a corrective action program or other laws and regulations relating to environmental remediation, including projects relating to the reclamation of industrial properties, also known as brownfield projects. ArcelorMittal USA is also as of now a potentially responsible party at least two state and federal Superfund sites. Superfund and analogous U.S. state laws can impose liability for the entire cost of clean-up at a site upon current or former site owners or operators or parties who sent hazardous materials to the site, regardless of fault or the lawfulness of the activity that caused the contamination. ArcelorMittal USA may incur additional costs or liabilities at these sites if additional clean-up is required, private parties may sue ArcelorMittal USA for personal injury or property damage, or other responsible parties may sue for reimbursement of costs incurred to clean up sites. ArcelorMittal USA may also be named as a potentially responsible party at other sites if its hazardous materials or those of its predecessor(s) were disposed of at a site that later becomes a Superfund site.
ArcelorMittal USAs environmental provisions also include $55 million, with anticipated expenditures of $4 million during 2010, to specifically address the removal and disposal of polychlorinated biphenyls (PCBs) and the elimination of asbestos-containing material.
In addition to expenditures relating to existing environmental liabilities, ArcelorMittal USA will invest significant sums in response to changes in environmental laws and regulations. For example, several of ArcelorMittal USAs facilities are subject to revised effluent regulations issued in 2002 under the Clean Water Act. Compliance with such regulations will be required because new facility discharge permits are required to continue operating. ArcelorMittal USA anticipates spending over $40 million on wastewater treatment plant improvements over the next few years.
In October 2009, the EPA published its final Mandatory Greenhouse Gas Reporting Rule. The rule requires data collection to commence on January 1, 2010 and the first reports covering calendar year 2010 to be filed in 2011. ArcelorMittal USA is in the process of gathering information and identifying the appropriate compliance methodologies. ArcelorMittal USA expects to incur substantial expense and management time to comply with the rule. Moreover, it is likely the United States will have a federal CO2 emissions cap and trade scheme in the near future. In June 2009, the U.S. House of Representatives approved the American Clean Energy and Security Act also referred to as the Waxman-Markey Bill and similar legislation currently is being considered by the U.S. Senate. If such legislation were enacted, ArcelorMittal USA could incur substantial expenses to purchase CO2 allowances or credits and to further reduce its emissions of greenhouse gases.
Significant EU Directives and regulations are applicable to our production units in the European Union, including the following:
The following EU Directives are also significant:
Environmental damages and violations of the EU legislation are subject to environmental and criminal liability under Directive 2004/35/EC of April 21, 2004, and Directive 2008/99/EC of November 19, 2008.
EU Directives applicable to our products include those relating to waste electrical and electronic equipments (Directive 2002/96/EC of January 27, 2003), end-of-life vehicles (Directive 2000/53/EC of September 18, 2000) and packaging and packaging waste (Directive 2004/12/EC of February 11, 2004).
ArcelorMittal is also subject to the REACH regulation (EC) N° 1907/2006 for Registration, Evaluation, Authorization and Restriction of Chemicals, adopted on December 18, 2006, which controls the chemical substances manufactured in or imported into the EU in volumes of over one tonne per year and to the GHS regulation (EC) N° 1272/2008 of December 16, 2008 on classification, labeling and packaging of substances and mixtures, which implements the United Nations Globally Harmonized System of classification and labeling. In June 2007, ArcelorMittal established a dedicated task force at the corporate level, responsible for coordinating the strategic aspects of implementation, as well as a platform addressing technical issues in order to achieve implementation of these regulations. In compliance with the REACH regulation, the legal entities of the ArcelorMittal group have pre-registered their imported and manufactured substances in the European Community with the European Chemical Agency (ECHA). Groupwide, as of November 2008, ArcelorMittal had submitted 756 pre-registration files to ECHA. By November 2010, ArcelorMittal plans to have submitted about 200 registration files (complete toxicological and ecotoxicological profile as well as the administrative fee) to ECHA. A legal entity of the ArcelorMittal group will not obtain the required license for continued production of a subject chemical if it fails (i) to submit a registration file for the subject chemical in due time, (ii) to submit a complete registration file or (iii) to make any required payment in connection with the registration file. In addition, the designation of additional chemicals of high concern under the REACH regulation could increase the costs of compliance with other EU Directives, including those relating to waste and water and the SEVESO directives.
ArcelorMittal anticipates that its capital expenditure with respect to environmental matters in the European Union over the next several years will relate primarily to installations of additional air emission controls and to requirements imposed in the course of renewal of permits and authorizations, including those pursuant to the IPPC Directive.
In particular, since 2005 ArcelorMittals operations in the European Union are subject to the Emissions Trading Directive, the EUs central instrument for achieving the EU Member States commitments under the Kyoto Protocol by providing a European emissions trading system (ETS) for carbon dioxide emissions. The ETS covers more than 10,000 installations across the EU, including combustion plants, oil refineries, coke ovens, iron and steel plants, and factories making cement, glass, lime, brick, ceramics, and pulp and paper. At the heart of ETS is the common trading currency of emission allowances. One allowance gives the holder the right to emit one tonne of carbon dioxide. For each trading period under the ETS, EU member states draw up national allocation plans that determine how many emission allowances each installation will receive. Companies that keep their emissions below the level of their allowances can sell their excess allowances. Companies that do not keep their emissions below the level of their allowances must either reduce their emissions, such as by investing in more efficient technology or using less carbon-intensive energy sources, or purchase the extra allowances that they need on the open market.
The National Allocation Plans (NAPs) for the period 2008 through 2012 have been finalized in all EU member states except Poland and the allowances assigned to ArcelorMittals EU operating subsidiaries are no longer expected to fall short for this period given the present slowdown in production.
For the period after 2012, the EU institutions adopted on December 17, 2008 the so-called EU climate change package which aims to reduce the Communitys greenhouse gas (GHG) emissions by 20% by 2020 compared to 1990 levels, and 30% if other developed countries commit themselves to comparable emission reductions and economically more advanced developing countries contribute adequately according to their responsibilities and capabilities. The package contains in particular the following legislative documents:
In particular, the new ETS includes centralized allocation rather than national allocation plans, a cap designed to achieve an overall reduction of greenhouse gases for the industrial sector of 21% in 2020 compared to 2005 emissions and auctioning as the basic principle for allocating emissions allowances, with transitional free allocation in particular for manufacturing industries under risk of carbon leakage. Many issues that ultimately will determine the impact of the revised ETS scheme need to be further elaborated in implementing legislation. The free allocation granted after 2012 will largely depend on the elaboration of the benchmarks for the sector. Through Commission Decision 2010/2/EU of December 24, 2009, manufacturing of coke oven products, of basic iron and steel, of ferro-alloys and of cast iron tubes have been recognized as exposed to a significant risk of carbon leakage.
ArcelorMittal has approved certain capital expenditures for more than $200 million in order to facilitate compliance with these EU environmental regulations, including the following: $126 million for actions at the steel shops; $55.5 million at sinter plants; $14 million for coke oven gas desulphurization; $11.5 million for energy savings and reduction of CO2 emissions and $10 million for actions in water treatment.
Increasingly stringent environmental laws and regulations also have been adopted in other jurisdictions. Set out below is a summary of the principal environmental legislation applicable to ArcelorMittal in key jurisdictions where it has substantial manufacturing or mining operations.
An Executive Decree dated April 15, 2006 regarding emissions and pollutants in effluent waters will require companies exceeding regulatory limits to comply before 2011. Moreover, a financial law introduced in July 2008 imposes additional taxes for air emissions and water discharges.
An Executive Decree dated June 21, 2009 requires authorization to discharge liquid effluents, other than sewage, from mining activities.
The following laws and decrees are applicable to our operations in Argentina:
Federal Law 25675 (2002), Law 11723 in the province of Buenos Aires and Law 11717 in the province of Santa Fe which define the provisions for the environment, sustainable development, preservation of protected species and remediation of damage to the environment.
Federal Law 25831 (2004), Federal Law 25670 (2002) and associated Decree 853 (2007), Federal Law 24051 (1992) and associated Decrees 1841 and 806, respectively which relate to the management of industrial waste, PCBs and hazardous waste.
Federal Law 26331 (2007) which concerns the protection and clearing of native forests, including impact studies, consultation of local communities and publicly available information under Federal Law 25831 (2004).
Federal Law 26168 (2006) which grants the Authority of the Matanza Riachuelo Basin (ACUMAR) the power to regulate and control industrial activities in the area in which ArcelorMittal Works Acindar is located.
Law 11459 and Decree 1741 for the Province of Buenos Aires, and Law 11717 and Decree 101 for the Province of Santa Fe, which regulate the environmental impact studies, certificates of environmental conformity and, in the Province of Buenos Aires, permits relating to atmospheric emissions from fixed sources and industries.
Bosnia and Herzegovina
A new set of laws and regulations became effective on January 1, 2008. In order to restart full production at ArcelorMittal Zenicas plant in 2008 and to obtain all relevant permits, an environmental protection plan has been submitted to federal and local authorities in 2007. In February 2009, all environmental protection plans were approved by the Federal Government except for the industrial waste landfill Rača, whose plan will be revised in early 2010. In 2009, ArcelorMittal Zenica received water permits from federal authorities for the following plants: EAF and BOF steel plants, blast furnace, forge plant and rolling mill. In December 2009, ArcelorMittal Zenica received related environmental permits for these plants. In 2010, ArcelorMittal Zenica expects to receive environmental permits for the remaining coke plant, sinter plant, power plant, transportation facility and Rača dump yard. The Zenica plant will require capital expenditures, in an amount not yet determined, to improve and complete existing pollution control equipment.
Decree N° 6514/2008, which implements Law N°9605/2008 on environmental liability and Decree N° 6686/2008 which implements the law on environmental crimes were both published in 2008.
Decree Nº 6848/2009 which implements Law N° 9985/2000 concerning environmental compensation establishes the percentage of total planned investments that must be devoted to greenfield projects in areas of conservation. Moreover federal law places certain restrictions on the location of mining projects. The Instituto Brasileiro do Meio Ambiente (IBAMA) controls licensing over certain types of land, including indigenous lands within 50 kilometers of the border of a neighboring country, environmentally protected areas (referred to locally as conservation units), or lands within or affecting more than one state, such as a railway. All other projects are licensed by the agencies of the state in which the project is located.
Federal Resolution No. 382/2006 which was published by the Brazilian National Environmental Council (CONAMA) imposes more stringent limitations on dust, sulphur dioxide and nitrogen oxide for new sources in the steel industry. Administrative Order Nº 259/2009 published by the Ministry of the Environment (MMA) and IBAMA requires that in the EIS (Environmental Impact Statement) contain a specific chapter on alternative clean technologies that can reduce the impact on the health of workers and the environment. The principal labor union is involved in the information and consultation process relating to the health, safety and environmental license.
Federal Resolution Nº 396/2008 published by CONAMA defines the guidelines and the guiding quality standards for classification of groundwater.
The state policy on solid waste management and recovery in the area of Espirito Santo, where ArcelorMittal Tubarão is located, is outlined in Law Nº 9264/2009.
Regarding soil protection, a CONAMA federal resolution was approved on November 26, 2009.
For the purpose of complying with environmental regulations, capital expenditure in an amount of $27 million has been approved for improvements at the coke oven plant of Tubarão.
In April 2007, Environment Canadas Clean Air Regulatory Agenda contemplated emission-intensity reductions to greenhouse gases beginning in 2010 and absolute limits on emissions of certain conventional air pollutants effective in 2015. In 2009, the Government of Canada announced a shift in its climate change policy going forward, indicating its intention to design and implement a cap and trade regulatory framework for limiting GHG emissions, harmonized as much as possible with the program to be implemented in the United States. Four Canadian provinces have joined the Western Climate Initiative; a sub-national North American GHG program intended to implement the cap-and-trade regimes at the national and provincial levels. Company and industry representatives are actively working to encourage all levels of government to avoid duplicate GHG regulatory frameworks. Concerning conventional air pollutants, Environment Canada, industries and NGOs are currently in discussions to establish Base Level Industrial Emissions Requirements (BLIERSs) to be reflected in new federal air emission limits.
Canadian steelmakers must file pollution prevention plans with Environment Canada addressing efforts to reduce mercury emissions on an annual basis. ArcelorMittal Dofasco, ArcelorMittal Contrecoeur, ArcelorMittal Contrecoeur-Ouest and other member companies of the Canadian Steel Producers Association meet this obligation by funding a national program to remove mercury-containing convenience switches from end-of-life vehicles before they enter the scrap stream and implementing mercury-free scrap purchasing policies.
In the Province of Ontario, ArcelorMittal Dofasco has submitted an application to the Ontario Ministry of the Environment for alternative and site-specific air emissions standards to address new air emission limits effective in 2010 under Ontario regulation 419/05. To support the application, ArcelorMittal Dofasco has submitted a CAD $16.6 million action plan on environmental capital projects and operating programs to be implemented between 2010 and 2014 to reduce emissions of certain parameters.
In the Province of Quebec, the metallurgical sector facilities are negotiating new environmental permits that will apply to the ArcelorMittal Mines Canada and ArcelorMittal Contrecoeur works. This program will require ArcelorMittal Mines Canada to invest in wastewater treatment at Port-Cartier and conduct studies on and monitor both the Port-Cartier and Mount Wright sites. We expect that the permit will be issued for Mount Wright in the first quarter of 2010, to be followed by Port-Cartier before the end of 2010.
ArcelorMittal expects that the new permits for ArcelorMittals Contrecoeur and Contrecoeur-Ouest facilities will be issued in 2010 following last minute disagreements about emissions limits. Obtaining the new permits will require increasing monitoring frequencies as well as conducting certain studies. A new Quebec regulation will require reporting monthly volume of water pumped from rivers beginning in the fourth quarter of 2009.
In October 2007, a new carbon tax was implemented and applies to the purchase of fossil fuels. The tax, which only applies to the province of Quebec, is based on GHG emissions.
The upcoming new regulation related to air quality in Québec is still to be published but no date has been put forward. Analysis of its possible impact in the DRI plant and steel mill is being made by considering the most likely scenarios.
Republic of Kazakhstan
Kazakhstans Environmental code no.212-III dated January 9, 2007 specifies the requirements for licensing, standardization, environmental audits, environmental permits, in-process controls and monitoring. It establishes the liabilities of users of natural resources in respect of design development and operation of economic entities and other facilities; the responsibilities as to emissions, discharge of wastewater and the operation and maintenance of landfills and long-term waste storage.
Law no.164-IV dated June 23, 2009, amended the Environment Code with respect to the import of environmental hazard processes, techniques and equipment imported to the Republic of Kazakhstan.
ArcelorMittal has approved an investment of $135 million for the upgrade of the dedusting at the converter shop and the blast furnace of Temirtau. Moreover, ArcelorMittal has also approved expenditure of $21 million for upgrades in the coal mines area.
Republic of Macedonia
Complementary to the framework laws on environment N° 53/05, 81/05, 24/07 and 159/08 which regulate environmental permits, environmental audits, prevention and control of major accidents involving hazardous substances and environmental liability the following specific regulations are also applicable: N° 67/04, 92/07 on quality of ambient air, N° 68/04, 71/04, 107/07, 102/08, 143/08 on management of waste, N° 87/08, 06/09 on water protection, N° 113/07, 40/07 on chemicals and N° 79/07 on noise.
To comply with these environmental laws and regulations, ArcelorMittal anticipates investments in an amount not yet determined for AM Skopje in complement to the $2.2 million already invested.
The Republic of Macedonia has ratified the Kyoto Protocol as a non-Annex I country.
In Mexico, steel and mining activities are under federal jurisdiction. Permits to operate are subject to different environmental authorizations. Complementary to the framework law on the environment of January 28, 1988 (Ley general para el equilibrio ecologico y protección ambiente or LGEEPA), the following specific regulations apply: prevention and control of air pollution of November 25, 1988, environmental impact study of May 30, 2000, environmental audit of November 29, 2000, transfer of contaminants of June 3, 2004, water management of April 29, 2004, waste management of May 22, 2006), sustainable forestry development act of February 25, 2003 which established a mandatory environmental impact study and authorization for that certain activities, including mining activities, and radioactivity control of March 2, 1985.
ArcelorMittal México has launched a compliance action plan for its steel and mining activities and has approved an investment of more than $50 million for the control of dust emissions at its steel facilities and for the management of tailings at its mining activities.
ArcelorMittals mining subsidiaries operating in the Kuzbass region of Russia are subject to several Russian Federation laws and regulations in the field of environmental protection, including Law no. 7 On Environmental Protection dated January 10, 2002; Law On Air Protection dated May 4, 1992; Law no. 89-FZ On Production and Consumption Wastes dated June 24, 1998; Water Code no. 74/FZ dated June 3, 2006; Land Code no. 136-FZ dated October 25, 2001; and Forest Code no. 101/FZ dated August 10, 2008, among others.
In 2007, once the new Water Code dated March 30, 2007 went into effect, requirements to limit wastewater from mining activities increased considerably. As of December 31, 2008, the legislation monitors 19 pollutants in mine wastewater, with rigid standards and high penalties for non-compliance. The main pollutants in mine wastewater are weighted coal and rock dust particles, ferrous sulphate, dissolved phenolic compounds and oils. The existing wastewater treatment facilities at the mines were commissioned in 1976 and are now obsolete. ArcelorMittal anticipates investments in an amount not yet determined on wastewater treatment plant improvements over the next few years to achieve compliance with the new standards.
In Senegal, the environmental regulations applicable to mining companies are set forth in the Mining Code, Act n° 2003-36 of November 24, 2003, its application decree n°2004-647 of May 17, 2004 and the Code of the Environment, Act n° 2001-01 of January 15, 2001.
These laws outline the requirements that apply to the activities of mining companies, including the exploration phase, exploitation phase and the rehabilitation of a mining site at the end of a mining lease.
Concerning the site of Falémé, a preliminary environmental impact study has inventoried the issues to be considered when implementing the mining project, the construction and operation of a railway, and the construction of a mineral port.
The National Environmental Management Act (NEMA) of 1998 serves as the departure point for any project in South Africa and determines the Environmental Impact Assessment (EIA) procedure that needs to be followed. NEMA is applicable to new infrastructure, capacity increases, changes to or upgrades of existing infrastructure and all water-air-waste related activities. A General Authorization (Record of Decision or ROD) is issued in terms of this act for any related projects. There is also a strong link between this Act and new legislation that is promulgated and this Act can be regarded as an umbrella for such legislation.
To regulate water use, water abstraction, effluent discharges and potential pollution of water resources including ground water, Water Use Licenses (WUL) are issued under the National Water Act of 1998. Due to the scarcity of water in South Africa, the authorities are placing an emphasis on water recycling in permits; Zero Effluent Discharge status is a condition many plants are required to achieve.
In South Africa many new environmental standards are currently being developed relating to new or updated legislation.
A new Waste Act, which came into effect on July 1, 2009, applies to all waste and by-product related activities and contaminated land. Waste Management Licenses are issued in terms of this Act after the EIA process (including public participation) is concluded as per NEMA. Existing disposal facilities are also included in this Act, although existing permits will remain valid until new Waste Management Licenses are issued. The most significant new issue pertaining to the Waste Act is that by-product related activities will now require a Waste Management License. The level of duplication that is introduced by this requirement is of concern as by-product related activities are also regulated in terms of other environmental laws. The interpretation of the definition of waste remains a contentious issue and negotiations with the authorities have not been concluded on this matter.
During 2009, the South African government promulgated various amendments to environmental laws. Most of the amendments were introduced to facilitate enforcement of the various pieces of legislation and to criminalize non-compliant activities that were not criminalized before. Transgression of many environmental laws in South Africa could from now on have criminal liability attached to it.
A new Air Quality Act is expected to be fully implemented by April 1, 2010, after various delays were experienced with the promulgation of emission standards, which forms part of the final implementation phase. The Air Quality Act will introduce strict emission standards for new and existing plants. Existing plants or processes will be granted a period of between five and eight years to achieve standards set for new plants. Atmospheric Emission Licenses will be issued in terms of this legislation after a General Authorization is issued under NEMA. It is expected that ArcelorMittal South Africas coke and sinter operations will be severely affected by the implementation of the new standards, and major capital expenditures will be required to achieve compliance.
For the purpose of complying with environmental regulations, ArcelorMittal has approved capital expenditures in an amount of $70 million for different actions relating to air pollution control, ZED (Zero Effluent Discharge) and waste management.
Trinidad & Tobago
Various pieces of legislation have been enacted under the Environment Management Act of March 8, 2000, the Water Pollution Rules of October 24, 2001 and the Noise Pollution Rules of April 19, 2001. Two other pieces of legislation are still under discussion: the Air Pollution Rules of 2001 and the Waste Management Rules of 2008. ArcelorMittal Point Lisas was registered under the Water Pollution Rules in 2008.
A new air regulation (No. 309) was published in Ukraine on June 27, 2006 and significantly restricts the emission limits of 140 substances for all types of plants. Priority pollutants are particulate matter, sulphur dioxide, nitrogen dioxide and carbon monoxide.
In order to comply with environmental regulations, ArcelorMittal expects to make capital expenditure in the area of Blast Furnace No.#6 at OJSC ArcelorMittal Kryviy Rih in an amount to be determined.
Unicons operations are subject to various environmental laws and regulations including: Environmental Frame Law, Environmental Penal Law, Hazardous Substances, Materials and Wastes Law, Decree 658 on Air Emissions Control, Decree 1400 on Water Use, Decree 2216 on Solid Wastes, Decree 2.635 on Hazardous Recoverable Materials and Wastes, Decree 3.219 on Water Pollution Control.
All Unicons sites hold the necessary operating permits except the Wastewater Treatment Plant 1, which is not yet registered. To comply with the environmental legislation, Unicon has launched different improvement projects at its wastewater treatment plants and with respect to the storage and handling of hazardous materials and wastes.
For further details regarding specific environmental proceedings involving ArcelorMittal, including a description of the more significant remediation sites, see Item 8AFinancial InformationConsolidated Statements and Other Financial InformationLegal Proceedings and Note 23 to ArcelorMittals consolidated financial statements.
Health and Safety Laws and Regulations
ArcelorMittals operations are subject to a broad range of laws and regulations relating to the protection of human health and safety. As these laws and regulations in the United States, the European Union and other jurisdictions continue to become more stringent, ArcelorMittal expects to expend substantial amounts to achieve or maintain compliance. ArcelorMittal has established corporate health and safety guidelines requiring each of its business units to comply with all applicable laws and regulations. Compliance with such laws and regulations and monitoring changes to them are addressed primarily at the business unit level. ArcelorMittal has a clear and strong health and safety policy aimed at reducing the severity and frequency of accidents on a continuing basis. The policy outlines the commitment ArcelorMittal has made to the health and safety of all employees and implements a common health and safety model across the entire organization which permits the Corporate Health and Safety department to define and follow-up performance targets and monitor results from every business unit. Further, ArcelorMittal is implementing an injury tracking and reporting database to track all information on injuries, lost man-days and other significant events. At present, the database enables access to statistics for the ArcelorMittal Group as a whole, and more detailed information on injuries for some business units. For the others, information is available at the plant sites. The use of the new system will be deployed in all business units during 2010 and onwards. It incorporates a company wide used return-of experience system for disseminating lessons learned from individual incidents. The aim is to achieve faster and more accurate feedback on the cause of accidents in order to improve prevention and prevent recurrence. A benchmarking component is being added for the time being; a first version went into effect at the end of 2009 and full deployment is expected in 2010.
ArcelorMittal has manufacturing operations in many countries and sells its products worldwide. In 2009, certain countries and communities, such as the European Union, Gulf Cooperation Council, India, Israel, Russia, Thailand and the United States have initiated proceedings to decide whether to impose/continue imposing trade remedies (usually antidumping or safeguard measures) against injury or the threat of caused by steel imports originating from various steel producing countries.
Under international agreements and the domestic trade laws of many countries, trade remedies are available to domestic industries where imports are dumped or subsidized and such imports cause injury, or a threat thereof to a domestic industry. Although there are differences in how the trade remedies are assessed, such laws typically have common features established in accordance with World Trade Organization (WTO) standards. Dumping involves selling for export a product at a price lower than that at which the same or similar product is sold in the home market of the exporter, or where the export prices are lower than a value that typically must be at or above the full cost of production (including sales and marketing costs) and a reasonable amount for profit. Subsidies from governments (including, among other things, grants and loans at artificially low interest rates) under certain circumstances are similarly actionable. The trade remedy available is typically an antidumping duty order or suspension agreement where injurious dumping is found and a countervailing duty order or suspension agreement where injurious subsidization is found. A duty equal to the amount of dumping or subsidization is imposed on the importer of the product. Such orders and suspension agreements do not prevent the importation of product, but rather require either that the product be priced at a non-dumped level or without the benefit of subsidies or that the importer pay the difference between such dumped or subsidized price and the actual price to the government as a duty.
Safeguard measures are addressed more generally to a particular product irrespective of its source to protect the domestic production against increased imports of the exported product. The remedies available under the safeguard investigations are commonly safeguard duties or allocation of quotas on the exported products between the exporting countries.
Each year there is typically a range of so-called sunset reviews affecting various countries of interest to ArcelorMittal (for example, in the United States we had a wire rod sunset review in 2008). All WTO members are required to review antidumping duty and countervailing duty orders and suspension agreements every five years to determine if they should be maintained, revised or revoked. This requires a review of whether the dumping or subsidization is likely to continue or recur if the order/suspension agreement is revoked and whether a domestic industry in the country is likely to suffer the continuation or recurrence of the injury within the reasonably foreseeable future if the orders are revoked. If the government finds both dumping or subsidization and the injury are likely to continue or recur, then the orders are continued. In case of safeguard measures for duration exceeding three years, all WTO members are required to review the imposed measures in the mid-term of the relevant measure. After a review, restrictions may be extended if they continue to be required, but the total period of relief provided may not exceed eight years.
In a number of markets in which ArcelorMittal has manufacturing operations, it may be a beneficiary of trade actions intended to address trade problems consistent with WTO regulations. In other situations, certain operations of ArcelorMittal may be a respondent in one or more trade cases and its products subject to duties or other trade restrictions.
In some developing countries in which ArcelorMittal is producing, state intervention impacts trade issues. For example, exports of steel mill products could require licenses from the local ministry of industry and trade or could be required to domicile, or submit for registration, export contracts with the local central bank.
Under European Community law, any form of state aid (non-commercial state support including, for example, cash payments or the exemption from taxes) is generally prohibited unless approved by the European Commission (article 107 and 108 of the Treaty of the Functioning of the European Union TFEU). Aid that has been granted contrary to European Community law must in general be recovered from the aid beneficiary by the member state that granted it. The general state aid rules of the European Community are applicable to steel products, and there are specific rules applicable to the steel industry. ArcelorMittals operating subsidiaries located in the European Union are subject to state aid rules.
Before the recent enlargement of the European Community in 2004 and 2007, the European Community and its member states had concluded Europe Agreements with certain Central and Eastern European countries with a view of facilitating the subsequent accession of these countries to the European Union. These agreements contain rules that extended the substantive state aid rules to such future member states. However, the Europe Agreements provided for separate state aid rules for the steel sector, which allowed, under specific conditions and for a limited period of time, aid for the restructuring of the national steel industry of the Central or Eastern European country.
The regime governing public aid to the steel sector under the Europe Agreements was further implemented, and to some extent modified, as part of the transitional arrangements that were negotiated in the framework of the recent accessions on May 1, 2004 and on January 1, 2007. The transitional arrangements became part of the respective treaty of accession to the European Union.
The transitional arrangements for each of the Czech Republic, Poland and Romania allow restructuring aids granted prior to the date of accession to certain steel undertakings (known as benefiting companies) if certain conditions are met. In particular, they impose restrictions on benefiting companies, the total amounts of aid (including limits for each benefiting company), and the time periods during which such aid can be granted, and require certain capacity reductions for finished products to be achieved within a specific time-frame. Moreover, the transitional arrangements provide that restructuring aid to benefiting companies is subject to national restructuring plans and individual business plans approved by the Council of Ministers of the European Union. Benefiting companies are also subject to certain rules concerning the merger with, or the taking-over of assets of non-benefiting companies.
The transitional arrangements and the restructuring periods as defined therein have ended on December 31, 2006 (for Poland and Czech Republic) and December 31, 2008 (for Romania). For the two Romanian companies that benefited from the transitional arrangements, ArcelorMittal Galati and ArcelorMittal Hunedoara, the EU is currently assessing compliance with the conditions of transitional arrangements.
Key Currency Regulations and Exchange Controls
The South African rand (ZAR) is subject to exchange controls enforced by the South African Reserve Bank (SARB). Prior approval is required for foreign funding, hedging policies and offshore investments. Imports and export payments are monitored by the Central Bank. Although the ZAR has not been fully convertible since 1941, the SARB has taken steps to gradually relax exchange controls. In October 2009, South Africa increased the limit on company applications to undertake offshore investments that an authorized dealer can approve from ZAR 50 million to ZAR 500 million and removed the 180 day rule requiring export companies to convert their foreign exchange proceeds into rand and permit South African companies to open foreign bank accounts without prior approval. Offshore bank accounts may however, only be used for permissible transactions.
The purchase and sale of foreign currency by Kazakh residents (including legal entities) is restricted by the National Bank of Kazakhstan. There are no requirements for foreign investors in order to invest in the country; however investors are required to obtain a tax registration number to open a cash account in Kazakhstan. Payments in routine currency operations may be made by residents of Kazakhstan to non-residents through authorized banks without any restriction. Routine currency operations include import/export settlements with payment within 180 days; short-term loans with terms of less than 180 days; dividends, interest and other income from deposits, investments, loans and other operations; and non-commercial transactions such as wages and pensions in Kazakh tenge (KZT). Operations involving the transfer of capital from residents to non-residents require a license from the National Bank of Kazakhstan, and transactions involving the transfer of capital from non-residents to residents must be registered with the National Bank of Kazakhstan. Licenses are issued on a case-by-case basis and are valid only for a single transaction. These transactions include payments for exclusive rights to intellectual property; payments for rights to immovable property; settlements for import/export transactions, loans with terms of more than 180 days; and international transfers of pension assets and insurance and re-insurance contracts of an accumulative nature.
The Algerian foreign currency market is regulated by the Central Bank of Algeria. Exchange control regulations do not permit capital account convertibility of the Algerian dinar (DZD) with a few exceptions involving Algerian companies investing in overseas projects. Currency outflows on current accounts, while freely permitted for the import of goods, are subject to controls for payments for service contracts. Overseas dividend repatriation is permitted subject to a 20% withholding tax. Algerian companies are restricted from investing their cash surplus overseas. All overseas remittances have to be made through the Central Bank. Exporters are permitted to retain 50% of their proceeds in foreign currency accounts, 20% of which can be utilized freely and the rest of which can be used in accordance with certain restrictions. Hedging of currencies is tightly regulated and restricted. Overseas investment in and out of Algeria requires compliance with several fiscal regulations.
Ukraine has significant restrictions on capital account flows, currencies and financial instruments that govern all aspects of transactions in the local currency, the hryvnia (UAH), and foreign currency, even if the authorities have taken some measures in recent years to improve the functioning of the foreign exchange market. The main regulatory body of the government is the National Bank of Ukraine, which has wide regulatory powers in this field. Export of capital from Ukraine, offshore investments, and purchases of foreign currency by Ukrainian companies are heavily regulated and are subject to National Bank regulations. Any transfer of foreign currency abroad from Ukraine requires an individual license from the National Bank, subject to an exhaustive list of exemptions. Such exemptions include: payment in foreign currency abroad by a Ukrainian resident in the discharge of a contractual obligation in such foreign currency to a non-resident in settlement for goods, services, intellectual property rights, or other property rights acquired or received by the resident from the non-resident (however, an acquisition of securities or other currency valuables does not fall within this exemption); payment of interest under a loan or income earned (such as, dividends) from a foreign investment in foreign currency abroad; and repatriation abroad from Ukraine of the amount of a foreign investment in foreign currency previously made in Ukraine upon the termination of the relevant investment activity. An individual National Bank license is also required for: repatriation and transfer of funds in UAH into Ukraine, if in excess of the amounts in UAH which have been transferred abroad on legal grounds; depositing funds in foreign currency and other currency valuables (such as securities) in an account outside Ukraine, except in the case of an account opening by a duly licensed Ukrainian commercial bank of a correspondent account with a foreign bank; and investing abroad, including transferring foreign currency abroad in connection with acquisitions of assets and securities. The receipt of a foreign currency loan by a Ukrainian resident (including a Ukrainian bank) from a non-resident is subject to the registration of the loan with the National Bank. Ukrainian residents are required to make settlements under import/export transactions within 90 days (180 days previously) without restrictions. Ukrainian legal entities may acquire non-cash foreign currency in Ukraine only through a duly licensed Ukrainian commercial bank or non-bank financial institution and only in a limited number of cases and subject to certain conditions.
In Brazil, all foreign exchange transactions are carried out on a single foreign exchange market. Foreign currencies may be purchased or sold only through Brazilian financial institutions authorized to operate in such market and are subject to registration with the Central Bank of Brazils electronic system. Foreign exchange rates are freely negotiated but may be influenced by Central Bank intervention. The Central Bank allows the Brazilian real (BRL) to U.S. dollar exchange rate to float freely although it has intervened occasionally to control volatility. Exchange controls on foreign capital and international reserves are administrated by the Central Bank. During periods of strong BRL appreciation, the Central Bank has implemented measures to discourage portfolio capital from entering the country. The authorities reintroduced a 25% tax on investments into the local equity markets and a 1.5% tax on the depositary receipts of Brazilian countries. Foreign and local companies may borrow internationally subject to registration with an approval by the Central Bank. Local companies may maintain up to 100% of their export revenues abroad.
In India, the exchange rate of the Indian rupee (INR) is determined in the interbank foreign exchange market. The Reserve Bank of India (RBI) announces a daily reference rate for the rupee against the U.S. dollar, Japanese yen, British pound and euro. The RBI monitors the value of the rupee against a Real Effective Exchange Rate (REER). The REER consists of six currencies: U.S. dollar, euro, British pound, Japanese yen, Chinese yuan and Hong Kong dollar. The rupee rate has been known to deviate significantly from longer-term REER trends. The RBI intervenes actively in the foreign exchange market in cases of excessive volatility. Exchange controls are established by both the government and the RBI. The Foreign Exchange Management Act (FEMA) of 2000 mandates that the government oversee current account transactions, while the RBI regulates capital accounts transactions. Restrictions on purchases and sales of INR have been significantly relaxed since the early 1990s. Since 1995, the Indian rupee has had full current account convertibility, though exchange controls on capital account transactions remain in effect.
The Chinese currency (CNY) is a managed float with reference to a basket of currencies and non-deliverable currency. The exchange rate of the Chinese yuan is determined in the interbank foreign exchange market, the China Foreign Exchange Trade System (CFETS). Five currency pairs are traded in CFETS: the CNY is paired with each of the U.S. dollar, the Hong Kong dollar, the Japanese Yen, the euro and the British Pound. Since January 1, 2006, existing designated foreign exchange banks have been permitted to engage in a bilateral trading platform which allows them to trade directly with other member banks in the CNY foreign exchange spot market, as opposed to just trading with CFETS, subject to a daily trading band limitation of no more than +/- 0.5% against the U.S. dollar. China maintains strict controls on its currency. Non-residents and Foreign Investment Enterprises (FIEs) must obtain a Foreign Exchange Registration Certificate (FERC) to open a foreign currency account onshore. There are three types of foreign currency accounts for non-residents: capital accounts (for investment and repatriation), current accounts (for trade) and loan accounts (for receiving and repaying loans). Residents may hold foreign currency in onshore accounts.
The Argentine peso (ARS) has not been freely convertible since December 2001. It is mandatory to convert 100% of foreign exchange revenues from exports into local currency. Exporters have from 60 to 360 consecutive days to convert foreign exchange receipts from exports depending on the type of exported product, and 120 days to settle foreign exchange receipts through the foreign exchange market. This term is extended to 180 days if the purchaser fails to pay and if the foreign exchange receipts result from export credit insurance. Services export receipts have 15 days to be converted into ARS. An exporter must transfer any payment within ten days from collection to the bank that transfers the funds into Argentina, but the exporter may also maintain the funds abroad in foreign currency until the due date. The Central Bank allows foreign exchange transactions for the purposes of futures settlements, guarantees, forwards, options and other derivatives as long as they are traded on-shore and settle in ARS. The authorities intervene in the foreign exchange market in order to maintain a stable rate. The central bank buys and sells US dollars at its discretion.
The Strong Bolivar (Bs.F.) has been the official currency in Venezuela since January 2008. Although an exchange control system fixes its value vis-à-vis the U.S. dollar, an unofficial currency market has developed whereby the value of the U.S. dollar is quoted above the rate set by the official exchange control system. On December 31, 2009, one U.S. dollar was equal to 5.97 Bs.F. in the unofficial currency market, while the official exchange rate was one U.S dollar to 2.15 Bs.F. The Bs.F. was devalued on January 9, 2010, resulting in a rate of 4.3 Bs.F. per U.S. dollar for most imports and transactions. The Venezuelan Central Bank has announced that it will subsidize a rate of 2.6 Bs.F. per U.S. dollar for imports of food, medicine and other essential items. At the time of the devaluation, the unofficial exchange rate was approximately 6.25 Bs.F. per U.S. dollar. The exchange control system permits transfers abroad from Venezuela by purchasing U.S. dollars at the official rate of Bs.F. 2.15 per U.S. dollar for profits or dividends arising from business activities in Venezuela, provided that the benefits or dividends derive from a foreign investment made in Venezuela and are registered with the Superintendence of Foreign Investments (SIEX). In addition, in order to transfer benefits or dividends abroad by purchasing foreign currency at the official rate, the transferor must have previously paid relevant taxes and purchased the foreign currency from the Foreign Exchange Administration Commission (CADIVI), which is authorized on the basis of availability. A 34% tax is levied on dividends paid by companies registered in Venezuela. This tax is calculated on the basis of a companys net income that exceeds its net taxed fiscal income. However, depending on the residence or domicile of the dividend beneficiary, the Conventions for the Avoidance of Double Taxation entered into by Venezuela may provide a different taxation rate in respect of such dividends. Foreign investors who have registered their investment with the SIEX are entitled to repatriate the funds obtained from the sale of shares related to such investment at any time. For this purpose, the exchange control system admits the possibility of granting foreign currency at the official rate from CADIVI, so that dividends can be converted into foreign currency (such as the U.S. Dollar) for repatriation. A foreign investor is also legally authorized to repatriate sums obtained from a reduction of capital or liquidation in Venezuela, provided they are related to a foreign investment registered with SIEX. To repatriate these funds, it is possible to purchase foreign currency at the preferential rate from CADIVI. In practice, however, obtaining the required amount of foreign currency (particularly in U.S. dollars) from CADIVI may take several months or even years. There are no legal restrictions regarding the percentage of benefits or dividends that can be reinvested in companies in Venezuela. However, as noted above, foreign investors must register reinvestments with SIEX in order to repatriate benefits or dividends arising from the reinvestment.
C. Organizational Structure
ArcelorMittal is a holding company with no business operations of its own. All of ArcelorMittals significant operating subsidiaries are indirectly owned by ArcelorMittal through intermediate holding companies. The following chart represents the current operational structure of the Company, including ArcelorMittals significant operating subsidiaries, and not its legal or ownership structure.
The following table identifies by operating segment each significant operating subsidiary of ArcelorMittal, including its registered office and ArcelorMittals percentage ownership thereof.
ArcelorMittal operates its business in the following six operating segments:
Within its corporate headquarters and, where appropriate, segment or regional management there are specialized and experienced executives in fields such as finance, mergers and acquisitions, marketing, procurement, operations, shipping, human resources, communications, internal assurance, health and safety, information technology, strategic planning, performance enhancement, technology and law.
Flat Carbon Americas produces slabs, hot-rolled coil, cold-rolled coil, coated steel products and plate. These products are sold primarily to customers in the following industries: distribution and processing; automotive; pipes and tubes; construction; packaging; and appliances. In Flat Carbon Americas, production facilities are located at eight integrated and mini-mill sites located in four countries. In 2009, shipments from Flat Carbon Americas totaled 16 million tonnes.
Flat Carbon Europe produces hot-rolled coil, cold-rolled coil, coated products, tinplate, plate and slab. These products are sold primarily to customers in the automotive, general industry and packaging industries. In Flat Carbon Europe, production facilities are located at 15 integrated and mini-mill sites located in six countries. In 2009, shipments from Flat Carbon Europe totaled 22 million tonnes.
Long Carbon Americas and Europe produces sections, wire rod, rebars, billets, blooms, wire drawing and pipes and tubes. In Long Carbon Americas, production facilities are located at 15 integrated and mini-mill sites located in six countries, while in Long Carbon Europe production facilities are located at 17 integrated and mini-mill sites in nine countries. In 2009, shipments from Long Carbon Americas and Europe totaled approximately 20 million tonnes.
AACIS produces a combination of flat and long products. It has six flat and long production facilities in three countries. In 2009, shipments from Asia, Africa and CIS totaled approximately 12 million tonnes, with shipments having been made worldwide.
Stainless Steel produces flat and long stainless steel and alloy products from its plants in Europe and South America. In the Americas, production facilities are located at one integrated site located in one country, while in Europe production facilities are located at three mini-mill sites in two countries. The products produced by Stainless Steel are sold to customers primarily in the following industries: domestic appliances and household equipment; automotive; construction; and general industry. In 2009, shipments from Stainless Steel totaled approximately 1.4 million tonnes.
Steel Solutions and Services is primarily an in-house trading and distribution arm of ArcelorMittal. It also provides value-added and customized steel solutions through further steel processing to meet specific customer requirements.
D. Property, Plant and Equipment
ArcelorMittal has steel production facilities, as well as iron ore and coal mining operations, in North and South America, Europe, Asia and Africa.
All of its operating subsidiaries are substantially owned by ArcelorMittal through intermediate holding companies, and are grouped into the six segments described above in Item 4COrganizational Structure. Unless otherwise stated, ArcelorMittal owns all of the assets described in this section.
For further information on environmental issues that may affect ArcelorMittals utilization of its assets, see Business OverviewGovernment RegulationsEnvironmental Laws and Regulations and Item 8AFinancial InformationConsolidated Statements and Other Financial InformationLegal Proceedings.
Production Facilities of ArcelorMittal
The following table provides an overview by type of facility of ArcelorMittals principal production units:
Flat Carbon Americas
ArcelorMittals Flat Carbon Americas segment has production facilities in both North and South America, including the United States, Canada, Brazil and Mexico. The following two tables set forth key items of information regarding ArcelorMittals principal production locations and production units in the Flat Carbon Americas segment:
Production LocationsFlat Carbon Americas
Production FacilitiesFlat Carbon Americas
Steel Production Facilities
ArcelorMittal USA has 18 major production facilities, consisting of four integrated steel-making plants, one basic oxygen furnace/compact strip mill, six electric arc furnace plants (one of which produces flat products and five of which produce long products), five finishing plants (four of which produce flat products and one of which produces long products), and two coke-making operations. ArcelorMittal USA owns all or substantially all of each plant. ArcelorMittal USA also owns interests in various joint ventures that support these facilities, as well as numerous raw material, railroad and transportation assets.
ArcelorMittal USAs operations include both flat carbon and long carbon production facilities. The long carbon facilities are discussed separately under Long Carbon Americas and EuropeArcelorMittal USA.
ArcelorMittal USAs main flat carbon operations include integrated steel-making plants at Indiana Harbor (East and West), Burns Harbor and Cleveland. The basic oxygen furnace/compact strip mill is located at Riverdale. The electric arc furnace plant is located in Coatesville. The four finishing plants are located in Gary, Weirton, Conshohocken, and Columbus. In 2009, ArcelorMittal USA permanently closed the finishing facilities at Hennepin and Lackawanna. The two coke batteries are located in Warren and Monessen.
Indiana Harbor (East and West) is a fully integrated steelmaker, strategically located on the southern shore of Lake Michigan in East Chicago, Ind., 20 miles southeast of Chicago, Illinois. The plant sits on both sides of the Indiana Harbor Canal, which provides shipping by large ships over the Great Lakes as well as highway and railroad transportation access. The two Indiana Harbor facilities produce hot-rolled sheet, cold-rolled sheet, hot dip galvanized sheet and bar products for use in automotive, appliance, service center, tubular, strip converters and contractor applications. Indiana Harbor Wests operations include a sintering plant, two blast furnaces, two basic oxygen furnaces and two continuous slab casters. Finishing facilities include a hot strip mill, pickle line, tandem mill, batch annealing facilities, a temper mill, a hot dip galvanizing line and an aluminizing line. Indiana Harbor East facilities include three blast furnaces, four basic oxygen furnaces and three slab casters. Finishing facilities include a hot strip mill, a pickle line, a tandem mill, continuous and batch annealing facilities, two temper mills and a hot dip galvanizing line. The Indiana Harbor West plant covers an area of approximately 4.9 square kilometers and the Indiana Harbor East plant covers an area of approximately 7.7 square kilometers. Indiana Harbor (East and West) produced 3.9 million tonnes of crude steel in 2009.
Burns Harbor is a fully integrated steel-making facility strategically located on Lake Michigan in northwestern, Indiana approximately 50 miles southeast of Chicago, Illinois. The area allows for good shipping access to the Port of Indiana-Burns Harbor, as well as highway and railroad access. Burns Harbor produces hot-rolled sheet, cold-rolled sheet, hot dip galvanized sheet and steel plate for use in automotive, appliance, service center, construction and shipbuilding applications. Burns Harbor facilities include two coke oven batteries, two blast furnaces, three basic oxygen furnaces and two continuous slab casters. Finishing facilities include a hot strip mill, two picklers, a tandem mill, continuous and batch annealing facilities, a temper mill and a hot dip galvanizing line. The Burns Harbor plant covers an area of approximately 15.3 square kilometers. Burns Harbor produced 2.0 million tonnes of crude steel in 2009.
Cleveland is located on the Cuyahoga River in Cleveland, Ohio with good access to Port of Cleveland and Great Lakes shipping, as well as good highway and railroad transportation routes. The facilities in Cleveland include two blast furnaces, two slab casters, ladle metallurgy and vacuum degassing facilities, a hot-strip mill, cold rolling mill, temper mill, a batch annealing shop and a hot dip galvanizing line. Cleveland plant serves the automotive, service centers, converters, plate slabs and tubular applications markets. Cleveland produced 0.6 million tonnes of crude steel in 2009.
Riverdale is located near the Indiana border in Riverdale, Ill., south of Chicago. Its location has shipping access to Lake Michigan and is surrounded by good highway systems and railroad networks. The Riverdale facility produces hot-rolled strip for strip converter and service center applications, and obtains supplies of hot metal for its basic oxygen furnaces from the Burns Harbor or Indiana Harbor locations. Riverdales principal facilities consist of basic oxygen furnaces, ladle metallurgy facilities and a continuous slab caster that uses a compact strip process. Riverdale produced 0.3 million tonnes of crude steel in 2009.
The Weirton facility is a significant producer of tin mill products. Columbus produces hot dip galvanized sheet for the automotive market.
Coatesvilles facilities consist of an electric arc furnace, a vacuum degasser, slab caster, and one plate mill capable of producing a wide range of carbon and discreet plate products for use in infrastructure, chemical process, and shipbuilding applications. Conshohocken and Garys principal facilities are plate mills and associated heat treat facilities. These locations use slabs principally from Coatesville and Burns Harbor, respectively. Coatesville produced 0.4 million tonnes of crude steel in 2009.
ArcelorMittal USA, through various subsidiaries, owns interests in joint ventures, including (1) ArcelorMittal Tek, (60% interest), a cold-rolling mill on 200 acres of land (which it wholly owns) near New Carlisle, Indiana with a 1.7 million tonne annual production capacity; (2) ArcelorMittal Kote (50% interest), a steel galvanizing facility on 25 acres of land located adjacent to the ArcelorMittal Tek site, which it wholly owns and which has a one million tonne annual production capacity; (3) Double G Coatings (50% interest), a coating line producing galvanized and Galvalume near Jackson, Mississippi with a 270,000 tonne annual production capability, (4) PCI Associates, (50% interest) a pulverized coal injection facility located within Indiana Harbor West; and (4) Hibbing Taconite Company, which is described below. ArcelorMittal USA also owns several short-line railroads that transport materials among its facilities, as well as raw material assets (including iron ore). It also has research and development facilities in East Chicago, Indiana.
ArcelorMittal USA has two coke oven batteries that supply coke to its production facilities. The coke battery in Warren is able to supply about 40% of the Cleveland facilities capacity coke needs. Warren is located in Warren, in northeastern Ohio, and has good rail, river and highway transportation access plus access to coal fields in the Appalachian region as well as to steel mills from Pennsylvania to Indiana. The Koppers Monessen Coke Plant in Monessen, Pennsylvania has an annual production capacity of 320,000 metric tonnes of metallurgical coke.
ArcelorMittal USA Iron Ore Mines
ArcelorMittal USA operates an iron ore mine through its wholly-owned subsidiary ArcelorMittal Minorca, and owns a majority stake in Hibbing Taconite Company, which is the owner of a mine managed by Cleveland-Cliffs Inc.
ArcelorMittal Minorca operates a concentrating and pelletizing facility, along with two open pit iron ore mines near Virginia, Minnesota. The Minorca pelletizing facility produced 1.5 million metric tonnes (own share of production) of fluxed pellets in 2009. The reduction in production from 2.8 million tonnes in 2008 is the result of market-induced downtime from May through September 2009, which resulted in no tonnes being produced. Iron ore is mined from the Laurentian Pit and the East Pit, located 12 kilometers from the processing facility. The operation consists of the two mines, a crushing facility, a three-line concentration facility and a single-line straight grate pelletizing plant. Pellets are transported by rail to ports on Lake Superior. Lake vessels are used to transport the pellets to Indiana Harbor West.
Hibbing Taconite Company mines the lower cherty layer of Minnesotas Mesabi Iron Range and is located four miles north of Hibbing, Minnesota. The Hibbing mine is jointly owned by ArcelorMittal USA (62.3%), Cleveland-Cliffs Inc. (23.0%) and U.S. Steel Canada (14.7%). The mine produced 1.1 million metric tonnes (own share of production) of taconite pellets in 2009. The reduction in production from 8.4 million metric tonnes in 2008 is the result of market-induced downtime from June through December 2009, which resulted in no tonnes being produced. The operation consists of drilling, blasting, loading, hauling, crushing, concentrating and pelletizing. The finished pellets are then transported by rail to Superior, Wisconsin, and then over the Great Lakes by lake vessels to ArcelorMittals integrated steel-making plants, principally Burns Harbor.
ArcelorMittal USA Coal Mines
ArcelorMittal Coal Group USA, LLC and its subsidiaries operate surface mines and deep mines in McDowell County, West Virginia, as well as a surface mine in Tazewell County, Virginia. The group combines the Mid Vol Coal Group and the Concept Group, which were acquired by ArcelorMittal in 2008. The combined production of the mines in 2009 was 2.8 million tonnes.
The Eckman Surface Mine (Northern Property) in McDowell County and is currently mining on a surface area of approximately 500 acres. It also has a deep mine that is currently being developed, as well as a coal preparation plant and a loadout facility. The Paradise Surface Mine and Virginia Point Surface Mine (Southern Property) are located in southern McDowell County, West Virginia and Tazewell County, Virginia on a surface area of approximately 700 acres. The property also has a surface mine that is currently being developed. The Western Property, which is located in McDowell County, West Virginia, has four active deep mines and one deep mine that is currently being developed. The property also has a coal preparation plant and two active loadouts.
ArcelorMittal Tubarão (AMT), a wholly-owned subsidiary of ArcelorMittal Brasil, has two major production facilities: the Tubarão integrated steel making facility, located in Espírito Santo state, Brazil and the Vega finishing complex, located at São Francisco do Sul, in Santa Catarina state, Brazil. The Tubarão integrated steel mill produces merchant slabs, semi-finished steel plates for export and hot-rolled coils while ArcelorMittal Vega produces cold-rolled coil and galvanized steel, to be used primarily by the automobile industry and, to a lesser degree, for household appliances, construction, pipe and coil formed shapes industries.
The Tubarão complex is strategically located and has infrastructure that includes a well-equipped road and railway system, as well as a port complex and the Praia Mole Marine Terminal. The Vega facility uses the port of São Francisco do Sul to receive hot-rolled coil, its main raw material, from Tubarão. AMTs Tubarão plant covers an area of approximately 13.7 square kilometers.
AMTs steel-making complex is composed of a coke plant consisting of three batteries, a sinter plant, three blast furnaces, a steel-making shop consisting of three oxygen furnace converters, three continuous slab casters and a hot strip mill. The Vega finishing complex consists of a modern, state-of-the-art coil strip mill and a hot dip galvanizing line. In July 2007, AMT successfully commissioned the third blast furnace and other steel making facilities, increasing slab capacity to 7.5 million MT. The project to increase the Tubarão hot strip mill capacity commenced in 2009 and the Vega finishing operations are in progress and scheduled to commence in 2010. In 2009, AMT produced 5.3 million tonnes of crude steel.
ArcelorMittal Lázaro Cárdenas
ArcelorMittal Lázaro Cárdenas (AMLC) is the largest steel producer in Mexico. AMLC operates a pelletizer plant, two direct reduced iron plants, electric arc furnace-based steel-making plants and continuous casting facilities. AMLC has advanced secondary metallurgical capabilities, including ladle furnaces refining, vacuum degassing and Ruhrstahl-Heraeus (RH) processes with calcium and aluminum injections, permitting the production of higher quality slabs that are used in specialized steel applications in the automotive, line pipe manufacturing, shipbuilding and appliance industries. AMLC utilizes direct reduced iron as its primary metallic input for virtually all of its production.
AMLCs production facilities are located on approximately 4.4 square kilometers adjacent to a major deep-water port in Lázaro Cárdenas in Michoacán State, México, through which most of its slabs are shipped for export and its raw materials are received.
AMLCs principal product is slab for the merchant market. AMLCs product line mainly caters to the high-end applications of its customers, including heat-treatment grades for plate manufacturing, oil country tubular goods and high chromium grade for oil exploration applications and for the gas transportation industry. AMLC has the capability to produce a wide range of steel grades from ultra low carbon-IF to microalloyed, medium and high carbon. In 2009, AMLC produced 1.4 million tonnes of crude steel.
AMLC Mining Assets
AMLC operates three iron ore mines in Mexico, through joint ownership of the Peña Colorada mine with Ternium S. A., the output of which is consumed by AMLCs and Terniums steel plants, and through its ownership of the El Volcan and Las Truchas mines.
Peña Colorada is an open pit mine on the Pacific coast of Mexico. AMLC owns 50% of the company, and Ternium S. A. owns 50% of the company. Peña Colorada produces magnetite concentrate and iron ore pellets. The mines produced 4.5 million tonnes of concentrate in 2009. The mine and the beneficiation plant are located near Minatitlán, and the pelletizing plant is located near Manzanillo Port, 50 kilometers from Minatitlán. Major production facilities include a primary crusher, a dry cobbing plant, one autogenous mill, horizontal and vertical ball mills and several stages of magnetic separation in the beneficiation plant. There are also two pelletizing lines with vacuum filtration facilities, balling discs and traveling grates by Lurgi. Both magnetite concentrates and iron ore pellets are shipped from Manzanillo Port to AMLC and abroad, as well as to Ternium steel plants by ship and by rail.
The El Volcan iron ore mine is an open pit operation that commenced operations in 2008, although it was inactive from January to November 2009 due to the economic downturn. The operation includes mine exploitation, crushing and dry cobbing facilities and a concentrate plant with a two million tonne capacity, as well as port facilities. The mine exploitation and crushing operations and all transport activities are performed by contractors. The concentrate and port operations are operated with ArcelorMittals own resources.
The mine is located in the northwest Mexican state of Sonora, 250 kilometers from the El Volcan port facility. The crushed and preconcentrated iron ore is transported by truck to a concentration plant located 120 kilometers from the El Volcan facility, and the concentrate is transported by rail to the Pacific port of Guaymas in order to be transported to the Lázaro Cárdenas steel plant. The crushing facilities at the mine include one primary crusher, one secondary crusher, a dry cobbing high intensity magnetic pulley and three tertiary crushers. The concentration plant includes two ball mills on line, a magnetic separation circuit, flotation systems, a belt conveyor filter and a disposal area for tails. The major port installations include a tippler for railroad cars, tippler, a conveyor, transfer towers and two ship loading systems.
Las Truchas mine is an integrated iron ore operation that includes mine exploitation, crushing, dry cobbing preconcentrate and concentration plant with aggregate production of 1.3 million tonnes in 2009. The extracted ore is used in steel production for both AMLC and ArcelorMittal Las Truchas (see Long Carbon AmericasArcelorMittal Las Truchas).
Las Truchas mine is located near the steel plant at the port of Lázaro Cárdenas. The concentrate ore is pumped through a 26 kilometer slurry pipeline. This facility includes one primary crusher, two secondary crushers and three tertiary crushers. The concentration plant includes one ball mill and one bar mill, two wet magnetic separation circuits, a pumping station, the 26 kilometer slurry pipeline and a tails dam.
ArcelorMittal Dofasco Inc. (Dofasco) is a leading North American steel solution provider and one of Canadas largest manufacturers of flat rolled steels. Its products include hot-rolled, cold rolled, galvanized and tinplate as well as tubular products and laser-welded blanks. Dofasco supplies these products to the automotive, construction, packaging, manufacturing, pipe and tube and steel distribution markets. Dofascos Hamilton plant covers an area of approximately 3.1 square kilometers.
Dofasco has seven wholly-owned operating subsidiaries: Dofasco USA Inc., Dofasco Tubular Products Inc., Dofasco Tubular Products Corporation, Sorevco Inc., Powerlasers Limited, Powerlasers Corporation and ArcelorMittal Mines Canada mining company (AMMC). Steel-making facilities are located at Dofascos Hamilton, Ontario plant and at its 50% owned mini mill facility, Gallatin Steel Company, located in Gallatin County, Kentucky, USA. Products produced by Dofasco and its steel related joint ventures and subsidiaries include: hot-and cold rolled steels; galvanized, Extragal and Galvalume steel; prepainted steel; tinplate and chromium-coated steels in coils, cut lengths and strips; welded pipe and tubular steels; laser welded steel blanks; and iron ore concentrate and pellets. Dofasco owns 100% of AMMC (whose operations are described below) and owns a 28.6% interest in Wabush Mines, each of which mines and processes iron ore for use in Dofascos steel-making operations and for sale to other steelmakers. In October 2009, ArcelorMittal Dofasco entered into an agreement to sell its interest in Wabush Mines to one of its partners, Cliffs Natural Resources. The transaction was completed on February 1, 2010.
Dofascos steel-making plant in Hamilton, Ontario is adjacent to water rail and highway transportation. The plant has two raw material handling bridges, ore and coal docks, storage yards and handling equipment, three blast furnaces, of which two are currently operating, three coke plants comprising six batteries, one basic oxygen steel-making plant, one two strand slab caster and a single-strand slab caster, one twin shell electric arc furnace and two ladle metallurgy stations associated with steel-making, a hot strip rolling mill including, slitting facilities for hot-rolled steel, two cold rolling mill complexes each consisting of a coupled pickling line and tandem cold rolling mill, one continuous, stand-alone pickle line, one electrolytic cleaning line, and shearing, coiling, slitting, rewind and inspection equipment related to the cold mills, three temper mills, two continuous annealing lines, 140 conventional and 16 high hydrogen bases for batch annealing and 16 bases for open coil annealing, five continuous galvanizing lines, one of which is capable of producing Galvalume steel and another of which is capable of producing Extragal steel, one continuous electrolytic tinning and chromium coating line and a tinplate packaging line and two tube mills. Dofasco produced 2.7 million tonnes of crude steel in 2009.
ArcelorMittal Mines Canada
ArcelorMittal Mines Canada is a major North American producer of iron ore products, including concentrate and several types of pellets. It holds mining rights over 60,000 hectares of land in the province of Québec, Canada. ArcelorMittal Mines Canada operates the Mont-Wright Mine and concentrator at Fermont in northeastern Québec. Mont-Wright is located 416 kilometers north of the port of Port-Cartier, the site of the pelletizing plant and shipping terminal on the north shore of the Gulf of St. Lawrence, and approximately 1,000 kilometers northeast of Montreal. A private railway connects the mine and concentrator with Port-Cartier. The railway and the port are owned and operated by ArcelorMittal Mines Canada. The Port-Cartier pellet plant produces acid and flux pellets that operate six ball mills, ten balling discs and two induration machines. The Mont-Wright operation consists of open pit mines and a concentrator, which began production in 1975. The ore is crushed in two gyratory crushers and the concentrator operates with six lines of three stage spiral classifiers and horizontal filters.
ArcelorMittal Mines Canada also owns mining rights to iron ore deposits in Fire Lake and Mont Reed. Fire Lake, located approximately 53 kilometers south of Mont-Wright, is a seasonal operation from which approximately 2.5 million tonnes of iron ore are transported by rail to the Mont-Wright concentrator annually. The Mont Reed deposit is currently not mined.
The mines in aggregate produced 13.1 million tonnes of pellets and concentrates in 2009.
Flat Carbon Europe
ArcelorMittals Flat Carbon Europe segment has production facilities in Western and Eastern Europe, including Germany, Belgium, France, Spain, Italy, Luxembourg, Romania, Poland, Macedonia, Estonia and the Czech Republic. The following two tables provide an overview by type of facility of ArcelorMittals principal production locations and production units in the Flat Carbon Europe segment:
Production LocationsFlat Carbon Europe
Production FacilitiesFlat Carbon Europe
ArcelorMittal Bremen is situated on the bank of the River Weser in the north of Bremen, Germany, and covers an area of approximately seven square kilometers. ArcelorMittal Bremen is a fully integrated and highly automated plant, with four million tonnes of crude steel annual production capacity. ArcelorMittal Bremen produced 2.3 million tonnes of crude steel in 2009.
ArcelorMittal Bremen has primary and finishing facilities and contains one sinter plant, two blast furnaces, one steel shop with two basic oxygen converters, one vacuum degassing line, one continuous slab caster and one hot strip mill for the primary facility. The finishing plant has one pickling line, a four-stand tandem mill, a batch annealing and temper mill, and two hot dip galvanizing lines. ArcelorMittal Bremen produces and sells a wide range of products, including slab, hot-rolled, pickled, cold-rolled and hot dip galvanized rolls to the automotive and primary transformation sectors.
ArcelorMittal Liège Upstream
The primary facilities of ArcelorMittal Liège Upstream are located in two main plants along the Meuse River: the Seraing-Ougrée plant, which includes a coke plant, a sinter plant and two blast furnaces, and the Chertal plant, which includes a steel shop with three converters, a ladle metallurgy with RH vacuum treatment, two continuous caster machines (a double strand and a single strand) and a hot strip mill. ArcelorMittal Liège downstream relies on the finishing facilities of ArcelorMittal Belgium (Liège facility) and has an annual production capacity of 3.5 million tonnes of crude steel. ArcelorMittal Liège Upstream produced 0.3 million tonnes of crude steel in 2009.
Most raw materials used by ArcelorMittal Liège Upstream are shipped from Rotterdam and Antwerp through dedicated port facilities situated along the Meuse River next to the Liège installations. Pig iron is transported from Ougrée to Chertal by torpedo ladles. The coke and blast furnace gases are sent to a power plant that produces steam and electricity.
ArcelorMittal Atlantique et Lorraine
ArcelorMittal Atlantique is part of ArcelorMittal Atlantique et Lorraine, which is wholly-owned by ArcelorMittal France. It has four plants in the north of France, located in Dunkirk, Mardyck, Montataire and Desvres. The Dunkirk, Mardyck, Desvres and Montataire plants cover an area of approximately 4.6 square kilometers, 2.6 square kilometers, 0.1 square kilometers and 0.7 square kilometers, respectively. ArcelorMittal Atlantique has an annual production capacity of 6.5 million tonnes. In 2009, ArcelorMittal Atlantique produced 4.6 million tonnes of crude steel. The Dunkirk plant has a coke plant, two sinter plants, three blast furnaces, a steel plant with three basic oxygen furnace (BOF) converters, one ladle treatment, one RH vacuum degasser, one tank vacuum degasser, four continuous casters for slabs and one hot strip mill. The remaining three plants serve as finishing facilities. Mardyck has a high-capacity coupled pickling-rolling line, a push-pull pickling line, and two hot dip galvanizing lines, while Montataire has three hot dip galvanizing lines, one organic coating line and one laminated composite line. Desvres has one hot dip galvanizing line.
ArcelorMittal Atlantique produces and markets a large range of products, including slabs, hot-rolled, pickled, galvanized, color-coated coils and composite products. ArcelorMittal Atlantiques products are sold principally in the regional market in France and Western Europe, particularly in the automotive market.
The sites of Florange and Mouzon comprise the Lorraine facilities of ArcelorMittal Atlantique et Lorraine. Florange is the only fully integrated steel plant in France. Mouzon specializes in finishing hot dip coating operations and is fully integrated in the Lorraine Cluster of flat carbon steel plants.
The Florange site has a total annual production capacity of 3.2 million tonnes of hot-rolled coils, which supply the finishing cold facilities and the coating lines of Mouzon and Dudelange, as well as the tinplate cold facilities for packaging facilities in Florange and Basse-Indre.
The Florange site has primary and finishing facilities that are located mainly along the Fensch River in Lorraine. It covers an area of approximately 6.2 square kilometers and contains a coke plant, two sinter plant, two blast furnaces, a steel-making division with two bottom blowing oxygen converters, ladle furnace and tank degasser facilities, and one continuous slab caster and a hot strip mill for the primary portion. Florange produced 0.6 million tonnes of crude steel in 2009. The finishing plant of Florange has a high-capacity coupled pickling-rolling line, a continuous annealing line, a batch annealing and temper mill, as well as three coating lines dedicated to the automotive marketa hot dip galvanizing line, an electro galvanizing line and an organic coating line. The Mouzon site covers an area of approximately 0.9 square kilometers and has two hot dip galvanizing lines for the production of zinc-aluminum silicium coated products.
The sites of Florange and Mouzon produce and deliver a range of flat steel high-value finished products to customers, including cold-rolled, hot dip galvanized, electro-galvanized, aluminized and organic-coated material, tin plate, draw wall ironed tin plate (DWI). Certain of its products are designed for the automotive market, such as Extragal, Galfan, Usibor (hot dip), Bonazinc (organic-coated), while others are designed for the appliances market, such as Solfer (cold-rolled) for enameling applications or High Gloss (organic-coated). Over 93% of the sites total production supplies the French and European Union markets.
ArcelorMittal Eisenhüttenstadt GmbH
ArcelorMittal Eisenhüttenstadt is situated on the Oder River near the German-Polish border, 110 kilometers southeast of Berlin, and covers an area of approximately 8.8 square kilometers. ArcelorMittal Eisenhüttenstadt is a fully integrated and highly-automated plant with two blast furnaces, one sinter plant, two oxygen converters, two continuous casters (slab and bloom), a hot strip mill with a coil box and a cold rolling mill with capacities for the production of cold-rolled coils, hot dip galvanizing and organic coating products and facilities for cutting and slitting.
In 2009, ArcelorMittal Eisenhüttenstadt produced 1.4 million tonnes of crude steel. Its maximum production capacity is 2.7 million tonnes. ArcelorMittal Eisenhüttenstadt produces and sells a wide range of products, including hot-rolled, cold-rolled, electrical and hot dip galvanized and organic-coated rolls to automotive, distribution, metal processing, construction and appliances industry customers in Germany, Central and Eastern Europe.
ArcelorMittal España consists of two facilities, Avilés and Gijón, which are interconnected by ArcelorMittal Españas own railway system and cover an area of approximately 15.1 square kilometers. The two facilities operate as a single integrated steel plant comprising coking facilities, sinter plants, blast furnaces, steel plants, hot-rolling mills and cold roll plants. The product range of ArcelorMittal España includes rail, wire rod, heavy plates and hot-rolled coil, as well as more highly processed products such as galvanized sheet, tinplate and organic-coated sheet. In 2009, ArcelorMittal España produced 2.6 million tonnes of crude steel.
The facilities are also connected by rail to the two main ports in the region, Avilés and Gijón. Raw materials are received at the port of Gijón, where they are unloaded at ArcelorMittal Españas own dry-bulk terminal, which is linked to the steel-making facilities by conveyor belt. A variety of products are shipped through the Avilés port facilities, both to other units of the ArcelorMittal group and to ArcelorMittal Españas customers.
ArcelorMittal España is connected to the other ArcelorMittal facilities in Spain by the wide-gauge and narrow-gauge rail networks. Shuttle trains link the ArcelorMittal España facilities direct to the ArcelorMittal Sagunto and ArcelorMittal Etxebarri plants, which it supplies with hot-rolled coils for subsequent processing into cold-rolled, galvanized and electrogalvanized sheet and tinplate.
ArcelorMittal España operates two coking plants, two sinter plants, two blast furnaces and two steel plantsone in Avilés for flats products, with two continuous casters slab, and other one in Gijón for long products, with two caster for bloom and billet, a hot strip mill, a heavy plate mill, a wire rod mill and a rail mill. The cold-rolled plants include two pickling lines, two five stands cold tandem mills, annealing facilities for tinplate, tinning lines, two galvanizing lines and one organic coating line. ArcelorMittal España includes also packaging facilities in Avilés and Etxebarri.
ArcelorMittal Méditerranée operates a flat carbon steel plant in Fos-sur-Mer. It also operates a finishing facility for electrical steel located in Saint-Chély, 300 kilometers northwest of Fos-sur-Mer. The Fos-sur-Mer plant is located 50 kilometers west of Marseilles on the Mediterranean Sea and covers an area of approximately 15 square kilometers. ArcelorMittal Méditerranées principal equipment consists of one coke oven plant, one sinter plant, two blast furnaces, two basic oxygen furnaces, two continuous slab casters, one hot strip mill, one pickling line, one cold rolling mill and two continuous annealing lines located at Saint-Chély. A deep water private wharf, situated at one end of the plant, is equipped with two unloader cranes to unload raw materials (iron ore, pellets and coal) and send them to the stock yard. ArcelorMittal Méditerranée produced 2.4 million tonnes of crude steel in 2009.
ArcelorMittal Méditerranées products include coils to be made into wheels, pipes for energy transport and coils for finishing facilities for exposed and non-exposed parts of car bodies, as well as the construction, home appliance, packaging, pipe and tube, engine and office material industries. The Saint-Chély plant produces electrical steel (with up to 3.2 % silicon content), mainly for electrical motors. About 60% of its products are shipped from a private wharf, in part through a shuttle system. 30% of its products are shipped by rail, with the remaining amount transported by truck.
ArcelorMittal Gent, Geel, Genk and Liège are part of ArcelorMittal Belgium. ArcelorMittal Gent is a fully integrated coastal steelworks which is located along the Ghent-Terneuzen canal, approximately 17 kilometers from the Terneuzen sea lock, which links the works directly with the North Sea. The canal is of the Panamax type and can accommodate ships of up to 65,000 tonnes. The ArcelorMittal Gent plant covers an area of approximately 8.2 square kilometers. ArcelorMittal Gent has an annual production capacity of 5.0 million tonnes of crude steel. In 2009, ArcelorMittal Gent produced 2.9 million tonnes of crude steel. ArcelorMittal Geel and ArcelorMittal Genk plants contain an organic coating line and an electrolytic galvanizing line, respectively. The Genk facility covers an area of 0.2 square kilometers.
ArcelorMittal Gent, Geel and Genks principal equipment consists of one coke oven plant, two sinter plants, two blast furnaces, two basic oxygen converters, two continuous slab casters, one hot strip mill, one high capacity couples pickling and rolling mill line, one coupled pickling and rolling mill, one pickling line for pickled and oiled products, batch annealing furnaces, one continuous annealing line, three temper rolling mills, three inspection lines, three hot dip galvanizing lines, one electrozinc coating line and two organic coating line.
ArcelorMittal Gent produces flat steel products with high-added value. A significant part of the production is coated, either by hot dip galvanizing, electrolytic galvanizing or organic coating. ArcelorMittal Gents products are mainly used in the automotive industry and in household appliances, tubes, containers, radiators and construction. The products are sold through the Flat Carbon Western Europe units.
The finishing facilities of ArcelorMittal Liège located south of Liège consist of a coupled pickling rolling mill line and a pickling line and a five-stand tandem mill (located in Tilleur), batch annealing furnaces and one continuous annealing line (located in Jemeppe), four hot dip galvanizing lines and two organic coating lines (located in the Flemalle/Ramet area) as well as three electrogalvanizing lines (located in Marchin).
ArcelorMittal Liège produces a large range of high-quality steel gradesultra-low carbon steels to deep-drawing aluminum-killed steels and tinplate low carbon specifications, including a range of construction steels and micro-alloyed grades. A portion of its production is sent to the Liège finishing facilities. The Liège finishing facilities mainly produce higher added-value products, such as products for automotive use (exposed and non-exposed parts), including high-strength steel for household electrical devices, general industry and construction applications, as well as packaging.
ArcelorMittal Piombinos production facilities and headquarters are located in Piombino, Italy. It also has a production division in San Mango sul Calore in Avellino, Italy. ArcelorMittal Piombino manufactures galvanized and organic-coated steel products. It operates one pickling line, a full continuous four-stand tandem mill, five hot dip galvanizing lines (of which three are operational) and three organic coating lines, one of which is located in Avellino. A new hot dipped galvanizing line was completed in 2009. ArcelorMittal Piombinos products are sold to European customers, primarily in the distribution, appliance and construction industries.
The Dudelange site is located in Luxembourg, 25 kilometers north of Florange, and contains a cold-rolled products plant. Dudelange operates two hot dip-coating lines, producing Alussi and Aluzinc, and two electro galvanizing lines for appliances and industries.
ArcelorMittal Sagunto is a flat steel finishing products plant located in eastern Spain. ArcelorMittal Sagunto has a maximum annual production capacity of two million tonnes of cold and coated steel. The facilities comprise a pickling line, a regeneration plant for HCl, a full continuous five stands tandem mill, H2 and HNX batch annealing, temper mill, an electro-galvanizing line, a hot dip galvanizing line, a power station and a waste treatment plant. ArcelorMittal Sagunto covers an area of 0.3 square kilometers.
ArcelorMittal Sestao is located inside the port of Bilbao on a 0.5 square kilometer property. Most of its raw materials arrive through a port owned by ArcelorMittal that is situated adjacent to the melt shop. ArcelorMittal Sestaos principal equipment consists of two electric arc furnaces, two continuous slab casters, one hot rolling mill and one pickling line. ArcelorMittal Sestao produced 0.9 million tonnes in 2009.
ArcelorMittal Sestao is a major supplier of hot-rolled, pickled and oiled coils to the Spanish market. Its range of production includes cold forming and drawing steels, structural steels, cold for re-rolling, direct galvanization, dual phase, weather resistance and floor plates. The compact steel production equipment, including a seven-stand hot rolling mill, enables ArcelorMittal Sestao to supply low thickness hot-rolled coil down to 1.0 millimeter. Sales outside Spain represent 20% of total shipments, most of them in Western Europe.
Industeel Belgium and Industeel France
Industeels facilities consist of six plants: Industeel Belgium (IB), located in Charleroi, Belgium; Industeel Creusot (IC), located in Le Creusot, France; Industeel Loire (IL), located in Chateauneuf, France and Euroform, located in Saint-Chamond, France, ArcelorMittal Ringmill in Seraing, Belgium and UF Aciers in Dunkirk, France. Industeel also owns an R&D center in Le Creusot, France.
IB, IC and IL are heavy plate mills. Each plant is fully-integrated, including melt shop and finishing facilities. IB and IC are designed to produce special steel plates, ranging from five to 150 millimeters in thickness, including stainless steel products, while IL is dedicated to extra heavy gauge products, ranging from 120 to 900 millimeters in thickness, in alloyed carbon steel. Euroform operates hot forming facilities, mainly to transform extra heavy gauge products received from IL. The R&D center is fully dedicated to special plate products development. ArcelorMittal Ringmill produces rings on a circular rolling mill.
Industeels principal facilities consists of three electric arc furnaces, two ingot casting, one continuous caster, three hot rolling mills, one circular rolling mill and heat treating and finishing lines. Industeels plants in Belgium cover an area of approximately 0.4 square kilometers, and its plants in France cover an area of approximately 0.7 square kilometers.
Industeel provides products for special steel niche markets, both in the form of alloyed carbon grades and in stainless steel. It mainly focuses on applications where tailor-made or added-value plates are needed. Industeels steel shipments reached 0.3 million tonnes in 2009, including 0.1 million tonnes of semi-products.
Industeels main product segments are stainless steel, pressure vessels steel, wear-resistant steel, cryogenics steel, mold steel, high-strength steel, jack-up rig elements, protection steel, clad plates, tool steel for oil and gas, chemistry and petrochemistry, wear resistant steel, assembly industries, process industries and construction inside and outside of Europe. The ringmill products are predominantly used in the wind turbine market.
ArcelorMittal Poland is the largest steel producer in Poland, with an annual production capacity of approximately 8.0 million tonnes of crude steel. The major operations of ArcelorMittal Poland are based in Dabrowa Gornicza, Krakow, Sosnowiec, Swietochlowice and Chorzów in Poland. ArcelorMittal Polands Dabrowa Gornicza, Krakow, Sosnowiec, Swietochlowice and Chorzów plants cover areas of 13.3, 15.4, 0.5, 0.8 and 0.2 square kilometers, respectively.
ArcelorMittal Poland also has interests in a number of companies, the largest of which is Zdzieszowice Coke Plant, which produces and supplies coke to other ArcelorMittal subsidiaries and external companies.
ArcelorMittal Poland produces a wide range of steel products, including both long products and flat products. Its product range includes slabs, billets, blooms, sections, rails, hot-rolled sheets and strips, cold-rolled sheets and strips, galvanized sheets, heavy plates, welded tubes, wire-rods and other wire and other wire products and coated sheets and coils. Products are mainly sold in the domestic Polish market, while the remainder is exported, primarily to customers located in other EU member states. ArcelorMittal Polands principal customers are in the construction, engineering, transport, mining and automotive industries.
ArcelorMittal Polands principal equipment consists of nine coke oven batteries, two sinter plants, five blast furnaces (two of which are currently operational), six basic oxygen furnaces, two continuous casters for blooms and billets, two continuous casters for slabs, one billets rolling mill, one hot rolling mill, one cold rolling mill, four section mills, three galvanizing lines (two of which are currently operational), two color coating lines, one wire rod mill, one wire drawing mill, one cold rolling mill for narrow strips and heavy plates mill. ArcelorMittal Poland produced 3.2 million tonnes of crude steel in 2009.
ArcelorMittal Galatis principal facilities include five coke oven batteries (none of which were operational in 2009), two sintering plants (one of which is operational), five blast furnaces (two of which are operational), six basic oxygen furnaces, four continuous slab casters, five continuous bloom casters (two of which are operational), one billet mill, two heavy plate mils, one hot strip mill, one cold rolling mill, one hot dip galvanizing line. ArcelorMittal Galatis plant covers an area of approximately 15.9 square kilometers.
In 2009, ArcelorMittal Galati produced 1.8 million tonnes of crude steel which were sold as plates, hot-rolled coil, cold rolled coil and galvanized products for the Romanian, Turkish and Balkan markets. ArcelorMittal Galati has stopped its coke battery for competitive and environmental issues and has a long-term supply contract with another ArcelorMittal company (Zdzieszowice Coke Plant in Poland) for the supply of high quality coke.
Following the completion in 2009 of $311 million capital expenditure program as provided under the terms of the purchase agreement for the facility, ArcelorMittal Galati has a commitment to spend an additional $40 million in capital expenditures from 2010 to 2011. This investment commitment is secured by a pledge of a portion of ArcelorMittal Galati shares.
ArcelorMittal Ostrava produces both flat and long carbon products. The facility is described under Long Carbon Americas and EuropeLong Carbon EuropeArcelorMittal Ostrava.
ArcelorMittal Annaba produces both flat and long carbon products. Its flat products business is included in ArcelorMittals Flat Carbon Europe segment, while its long products business is included in ArcelorMittals Long Carbon Americas and Europe segment. It is described under Long Carbon Americas and EuropeLong Carbon EuropeArcelorMittal Annaba.
Long Carbon Americas and Europe
ArcelorMittals Long Carbon Americas and Europe segment has production facilities in North and South America and Europe, including the United States, Canada, Brazil, Argentina, Costa Rica, Mexico, Trinidad, Spain, Germany, France, Luxembourg, Italy, Poland, Romania, Morocco, Algeria, Bosnia and Herzegovina and the Czech Republic. The following two tables provide an overview by type of facility of ArcelorMittals principal production locations and production units in the Long Carbon segment:
Production LocationsLong Carbon Americas and Europe
Production FacilitiesLong Carbon
ArcelorMittal Brasil (together with its subsidiaries, including Acindar in Argentina, Laminadora Costarricense and Trefileria Colima in Costa Rica) is the second largest long-rolled steel producer and the largest wire steel producer in Latin America in terms of both capacity and sales. ArcelorMittal Brasils steel production facilities include one integrated plant (the João Monlevade plant in Brazil), one semi-integrated steel plant (the Villa Constitución plant in Argentina), three mini-mills (the Juiz de Fora, Piracicaba and Vitória plantsBrazil), nine wire plants and three plants that produce transformed steel products. In addition, ArcelorMittal Brasil, through its subsidiary ArcelorMittal Bioenergética, produces charcoal from eucalyptus forestry operations that is used to fuel its furnaces in Juiz de Fora and or to exchange for pig iron with local producers, and through the jointly controlled entity Guilman Amorin, produces energy used to supply the João Monlevade plant. ArcelorMittal Brasil covers an area of approximately 1.322 square kilometers, including production plants and forested areas in Brazil.
ArcelorMittal Brasils current crude steel production capacity is 5.7 million tonnes. In 2009, it produced 4.1 million tonnes of crude steel and a total of 3.9 million tonnes of rolled products, of which 0.6 million tonnes were processed to manufacture wire products.
ArcelorMittal Brasils long-rolled products are principally directed at the civil construction and industrial manufacturing sectors. Long-rolled products used in the construction sector consist primarily of merchant bars and rebars for concrete reinforcement. Long-rolled products for the industrial manufacturing sector consist principally of bars and wire rods. A portion of the wire rods produced is further used by ArcelorMittal Brasil to produce wire products such as barbed and fence wire, welding wire, fasteners and steel cords. In addition, ArcelorMittal Brasil uses wire rods (mostly low carbon wire rods) to manufacture transformed steel products, such as welded mesh, trusses, pre-stressed wires, annealed wires and nails sold to construction companies, as well as drawn bars for the automotive industry.
ArcelorMittal Brasils wire steel products are value-added products with higher margins and are manufactured by the cold drawing of low- and high-carbon wire rods into various shapes and sizes. ArcelorMittal Brasils subsidiary BBABelgo Bekaert Arames Ltda. and the wire steel division of Acindar manufacture wire products that are consumed mainly by agricultural and industrial end-users and are sold at retail stores. These wire steel products include barbed and fence wire, welding wire and fasteners. Wire products produced by ArcelorMittal Brasils subsidiary BMBBelgo-Mineira Bekaert Artefatos de Arame Ltda., consist of steel cords that are consumed by the tire industry and hose wire that is used to reinforce hoses.
ArcelorMittal Brasils transformed steel products are produced mainly by the cold drawing of low-carbon wire rods. ArcelorMittal Brasils transformed steel products for the civil sector include welded mesh, trusses, annealed wire and nails. In addition, ArcelorMittal Brasil also processes wire rods to produce drawn bars at its Sabará facility, which are sold to customers in the automotive industrial sector.
ArcelorMittal Mineração Serra Azul
ArcelorMittal Serra Azul is an iron ore producer located in the Minas Gerais state of Brazil, about 60 kilometers south of Belo Horizonte, in the iron ore quadrangle. It supplies sinter feed to ArcelorMittal plants in Europe and lump ore for local pig iron producers and certain ArcelorMittal Brasil integrated plants.
Mineral production is transported either by truck to lump clients, or by truck and railway up to third-party port facilities located in the Rio de Janeiro state, where it is exported. In 2009, ArcelorMittal Serra Azul produced 2.4 million tonnes of iron ore.
Acindar Industria Argentina de Aceros S.A.
Acindar Industria Argentina de Aceros S.A. (Acindar) is the largest long steel maker in Argentina. Its main facilities, located in Villa Constitución in the Santa Fe province of Argentina, comprise a direct reduction iron plant, three electric arc furnaces, a ladle furnace and continuous casting, rolling mills, wire production and construction service facilities. The Acindar plant covers an area of approximately 2.8 square kilometers. In 2009, Acindar produced 1.0 million tonnes of crude steel. Acindar sells products to the construction, industrial, and agricultural sectors in Argentina, and exports to the South American and U.S. markets. It produces rebars, wire rod, merchant bars, special bar quality (SBQ), wires, wire mesh, cut and bend and drawn bars. Acindars own distribution network can also service end-users.
ArcelorMittal Point Lisas
ArcelorMittal Point Lisas, located in Trinidad, is the largest steelmaker in the Caribbean, based on 2008 shipments. Its facilities cover approximately 1.1 square kilometers at the Point Lisas Industrial Complex in Point Lisas. ArcelorMittal Point Lisas principal production facilities comprise three direct reduced iron plants, two electric arc furnaces, two continuous casters for billets and one wire rod mill. In 2009, ArcelorMittal Point Lisas produced 0.4 million tonnes of crude steel. ArcelorMittal Point Lisas receives its raw material imports and ships its steel products through a dedicated deep-water port facility within its production complex near the waterfront of the Gulf of Paria.
In 2009, ArcelorMittal Point Lisas exported substantially all of its wire rod shipments, primarily to steel manufacturers in South and Central America, the Caribbean and the United States. ArcelorMittal Point Lisas is also a significant producer, exporter, and user of direct reduced iron.
ArcelorMittal USA produces both flat and long carbon products. The flat carbon-related facilities and the mining operations associated with ArcelorMittal USA are described under Flat Carbon AmericasArcelorMittal USA.
ArcelorMittal USAs long carbon facilities, located at Indiana Harbor in East Chicago, Illinois, consist of an electric arc furnace, continuous billet caster, and bar mill. In 2009, the Indiana Harbor bars facility did not have any production. (Indiana Harbors flat carbon facilities are described above under Flat Carbon AmericasArcelorMittal USA).
ArcelorMittal USAs Steelton, Pennsylvania plant produces railroad rails, specialty blooms and flat bars for use in railroad and forging markets. Principal facilities consist of an electric arc furnace, vacuum degasser, bloom caster, and an ingot teaming facility. Finishing operations include a blooming mill, rail mill and bar mill. In 2009, the Steelton facility produced 0.3 million tonnes of crude steel. ArcelorMittal USAs Georgetown, South Carolina plant produces high-quality wire rod products, which are used to make low carbon fine wire drawing, wire rope, tire cord, high-carbon machinery and upholstery springs. Principal facilities consist of one electric arc furnaces, two ladle metallurgy stations, a billet caster and a wire rod rolling mill. In 2009, the Georgetown facility did not have any production.
ArcelorMittal USAs Vinton plant, located in El Paso, Texas, produces rebar and grinding balls, with an annual production capacity of 240,000 tonnes of liquid steel and 235,000 tonnes of finished products. Its steel making facility includes two electric arc furnaces, two continuous caster and a rolling mill. It services markets in the northern states of Mexico and the southwest of the United States. In 2009, the Vinton facility produced 0.1 million tonnes of crude steel.
ArcelorMittal LaPlace is a structural steel producer located in LaPlace, Louisiana and Harriman, Tennessee. The facilities in LaPlace consist of one electric arc furnace, two continuous casters and a rolling mill. Harriman consists of a rolling mill that is supplied with billets from LaPlace. In 2009, the LaPlace facilities produced 0.4 million tonnes of crude steel.
ArcelorMittal Montreal is the largest mini-mill in Canada with 2.3 million tonnes of crude steel capacity. In 2009, ArcelorMittal Montreal produced 1.3 million tonnes of crude steel. With eight major production facilities, ArcelorMittal Montreal offers flexibility in production and product offering.
ArcelorMittal Montreals main operations include the semi-integrated Contrecoeur East site with two DRI plants, one steel plant operating two electric arc furnaces and a rod mill. It is the only site in Canada to make steel with self-manufactured DRI. The Contrecoeur East site has the flexibility in metallic management and it can use either DRI or scrap, depending on their respective economies. The Contrecoeur West mini-mill site operates one steel plant with one electric arc furnace and a bar mill. Its steel production is made out of recycled scrap.
ArcelorMittal Montreal also operates a second bar mill in the Montreal area. It is engaged in further downstream production with two wire drawing mills, one in the Montreal area and one in Hamilton, Ontario. ArcelorMittal Montreal produces a wide range of products with a focus on niche and value-added products. These products include wire rods, wire products and bars primarily sold in Canada and the United States. ArcelorMittal Montreal principally serves the automotive, appliance, transportation, machinery and construction industries. The Contrecoeur East site also produces slabs that are resold within ArcelorMittal to the Flat Carbon segment and to external clients.
ArcelorMittal Montreal owns Bakermet, a scrap recycling business located in Ottawa, Ontario and also owns interests in Dietcher, a scrap processing business located in Montreal. These are an important source of scrap supply.
ArcelorMittal Las Truchas
ArcelorMittal Las Truchas is an integrated maker of long steel products, with one of the largest single rebar and wire rod production facilities in Mexico. ArcelorMittal Las Truchas is the largest exporter of rebar and wire rod in Mexico. It is located in Lázaro Cárdenas, Mexico, with additional facilities elsewhere in Mexico.
ArcelorMittal Las Truchas extracts its own iron ore, and is self-sufficient in this material for its production needs. Its iron ore mines (described below) are located 26 kilometers from its plant facilities. The ArcelorMittal Las Truchas plant covers an area of approximately 5.2 square kilometers. ArcelorMittal Las Truchas has 1.8 million tonnes of crude steel capacity. In 2009, ArcelorMittal Las Truchas produced 1.4 million tonnes of crude steel. Its integrated steel making complex at Lázaro Cárdenas includes an iron ore concentrating plant, a pelletizing plant, a coke oven, a blast furnace, two basic oxygen furnaces (BOFs), three continuous casters billet, a rebar rolling mill, a wire rod rolling mill and port facilities. It also has industrial services facilities, including a power plant, a steam plant, and a lime plant. The adjacent port facilities on Mexicos Pacific coast have berthing capacity for three incoming and two outgoing vessels at a time. The port gives ArcelorMittal Las Truchas maritime access to North American, South American and Asian markets.
ArcelorMittal Las Truchass other industrial facilities are in Córdoba, Celaya and Tultitlán. Its Córdoba facility (which is not currently operational) on the Gulf of Mexico has an electric arc furnace mini-mill that produces billet, with production capacity of 165,000 tonnes per year of liquid steel and 160,000 tonnes per year of billets. It principally supplies billets to the Tultitlán rolling mill. The Celaya rolling mill, strategically located in the geographic center of Mexico, produce rebar by using billet from ArcelorMittal Las Truchas. Its annual rebar production capacity is 500,000 tonnes. The Tultitlán rolling mill (currently without operations) processes billets from ArcelorMittal Las Truchas and Córdoba to produce rebar. It has an annual rebar production capacity of 240,000 tonnes. Its location in Tultitlán, near to Mexico City, allows it to function as a service and distribution center supplying rebar to central Mexico.
AMLT Mining Assets
The Las Truchas mine is an integrated iron ore facility that includes mine exploitation, crushing, dry cobbing preconcentrate and concentration plant with aggregate production of 1.3 million tonnes in 2009. It produces iron ore for both the Flat Carbon Americas and Long Carbon Americas and Europe segments and is described under Flat Carbon AmericasAMLC mining assets.
ArcelorMittal Duisburgs production facilities are located in Ruhrort and Hochfeld, Germany. The Ruhrort facilities include two oxygen converters, secondary metallurgy (including a ladle furnace, tank degasser and an RH degasser), a blooms caster, a billet caster and a billet mill. In 2009, ArcelorMittal Duisburg produced 0.6 million tonnes of crude steel. The Hochfeld facility is a wire rod mill. The Duisburg plants together cover an area of approximately 1.9 square kilometers. More than 90% of its production is sold in Europe, primarily to automotive, railway and engineering customers. In 1997, the former Mittal Steel Ruhrort (a predecessor to ArcelorMittal Duisburg) signed an agreement with ThyssenKrupp Stahl AG for the purchase of 1.3 million tonnes per year of hot metal, which was renewed in 2007. This agreement is valid until 2027 with an option to renew for five additional years.
The ArcelorMittal Hamburg plant covers a leased area of approximately 0.6 square kilometers. Its production facilities are one DRI production facility (MIDREX), one electric arc furnace, one ladle furnace, one billet caster, one wire rod mill and one stretching plant. About 85% of its production is sold in Europe. ArcelorMittal Hamburg produced 0.8 million tonnes of crude steel in 2009.
ArcelorMittal Gandrange & Schifflange
Built in 1966, the Gandrange site covers 279 hectares. In 2009, the electric arc furnace and the bar mill were permanently closed. The facility at the Gandrange site that remains operational is a bar/wire rod mill. In 2009, the mill began to be transformed to broaden its product range.
The Schifflange site (STFS) covers 2.8 hectares. The Schifflange facility consists of a wire rod mill and a rebar and coil installation. The sites produce special bars quality, rebar and wire rods (mesh, low carbon, high carbon, alloyed spring, steel cord, free cutting and cold heading quality products).
ArcelorMittal Poland produces both flat carbon and long carbon products. The facility is described under Flat Carbon EuropeFlat Carbon Eastern EuropeArcelorMittal Poland.
ArcelorMittal Ostravas production facilities are located in Ostrava, Czech Republic. It is approximately 83%-owned by the ArcelorMittal group, with the remaining percentage owned by third parties. ArcelorMittal Ostrava covers an area of approximately 5.6 square kilometers. Its principal production facilities include three coke oven batteries, two sinter plants, four blast furnaces, four open hearth tandem furnaces (three of which are operational), three continuous casters, one hot strip mill, two section mills, one wire rod mill and one power plant. In 2009, ArcelorMittal Ostrava produced 1.6 million tonnes of crude steel.
In connection with the 2003 privatization of ArcelorMittal Ostrava by the government of the Czech Republic (as part of its initiative to restructure the Czech steel industry), ArcelorMittal made capital expenditure commitments totaling $243 million (by Czech accounting standards) over 10 years (including $20 million for environmental improvements).
ArcelorMittal Ostrava has made capital expenditures of approximately $231 million as of December 31, 2009 towards this commitment. In connection with the acquisition, ArcelorMittal restructured the debt obligations of ArcelorMittal Ostrava with a consortium of Czech and international banks led by the International Finance Corporation, and also agreed to implement a medium-term restructuring plan approved by the European Commission. This plan includes certain reductions in capacity and employment levels. ArcelorMittal Ostrava produces long and flat products. Approximately 52% of ArcelorMittal Ostravas production is sold in the Czech domestic market, with the remainder sold primarily to customers in other European countries. ArcelorMittal Ostrava sells most of its products directly to end-users primarily in the engineering, automotive and construction industries, as well as to small-lot resellers.
The significant downstream subsidiaries of ArcelorMittal Ostrava are ArcelorMittal Tubular Products Ostrava a.s., ArcelorMittal Tabular Product Karvina, ArcelorMittal Distribution Solution Czech Republic s.r.o and ArcelorMittal Frydek-Mistek a.s. (previously known as Valcovny Plechu a.s.), which are all wholly-owned. ArcelorMittal Tubular Products Ostrava has an annual capacity of 275,000 tonnes of seamless tubes and 45,000 tonnes of welded pipes. ArcelorMittal Tabular Product Karvina has an annual capacity of 255,000 tonnes of welded pipes. ArcelorMittal Frydek-Mistek has an annual capacity of 145,000 tonnes of cold-rolled products. ArcelorMittal Distribution Solution Czech Republic s.r.o has an annual capacity of 960,000 tonnes of cutting and slitting.
ArcelorMittal Belval & Differdange
ArcelorMittal Belval & Differdange has two facilities located in Esch Belval and Differdange, Luxembourg. The Differdange plant covers an area of approximately 1.2 square kilometers, and the Belval plant covers an area of approximately 1.1 square kilometers. ArcelorMittal Belval & Differdanges principal production facilities are two electric arc furnaces, two continuous casters, two long section rolling mills and one sheet piles rolling mill. ArcelorMittal Belval & Differdange produces a wide range of sections and sheets piles, and produced 1.5 million tonnes of crude steel in 2009.
ArcelorMittal Rodange and Schifflange
ArcelorMittal Rodange and Schifflange has one electric arc furnace and a continuous caster for billets located in Schifflange and two rolling mills in Rodange. ArcelorMittal Rodange and Schifflange is 80%-owned by ArcelorMittal Belval Differdange, with the remaining 20% owned by third parties. The Rodange plant covers an area of approximately 0.5 square kilometers and the Esch Schifflange plant covers an area of approximately 0.4 square kilometers. In 2009, ArcelorMittal Rodange and Schifflange produced 0.6 million tonnes of crude steel.
ArcelorMittal Rodange and Schifflange manufactures special sections (track shoes, cathode bars, car building sections, mining sections and metro guide corners), crane rails, heavy angles and squares and rebars (Tempore, Krybar, Gewi and specials), and, in 2008, expanded its range to include light sheet piles products.
ArcelorMittal Warszawa is located in Warsaw, Poland and produces long products. Its plant covers an area of approximately 3.0 square kilometers and includes an electric arc furnace, a continuous caster, and two rolling mills (producing special quality bars and rebars). In 2009, ArcelorMittal Warszawa produced 0.4 million tonnes of crude steel. A new rolling mill producing rebars and light merchant started production in the second quarter of 2008. ArcelorMittal Warszawa produces special quality bars from 10 millimeters to 65 millimeters in diameter and in 2008, began producing rebar from 10 millimeters to 32 millimeters in diameter.
On September 15, 2009, the legal entity ArcelorMittal Olaberría merged with ArcelorMittal Bergara and Zumarraga and changed its name into ArcelorMittal Gipuzkoa.
The Olaberría facility is located in northeastern Spain. Its facilities include an electric arc furnace, a continuous caster and a rolling mill. It produces sections from 140 to 450 millimeters in diameter and 6.0 and 24.1 meters in length. Its plant covers an
area of approximately 0.18 square kilometers. The Olaberría facility produced 0.5 million tonnes of crude steel in 2009. After being upgraded in 2009, it now has a capacity of 1.2 million tonnes of finished products.
The Bergara facility is located in northeastern Spain. Its facilities include an electric arc furnace, a continuous caster and a continuous rolling mill. During the second half of 2009, the electric arc furnace and the continuous caster were cold idled.
The Zumarraga facility is located in northeastern Spain. Its facilities include an electric arc furnace, a continuous caster, a wire rod rolling mill and a bar rolling mill. In 2009, it produced 0.6 million tonnes of crude steel.
ArcelorMittal Madrid is located 15 kilometers south of Madrid. Its facilities include an electric arc furnace, a continuous caster and a rolling mill. It produces sections from 600 millimeters in diameter and between 9.0 and 18.3 meters in length. Its plant covers an area of approximately 0.2 square kilometers. In 2009, ArcelorMittal Madrid produced 0.3 million tonnes of crude steel.
ArcelorMittal Zaragoza is located in Aragon, in northeastern Spain. ArcelorMittal Zaragoza moved its industrial activity to a new location in 2007, which increased production capacity and product range. Its facilities include an electric arc furnace, a continuous caster and two rolling mills. It currently produces angles from 25 to 120 millimeters, flats from 40 to 200 millimeters and rebars from 10 to 32 millimeters in diameter. In 2009, ArcelorMittal Zaragoza produced 0.5 million tonnes of crude steel.
ArcelorMittal Asturiass production facilities are located in Gijón, Spain. The Gijón facilities include a steel plant with two oxygen converters, secondary metallurgy (including two ladle furnaces and a RH degasser), a blooms caster and a billets caster, as well as a wire rod mill and a rail mill. In 2009, the Asturias steel plant produced 0.5 million tonnes of crude steel (0.3 million tonnes of blooms and 0.3 million tonnes of billets). The wire rod mill produced 0.2 million tonnes of wire rod and the rail mill produced 0.3 million tonnes of rail.
ArcelorMittal Zenicas facilities are located in Bosnia and Herzegovina. It is 92%-owned by the ArcelorMittal group and 8% owned by the government of Bosnia and Herzegovina. ArcelorMittal Zenica covers an area of approximately 29.1 square kilometers. Its principal production facilities are electric arc furnaces, coke oven batteries, a sinter plant, a blast furnace, a BOF, a continuous caster, two rolling mills, a forge shop and a power plant. In 2009, ArcelorMittal Zenica produced 0.5 million tonnes of crude steel and acquired a new ingot caster. At the time of acquisition of ArcelorMittal Zenica, capital expenditure commitments totaling $135 million over 10 years (from 2005-2014) were made. As of December 31, 2009 ArcelorMittal Zenica has made capital expenditures of approximately $154 million, including $39 million on environmental projects, fulfilling its commitment.
ArcelorMittal Zenica produces long and forged products. Approximately 55% of ArcelorMittal Zenicas production is exported. ArcelorMittal Zenica sells most of its production directly to end users primarily in the engineering and construction industries, as well as to small-lot resellers.
ArcelorMittal Prijedor, located near Prijedor in the Republic of Srpska in Bosnia and Herzegovina, is an iron ore mining operation that is 51%-owned by ArcelorMittal.
The mine is a surface mine with an annual capacity of 1.8 million tonnes of iron ore. A new pit in the same area, known as Buvac, is in process and should be functional in 2010. The production process includes crushing, with hydro-cyclones and magnetic separation at the concentration plant.
ArcelorMittal Annaba and ArcelorMittal Tebessa
ArcelorMittal Annaba is the only integrated steel plant in Algeria. ArcelorMittal Annaba also owns port facilities at Annaba, which are located approximately 12 kilometers from its steel-producing operations, where exports of steel products and imports of raw materials are handled. Its plant covers an area of approximately 9.9 square kilometers.
ArcelorMittal Annabas production facilities consist of two basic oxygen furnaces with six converters. It operates two sinter plants, two blast furnaces, four continuous casters, a hot-strip mill, a cold reducing mill, a bar and rod mill and a seamless tube mill. In 2009, ArcelorMittal Annaba produced 0.6 million tonnes of crude steel.
ArcelorMittal Annaba produces both long and flat products. Its flat product range includes slabs, hot-rolled and cold-rolled coils and sheets, hot-dipped galvanized products and tin plates, and its long product range includes billets, wire-rods, rebars and seamless tubes. ArcelorMittal Annaba supplies products primarily to the construction, housing, engineering, packaging and petrochemical industries.
ArcelorMittal Tebessa operates two iron ore mines at Ouenza and Boukhadra; it produced 1.096 million tonnes ore in 2009. The Ouenza mine that is located in the southeast of Algeria near the Tunisian border, 150 kilometers from the Annaba coast, is an open cast mine with an overall surface area of 1,085 hectares. Ouenzas operations began in 1921. Its material is dispatched to the ArcelorMittal Annaba steel plant.
The Boukhadra mine is located in the southeast of Algeria, near the Tunisian border, approximately 180 kilometers from Annaba coast. Boukhadras operations started in 1927. Its material is dispatched to ArcelorMittal Annaba Plant.
Both mines can be accessed by road and by electrified railways that run between the mines and ArcelorMittal Annaba steel plant. Since October 18, 2001, both the Ouenza mine and Boukhadra mine have been owned by ArcelorMittal and Ferphos, an Algerian public sector company, with each entity holding 70% and 30%, respectively. The major production facilities at the mines include three crusher plants, conveyor belts and wagon-loading hoppers stations.
At the time of the acquisition of ArcelorMittal Annaba, capital expenditure commitments totaling $140 million over 10 years (from 2001-2011) were made. As of December 31, 2009 ArcelorMittal Annaba has made capital expenditures of approximately $130 million towards this commitment.
Sonasid (Société Nationale de Sidérurgie) is the largest long steel producer in Morocco and has facilities in Nador, Jorf and Lasfar. Its facilities consist of one electric arc furnace, one continuous caster, one wire rod and one bar mill. Sonasid principally produces steel bars and rods. These products include reinforcing bars (used in construction), wire rods (used to manufacture nails and springs) and merchant bars (used in mechanical construction and steel framework structures). Sonasid produced 0.5 million tonnes of crude steel in 2009.
ArcelorMittal Hunedoaras facilities are located in Romania. Its production facilities are one electric arc furnaces, two continuous casters and a sections rolling mill. In 2009, Arcelor Mittal Hunedoara produced 0.1 million tonnes of crude steel.
ArcelorMittal Tubular Products
ArcelorMittal Tubular Products division operated 20 operating units in Europe, North America, South America, CIS and Africa in 2009. The division caters mainly to the energy, mechanical tubing and automotive tubing and components markets. The facilities include four facilities producing seamless tubes, three facilities producing large diameter welded tubes, 11 facilities producing Electric Resistance Welded (ERW) tubes, one facility producing high value-added cold drawn (DOM) tubes and two facilities producing automotive components using welded tubes.
In 2009, ArcelorMittal sold its welded tube manufacturing and galvanizing facility in Contrecoeur, Canada to a local steel tube manufacturing group. The facility had an annual rolling capacity of 80,000 tonnes and an actual production capacity of 34,000 tonnes in 2009.
ArcelorMittals AACIS segment has production facilities in Asia and Africa, including Kazakhstan, Ukraine, South Africa and Russia. The following two tables provide an overview by type of facility of ArcelorMittals principal production locations and production:
ArcelorMittal South Africa (ArcelorMittal South Africa Ltd)
ArcelorMittal South Africa is the largest steel producer in Africa and has an installed capacity of approximately 7.7 million tonnes of crude steel. In 2009, ArcelorMittal South Africa produced 5.1 million tonnes of crude steel. ArcelorMittal, South Africas common shares are listed on JSE Limited in South Africa under the symbol ACL. Mittal Steel Holdings AG has a shareholding of 52.02%.
ArcelorMittal South Africa has four main production facilities which are supported by a metallurgical by-products division (Coke and Chemicals). Vanderbijlpark Steel is an integrated flat steel producer whose facility is located in Gauteng province, approximately 80 kilometers south of Johannesburg, which covers an area of approximately 23.0 square kilometers with a crude steel capacity of approximately 4.2 million tonnes. Vereeniging Steel is a mini-mill located in Vereeniging, close to Vanderbijlpark Steel, producing specialty steel products and covering an area of approximately 0.8 square kilometers, with an annual crude steel capacity of approximately 0.4 million tonnes of crude steel. Newcastle Steel is an integrated long products facility located in Kwa-Zulu Natal province and covers an area of approximately 13.1 square kilometers. It produces sections and bars as well as billets for re-rolling and wire rod and has an annual crude steel capacity of approximately 1.9 million tonnes. Saldanha Steel is a flat steel producer located in Western Cape Province, close to the deep-sea port of Saldanha, and covers an area of approximately 4.0 square kilometers. The facility has a crude steel capacity of approximately 1.3 million tonnes per annum and utilizes the Corex/Midrex process.
ArcelorMittal South Africas range of products includes hot-rolled plates and sheet in coil form, cold-rolled sheet, coated sheet, wire-rod and sections as well as forgings. Approximately 69% of its products are sold in the South African domestic market while Africa is its largest export market. It also sells significant quantities of product into Asia with minor sales into Europe and the Americas.
ArcelorMittal Kryviy Rih
The former Mittal Steel acquired the Ukrainian steel maker Kryvorizhstal in 2005 and subsequently renamed it ArcelorMittal Kryviy Rih.
ArcelorMittal Kryviy Rihs integrated steel plant consists of eight coke oven plants (including two coke oven plants under reconstruction), three sintering plants, six blast furnaces (four of which are operational), six basic oxygen furnaces, two open hearth furnaces, two blooming mills and six light section / bar mills and three wire rod mills. It covers an area of approximately 120 square kilometers including mines, an agriculture division and various recreational centers.
ArcelorMittal Kryviy Rih is committed to invest at least $500 million through 2010 pursuant to the agreement under which it was acquired. This includes certain innovation, investment and environment-related undertakings. As of December 31, 2009, ArcelorMittal Kryviy Rih had spent approximately $554 million toward these commitments. ArcelorMittal Kryviy Rih has also undertaken certain labor obligations relating to preservation of headcount and average wages.
ArcelorMittal Kryviy Rihs product range includes billets, rounds and light sections including squares, angles and strips. The products are sold to a range of industries such as hardware, construction, re-rolling and fabrication. The markets for the products include Ukraine, CIS and Russia, North Africa, Europe, the Middle East and the Gulf states. In 2009, ArcelorMittal Kryviy Rih produced five million tonnes of crude steel.
ArcelorMittal Kryviy Rih has two captive iron ore mines: an open pit mine that produced 7.0 million tonnes in 2009, known as Kryviy Rih Opencast, and an underground mine with production of 1.2 million tonnes in 2009, known as Kryviy Rih Underground. The production process includes crushing, hydroclassifiers and low intensity magnetic separation.
The main consumer of the sinter and concentrate mining production is ArcelorMittal Kryviy Rih, with some concentrate shipped to other ArcelorMittal affiliates in Kazakhstan and other Eastern Europe group companies, as well as to external consumers.
The Companys ownership in ArcelorMittal Kryviy Rih has gradually increased from 93.77% in 2006 to 95.13% in 2009 through acquisitions of non-controlling (minority) interests.
ArcelorMittal Temirtaus wholly-owned integrated steel plant, located in the Karaganda region of Kazakhstan, consists of seven coke oven batteries of which six are operating, three sinter plants, four blast furnaces (three of which are operational), three basic oxygen furnaces, two continuous slab casters, one hot strip mill, two cold rolling mills and three tinning lines, one hot dip galvanizing and one aluminum-zinc coating lines, one color coating line, two welded pipe mills and a bar mill. It covers an area of approximately seven square kilometers. In 2009, ArcelorMittal Temirtau produced 3.3 million tonnes of crude steel.
ArcelorMittal Temirtaus product range of flat steel products includes pig iron, continuous caster slabs, hot- and cold-rolled coils and sheets, black plates, covers, tin plates, hot dipped galvanized products, color coated products and welded pipes, bars, sections and rebars. It sells steel products to a range of industries, including the tube- and pipe-making sectors, as well as manufacturers of consumer goods and appliances.
ArcelorMittal Temirtau also has iron ore mines that produced 4.5 million tonnes of iron ore and coal mines that produced 3.9 million tonnes of coking coal in 2009.
ArcelorMittal has developed a plan to increase the facilitys steel production capacity to ten million tonnes. This would be done in two phases. In first phase the production capacity would be upgraded to 6 million tonnes by modernizing and de-bottlenecking of existing facilities. In second phase, a greenfield plant with four million tonnes of crude-steel production capacity would be constructed. The iron ore and coal mines and power plants would expand proportionally in order to provide 100 % self-sufficiency. In view of the recent downturn in the global steel market, the timeframe and required investments for all of these expansion projects is currently under review. See Item 4Information on the CompanyUpdate on Previously Announced Investment Projects.
Iron Ore Mines: Lisakowsk, Kentobe, Atasu, Atansore
ArcelorMittal Temirtau has four iron ore mines in central Kazakhstan. The mines are Lisakowsk, Kentobe, Atasu, Atansore. The four mines are connected by all-weather roads and railways. Dispatch of ore from these mines is by railway.
Lisakowsk is an open pit operation located in northwest Kazakhstan about 1,100 kilometers from Temirtau. This mine was initially commissioned in 1976 and was acquired by ArcelorMittal in 1999. The production process comprises crushing, screening, grinding, wet jigging and wet magnetic separation. Product is fine concentrate which is dispatched to Temirtau by railway rakes. A prototype pilot project on dephosphorisation was commissioned in 2007. This unit is not currently operational due to cost considerations.
Kentobe is an open pit operation located about 300 kilometers southeast of Temirtau, initially started in 1994. It was acquired by ArcelorMittal in 2001. Ore processing is performed by crushing and dry magnetic separation, producing coarse concentrate.
Atasu is an underground mine operation located about 400 kilometers south/southwest from Temirtau. The mine was started in 1956 with open pit exploitation of near surface reserves. Surface operations ended in 1980. Underground operations commenced in 1976. ArcelorMittal Temirtau acquired the mine in 2003 and operations continue to be underground mining. Processing comprises crushing and wet jigging.
Atansor is an open pit operation located about 500 kilometers northeast of Temirtau. The mining lease was obtained by ArcelorMittal in 2004. Ore is processed by a simple dry crushing and screening circuit.
Karaganda Coal Mines
ArcelorMittal Temirtau (formerly known as Ispat Karmet, Kazakhstan) acquired 15 coal mines in 1996 in the Karaganda coal basin region. These mines required considerable restructuring and investments. Restructuring and improvements were made by ArcelorMittal to form eight captive coal mines Kostenko, Kuzembaev, Saranskaya, Abaiskaya, Kazakstanskava, Lenina, Shaktanskaya and Tenteskaya. These coal mines are all underground mines utilizing the retreat longwall mining method.
The mines produce primarily coking coal used in steel-making at Temirtau as well as thermal coal for ArcelorMittal Temirtaus power plants. For beneficiation of coking coal, two washeries are operated one located near several of the coal mines and the other at the ArcelorMittal Temirtau steel plant. Surplus coal is supplied to group steel plants, mainly ArcelorMittal Kryviy Rih.
Kuzbass Coal Mines
ArcelorMittal Northern Kuzbass in Siberia, Russia includes the Berezovskaya, Pervomayskaya and Anzherskaya mines, as well as the Severnaya coal washery. The main consumers of the coal and concentrate produced are ArcelorMittal Kriviy Rih, ArcelorMittal Temirtau and ArcelorMittals Eastern European plants.
The Berezovskaya mine, which is 98.29%-owned by ArcelorMittal, is an underground coking coal mine located in the northeastern part of the Kemerovo geological and economic district of Kuzbass, 35 kilometers from the regional city of Kemerovo. The mine is connected with the towns of Berezovsky and Kemerovo by motorway, and has access to the Kemerovo-Barzas railway.
The Pervomayskaya mine, which is 99.5%-owned by ArcelorMittal, is an underground coking coal mine located in the northern part of the Kemerovo geological and economic district of Kuzbass, 60 kilometers from Kemerovo. The mine is connected with the towns of Berezovsky and Kemerovo by motorway, and has access to the Kemerovo-Barzas railway.
The Anzherskaya mine, which is wholly-owned by ArcelorMittal, is an underground steam coal mine located in the central part of the Anzhersky geological and economic district of Kuzbass. Roads connect the mine to Anzhero-Sudzhensk has access to the Anzherskaya railway station.
The major mine equipment and machinery includes mining and heading machines, shearers and road headers, powered roof supports, face conveyors, rock loading machines, belt conveyors, hoisting machines, electric locomotives, ground and suspended diesel locomotives.
ArcelorMittal Stainless Steel segment has production facilities in South America and Europe, including Brazil, France and Belgium. The following two tables provide an overview by type of facility of ArcelorMittal Stainless Steel principal production locations and production units:
Production Locations - ArcelorMittal Stainless Steel
Production Facilities for ArcelorMittal Stainless Steel
ArcelorMittal Inox Brasil S.A.
ArcelorMittal Inox Brasil is the stainless steel business unit of ArcelorMittal in South America. It is the only integrated producer of flat stainless and silicon steel in the region. In 2009, it exported products to more than 48 countries. Its steel mill in Timóteo, in the Vale do Aço, Minas Gerais state, Brazil, has an annual production capacity of 0.9 million tonnes of liquid steel.
The integrated plant of ArcelorMittal Inox Brasil in Timóteo includes two blast furnaces, a melting shop area (including two electrical furnaces, one smelter, two converters and two continuous casting machines), a hot strip rolling mill (including one walking beam and one push furnace with one rougher mill and one steckel mill), a stainless cold rolling mill (including one hot annealing pickling, two cold annealing pickling and one cold preparation line, three cold rolling mills and boxes annealing) and a silicon cold rolling mill (including one hot annealing pickling line, two tandem lines, one decarb line, one carlite coating line and one cold rolling mill). ArcelorMittal Inox Brasil produced 0.6 million tonnes of crude steel in 2009.
ArcelorMittal Inox Brasil also runs several stainless steel distribution companies: ArcelorMittal Inox Brasil Serviços, which includes several entities involved in steel cutting, finishing, trading and distribution, as well as two companies acquired at the end of 2007: Cínter, a tube manufacturer in Uruguay, and M.T. Majdalani y Cia., the leading stainless steel service center and distributor in Argentina.
ArcelorMittal Inox Brasil Serviços operates the following entities: ArcelorMittal São Paulo Serviços Aços Inoxidáveis e Elétricos, which is a service center in Ipiranga, São Paulo that also trades tubes and bars; ArcelorMittal Campinas Serviços Aços Inoxidáveis e Elétricos, which is a service center; ArcelorMittal Timóteo Serviços Aços Inoxidáveis e Elétricos, which is a service center at the Timóteo plant that processes stainless steel; ArcelorMittal Timóteo Comercial Aços Inoxidáveis e Elétricos, which is also located at the Timóteo plant and provides regional stainless flat and tubes commercial and distribution activities; ArcelorMittal Caxias do Sul- Serviços Aços Inoxidáveis e Elétricos, which is a service center in Caxias do Sul (RS); and owns Acesita Argentina S.A., which handles importing, exporting, purchasing and selling, distribution, representation and trading, processing and transformation of flat and non-flat stainless steel, silicon steels, high carbon steel, non-flat products (except tubes) and cast steel products, primarily in the Argentine market.
ArcelorMittal Inox Brasil Serviços is also active in the stainless tubes production and distribution segment with its subsidiary ArcelorMittal Inox Brazil Tubos, a company formed by a manufacturer of seam-welded stainless steel tubes (previously known as Cetubos) and a company that serves customers with special welded seams needs (previously known as Inoxtubos).
ArcelorMittal Inox Brasil products are exported out of South America and are distributed worldwide through the network of ArcelorMittal Stainless International.
ArcelorMittal Stainless Europe
ArcelorMittal Stainless Europe is the stainless steel business unit of ArcelorMittal in Europe. It operates upstream and downstream facilities in France and Belgium and manages a network that distributes stainless products throughout Europe and to export markets.
The upstream facilities of ArcelorMittal Stainless Europe consist of two steel-making plants in Belgium (Genk and Châtelet). The Genk plant includes two electric arc furnaces, vacuum and argon oxygen decarburizing facilities, ladle refining metallurgy and slab continuous caster. The Genk plant also includes a cold rolling mill facility. The Genk plant covers an area of approximately 0.8 square kilometers. The Châtelet plant is an integrated upstream steel-making plant with a melt shop and a hot rolling mill. The Châtelet melt shop includes an electric arc furnace, argon-oxygen decarburizing equipment, ladle refining metallurgy, slab continuous caster and slab grinders. The Châtelet plant covers an area of approximately 0.5 square kilometers. ArcelorMittal Stainless Europe produced 1.0 million tonnes of crude steel in 2009.
ArcelorMittal Stainless Europes downstream facilities consist of three cold rolling mill plants, located in Genk, Belgium, Gueugnon and Isbergues, France. All three plants include annealing and pickling lines (with shot blasting and pickling equipments), cold rolling mills, bright annealing lines (in Gueugnon and Genk), skin-pass, and finishing operations equipments. In addition, the Isbergues plant also includes a direct rolling annealing and pickling (DRAP) line. The Genk plant is focused on austenitic products, the Gueugnon plant on ferritic products, and Isbergues on products dedicated to automotive (mainly ferritic) and industry (mainly austenitic) markets. The Gueugnon plant covers an area of approximately 0.4 square kilometers and the Isbergues plant covers an area of approximately 0.9 square kilometers.
ArcelorMittal Stainless Europe is also active in the production of stainless precision strips via ArcelorMittal Stainless Precision Europe, which operates two plants in Pont de Roide and Firminy, France. These facilities are equipped with continuous annealing and pickling lines, cold rolling mills, bright annealing lines and finishing operations equipments.
ArcelorMittal Stainless Europe also produces stainless welded tubes via ArcelorMittal Stainless Tubes Europe, which operates one plant in Ancerville, France (producing tubes for industrial and ornamental markets) and ArcelorMittal Stainless Automotive Tubes, which operates one plant in Usti, Czech Republic (producing tubes for exhaust systems).
ArcelorMittal Stainless Europes in-house distribution network enables it to cover the entire European market. Its steel service centers are located in Isbergues (France), Genk (Belgium), Luxembourg, Sersheim and Rheinhausen (Germany), Viladecans (Spain), Massalengo and Podenzano (Italy), Siemianowice Slaskie (Poland), Istanbul (Turkey). All service centers have dedicated equipment to adapt products to local markets. These include slitters, coils packaging lines, cut-to-length lines and coils polishing lines.
ArcelorMittal Stainless Europes products for export are distributed worldwide by the network of ArcelorMittal Stainless International.
ArcelorMittal Stainless & Nickel Alloys
ArcelorMittal Stainless & Nickel Alloys is the stainless steel business unit of ArcelorMittal specialized in the design, production and transformation of nickel and cobalt alloys and certain specific stainless steels.
Produced in the form of bars, cold-rolled strip, wire rod and plates, these products are intended for high-tech applications or applications addressing very specific requirements.
ArcelorMittal Stainless & Nickel Alloyss production facilities are principally located in Imphy, France. They include melt shop, cold rolling mill and wire hot rolling mill facilities. In 2008 ArcelorMittal Stainless & Nickel Alloys bought Rescal, a cold drawing shop located 50 kilometers west of Paris that produces heat-resistant elements.
Steel Solutions and Services
Steel Solutions and Services is primarily the in-house trading and distribution arm of ArcelorMittal. It also provides value-added and customized steel solutions through further processing to meet specific customer requirements. It services a variety of customer industries, including automotive, construction, household appliances, public works, civil engineering and general industry. Steel Solutions and Services is the largest customer of both the Flat and Long Carbon Steel segments. Steel Solutions and Services has numerous small to medium-sized service centers and warehouses. The range of distribution solutions is offered through a network covering 30 countries, while specific solutions are dispatched in five business units: ArcelorMittal Construction Solutions, ArcelorMittal International, ArcelorMittal Projects, ArcelorMittal Total Offer Processing, ArcelorMittal WireSolutions.
The range of distribution solutions is organized across a dozen of specific geographical areas through locally empowered management: France, Iberia, Italy, Turkey/Mediterranean, South America, Benelux, Germany/Switzerland, Central and Eastern Europe, Asia/Middle East/India, Poland, UK/Scandinavia.
The processing facilities provide value-added services for flat and long carbon steel as well as for specialty products, from light finishing work on beams to an integrated offer of slit coils, sheets and blanks, with technical expertise and innovation for the construction, automotive and general industry markets.
The distribution network, with over than 300 storage facilities, has expertise in service and proximity, ensuring immediate availability of the entire range of products (flat, long, technical and special steel) through an extensive network of agencies and sales offices. Thousands of user customers have direct access to the ArcelorMittals steel products and a complete portfolio of steel solutions.
ArcelorMittal Construction Solutions
ArcelorMittal Construction Solutions provides its customers with steel-based solutions for cladding, roofing, flooring and framing. It has a worldwide footprint, including operations in Europe, Brazil, as well as in the Indian Ocean and the Caribbean areas. Its facilities include one pickling line, one cold roll mill, two integrated galvanizing/coating lines, two coating lines, 90 profiling lines and 17 continuous panel lines. ArcelorMittal Construction Solutions sells three main types of products: profiles, floor elements and sandwich polyurethane and mineral wood panels. Its three businesses are known as Arval, Arclad and Armat.
Arval serves the diverse requirements of architects and engineering firms, providing complete solutions and a large range of colors for building projects. Arclad provides standard cladding profiles and panels with short delivery times. Armat is focused on providing distributors with products such as roof tiles, rainwater evacuation systems, accessories and panels.
In addition, ArcelorMittal Construction Solutions is developing new ventures in the solar business (Amhelios) and the residential sector.
ArcelorMittal International is a worldwide sales network supplying ArcelorMittal products from over 30 mills outside of their home markets. With end-user contacts in all key markets, it is the spearhead for ArcelorMittals expansion in emerging markets.
It has over 45 sales offices on five continents serving more than 27 countries and provides its customers with a wide range of flat and long products, also supplying steel products and technical support for complex projects, such as offshore and onshore drilling platforms, multi-purpose vessels, bridges, sports infrastructures, airports, electric power plants and skyscrapers.
ArcelorMittal Projects provides steel solutions and services for projects worldwide in infrastructure, oil and gas and construction.
In-house production and processing facilities combined with steel mainly from ArcelorMittal mills allows ArcelorMittal Projects to offer a complete product range. Strategically located stock yards provide short delivery times. ArcelorMittal Projects supports its customers with project management skills and engineering assistance, offering a range of on-demand services such as processing, storage and handling, tailor-made logistics, quality control and inspection, document control and project administration.
Its market sectors include oil and gas, offshore, power plants (wind, water, nuclear), liquid natural gas (LNG) terminal and civil construction projects all over the world.
ArcelorMittal Total Offer Processing
ArcelorMittal Total Offer Processing provides steel processing solutions, ranging from design to production and logistics of steel components and steel solutions for industrial accounts. A global network of sites, with a strong presence in emerging markets, enables ArcelorMittal Total Offer Processing to follow its global customers in their expansion in these developing regions.
The market sectors of ArcelorMittal Total Offer Processing include railways, crane and lifting machinery, yellow goods, agriculture, trucks, new energies and electrical appliances. It is currently present in nine countries with 30 specific sites.
ArcelorMittal Wire Solutions
ArcelorMittal Wire Solutions is an industrial wiredrawer with a global presence, serving sectors such as agriculture, automotive, construction, energy and general industry. Production sites are in Europe, North America and China in addition to a long-standing joint venture Kiswire-ArcelorMittal in Asia with worldwide distribution channels.
ArcelorMittal Wire Solutions has developed recognized brands and high quality products with a broad range of tailor-mad