false--12-31FY20182018-12-310001243429YesfalseLarge Accelerated FilerfalseYes0.01600.16000.00900.07650.01500.15000.01300.07650.01750.16000.01750.09500.01800.10000.02000.32000.01800.09000.02000.04500.02000.10000.02000.0480220.01800.05600.01800.05000.01800.08000.04770.05070.01250.034600.05030.02250.100000.026201300000010000006100000014100000011900000063.42235.3263.42235.3263.42235.3291.98109.14013000000031000000031000000005000000005000000005000000005000000005000000005000000005000000004000000001000000000.01000000000.01000000000.01500000000.01500000000.01100000000.07000000000.0750000000750000000600000000225000000000115157692111515769211021903623305800000010200000000.01000.01000.01000.01000.01000.01000.01000.01000.50000.62310.60000.50000.46990.33430.35000.31070.39020.33430.35000.28140.37020.33430.35000.44540.45330.50000.50000.50000.49000.45330.50000.50000.50000.49000.50000.50000.500026000000020100000040600000036600000012141214P7Y6300000061700000013000000140000000750000000.7P3Y0.01750.01750.0175P10YP10YP10YP5YP10YP10YP10YP5YP1YP1Y63.42235.3263.42235.3291.98109.1491.98235.3263.42235.3263.42235.320.00720.0140P20Y46700000058000000000042000000000010.6822.850.010.10.01P3YP3YP5YP3YP2YP5YP3YP2YP3YP3YP3YP3YP3Y01.510.21.50.51.510.501.510.5010.5010.5010.500.500.500.5010.5010.500.210.510.5010.50110.020.800.020.020.021.210.81.210.801.21.211.211.211.21111110.81.51.5110.33333333331.57140.2100000000P10YP50YP15YP50YP15YP45YP5YP20Y<div class="jc0"><div class="jc2"><font class="jc3">Intangible assets</font><font class="jc3"> </font></div><div class="jc4"><font class="jc5">Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets will accrue to the Company and the cost can be reliably measured. Intangible assets acquired separately by ArcelorMittal are initially recorded at cost and those acquired in a business combination are initially recorded at fair value at the date of the business combination. These primarily include the cost of technology and licenses purchased from third parties and operating authorizations granted by governments or other public bodies (concessions). Intangible assets are amortized on a straight-line basis over their estimated economic useful lives, which typically do not exceed </font><font class="jc5">five years</font><font class="jc5">. Amortization is included in the consolidated statements of operations as part of cost of sales.</font><font class="jc5"> </font></div><div class="jc4"><font class="jc5">ArcelorMittal’s industrial sites which are regulated by the European Directive 2003/87/EC of October 13, 2003 on carbon dioxide (“CO</font><font class="jc6">2</font><font class="jc5">”) emission rights, effective as of January 1, 2005, are located primarily in Belgium, Czech Republic, France, Germany, Luxembourg, Poland, Romania, Spain and Italy. ArcelorMittal's operations in Ontario, Canada are subject to the “Climate Change Mitigation and Low-carbon Economy Act, 2016”, a cap and trade program regulation effective from July 1, 2016. The emission rights allocated to the Company on a no-charge basis pursuant to the annual national allocation plan are recorded at nil value and purchased emission rights are recorded at cost. </font><font class="jc5"> </font></div></div><div class="jc0"><div class="jc7"><font class="jc8">Trade accounts receivable and allowance for lifetime</font><font class="jc5"> </font><font class="jc8">expected credit losses</font><font class="jc8"> </font><div class="jc9"><table class="jca"><tr><td colspan="6"></td></tr><tr><td class="jcb"></td><td class="jcc"></td><td class="jcd"></td><td class="jcd"></td><td class="jcc"></td><td class="jcd"></td></tr><tr><td class="jce"><div class="jcf"><font class="jcg"> </font></div></td><td colspan="5" class="jch"><div class="jci"><font class="jcj">December 31,</font></div></td></tr><tr><td class="jce"><div class="jck"><font class="jc5"> </font></div></td><td colspan="2" class="jcl"><div class="jcm"><font class="jcn">2018</font></div></td><td class="jce"><div class="jco"><font class="jc5"> </font></div></td><td colspan="2" class="jcp"><div class="jcm"><font class="jcn">2017</font></div></td></tr><tr><td class="jcq"><div class="jck"><font class="jc5">Gross amount</font></div></td><td class="jcr"><div class="jcs"><font class="jc5">4,605</font></div></td><td class="jct"><div class="jck"><font class="jc5"><br clear="none"/></font></div></td><td class="jcu"><div class="jco"><font class="jc5"> </font></div></td><td class="jcr"><div class="jcs"><font class="jc5">4,056</font></div></td><td class="jct"><div class="jck"><font class="jc5"><br clear="none"/></font></div></td></tr><tr><td class="jcv"><div class="jck"><font class="jc5">Allowance for lifetime expected credit losses</font></div></td><td class="jch"><div class="jcs"><font class="jc5">(173</font></div></td><td class="jcw"><div class="jck"><font class="jc5">)</font></div></td><td class="jce"><div class="jco"><font class="jc5"> </font></div></td><td class="jch"><div class="jcs"><font class="jc5">(193</font></div></td><td class="jcw"><div class="jck"><font class="jc5">)</font></div></td></tr><tr><td class="jcq"><div class="jck"><font class="jc5">Total</font></div></td><td class="jcx"><div class="jcs"><font class="jc5">4,432</font></div></td><td class="jcy"><div class="jck"><font class="jc5"><br clear="none"/></font></div></td><td class="jcu"><div class="jco"><font class="jc5"> </font></div></td><td class="jcx"><div class="jcs"><font class="jc5">3,863</font></div></td><td class="jcy"><div class="jck"><font class="jc5"><br clear="none"/></font></div></td></tr></table></div></div></div> 0001243429 ifrs-full:NotLaterThanOneYearMember ifrs-full:LiquidityRiskMember 2018-12-31 0001243429 ifrs-full:SubsidiariesWithMaterialNoncontrollingInterestsMember 2017-12-310001243429country:FRifrs-full:ProvisionForDecommissioningRestorationAndRehabilitationCostsMember2020-12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
| |
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
| |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20182021
OR
| |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
| |
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-35788
ARCELORMITTAL
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Grand Duchy of Luxembourg
(Jurisdiction of incorporation or organization)
24-26, Boulevard d’Avranches, L-1160 Luxembourg,
Grand Duchy of Luxembourg
(Address of Registrant’s principal executive offices)
Henk Scheffer, Company Secretary, 24-26, Boulevard d’Avranches, L-1160 Luxembourg,
Grand Duchy of Luxembourg. Fax: +352 4792 2235
(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:
|
| | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Ordinary Shares | MT | New York Stock Exchange |
| 5.5% Mandatorily convertible subordinated notes due 2023 | MTCN | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares
1,013,568,258910,893,202
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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‐T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer, large“large accelerated filer," "accelerated filer" and emerging"emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | |
Large accelerated filer x
| Accelerated filer ¨
| Non-accelerated filer ¨Large accelerated filer ☒Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
| Emerging growth company ¨
|
standardsstandards† provided pursuant to Section 13(a) of the ExchangeAct. ☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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
Table of contents
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| Page |
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| Management report | |
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| Introduction | |
| Company overview | |
| History and development of the Company | |
| Cautionary Statement regarding forward-looking statements | |
| Key transactions and events in 2021 and recent developments | |
| Risk Factors | |
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| Business overview | |
| Business strategy | |
| Research and development | |
| Sustainable development | |
| Products | |
| Sales and marketing | |
| Insurance | |
| Intellectual property | |
| Government regulations | |
| Organizational structure | |
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| Properties and capital expenditures | |
| Property, plant and equipment | |
| Capital expenditures | |
| Reserves and Resources (iron ore and coal) | |
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| Operating and financial review | |
| Key factors affecting results of operations | |
| Operating results | |
| Liquidity and capital resources | |
| Disclosures about market risk | |
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| Outlook | |
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| Management and employees | |
| Directors and senior management | |
| Compensation | |
| Corporate governance | |
| Employees | |
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| Shareholders and markets | |
| Major shareholders | |
| Related party transactions | |
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| Page |
| Markets | |
| New York Registry Shares | |
| Purchases of equity securities by the issuer and affiliated purchasers | |
| Share capital | |
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| Additional information | |
| Memorandum and Articles of Association | |
| Material contracts | |
| Exchange controls and other limitations affecting security holders | |
| Taxation | |
| Evaluation of disclosure controls and procedures | |
| Management’s report on internal control over financial reporting | |
| Principal accountant fees and services | |
| Glossary - definitions, terminology and principal subsidiaries | |
| Exhibits | |
| Signature | |
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| Report of Independent Registered Public Accounting Firm | |
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| Consolidated financial statements | |
| Consolidated statements of operations | |
| Consolidated statements of other comprehensive income | |
| Consolidated statements of financial position | |
| Consolidated statements of changes in equity | |
| Consolidated statements of cash flows | |
| Notes to the consolidated financial statements | |
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Form 20-F Cross Reference Guide
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| Item | Form 20-F Caption | Reference in current report | Page |
| | | |
| Glossary - definitions, terminology and principal subsidiaries | |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSCautionary statement regarding forward-looking statements | |
| | | |
| Identity of Directors, Senior Management and Advisers | Not applicable | |
| Offers Statistics and Expected Timetable | Not applicable | |
| Key Information | | |
| | Not applicable | |
| | Not applicable | |
| | Not applicable | |
| | Risk Factors | |
| Item 4. | Information on the Company | | |
| | History and development of the Company, Key transactions and events in 2021 and recent developments, Capital expenditures, Sources and uses of cash | |
| | Business strategy, Market information, Competitive strengths, Sustainable development, Products, Sales and marketing, Insurance, Intellectual property, Government regulations | |
| | Organizational structure | |
| | Property, plant and equipment, Capital expenditures, Reserves and Resources (iron ore and coal) | |
| Item 4A. | Unresolved staff comments | None | |
| | | |
| | Key factors affecting results of operations, Operating results | |
| | Liquidity and capital resources | |
| C. | Research and development, patents and licenses, etc. | Competitive strengths, Research and development | |
| | Outlook | |
| E. | Critical Accounting Estimates | Critical accounting policies and use of judgments and estimates | |
| | | |
| | | |
| | | |
| | Directors and senior management | |
| | Compensation | |
| | Corporate governance, Directors and senior management | |
| | Employees | |
| | Management share ownership, Compensation | |
| | | |
| | Major shareholders | |
| | Related party transactions | |
| C. | Interest of experts and counsel | Not applicable | |
| | | |
| A. | Consolidated statements and other financial information | Consolidated financial statements as of and for the year ended December 31, 2021, Export sales, Legal proceedings | |
| B. | Significant changes | Not applicable | |
| Item 9. | The Offer and Listing | | |
| A. | Offer and listing details | Markets | |
| B. | Plan of distribution | Not applicable | |
| | | | | | | | | | | |
| | Markets | |
| D. | Selling shareholders | Not applicable | |
| E. | Dilution | Not applicable | |
| F. | Expenses of the issue | Not applicable | |
| Item 10. | Additional Information | | |
| | Share capital | |
| | Memorandum and Articles of Association | |
| | Material contracts | |
| | Exchange controls and other limitations
affecting security holders | |
| | Taxation | |
| F. | Dividends and paying agents | Paying agents and Earnings distribution | |
| G. | Statements by experts | Reserves and Resources (iron ore and coal) and Exhibits 15.1, 15.2, 15.3,15.4, 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 15.12 and 15.13 | |
| H. | Documents on display | History and development of the Company | |
| I. | Subsidiary information | Not applicable | |
| | Disclosures about market risk | |
| Item 12. | Description of Securities Other Than Equity Securities | | |
| A. | Debt Securities | Not applicable | |
| B. | Warrants and Rights | Not applicable | |
| C. | Other Securities | Not applicable | |
| | New York Registry Shares | |
| Part II | | | |
| Item 13. | Defaults, Dividend Arrearages and Delinquencies | None | |
| Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | None | |
| | Evaluation of disclosure controls and
procedures, Management’s report on internal control
over financial reporting | |
| Item 16A. | Audit committee financial expert | Corporate governance | |
| Item 16B. | Code of Ethics | Corporate governance — Code of Business Conduct | |
| | Principal accountant fees and services | |
| Item 16D. | Exemptions from the Listing Standards for Audit Committees | None | |
| | Purchases of equity securities by the issuer and affiliated purchasers | |
| Item 16F. | Change in Registrant’s Certifying Accountant | Change in registrant’s certifying accountant | | |
| Corporate Governance | ITEM 4A.Corporate governance | | |
| | Not applicable | |
| | Not applicable |
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| Item 17. | Financial statements | Consolidated financial statements | |
| Item 18. | Financial statements | Consolidated financial statements | |
| | Exhibits | |
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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
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 24-26, Boulevard d’Avranches, L-1160 Luxembourg, Grand Duchy of Luxembourg, and, where the context requires, its consolidated subsidiaries. References to the “ArcelorMittal group” and the “Group” are to ArcelorMittal and its consolidated subsidiaries. ArcelorMittal’s principal subsidiaries, categorized by reporting segment and location, are listed below.
For the purposes of this annual report, the names of the following ArcelorMittal subsidiaries as abbreviated below will be used where applicable. |
| | | | |
Name of SubsidiaryManagement report | | Abbreviation | | Country |
NAFTA | | | | |
ArcelorMittal Dofasco G.P. | | ArcelorMittal Dofasco | | Canada |
ArcelorMittal México S.A. de C.V. | | ArcelorMittal Mexico | | Mexico |
ArcelorMittal USA LLC | | ArcelorMittal USA | | USA |
ArcelorMittal Long Products Canada G.P. | | ArcelorMittal Long Products Canada | | Canada |
| | | | |
Brazil and neighboring countries ("Brazil") | | | | |
ArcelorMittal Brasil S.A. | | ArcelorMittal Brasil | | Brazil |
Acindar Industria Argentina de Aceros S.A. | | Acindar | | Argentina |
| | | | |
Europe | | | | |
ArcelorMittal Atlantique et Lorraine S.A.S. | | ArcelorMittal Atlantique & Lorraine | | France |
ArcelorMittal Belgium N.V. | | ArcelorMittal Belgium | | Belgium |
ArcelorMittal España S.A. | | ArcelorMittal España | | Spain |
ArcelorMittal Flat Carbon Europe S.A. | | AMFCE | | Luxembourg |
ArcelorMittal Galati S.A.1
| | ArcelorMittal Galati | | Romania |
ArcelorMittal Poland S.A. | | ArcelorMittal Poland | | Poland |
ArcelorMittal Eisenhüttenstadt GmbH | | ArcelorMittal Eisenhüttenstadt | | Germany |
ArcelorMittal Bremen GmbH | | ArcelorMittal Bremen | | Germany |
ArcelorMittal Méditerranée S.A.S. | | ArcelorMittal Méditerranée | | France |
ArcelorMittal Belval & Differdange S.A. | | ArcelorMittal Belval & Differdange | | Luxembourg |
ArcelorMittal Hamburg GmbH | | ArcelorMittal Hamburg | | Germany |
ArcelorMittal Ostrava a.s.1
| | ArcelorMittal Ostrava | | Czech Republic |
ArcelorMittal Duisburg GmbH | | ArcelorMittal Duisburg | | Germany |
ArcelorMittal International Luxembourg S.A. | | ArcelorMittal International Luxembourg | | Luxembourg |
ArcelorMittal Italia S.p.A.2
| | ArcelorMittal Italia | | Italy |
| | | | |
Africa and Commonwealth of Independent States ("ACIS") | | | | |
ArcelorMittal South Africa Ltd. | | ArcelorMittal South Africa | | South Africa |
JSC ArcelorMittal Temirtau | | ArcelorMittal Temirtau | | Kazakhstan |
PJSC ArcelorMittal Kryvyi Rih | | ArcelorMittal Kryvyi Rih | | Ukraine |
| | | | |
Mining | | | | |
ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure Canada G.P. | | ArcelorMittal Mines and Infrastructure Canada | | Canada |
ArcelorMittal Liberia Ltd | | ArcelorMittal Liberia | | Liberia |
JSC ArcelorMittal Temirtau | | ArcelorMittal Temirtau | | Kazakhstan |
PJSC ArcelorMittal Kryvyi Rih | | ArcelorMittal Kryvyi Rih | | Ukraine6 |
Introduction
Company overview
ArcelorMittal is one of the world’s leading integrated steel and mining companies. ArcelorMittal is the largest steel producer in Europe and among the largest in the Americas, second largest in Africa and the sixth largest steel producer in the CIS region and has a smaller but growing presence in Asia.
*Iron ore production includes production from ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure G.P. ("AMMC"), AM Liberia ("AML") and captive mines.
The Company's key metrics above in 2020 include the U.S. operations prior to their sale on December 9, 2020:
| | | | | | | | |
U.S. operations
(in million tonnes) | Crude steel | Iron ore |
| Production | 9.93 | 5.83 |
| Shipments | 9.14 | 5.53 |
ArcelorMittal has steel-making operations in 16 countries on four continents, including 37 integrated and mini-mill steel-making facilities. As of December 31, 2021, ArcelorMittal had approximately 158,000 employees.
ArcelorMittal produces a broad range of high-quality finished and semi-finished steel products ("semis"). Specifically, ArcelorMittal produces flat products, including sheet and plate, and long products, including bars, rods and structural shapes. It also produces pipes and tubes for various applications. ArcelorMittal sells its products primarily in local markets and to a diverse range of customers in approximately 155 countries, including the automotive, appliance, engineering, construction and machinery industries. ArcelorMittal’s mining operations
produce various types of mining products including iron ore lump, fines, concentrate, pellets, sinter feed and coking coal.
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 higher value-added products in its product mix.
History and development of the Company
ArcelorMittal results from the merger in 2007 of its predecessor companies Mittal Steel Company N.V. and Arcelor, each of which had grown through acquisitions over many years. Since its creation ArcelorMittal has experienced periods of external growth as well as consolidation and deleveraging (including through divestment).
ArcelorMittal's success is built on its core values of sustainability, quality and leadership and the entrepreneurial boldness that has empowered its emergence as the first truly global steel and mining company. Acknowledging that a combination of structural issues and macroeconomic conditions will continue to challenge returns in its sector, the Company has adapted its footprint to the new demand realities, redoubled its efforts to control costs and repositioned its operations with a view toward outperforming its competitors. ArcelorMittal’s research and development capability is strong and includes several major research centers as well as strong academic partnerships with universities and other scientific bodies.
Against this backdrop, ArcelorMittal's strategy is to leverage four distinctive attributes that will enable it to capture leading positions in the most attractive areas of the steel industry’s value chain, from mining at one end to distribution and first-stage processing at the other: global scale and scope; superior technical capabilities; a diverse portfolio of steel and related businesses, one of which is mining; and financial capabilities. The Company’s strategy is further detailed under “Business overview—Business strategy”.
ArcelorMittal’s steel-making operations have a high degree of geographic diversification. Approximately 30% of its crude steel was produced in the Americas, approximately 53% was produced in Europe and approximately 17% was produced in other countries, such as Kazakhstan, South Africa and Ukraine in 2021. In addition, ArcelorMittal’s sales of steel products are spread over both developed and developing markets, which have different consumption characteristics. ArcelorMittal’s mining operations are present in North and South America,
| | | | | |
1.7 | ArcelorMittal Galati S.A. and ArcelorMittal Ostrava a.s. were classified as held for sale as of December 31, 2018.Management report
|
Africa, Europe and the CIS region and captive mines are integrated with the Company's global steel-making facilities.
Competitive strengths
As shown by the following graph, ArcelorMittal has a diversified portfolio of steel and mining products to meet a wide range of customer needs across many steel-consuming sectors, including automotive, appliance, engineering, construction, energy and machinery and via distributors.
* Other steel sales mainly represent metal processing, machinery, electrical equipment and domestic appliances
**Other sales mainly represent mining, chemicals & water, slag, waste, sale of energy and shipping
The Company believes that the following factors contribute to ArcelorMittal’s success in the global steel and mining industry:
Market leader in steel. ArcelorMittal had annual achievable production capacity of approximately 82.7 million tonnes of crude steel for the year ended December 31, 2021. Steel shipments for the year ended December 31, 2021 totaled 62.9 million tonnes. ArcelorMittal has significant operations in many countries which are described in "Properties and capital expenditures". In addition, many of ArcelorMittal’s 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, India, Africa, CIS and Southeast Asia).
The Company sells its products in local markets and through a centralized marketing organization to customers in approximately 155 countries. ArcelorMittal’s 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 world’s major automobile and appliance manufacturers. The Company is a strategic partner to several of 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.
A world-class mining business. ArcelorMittal has a global portfolio of 12 operating units with mines in operation and development and is among the largest iron ore producers in the world. In 2021, ArcelorMittal sourced a large portion of its raw materials from its own mines and facilities including finance leases. The table below reflects ArcelorMittal's self-sufficiency through its mining operations in 2021.
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Millions of metric tonnes 3 | | Consumption | | Sourced from own mines/facilities2 | | Other sources | | Self-sufficiency % |
| Iron ore | | 86.5 | | 50.6 | | 35.9 | | 59% |
PCI & coal1 | | 34.8 | | 3.3 | | 31.5 | | 9% |
| Coke | | 20.7 | | 19.4 | | 1.3 | | 94% |
| Scrap & DRI | | 29.8 | | 14.9 | | 14.9 | | 50% |
1.Includes coal only for the steelmaking process and excludes a small proportion of ArcelorMittal's consumption of PCI and coal was 6.75 million tonnes and 29.6 million tonnes, respectively, for the year ended December 31, 2021.
2.Assumes 100% consumption of ArcelorMittal's iron ore and coal production.
3. Includes consumption of ArcelorMittal Italia until April 14, 2021.
The Company has iron ore mining activities in Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, Ukraine, South Africa and through its joint venture in India and associate in Canada (Baffinland). It has coal mining activities in Kazakhstan. ArcelorMittal’s main mining products include iron ore lump, fines, concentrate, pellets, sinter feed, metallurgical coals including hard and weak coals. In addition, ArcelorMittal produces substantial amounts of direct reduced iron ("DRI") which is a scrap substitute used in its mini-mill facilities to supplement external metallic purchases. As of December 31, 2021, ArcelorMittal’s iron ore reserves (including reserves at mines where ArcelorMittal owns less than 100%, based on ArcelorMittal's ownership percentage even if ArcelorMittal is entitled to mine all the reserves, and including reserves for which use is restricted) were estimated at 3,942 million tonnes run of mine and its total coking coal reserves were estimated at 210 million tonnes run of mine. See “Property, Plant and
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2.Management report | On November 1, 2018, ArcelorMittal completed the acquisition of Ilva S.p.A. subsequently renamed ArcelorMittal Italia S.p.A. See "Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018."
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Equipment—Reserves and resources (iron ore and coal)” for a detailed list of the entities with mineral reserves and resources and ownership structure. The Company’s long-life iron ore and coal reserves and resources provide a measure of security of supply and an important natural hedge against raw material volatility and global supply constraints. The seaborne iron ore mining business is managed as a separate segment which enhances ArcelorMittal’s ability to optimize capital allocation.
ArcelorMittal’s facilities have good access to shipping facilities, including through ArcelorMittal’s own, or partially owned, 15 deep-water port facilities and linked railway sidings.
Market-leading automotive steel business. ArcelorMittal has a leading market share with approximately 17% of the worldwide market share in the automotive steel business as of December 31, 2021, and is a leader in the fast-growing advanced high strength steels ("AHSS") segment, specifically for flat products. ArcelorMittal is the first steel company in the world to embed its own engineers within an automotive customer to provide engineering support. The Company begins working with OEMs as early as five years before a vehicle reaches the showroom, to provide generic steel solutions, co-engineering and help with the industrialization of the project. These relationships are founded on the Company’s continuing investment in R&D and its ability to provide well-engineered solutions that help make vehicles lighter, safer and more fuel-efficient.
In 2010, ArcelorMittal initiated a development effort of dedicated S-in motion® engineering projects. Its S-in motion® line (B,C&D car segments, SUV, pick-up trucks, light commercial vehicles, truck cabs, hybrid vehicles, battery electric vehicles ("BEVs")) is a unique offering for the automotive market that respond to OEMs’ requirements for safety, fuel economy and reduced CO2 emissions. By utilizing AHSS in the S-in motion® projects, OEMs can achieve significant weight reduction using the Company's emerging grades solutions such as Fortiform®, the Company's third generation AHSS for cold forming, or Usibor® 2000 and Ductibor® 1000, the Company's latest AHSS grades for hot stamping.
S-in motion® projects for electrical cars in the C segment as well as for the plug-in hybrid C-segment were completed in 2019. There are multiple specificities for BEVs: shorter front module, necessity to protect batteries against crash, lowering of the center of gravity, huge additional weight due to batteries, etc. These specificities require rethinking crash management. S-in Motion® BEV for SUV is a catalog of steel solutions adapted to this new type of vehicles. Advanced and especially ultra-high strength steels, innovative press hardened steels, laser welded blanks are especially highlighted as key solutions for an optimal performance (safety/weight) and battery safety. The growth of various types of electric vehicles will impact design and manufacturing. For instance, new large mass batteries change
the mass distribution of a vehicle and impact the design and manufacturing of the chassis and wheels. Battery protection provides another example: both the battery box and body structure have to protect the battery in the event of a crash. AHSS products are among the most affordable solutions on the market for these specific applications. In a context where the supply of electric vehicles, and especially BEVs are expected to grow quickly, new projects have been launched to address these new trends.
In the automotive industry, ArcelorMittal mainly supplies the geographic markets where its production facilities are located in Europe, North and South America, South Africa and China through Valin ArcelorMittal Automotive Steel Co., Ltd (“VAMA”), its joint venture with Hunan Valin. VAMA’s product mix is oriented toward higher value products and mainly toward the OEMs to which the Company sells tailored solutions based on its products. With sales and service offices worldwide, production facilities in North and South America, South Africa, Europe and China, ArcelorMittal believes it is uniquely positioned to supply global automotive customers with the same products worldwide. The Company has multiple joint ventures and has also developed a global downstream network of partners through its distribution solutions activities. This provides the Company with a proximity advantage in virtually all regions where its global customers are present.
In 2020, ArcelorMittal was OEM qualified for galvanized Fortiform® 980 material, and sourced for the first time ever on all new vehicle platforms launching throughout 2021. Fortiform® 980 is an advanced grade of steel designed specifically for the auto industry, it offers leading-edge formability and strength with superior weldability. It is produced at the Company's joint venture facility in Calvert, Alabama, USA. In 2021, the automotive industry’s priority turned towards the simplification of the vehicle manufacturing complexity linked to the rising importance of electrical vehicles. ArcelorMittal’s response is the Multi-Part Integration ("MPI") concept integrating a large number of parts into one single component combining PHS (Usibor®) and laser welding technology. Examples of MPI are the rear H-Frame and the double door ring.
Sustainability (with focus on CO2 emission reduction in the supply chain) has become a key requirement in the automotive industry linked to the importance of sustainability in the holistic electrical vehicle marketing concept. In 2021, ArcelorMittal has launched two solutions under the XCarb™ brand: XCarb™ green steel certificates and XCarb™ recycled & renewable produced, which was well received in industry and automotive markets.
For further details on the new products under development, see "Business overview—Research and development”.
Diversified and efficient producer. As a 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.
•Diversified production process. In 2021, approximately 52.9 million tonnes of crude steel were produced through the basic oxygen furnace process and approximately 16.2 million tonnes through the electric arc furnace ("EAF") process. This provides ArcelorMittal with greater flexibility in its raw material and energy use, and increased ability to meet varying customer requirements in the markets it serves.
•Product and geographic diversification. By operating a portfolio of assets diversified across product segments and geographic areas, ArcelorMittal benefits from a number of natural hedges. As a global steel producer with a broad range of high-quality finished and semi-finished steel products, ArcelorMittal is able to meet the needs of diverse markets. Steel consumption and product requirements vary between mature economy markets and developing economy markets. Steel consumption in mature economies is largely from flat products and a higher value-added mix, while developing markets utilize a higher proportion of long products and commodity grades. As developing economies mature and as market needs evolve, local customers will require increasingly advanced steel products. 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.
•Upstream integration. ArcelorMittal believes that its own raw material production provides it with a competitive advantage over time. Additionally, ArcelorMittal benefits from the ability to optimize its steel-making facilities’ efficient use of raw materials, its global procurement strategy and the implementation of company-wide knowledge management practices with respect to raw materials. Certain of the Company’s operating units also have access to infrastructure, such as deep-water port facilities, railway sidings and engineering workshops that lower transportation and logistics costs.
•Downstream integration. ArcelorMittal’s downstream integration, primarily through its Europe segment for distribution solutions, enables it to provide customized steel solutions to its customers more effectively. The Company’s downstream assets have cut-to-length, slitting and other processing facilities, which provide
value additions and help it to maximize operational efficiencies.
Dynamic responses to market challenges and opportunities. ArcelorMittal’s management team has a strong track record and extensive experience in the steel and mining industries. In line with its deleveraging focus at the time, it announced in August 2019 that it had identified opportunities to unlock up to $2 billion in value from its asset portfolio over the then- following two years. In 2020, the Company completed its goal with the sale of ArcelorMittal USA to Cleveland-Cliffs.
In 2020, the Company successfully reduced fixed costs, including through temporary measures, in line with lower production resulting from the impacts of the COVID-19 pandemic. This reduction was achieved through significant savings in labor cost (including temporary salary reductions, utilizing the available economic unemployment schemes to match workforce to operating rates, temporary layoffs, reduction/elimination of contractors, reduced overtime, etc.), reduction in repairs and maintenance expenses (given lower operating rates) and savings in selling, general and administrative expenses. The comprehensive measures taken to “variabilize” fixed costs were critical to protecting profitability and cash flows. As economic activity recovered during the year, the Company responded by restarting or increasing production, leading to the reversal of some of these temporary savings. At the same time, the Company remained focused on structural cost improvements to appropriately position its fixed cost base for the post-COVID-19 operating environment. These savings were expected to limit the increase in fixed costs as activity and production levels recover, thus leading to lower fixed costs per tonne. In total, $1.0 billion of structural cost improvements were identified within this fixed cost reduction program which was expected to be fully realized in 2022. In 2021, the Company achieved $0.6 billion of fixed cost savings relating to its previously announced $1.0 billion structural improvement plan. Savings were achieved through productivity gains and footprint optimization (following closures at Krakow, coke plant in Florange, and Saldanha); and SG&A savings including a 20% reduction in corporate office costs including headcount reduction. The Company did not make progress against its plan related to repairs and maintenance following the decision taken to maintain such expenditures at higher levels to ensure operational reliability.
In February 2022, the Company has announced a new three year $1.5 billion value plan focused on creating value through well-defined commercial and operational initiatives. This plan does not include the impact of strategic capital expenditure projects (which will be followed separately). The plan includes commercial initiatives, including volume/mix improvements and operational improvements (primarily in variable costs). The plan aims at protecting operating income potential of the business
from rising inflationary pressures, improving its relative competitive position vis-a-vis its peers and supporting sustainably higher profits.
Proven expertise in acquisitions and turnarounds. ArcelorMittal’s 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 areas of expertise from different business units across the Company to evaluate new assets, conduct due diligence and monitor integration and post-acquisition performance. The Company has grown through a series of acquisitions and by improving the operating performance and financial management at acquired facilities. In particular, ArcelorMittal seeks to improve acquired businesses by eliminating operational bottlenecks, addressing any historical under-investments and increasing the capability of acquired facilities 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 improved the operating performance and the quality of steel produced at such facilities.
In recent years, the Company has focused on improving its costs through its Action 2020 program and non-core asset disposals as well as through some strategic M&A activity. In 2020, the Company sold ArcelorMittal USA and on April 14, 2021, Company has created a joint venture (Acciaierie d'Italia) with the Italian government. For further details please see "Key transactions and events in 2021".
The Company has announced a new three year $1.5 billion value plan focused on creating value through well-defined commercial and operational initiatives (see above).
Sustainability leadership.
ArcelorMittal is committed to leading the industry’s efforts to decarbonize, and to be part of the solution to the world reaching net-zero by 2050. In addition unless indicatedto its 2050 net-zero target, the Company has recently set a group target of reducing its CO2 emissions intensity by 25% by 2030, and in its European operations, by 35% by 2030 (scope 1 and 2 emissions). As innovation is central to the Company's success with the onus it places on research and development ("R&D") ensuring ArcelorMittal is at the forefront of the evolution of steelmaking processes and products, the Company has developed the industry’s broadest and most flexible suite of low-emissions steelmaking technologies and has integrated them into two pathways, Smart Carbon and Innovative-DRI, both of which hold the potential to deliver carbon-neutral steelmaking.
Other information
ArcelorMittal is a public limited liability company (société anonyme) that was incorporated for an unlimited period under the laws of the Grand Duchy 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 ArcelorMittal’s registered office are:
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| ArcelorMittal |
| 24-26, Boulevard d’Avranches |
| L-1160 Luxembourg |
| Grand Duchy of Luxembourg |
| Telephone: +352 4792-1 |
ArcelorMittal’s agent for U.S. federal securities law purposes is:
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| ArcelorMittal Sales & Administration LLC |
| 833 W. Lincoln Highway, Suite 200E, |
| Schererville, IN 46375 |
| Telephone: +219 256 7303 |
Internet site
ArcelorMittal maintains an Internet site at www.arcelormittal.com. Information contained on or otherwise or the context otherwise requires,accessible through this Internet site is not a part of this annual report. All references in this annual report to abbreviationsthis Internet site and to any other Internet sites (other than to specific documents furnished to or terms shown below havefiled with the following definitions:SEC and specifically incorporated by reference herein) are inactive textual references and are for information only.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
ArcelorMittal produces a range of publications to inform its shareholders. These documents are available in various formats: they can be viewed online or downloaded. Please refer to www.arcelormittal.com, where they can be located within the Investors menu, under Financial Reports, or within the Corporate Library.
Any request for documents may be sent to: company.secretary@arcelormittal.com or ArcelorMittal’s registered office.
Sustainable development
ArcelorMittal’s sustainable development information is detailed in the Integrated Annual Review that will be published during the second quarter of 2022 and will be available within the Corporate Library on www.arcelormittal.com. For further information, please refer to the section "Sustainable Development".
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Articles of Association11 | the amended and restated articles of association of ArcelorMittal, dated May 16, 2018, filed as Exhibit 1.1 hereto | | KZT | the Kazakhstani tenge, the official currency of Kazakhstan |
AUD$ or AUD | Australian dollars, the official currency of Australia | | Metallurgical coal | a broader term than coking coal that includes all coals used in steelmaking, such as coal used for the pulverized coal injection (“PCI”) process |
Brownfield project | the expansion of an existing operation | | Number of employees | employees on the payroll of the Company |
C$ or CAD | Canadian dollars, the official currency of Canada | | Production capacity | the annual production capacity of plant and equipment based on existing technical parameters as estimated by management |
CEO Office | the Chief Executive Officer, Mr. Lakshmi N. Mittal, and the President and Chief Financial Officer, Mr. Aditya Mittal | | Ps or MXN | the Mexican peso, the official currency of the United Mexican States |
CIS | the countries of the Commonwealth of Independent States | | Real, reais or R$ | Brazilian reais, the official currency of Brazil |
CNY | Chinese yuan, the official currency of China | | ROM | run of mine - mined iron ore or coal to be fed to a preparation and/or concentration process |
Coking coal | coal that, by virtue of its coking properties, is used in the manufacture of coke, which is used in the steelmaking process | | Sales | include shipping and handling fees and costs billed to a customer in a sales transaction |
Crude steel | the first solid steel product upon solidification of liquid steel, including ingots from conventional mills and semis (e.g., slab, billet and blooms) from continuous casters | | SBQ | special bar quality steel, a high-quality long product |
Downstream | finishing operations: flat products - the process after the production of hot-rolled coil/plates, and long products - the process after the production of blooms/billets (including production of bars, wire rods, SBQ, etc.) | | Significant Shareholder | a trust (HSBC Trustee (C.I.) Limited, as trustee), of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries |
DMTU or dmtu | dry metric tonne unit | | Sinter | a metallic input used in the blast furnace steel-making process, which aggregates fines, binder and other materials into a coherent mass by heating without melting |
DRI | direct reduced iron, a metallic iron formed by removing oxygen from iron ore without the formation of, or passage through, a smelting phase. DRI can be used as feedstock for steel production | | Spanish Stock Exchanges | the stock exchanges of Madrid, Barcelona, Bilbao and Valencia |
Energy coal | coal used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steam or thermal coal | | Steel products | finished and semi-finished steel products, and exclude raw materials (including those described under “upstream” below), direct reduced iron (“DRI”), hot metal, coke, etc. |
Euro, euros, EUR or € | the official currency of the European Union (“EU”) member states participating in the European Monetary Union | | Tons, net tons or ST | short tons are used in measurements involving steel products (a short ton is equal to 907.2 kilograms or 2,000 pounds) |
Executive Officers | those executives of the Company who are supporting the CEO Office and jointly with the CEO Office represent the senior management of the Company | | Metric Tonnes or MT | metric tonnes and are used in measurements involving steel products, as well as crude steel, iron ore, iron ore pellets, DRI, hot metal, coke, coal, pig iron and scrap (a metric tonne is equal to 1,000 kilograms or 2,204.62 pounds)Management report |
ArcelorMittal as parent company of the ArcelorMittal group
ArcelorMittal, incorporated under the laws of Luxembourg, is the parent company of the ArcelorMittal group and is expected to continue this role during the coming years. The Company has no branch offices.
Listings
ArcelorMittal’s shares (also referred to as "ordinary shares" or "common shares" throughout this report) are traded on several exchanges: New York (MT), Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS). Its primary stock exchange regulator is the Luxembourg CSSF ("Commission de Surveillance du Secteur Financier"). ArcelorMittal’s CSSF issuer number is E-0001.
ArcelorMittal’s 5.50% Mandatorily Convertible Subordinated Notes ("MCNs") due 2023 issued in May 2020 are listed on the New York Stock Exchange.
Indexes
ArcelorMittal is a member of more than 145 indices including: STOXX Europe 600, S&P Europe 350, CAC40, MSCI Pan-Euro, Bloomberg World Index, IBEX 35, Euronext Paris CAC Basic Materials Index, DAXglobal Steel EUR Price and Euronext Amsterdam AEX Basic Materials Index. Recognized for its commitments to sustainable development, ArcelorMittal is also included in the FTSE4Good Index, Euronext Vigeo Europe 120 and the Euronext Most Advanced Benelux 20. Further, ArcelorMittal has been participating in CDP Climate since 2005 and the United National Global Compact since 2003.
Share price performance
During 2021, the price of ArcelorMittal shares increased by 38% in dollar terms compared to 2020 year on year; the chart below shows a comparison between the performance of ArcelorMittal’s shares and the Eurostoxx600 Basic Resource (SXPP).
Capital return policy
On June 8, 2021, at the annual general meeting of shareholders, the shareholders approved the dividend of $0.30 per share proposed by the Board of Directors. The dividend amounted to $325 million and was paid on June 15, 2021.
In accordance with its capital return policy, the Company expects to pay a base annual dividend (to be progressively increased over time). In addition, 50% of the amount of free cash flow (calculated as net cash provided by operating activities less purchases of property, plant and equipment and
intangibles ("capital expenditures") less dividends paid to non-controlling shareholders) remaining after paying the base annual dividend is allocated to a share buyback program to be completed over the subsequent 12 month period. Should the ratio of net debt to operating income (loss) less depreciation, impairment and special items be greater than 1.5x then the share buyback will not be made.
During 2021, as part of its capital return policy, ArcelorMittal completed early redemptions of MCNs in the amount of $1.2 billion as well as five consecutive share buyback programs
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GMBManagement report | the Group Management Board, the former senior management body which was replaced by the CEO Office as of January 1, 2016. The CEO Office, supported by five Executive Officers, makes up the Company’s senior management | | UAH | Ukrainian Hryvnia, the official currency of Ukraine |
Greenfield project | the development of a new project | | US$, $, dollars, USD or U.S. dollars | United States dollars, the official currency of the United States |
Iron ore fines | ultra-fine iron ore generated by mining and grinding processes, that are aggregated into iron ore pellets through an agglomeration process or used as sinter feed | | Upstream | operations that precede downstream steel-making, coking coal, coke, sinter, DRI, blast furnace, basic oxygen furnace (“BOF”), electric arc furnace (“EAF”), casters & hot rolling/plate mill |
Iron pellets | agglomerated ultra-fine iron ore particles of a size and quality suitable for use in steel-making processes | | Wet recoverable | a quantity of iron ore or coal recovered after the material from the mine has gone through a preparation and/or concentration process excluding drying |
Kilometers | measures of distance are stated in kilometers, each of which equals approximately 0.62 miles, or in meters, each of which equals approximately 3.28 feet | | ZAR | South African rand, the official currency of the Republic of South Africa12 |
corresponding to the repurchase of 170.9 million shares for a total amount of €4.4 billion ($5.2 billion). Including the $0.5 billion share buyback program that was completed on October 30, 2020, the Company returned since then and through 2021 in total $7.2 billion to shareholders under the above-mentioned capital return policy.
In February 2022, the Board of Directors recommended an increase of the base annual dividend to $0.38/share (from $0.30/share paid in 2021) to be paid in June 2022, subject to the approval of shareholders at the annual general meeting of shareholders in May 2022. In addition, the Company has initiated a new $1.0 billion share buyback program for first half of 2022. This is the maximum based on the current authorization provided by shareholders at the annual general meeting of shareholders in June 2021. Additional authorization to repurchase shares will be sought from shareholders at the 2022 annual general meeting of shareholders.
Investor relations
ArcelorMittal has a dedicated investor relations team at the disposal of analysts and investors. By implementing high standards of financial information disclosure and providing clear, regular, transparent and even-handed information to all its shareholders, ArcelorMittal aims to be the first choice for investors in the sector.
To meet this objective and provide information to fit the needs of all parties, ArcelorMittal implements an active and broad investor communications policy: conference calls, road shows with the financial community, regular participation at investor conferences, plant visits and meetings with individual investors.
ArcelorMittal’s senior management plans to meet investors and shareholder associations in road shows throughout 2022.
Depending on their geographical location, investors may use the following e-mails or contact numbers to reach the investor relations team:
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| investor.relations@arcelormittal.com | +44 203 214 2893 |
| privateinvestors@arcelormittal.com | +44 203 214 2893 |
| creditfixedincome@arcelormittal.com | +33 1 7192 1026 |
Sustainable responsible investors
The Investor Relations team is also a source of information for the growing sustainable responsible investment community. The team organizes special events on ArcelorMittal’s corporate responsibility strategy and answers all requests for information sent to the Group investor.relations@arcelormittal.com or may be contacted at +44 203 214 2893.
Financial calendar
The schedule is available on ArcelorMittal’s website www.arcelormittal.com under Investors>Financial calendar.
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| Financial results*: | |
| Results for the 1st quarter 2022 | May 5, 2022 |
| Results for the 2nd quarter 2022 and 6 months 2022 | July 28, 2022 |
| Results for the 3rd quarter 2022 | November 10, 2022 |
| Meeting of shareholders: | |
| Annual general meeting of shareholders | May 4, 2022 |
* Earnings results are issued before the opening of the stock exchanges on which ArcelorMittal is listed.
Contact the investor relations team on the information detailed above or please visit www.arcelormittal.com/corp/investors/contact.
Cautionary Statement Regarding Forward-Looking Statements
This annual report contains the audited consolidated financial statements of ArcelorMittal and its consolidated subsidiaries, including the consolidated statements of financial position as of December 31, 2018 and 2017, and the consolidated statements of operations, other comprehensive income, changes in equity and cash flows for each of the years ended December 31, 2018, 2017 and 2016. ArcelorMittal’s consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
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 on Form 20-F includes net debt and operating working capital, which are non-GAAP financial measures. ArcelorMittal believes net debt and operating working capital to be relevant to enhance the understanding of its financial position and provides additional information to investors and management with respect to the Company’s operating cash flows, capital structure and credit assessment. Non-GAAP financial measures should be read in conjunction with and not as an alternative for, ArcelorMittal’s financial information prepared in accordance with IFRS. Such non-GAAP measures may not be comparable to similarly titled measures applied by other companies.
Market information
This annual report includes industry data and projections about the Company’s markets obtained from industry surveys, market research, publicly available information and industry publications. Statements on ArcelorMittal’s competitive position contained in this annual report are based primarily on public sources including, but not limited to, publications of the World Steel Association. 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. The Company has not independently verified this data or determined the reasonableness of such assumptions. In addition, in many cases the Company has made statements in this annual report regarding its industry and its position in the industry based on internal surveys, industry forecasts and market research, as well as the Company’s experience. While these statements are believed to be reliable, they have not been independently verified.
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. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk factors” (Part I, Item 3D of this Annual Report on Form 20-F). The Company undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.
PART I
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ITEM 1.13 | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSManagement report |
Not applicable.
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ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.All information that is not historical in nature and disclosed under “Operating and financial review ” is deemed to be a forward-looking statement.
A. Selected financialThis annual report includes industry data and projections about the Company’s markets obtained from industry surveys, market research, publicly available information and industry publications. Statements on ArcelorMittal’s competitive position contained in this annual report are based primarily on public sources including, but not limited to, published information from the Company's competitors. 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. The Company has not independently verified this data or determined the reasonableness of such assumptions. In addition, in many cases the Company has made statements in this annual report regarding its industry and its position in the industry based on internal surveys, industry forecasts and market research, as well as the Company’s experience. While these statements are believed to be reliable, they have not been independently verified.
The following tables present selectedFinancial information
This annual report contains the audited consolidated financial informationstatements of ArcelorMittal and its consolidated subsidiaries, including the consolidated statements of financial position as of December 31, 2021 and 2020, and the consolidated statements of operations, other comprehensive income, changes in equity and cash flows for each of the years ended December 31, 2018, 2017, 2016, 20152021, 2020 and 2014,2019. ArcelorMittal’s consolidated financial statements were prepared in accordance with IFRSInternational Financial Reporting Standards (“IFRS”) as issued by the IASB.International Accounting Standards Board (“IASB”).
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 on the rounded numbers. This selected consolidatedannual report includes net debt, operating working capital and free cash flow, which are non-GAAP financial measures. ArcelorMittal believes net debt, operating working capital and free cash flow to be relevant to enhance the understanding of its financial position and provides additional information to investors and
management with respect to the Company’s operating cash flows, capital structure and credit assessment. In addition, it refers to “special” items in its capital return policy which will be used to determine if the base dividend will be paid. “Special” items relate to events or charges that the Company does not consider to be part of the normal income generating potential of the business. Items may qualify as “special” although they may have occurred in prior years or are likely to recur in following years. Non-GAAP financial measures should be read in conjunction with and not as an alternative for, ArcelorMittal’s consolidated financial statements, includinginformation prepared in accordance with IFRS. Such non-GAAP measures may not be comparable to similarly titled measures applied by other companies.
Key transactions and events in 2021
During 2021, ArcelorMittal completed several financing and liability management transactions. Please refer to the notes thereto, included elsewhere herein."Business overview - Liquidity and capital resources" and "Business overview - Financings" of this report for a summary of these transactions.
•On February 9, 2021, ArcelorMittal announced an agreement to sell 40 million Cleveland-Cliffs shares for total gross proceeds of $652 million (net proceeds of $16.12 per share) as part of a combined primary and secondary public offering of Cleveland-Cliffs shares. Following the sale, ArcelorMittal continued to hold 38.2 million common shares in addition to preferred shares redeemable at Cleveland-Cliffs's option for 58 million common shares. On June 18, 2021, ArcelorMittal announced the conclusion of the sale of its remaining 38.2 million common shares in Cleveland-Cliffs Inc. The proceeds from the sale of Cleveland-Cliffs common shares were returned to shareholders via a new $750 million share buyback program of ArcelorMittal common shares. On July 28, 2021, ArcelorMittal announced it had received $1.2 billion in cash from Cleveland-Cliffs following the purported redemption of Cleveland-Cliffs preferred shares ($1.3 billion following a final review of the redemption notice). The redemption of the preferred stock by Cleveland-Cliffs brought the total cash proceeds from the sale of ArcelorMittal USA to $3.2 billion, all of which have been returned to ArcelorMittal shareholders via share buybacks.
Consolidated Statements•On February, 11, 2021, the Board of OperationsDirectors of ArcelorMittal announced, effective immediately, that Aditya Mittal, formerly President, CFO and CEO ArcelorMittal Europe, would become Chief Executive Officer of the Company. Lakshmi N. Mittal, who founded the Company in 1976 and was Chairman and CEO, became Executive Chairman. In this position Mr. Lakshmi N. Mittal continues to lead the Board of Directors and work together with the CEO and management team. The CEO Office was
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| (Amounts in $ millions except per share data) | Year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
| Sales | 76,033 | | 68,679 | | 56,791 | | 63,578 | | 79,282 |
| Operating income/(loss) | 6,539 | | 5,434 | | 4,161 | | (4,161) | | 3,034 |
| Net income/(loss) from continuing operations (including non-controlling interest) | 5,330 | | 4,575 | | 1,734 | | (8,423) | | (974) |
| Net income/(loss) attributable to equity holders of the parent | 5,149 | | 4,568 | | 1,779 | | (7,946) | | (1,086) |
| Net income/(loss) (including non-controlling interest) | 5,330 | | 4,575 | | 1,734 | | (8,423) | | (974) |
| Earnings per common share (in U.S. dollars) | | | | | | | | | |
Basic earnings (loss) per common share1, 2 | 5.07 | | 4.48 | | 1.87 | | (10.29) | | (1.43) |
Diluted earnings (loss) per common share1, 2 | 5.04 | | 4.46 | | 1.86 | | (10.29) | | (1.43) |
Dividends declared per share3,4 | 0.20 | | 0.10 | | — | | — | | 0.45 |
Consolidated Statements of Financial Position
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| (Amounts in $ millions except share data) | As of December 31, |
| | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
| Total assets | 91,249 | | 85,297 | | 75,142 | | 76,846 | | 99,179 |
| Net assets | 44,108 | | 40,855 | | 32,325 | | 27,570 | | 45,160 |
| Share capital | 364 | | 401 | | 401 | | 10,011 | | 10,011 |
Basic weighted average common shares outstanding (millions)2 | 1,015 | | 1,020 | | 953 | | 772 | | 771 |
Diluted weighted average common shares outstanding (millions)2 | 1,021 | | 1,024 | | 955 | | 772 | | 771 |
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1Management report | Basic earnings per common share are computed by dividing net income attributable to equity holders of ArcelorMittal by the weighted average number of common shares outstanding during the periods presented. Diluted earnings per common share include assumed shares from stock options, shares from restricted stock units and convertible debt (if dilutive) in the weighted average number of common shares outstanding during the periods presented. See note 10.3 to the consolidated financial statements for further information.14 |
renamed Executive Office, consisting of the Executive Chairman and the CEO. As a result of these developments, Genuino Christino, who joined the Company in 2003 and had held the position of Head of Finance since 2016, became CFO.
•On March 4, 2021, ArcelorMittal announced the completion of its first share buyback program under the authorization given by the annual general meeting of shareholders held on June 13, 2020. By market close on March 3, 2021, the Company had repurchased 27.1 million shares for a total amount of €537 million ($650 million) at an average price per share of €19.79 (equivalent to $23.97).
•On March 17, 2021, ArcelorMittal announced the launch of its first three XCarb™ initiatives as part of the Company's journey to deliver on its 2050 net zero commitment. XCarb™ will ultimately bring together all of ArcelorMittal's reduced, low and zero-carbon products and steelmaking activities, as well as wider initiatives and green innovation projects, into a single effort focused on achieving demonstrable progress towards carbon neutral steel. To support its launch, ArcelorMittal announced three XCarb™ branded initiatives:
•‘XCarb™ green steel certificates’, which will enable the Company to support its customers as they seek to reduce their Scope 3 emissions. CO2 savings achieved through technology investments at ArcelorMittal Europe - Flat Products operations are aggregated, independently assured, and then converted into XCarb™ green steel certificates which customers can attach to their physical orders of steel, enabling them to report a reduction in their Scope 3 carbon emissions in accordance with the GHG Protocol Corporate Accounting and Reporting Standard. The Company anticipates it will have 600,000 tonnes of equivalent green steel tonnes available by the end of 2022.
•‘XCarb™ recycled and renewably produced’ has been designed for products made via the Electric Arc Furnace (‘EAF’) route using scrap steel. Recycled and renewably produced means that the physical steel was made with recycled material (scrap) using renewable electricity, giving it an extremely low CO2 footprint that can be as low as approximately 300kg of CO2 per tonne of finished steel when the metallics are 100% scrap. This customer offer is for both flat and long products. The electricity used in the steelmaking process is independently verified, with a ‘Guarantee of Origin’ given that it is from renewable sources.
•‘XCarb™ innovation fund’: ArcelorMittal has launched an innovation fund which will invest up to $100 million
annually in groundbreaking companies developing pioneering or breakthrough technologies that will accelerate the steel industry's transition to carbon neutral steelmaking.
•On March 29, 2021, ArcelorMittal announced that it is planning to build a large-scale industrial plant for the DRI and EAF-based steelmaking at its site in Bremen, as well as an innovative DRI pilot plant in addition to EAF in Eisenhüttenstadt, following the announcement of the planned expansion of Germany’s hydrogen infrastructure. Using green hydrogen, up to 3.5 million tonnes of steel could be produced by the Bremen and Eisenhüttenstadt sites by 2030, with significantly lower CO2 emissions. Depending on the amount of hydrogen available, CO2 savings of more than 5 million tonnes could be possible. The technology conversion requires investments in the range of €1-1.5 billion.
•On April 14, 2021, pursuant to the investment agreement of December 10, 2020 forming a public-private partnership between Invitalia - Agenzia nazionale per l'attrazione degli investimenti e lo svliuppo d'impresa SpA ("Invitalia"), an Italian state-owned company, and AM InvestCo Italy SpA ("AM InvestCo"), ArcelorMittal's subsidiary party to the lease and purchase agreement for the Ilva business, Invitalia invested €400 million ($476 million) of new equity into AM InvestCo, providing Invitalia with a 38% shareholding, equal voting and governance rights and therefore joint control. Going forward, AM InvestCo, thereupon renamed Acciaierie d'Italia Holding, will operate independently and as such will have its own funding plans. Accordingly, as of April 14, 2021, the Company derecognized the assets and liabilities of Acciaierie d'Italia Holding and its subsidiaries from its consolidated statement of financial position and accounted for its 62% interest in the joint venture under the equity method. The investment agreement stipulates a second equity injection by Invitalia, of up to €680 million, to fund the completion of the purchase of Ilva’s business by Acciaierie d'Italia Holding, subject to certain conditions precedent to be met by May 2022. At this point, Invitalia’s shareholding in Acciaierie d'Italia would increase to 60%. ArcelorMittal may need to invest up to €70 million to the extent necessary to retain a 40% shareholding and joint control over the company.
•ArcelorMittal announced on June 18, 2021 the completion of its second share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 13, 2020 and June 8, 2021. At market closure on June 17, 2021, ArcelorMittal had repurchased 17.8 million shares for a total value of approximately €469 million (equivalent to $570 million) at
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215 | Following the Company’s equity offering in April 2016, the earnings (loss) per share for prior periods have been recast in accordance with IFRS for the years ended December 31, 2015 and 2014, respectively, to include the bonus element derived from the 35% discount to the theoretical ex-right price included in the subscription price. Following the completion of the Company's share consolidation of each three existing shares into one share without nominal value on May 22, 2017, the earnings (loss) per share and corresponding basic and diluted weighted average common shares outstanding for the years ended December 31, 2016, 2015 and 2014, respectively, have been recast in accordance with IFRS.Management report |
an average price per share of €26.27 (equivalent to $31.94).
•On June 28, 2021, as previously announced in ArcelorMittal’s first quarter 2021 financial results, following the Company’s steps to streamline and optimize its business, primary responsibility for the management of its captive mining operations (those mining operations which primarily serve the Company’s steel operations) was moved from its Mining segment to the relevant steel segment. The Mining segment retains responsibility for the operation of the seaborne-oriented mining operations at AMMC and Liberia and continues to provide technical support to all mining operations within the Company.
•ArcelorMittal announced on July 7, 2021 the completion of its third share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 13, 2020 and June 8, 2021. At market closure on July 5, 2021, ArcelorMittal had repurchased 24.5 million shares for a total value of €630 million (equivalent to $750 million) at an average price per share of €25.77 (equivalent to $30.66).
•On July 13, 2021, ArcelorMittal signed a memorandum of understanding with the Spanish Government for a €1 billion investment in decarbonization technologies at ArcelorMittal Asturias’ plant in Gijón (Spain). New DRI and electrical arch furnace installations will reduce CO2 emissions at ArcelorMittal’s Spanish operations by up to 4.8 million tonnes, which represents approximately 50% of emissions, within the next five years. The DRI installation in Gijón will also enable ArcelorMittal Sestao to be the world’s first full-scale zero carbon-emissions steel plant.
•On July 20, 2021 ArcelorMittal announced that it had achieved ResponsibleSteel™ site certification in Belgium, Germany and Luxembourg. The Company’s steelmaking sites in ArcelorMittal Belgium (Geel, Genk, Ghent and Liège), Luxembourg (Belval, Differdange and Rodange) and Germany (Bremen and Eisenhüttenstadt) are the first steel plants globally to be independently audited and found to meet the standards required for ResponsibleSteel, the industry’s first global multi-stakeholder standard and certification initiative. The ResponsibleSteel audit process enables each site to prove that its production processes meet rigorously defined standards across a broad range of social, environmental and governance criteria including climate change and greenhouse gas emissions, water stewardship and biodiversity, human rights and labor rights, community relations and business integrity.
•On July 30, 2021, ArcelorMittal announced with the Canadian Government its intention for a CAD$1.8 billion
investment in decarbonization technologies at ArcelorMittal Dofasco’s plant in Hamilton. The intended investments will reduce annual CO2 emissions at ArcelorMittal’s Hamilton, Ontario operations by approximately 3 million tonnes, which represents approximately 60% of emissions. At the heart of the plan is a 2.5 million tonne capacity DRI facility and an EAF facility capable of producing 2.4 million tonnes of high-quality steel through its existing secondary metallurgy and secondary casting facilities. Modification of the existing EAF facility and continuous casters will also be undertaken to align productivity, quality and energy capabilities between all assets in the new footprint. The investment was contingent on support from the governments of Canada and Ontario. The Canadian Government announced on July 30, 2021 that it would invest CAD$400 million in the project and on February 15, 2022, the Government of Ontario announced that it would invest CAD$500 million in the project. This secures project funding and firms up the investment. The project is scheduled to be complete by 2028, although the Company is looking for opportunities to accelerate the project timelines. Besides a considerable reduction of CO2 emissions, the new manufacturing processes contribute deliver other positive environmental impacts including the elimination of emissions and flaring from coke making and ironmaking operations.
•On August 4, 2021 and September 22, 2021, in line with the authorization granted by the extraordinary general meeting of shareholders held on June 8, 2021, the Board of ArcelorMittal decided to cancel 70 million and 50 million treasury shares, respectively, to keep the number of treasury shares within appropriate levels. This cancellation also takes into account the $2.2 billion share buyback announced on July 29, 2021. As a result of these cancellations, ArcelorMittal had 982,809,772 shares in issue (compared to 1,102,809,772 before the cancellation).
•On September 10, 2021, the Liberian Government and ArcelorMittal signed an amendment to the Mineral Development Agreement ("MDA"). The agreement is currently under the legislative ratification process. The expansion project - which encompasses processing, rail and port facilities - would be one of the largest mining projects in West Africa. The capital required to finalize the project is expected to be approximately $0.8 billion (currently under review given impacts of inflation and enlarged scope), as it is effectively a brownfield expansion. The expansion project includes the construction of a new concentration plant and the substantial expansion of mining operations, with the first concentrate expected in late 2023, ramping up to 15 million tonnes per annum. Under the agreement the Company will have reservation for
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3Management report | Following the Company’s equity offering in April 2016, the dividends declared per share for prior periods have been recast for the year ended December 31, 2014 to include the bonus element derived from the 35% discount to the theoretical ex-right price included in the subscription price. The actual dividends paid was $0.20 per issued share as of December 31, 2014. Following the completion of the Company's share consolidation of each three existing shares into one share without nominal value on May 22, 2017, the dividends declared per share for the year ended December 31, 2014 was recast.16 |
expansion for at least up to 30 million tonnes. Other users may be allowed to invest for additional rail capacity.
•On September 28, 2021, ArcelorMittal announced that it had signed a letter of intent with the Governments of Belgium and Flanders, supporting a €1.1 billion project to build a 2.5 million-tonne DRI plant and EAF facility at its site in Ghent. A DRI plant uses natural gas, and potentially hydrogen, instead of coal to reduce iron ore, resulting in a large reduction in CO2 emissions compared with blast furnace iron making. The two electric furnaces will melt the DRI and scrap steel, which will then be transformed in the steel shop into steel slabs and then further processed into finished products. Once the DRI and electric furnaces are built, there will be a transition period during which production will move gradually from blast furnace A, to the DRI and electric furnaces, after which blast furnace A will be closed as it reaches the end of its life. By 2030, this will result in a reduction of around three million tonnes of CO2 emissions each year. The support of both the national and the Flanders governments in this project is crucial given the significant cost associated with the transition to carbon-neutral steelmaking. Approval from the European Commission for the funding support will also be required.
•On September 30, 2021, ArcelorMittal announced that Stefan Buys had been nominated Executive Vice President of ArcelorMittal and appointed as CEO of ArcelorMittal Mining, effective October 1, 2021. Stefan replaced Simon Wandke who retired, following a career of 40 years in the Mining industry, the last 11 of which were with ArcelorMittal.
•On November 3, 2021, ArcelorMittal and the government of Quebec announced a CAD$205 million investment by AMMC in its Port-Cartier pellet plant, enabling this facility to convert its entire 10 million tonne annual pellet production to DRI pellets by the end of 2025. The investment, in which the Quebec government will contribute through an electricity rebate of up to CAD$80 million, will enable the Port-Cartier plant to become one of the world’s largest producers of DRI pellets, the raw material feedstock for iron making in a DRI furnace. The project includes the implementation of a flotation system that will enable a significant reduction of silica in the iron ore pellets, facilitating the production of a very high-quality pellet. The project is expected to have a direct annual CO2e reduction of approximately 200,000 tonnes at AMMC’s Port-Cartier pellet plant, equivalent to over 20% of the pellet plant’s total annual CO2e emissions. This reduction in CO2e emissions will be achieved through a reduction in the energy required during the pelletizing process.
•On November 17, 2021, ArcelorMittal announced the completion of its fourth share buyback program pursuant to
an authorization by the annual general meeting of shareholders on June 8, 2021. At market closure on November 16, 2021, ArcelorMittal had repurchased 67.4 million shares for a total value of €1.9 billion (equivalent to $2.2 billion) at an average price per share of €27.91 (equivalent to $32.64).
•On December 9, 2021, ArcelorMittal announced that it had made a $30 million investment in carbon recycling company, LanzaTech through its XCarb™ innovation fund, the fourth investment the Company has made through the fund since its launch in March 2021. The investment further expands ArcelorMittal’s relationship with LanzaTech, which commenced in 2015 when the Company first announced plans to utilise LanzaTech’s carbon capture and re-use technology at its plant in Ghent, Belgium. The €180 million Carbalyst® plant – ArcelorMittal’s flagship carbon capture and re-use technology project - is currently under construction, with commissioning expected before the end of 2022. Also known as the Steelanol project, funding has been obtained from various sources, including from the European Union's Horizon 2020 program, the European Investment Bank and the Belgian and Flemish governments. Using LanzaTech’s gas fermentation technology, which captures carbon-rich waste gases from the steelmaking process and converts them into sustainable fuels and chemicals, the plant should reduce ArcelorMittal Ghent’s CO2e emissions by 125,000 tonnes a year. It will also produce 80 million liters of bio-ethanol annually, which can be blended with traditional gasoline and used as a low-carbon alternative fuel for the transport sector. LanzaTech is also developing technology to convert captured emissions into a range of other chemical building blocks to make useful materials, such as textiles, rubber, and packaging.
•On December 13, 2021, ArcelorMittal signed separate, privately negotiated agreements with a limited number of holders of MCNs to repurchase $395 million in aggregate principal amount of MCNs at the minimum conversion ratio for an aggregate cash consideration of $1.2 billion. The repurchase of this aggregate principal amount of MCNs was equivalent to repurchasing approximately 36.6 million shares of ArcelorMittal common shares that would otherwise be issuable at maturity under the MCNs (at the minimum conversion ratio). Pursuant to the repurchase agreements the repurchased MCNs have been cancelled and therefore will not convert into common shares of the Company. Following completion of the repurchases on December 23, 2021, $608 million aggregate principal amount of the MCNs remained outstanding as of December 31, 2021. This transaction was a further step in the Company's ongoing capital return program. See note 11.2 to the consolidated financial statements.
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417 | The Board has agreed on a new dividend policy which was approved by the shareholders at the AGM in May 2018. Given the current deleveraging focus, dividends began at $0.10 per share in 2018 (paid from 2017 results). The Board is proposing an increase in the base dividend for 2019 (paid from 2018 earnings) to $0.20 per share to the shareholders at the annual shareholders meeting in May 2019.Management report |
•On December 29, 2021, ArcelorMittal announced the completion of its fifth share buyback program announced on November 17, 2021 pursuant to an authorization by the annual general meeting of shareholders on June 8, 2021. At market closure on December 28, 2021, ArcelorMittal had repurchased 34.0 million shares for a total value of €886 million (equivalent to $1.0 billion) at an average price per share of €25.99 (equivalent to $29.34). This brought the total advance as part of its prospective 2022 capital return to shareholders (to be funded from 2021 surplus cash flow under the capital return policy announced February 2021) to $2 billion.
•On January 14, 2022, ArcelorMittal announced that 45 million treasury shares had been cancelled to keep the number of treasury shares within appropriate levels. This cancellation takes into account the shares already purchased under the $1 billion share buyback announced on November 17, 2021, which was completed on December 28, 2021. As a result of these cancellations, ArcelorMittal had 937,809,772 shares in issue (compared to 982,809,772 before the cancellation). B. Capitalization•On February 4, 2022, ArcelorMittal announced an acceleration of its decarbonization with €1.7 billion investment program by 2030 at its French steelmaking sites in Fos-sur-Mer and indebtedness
Not applicable.
C. ReasonsDunkirk with support from the French Government while maintaining equivalent production capacities. This investment will enable a profound transformation of steelmaking in France and a total reduction of close to 40% or 7.8 million tonnes per year in ArcelorMittal’s CO2 emissions in France by 2030. This transformation will represent a 10% reduction in greenhouse gas emissions from the manufacturing industry in France and put France’s steelmaking industry on the path of the Paris Agreement. In Fos-sur-Mer, ArcelorMittal will build an EAF, which will complement the ladle furnace announced in March 2021 and supported by France’s recovery plan, ‘France Relance’. Together these investments will turn Fos-sur-Mer into a reference site for the offerproduction of low carbon, circular steel, made from recycled steel. In Dunkirk, ArcelorMittal will build a 2.5 million tonne DRI unit to transform iron ore using hydrogen instead of coal. This DRI will be coupled with an innovative technology electric furnace and usecompleted by an additional EAF. Other investments are already under way to continue to increase the proportion of proceedsscrap steel used. The new industrial facilities will be operational starting in 2027 and will gradually replace 3 out of 5 of ArcelorMittal’s blast furnaces in France by 2030 (2 out of 3 in Dunkirk, 1 out of 2 in Fos-sur-Mer).
Not applicable.
•On February 11, 2022, ArcelorMittal announced a new share buyback program in the amount of $1 billion under the authorization given by the annual general meeting of shareholders of June 8, 2021. The program is expected to be completed during the first half of 2022, subject to market conditions. The shares acquired under the program are intended to meet ArcelorMittal’s obligations under debt obligations exchangeable into equity securities, reduce ArcelorMittal’s share capital, and/or meet ArcelorMittal’s obligations arising from employee share programs. On February 25, 2022, ArcelorMittal announced that its Significant Shareholder would not sell shares to ArcelorMittal in proportion to shares purchased on the market by ArcelorMittal; accordingly its percentage holding of issued and outstanding shares will increase as the share buyback program is implemented.
•On March 3, 2022, ArcelorMittal announced its decision to idle its steelmaking operations in Kryvyi Rih, Ukraine in order to ensure the safety and security of its employees and assets. The Company has been evaluating the situation on a daily basis and production had previously been reduced with the plant operating at a technical minimum (approximately one-third of its normal production levels). The process to safely idle all blast furnaces while maintaining asset integrity commenced on the same day.
For further information on ArcelorMittal’s ongoing capital expenditure projects, see “Properties and capital expenditures—Capital expenditures”.
Risk factors
ArcelorMittal’s business, financial condition, results of operations, reputation or prospects could be materially and adversely affected by one or more of the risks and uncertainties described below.
Summary
Our business is subject to numerous risks and uncertainties, including those highlighted under “Detailed risk factors” below. These risks include, but are not limited to, the following:
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| I. | Risks related to the global economy and the mining and steel industry |
| a) | Prolonged low steel and (to a lesser extent) iron ore prices and/or low steel demand would have an adverse effect on ArcelorMittal’s results of operations. |
| b) | Volatility in the supply and prices of raw materials, energy and transportation, and volatility in steel prices or mismatches between steel prices and raw material prices could adversely affect ArcelorMittal’s results of operations. |
| c) | Excess capacity and oversupply in the steel industry and in the iron ore mining industry have in the past and may continue in the future to weigh on the profitability of steel producers, including ArcelorMittal. |
| d) | Unfair trade practices, import tariffs and/or barriers to free trade could negatively affect steel prices and ArcelorMittal’s results of operations in various markets. |
| e) | Russia’s invasion of Ukraine, international reaction to it (in particular in the form of sanctions) and any regional or global escalation of the conflict, could adversely affect the Company’s business, results of operations and financial condition. |
| f) | Developments in the competitive environment in the steel industry could have an adverse effect on ArcelorMittal’s competitive position and hence its business, financial condition, results of operations or prospects. |
| g) | Competition from other materials and alternative steel based technologies could reduce market prices and demand for steel products and thereby reduce ArcelorMittal’s cash flows and profitability. |
| II. | Risks related to ArcelorMittal's operations |
| a) | ArcelorMittal’s level of profitability and cash flow currently is and, depending on market and operating conditions, may in the future be, substantially affected by its ability to reduce costs and improve operating efficiency. |
| b) | The Group’s carbon emissions intensity reduction targets are based on current assumptions with respect to the costs, government and societal support for the reduction of carbon emissions in particular regions and the advancement of technology and infrastructure related to the reduction of carbon emissions over time. Future developments may affect such assumptions, and this may render the achievement of ArcelorMittal’s targets more difficult, or even impossible to achieve for cost or other reasons. |
| c) | ArcelorMittal has incurred and may incur in the future operating costs when production capacity is idled or increased costs to resume production at idled facilities. |
| d) | ArcelorMittal could experience labor disputes that may disrupt its operations and its relationships with its customers and its ability to rationalize operations and reduce labor costs in certain markets may be limited in practice or encounter implementation difficulties. |
| e) | Disruptions to ArcelorMittal’s manufacturing processes caused for example by equipment failures, natural disasters, accidents, epidemics or pandemics or geopolitical conflicts or extreme weather events could adversely affect its operations, customer service levels and financial results and liabilities. |
| f) | ArcelorMittal’s insurance policies provide limited coverage, potentially leaving it uninsured against some business risks. |
| g) | ArcelorMittal’s reputation and business could be materially harmed as a result of data breaches, data theft, unauthorized access or successful hacking. |
| III. | Risks related to ArcelorMittal’s Mining activities |
| a) | ArcelorMittal’s mining operations are subject to risks associated with mining activities. |
| b) | ArcelorMittal’s reserve and resource estimates may materially differ from mineral quantities that it may be able to actually recover; ArcelorMittal’s estimates of mine life may prove inaccurate; and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine. |
| c) | ArcelorMittal faces rising extraction costs over time as reserves deplete. |
| IV. | Risks related to ArcelorMittal’s acquisitions and investments |
| a) | ArcelorMittal has grown through acquisitions and may continue to do so. Failure to manage external growth and difficulties completing planned acquisitions or integrating acquired companies could harm ArcelorMittal’s future results of operations, financial condition and prospects. |
| b) | ArcelorMittal may encounter further difficulties with respect to ArcelorMittal Italia (renamed Acciaierie d'Italia). |
| c) | ArcelorMittal faces risks associated with its acquisition, via a joint venture, of AMNS India. |
| d) | ArcelorMittal’s greenfield, brownfield and other investment projects are subject to financing, execution and completion risks. |
| e) | ArcelorMittal faces risks associated with its investments in joint ventures and associates. |
| V. | Risks related to ArcelorMittal’s financial position and organizational structure |
| a) | Changes in assumptions underlying the carrying value of certain assets, including as a result of adverse market conditions, could result in the impairment of such assets, including intangible assets such as goodwill. |
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| b) | ArcelorMittal's indebtedness could have an adverse impact on its results of operations and financial position, and the market's perception of ArcelorMittal's leverage may affect its share price. |
| c) | ArcelorMittal’s ability to fully utilize its recognized deferred tax assets depends on its profitability and future cash flows. |
| d) | Underfunding of pension and other post-retirement benefit plans at some of ArcelorMittal’s 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 ArcelorMittal’s business. |
| e) | ArcelorMittal’s results of operations could be affected by fluctuations in foreign exchange rates, particularly the euro to U.S. dollar exchange rate, as well as by exchange controls imposed by governmental authorities in the countries where it operates. |
| f) | The Significant Shareholder has the ability to exercise significant influence over the outcome of shareholder votes. |
| g) | 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, and loss-making subsidiaries may drain cash flow necessary for such needs or distributions. |
| VI. | Legal and regulatory risks |
| a) | ArcelorMittal is subject to strict environmental, health and safety laws and regulations that could give rise to a significant increase in costs and liabilities. |
| b) | Laws and regulations restricting emissions of greenhouse gases could force ArcelorMittal to incur increased capital and operating costs and could have a material adverse effect on ArcelorMittal’s results of operations, financial condition and reputation. |
| c) | 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. |
| d) | ArcelorMittal is subject to economic policy, political, social and legal risks and uncertainties in the emerging markets in which it operates or proposes to operate, and these uncertainties may have a material adverse effect on ArcelorMittal’s business, financial condition, results of operations or prospects. |
| e) | ArcelorMittal is subject to an extensive, complex and evolving regulatory framework which may expose it and its subsidiaries, joint ventures and associates to investigations by governmental authorities, litigation and fines, in relation, among other things, to antitrust and compliance matters. The resolution of such matters could negatively affect the Company’s strategy, operations and profitability and cash flows in a particular period or harm its reputation. |
| f) | ArcelorMittal is currently and in the future may be subject to legal proceedings or product liability claims, the resolution of which could negatively affect the Company’s profitability and cash flows in a particular period. |
| g) | Changes to global data privacy laws and cross-border personal data transfer requirements could adversely affect ArcelorMittal's business and operations. |
| h) | U.S. investors may have difficulty enforcing civil liabilities against ArcelorMittal and its directors and senior management. |
Detailed risk factors
I. Risks related to the global economy and the mining and steel industry
ArcelorMittal’s business and results are substantially affected by regional and global macroeconomic conditions. Recessions or prolonged periods of weak growth in the global economy or the economies of ArcelorMittal’s key selling markets have in the past had and in the future would be likely to have a material adverse effect on the mining and steel industries and on ArcelorMittal’s results of operations and financial condition.
The mining and steel industries have historically been highly volatile largely due to the cyclical nature of the business sectors that are the principal consumers of steel as described above. Demand for minerals, metals and steel products thus generally correlates to macroeconomic fluctuations in the global economy. This correlation and the adverse effect of macroeconomic downturns on metal mining companies and steel producers were evidenced in the 2008/2009 financial and subsequent economic crisis, for example, during which the results of both mining companies and steel producers were substantially affected, with many steel producers (including ArcelorMittal) recording sharply reduced revenues and operating losses.
Global steel demand has improved since 2015, when global apparent steel consumption contracted notably in China and most of ArcelorMittal’s core markets except Europe. Global economic growth was particularly strong during the second half of 2017 and the first half of 2018. Growth slowed less than anticipated in China in 2018 as strength in real estate and machinery partially offset weakness in automotive growth and a slowdown in infrastructure. There is, however, a risk of a significant slowdown in Chinese growth in 2019 due in particular to the potential fall-out from the trade dispute with the United States and the real estate market likely having reached a peak. In Europe, a major market for ArcelorMittal, results have suffered in prior years from recession and stagnation. After a period of robust industrial activity in late 2017 and early 2018, momentum has eased amid moderating export growth and less accommodative policies. Slowing global trade and increased uncertainty have negatively impacted industry, with the weakness amplified by a larger-than-expected temporary decline in automotive output due to regulatory changes. While economic conditions have improved in recent periods in many of ArcelorMittal’s other markets, including Brazil and the CIS, such improvements may prove fragile. Economic conditions have remained challenging in some of the Company’s other markets, including South Africa, which suffered a technical recession during the first half of 2018 but has since gradually recovered.
Overall, the short-term outlook for 2019 global GDP growth is an expected slowdown to 2.7% down from 3.0% in 2018. Leading indicators support a slowdown in growth in the U.S. to a still robust 2.4%, despite the fading fiscal stimulus and tighter financial conditions. While growth in Europe weakened sharply during the second half of 2018, growth is still expected to recover to average 1.7% in 2019 as consumer expenditure is supported byProlonged low unemployment and weak inflation. Chinese growth is also expected to slow, and while growth in some emerging markets is likely to improve, notably Brazil, others are likely to see growth capped by rising borrowing costs as interest rates rise.More generally, there are many risks to the global macro-economic outlook in 2019, including (among other things) monetary policy uncertainty; geopolitical tensions globally; political tensions in Europe; unsolved sovereign debt issues in many southern European countries; threats to globalization by renewed protectionism, including rising trade tensions stemming from the U.S imposition of tariffs on steel and aluminum imports and international responses thereto; the lack of progress in Brexit negotiations raising the risk of(to a disruptive exit with potential far-reaching consequences including the imposition of potential trade barriers, custom duties, logistic issues and restrictions to the free movement of goods and people; high levels of government, corporate and consumer indebtedness in various countries (including high levels of indebtedness in emerging markets) and a potentially significant slowdown in Chinese growth. A materialization of any of these risks could depress demand for (and hence the price of) steel and iron ore and therefore have a material adverse effect on ArcelorMittal’s results of operations and financial condition.
Excess capacity and oversupply in the steel industry and in the iron ore mining industry have in the past and may continue in the future to weigh on the profitability of steel producers, including ArcelorMittal.
The steel industry is affected by global and regional production capacity and fluctuations in steel imports and exports, which are themselves affected by the existence and amounts of tariffs and customer stocking and destocking cycles. The steel industry globally has historically suffered from structural overcapacity, and the current global steelmaking capacity exceeds the
current global consumption of steel. This overcapacity is amplified during periods of global or regional economic weakness due to weaker global or regional demand. In particular, China is both the largest global steel consumer and the largest global steel producer by a large margin, and the balance between its domestic production and consumption has been an important factor influencing global steel prices in recent years, such as in 2015, when Chinese domestic steel demand weakened resulting in a surge in Chinese steel exports. While the structural imbalance between Chinese supply and demand has been reduced by capacity eliminations in recent years, if Chinese capacity were to increase again, and/or if Chinese demand were to weaken significantly, there could be a renewed flood of Chinese steel exports. Other developing markets (such as Brazil, Russia and Ukraine) continue to show structural overcapacity after domestic demand fell sharply during recent recessions, and developed Asia continues to exhibit overcapacity and the need to export significant volumes onto world markets. Regional steel markets are also vulnerable at times of economic crisis in countries with significant steel making capacity. One such example is Turkey where a currency crisis has caused domestic demand to decline sharply during the second half of 2018 and leading to a pick-up in exports, particularly for long steel products. In Europe, while the rebound in demand has lessened the structural imbalance between capacity and demand, a decrease in demand would mean a return to the structural overcapacity issues that have plagued the EU 28 for years. Finally, in the United States, improved economic conditions and the pricing support from the Section 232 tariffs have led to new capacity being built and previously idled capacity re-opened, increasing the risk of oversupply and overcapacity in the event of a market downturn.
The overcapacity of steel production in the developing world and in China in particular has weighed on global steel prices at times over the past decade, as exports have surged to Europe and NAFTA, ArcelorMittal’s principal markets, often at low prices that may be at or below the cost of production, depressing steel prices in regional markets world-wide. See “Unfair trade practices in ArcelorMittal’s home markets could negatively affect steel prices and reduce ArcelorMittal’s profitability while trade sanctions and barriers may have an adverse effect on ArcelorMittal's operations in various markets.” If global demand were to weaken, such a phenomenon could happen again.
Finally, excess iron ore supply coupled with decreased demand in iron ore consuming industries, such as steel, has led to a prolonged depression oflesser extent) iron ore prices at various points in recent years, in particular in 2015, which in turn weighed on steel prices as iron ore is a principal raw material in steelmaking. While the supply/demand balance has improved more recently, no assurance can be given that it will not deteriorate again, particularly if Chineseand/or low steel demand declines or worldwide capacity increases due to new construction or the restart of production. A renewed phase of steel and iron ore oversupply would likely have a material adverse effect on ArcelorMittal’s results of operations and financial condition.
Protracted low steel and iron ore prices would likely have an adverse effect on ArcelorMittal’s results of operations.
As an integrated producer of steel and iron ore, ArcelorMittal’s results of operations are sensitive to the market prices of, and demand for, steel and iron ore in its markets and globally. The impact of market steel prices on its results is direct. Thedirect while the impact of market iron ore prices is both direct and indirect, as ArcelorMittal sells iron ore on the market to third parties (in which case it benefits from higher iron ore market prices), and indirect, as iron ore is a principal raw material used in steel production and fluctuations in its market price are typically and eventually (with the timing dependent on steel market conditions) passed through to steel prices.prices (with any lags in passing on higher prices “squeezing” steel margins, as discussed below). Steel prices and iron ore prices are affected by supply trends (see above),and demand trends and inventory cycles. In terms of demand, steel and iron ore prices are sensitive to trends in cyclical industries, such as the automotive, construction, appliance, machinery, equipment and transportation industries, which are significant markets for ArcelorMittal’s products.products (with
automotive being particularly significant). More generally, steel and iron ore prices are sensitive to macroeconomic fluctuations in the global economy which are impacted by many factors ranging from trade and geopolitical tensions to global and regional monetary policy to specific disruptive events such as pandemics and natural disasters. In the past, substantial price decreases during periods of economic weakness have not always been offset by commensurate price increases during periods of economic strength. In addition, as indicated above,further discussed below, excess supply relative to demand for steel in local markets generally results in increased exports and drives down regional or global prices. In terms of inventory, steel stocking and destocking cycles affect apparent demand for steel and hence steel prices and steel producers’ profitability. For example, steel distributors may accumulate substantial steel inventories in periods of low prices and, in periods of rising real demand for steel from end-users, steel distributors may sell steel from inventory (destock), thereby delaying the effective implementation of steel price increases. Conversely, steel price decreases can sometimes develop their own momentum, as customers adopt a “wait and see” attitude and destock in the expectation of further price decreases.
As a result of these factors, steel and iron ore prices camefluctuate substantially and have come under pressure at various points in
recent periods and particularly in 2015, when bothperiods. In 2019, steel and iron ore reached their lowest prices over the last decade. This hadmarket conditions deteriorated significantly due to a pronounced negative effect on ArcelorMittal’s results of operations, in the form of significant declines in revenues and operating income for 2015. Moreover, the particularly sharp decline in steel prices (lower demand in Europe and the U.S., higher imports in Europe and additional domestic supply and the effect of customer destocking in the U.S.) and higher raw material costs (particularly in iron ore due to supply-side developments), resulting in a negative price-cost effect. This led to substantial inventory-related and impairment charges and hence sharply lower steel segment operating income in 2019. Steel market conditions were adversely affected in the first half of 2020 by the COVID-19 pandemic and its economic ramifications, with demand plummeting (e.g., an 18.4% year-on-year drop in EU apparent steel consumption and a 34.7% drop in overall steel shipments in the second quarter versus the prior year quarter) and prices falling substantially. After a strong rebound starting in the second half of 2015 triggered inventory related losses2020 and continuing into the third quarter of $1.3 billion, and the significant2021, steel prices began to decline in iron ore and coal prices led to a $3.4 billion impairment of mining assets and goodwillfrom very high levels in the fourth quarter of 2015.
While steel2021, in varying degrees by market, in particular, due to softer end-market demand conditions (e.g., supply chain issues affecting automobile production and iron ore prices have generally improved more recently, the timing and extent of continued price recovery, maintenance of improved price levels or a return to prior low levels cannot be predicted. In particular, while the imposition of tariffsweakness in the United StatesChinese real estate market, both major consumers of steel).
The trajectory of steel demand and Europe at a rateprices going forward and in particular in 2022 is difficult to predict due to such variables as the extent and duration of 25% has resultedsupply chain issues affecting end-markets (and in higher steel pricesparticular automobile production), the remaining course of the COVID-19 pandemic (including the risk of renewed containment measures affecting consumer demand and production facilities), import volumes and tariff levels and inventories. In addition, macroeconomic conditions are uncertain, including due to geopolitical developments, particularly Russia’s invasion of Ukraine and the international community’s reaction to it. Any economic downturn globally or in preventing significant dropscertain regions may result in steel prices, further tariffs on a widening list of imported products and retaliatory protectionist measures by other countries risk having a significant negative impact on global trade and ultimately economic growth,lower steel demand and lower steel and iron ore prices. A renewed scenario of prolonged low steel and (to a lesser extent or if simultaneous) iron ore prices whether or not combined with low steel demand would have a material adverse effect on ArcelorMittal’s results of operations and financial condition.
Volatility in the supply and prices of raw materials, energy and transportation, and volatility in steel prices or mismatches between steel prices and raw material prices could adversely affect ArcelorMittal’s results of operations.
As a producer and seller of steel, the Company is directly exposed to fluctuations in the market price for steel, iron ore, coking coal and other raw materials, energy and transportation. In particular, steel production consumes substantial amounts of raw materials including iron ore, coking coal and coke, and the production of direct reduced iron, the production of steel in electric arc furnaces and the re-heating of steel involve the use of significant amounts of energy, making steel companies dependent on the price of and their reliable access to supplies
of raw materials and energy. In the fourth quarter of 2021 and early 2022, the Company has become subject to increasing inflationary cost pressures, with in particular the prices of electricity, natural gas and CO2 all increasing significantly, putting pressure on steel price spreads even in a high steel price environment. Although ArcelorMittal has substantial sources of iron ore from its own mines (the Company’s self-sufficiency rate was 59% for iron ore in 2021), it nevertheless remains exposed to volatility in the supply and price of iron ore and coking coal given that it obtains a significant portion of such raw materials under supply contracts from third parties. For additional details on ArcelorMittal’s raw materials supply and self-sufficiency, see “Business overview—Products—Mining products” and “Business overview—Products—Other raw materials and energy”.
The prices of steel, iron ore, coking coal and scrap have been highly volatile in recent years. Volatility in steel and raw material prices can result from many factors including: trends in demand for iron ore in the steel industry itself, and particularly from Chinese steel producers (as the largest group of producers); industry structural factors (including the oligopolistic nature of the seaborne iron ore industry and the fragmented nature of the steel industry); the expectation or imposition of corrective trade measures such as tariffs; massive stocking and destocking activities (sudden drops in prices can lead end-users to delay orders pushing prices down further); speculation; new laws or regulations; changes in the supply of iron ore, in particular due to new mines coming into operation; business continuity of suppliers; changes in pricing models or contract arrangements; expansion projects of suppliers; worldwide production, including interruptions thereof by suppliers; capacity-utilization rates; accidents or other similar eventsdisruptions at suppliers’ premises or along the supply chain;chain as occurred in 2019 and 2021; wars, natural disasters, public health epidemics (such as the COVID-19 pandemic which substantially depressed demand for steel for an extended period in 2020), political disruption and other similar events; fluctuations in exchange rates; the bargaining power of raw material suppliers and the availability and cost of transportation.
As a producer Industry and seller of steel, the Company is directly exposed to fluctuationsoverall decarbonization efforts may also result in the market price for steel, iron ore, coking coal and other raw materials,increased and/or volatile prices, in particular, higher energy and transportation. InCO2 prices as well as scrap prices (due in particular steel production consumes substantial amountsto an industry shift to EAF production). For further information on the movement of raw materials including iron ore, coking coalmaterial prices in recent years, see “Operating and coke, and the productionfinancial review—Key factors affecting results of direct reduced iron, the production of steel in EAFs and the re-heating of steel involve the use of significant amounts of energy, making steel companies dependent on the price of and their reliable access to supplies of raw materials and energy. Although ArcelorMittal has substantial sources of iron ore and coal from its own mines (the Company’s self-sufficiency rates were 49% for iron ore and 12% for PCI and coal in 2018),operations—Raw materials”.
it nevertheless remains exposed to volatility in the supply and price of iron ore and coking coal given that it obtains a significant portion of such raw materials under supply contracts from third parties. For additional details on ArcelorMittal’s raw materials supply and self-sufficiency, see “Item 4.B—Information on the Company—Business overview—Mining products—Other raw materials and energy”.
Furthermore, while steel and raw material (in particular iron ore and coking coal) price trends have historically been correlated, a lack of correlation or an abnormal lag in the corollary relationship between raw material and steel prices may also occur and result in a “price-cost effect” in the steel industry. ArcelorMittal has experienced negative price-cost effecteffects (or
“squeezes”) at various points in recent years including in 2019, 2020 and may2021 and will likely continue to do so.so as this is a structural feature. In some of ArcelorMittal’s segments, in particular Europe and NAFTA, there are several months between raw material purchases and sales of steel products incorporating those materials, rendering them particularly susceptible to price-cost effect. For example, coking coal sourced from Australia takes several weeks to reach Europe (e.g. ~4approximately 4 weeks sailing time, plus loading/unloading time at ports), creating a structural lag. Sudden spikes in raw materials, such as coking coal, have occurred in the past and may occur in the future. Because ArcelorMittal sources a substantial portion of its raw materials through long-term contracts with quarterly (or more frequent) formula-based or negotiated price adjustments and as a steel producer sells a substantial part of its steel products at spot prices, it faces the risk of adverse differentials between its own production costs, which are affected by global raw materials and scrap prices, on the one hand, and trends for steel prices in regional markets, on the other hand.
Another areaThe price/cost dynamic in the most recent periods can be summarized as follows: in 2019, the significant decline in steel prices (due to lower demand and higher imports, among other things) and significant increase in iron ore prices among other trends due in part to supply shocks following the collapse of exposurethe Brumadinho dam owned by Vale in Brazil and a heavy cyclone season in Australia weighed heavily on the profitability of the Company's steel business. In 2020, the negative impact of the COVID-19 pandemic restrictions on steel demand led to lower spreads as steel prices declined, in particular in the second quarter of 2020. Prices remained low in the third quarter of 2020 (due in part to price volatility is transportation. Freightlag), while raw material costs, (i.e., shipping) are a substantial component of ArcelorMittal’s cost of goods sold. In particular, if freight costs were to increase beforeespecially iron ore, orremained broadly stable, underpinned by the strong rebound in Chinese demand, resulting in a price-cost squeeze. In the fourth quarter of 2020, with the recovery of steel demand in the world ex-China, there was a recovery in steel and iron ore prices, while prices for coking coal decreased and remained stable throughout the fourth quarter of 2020 due to the Chinese ban on Australian coals. The significant increase in steel prices thisin the fourth quarter of 2020 resulted in a multi-year high in steel spreads (which was not fully reflected in the Company’s performance due to lag effect). This trend continued through the third quarter of 2021 before prices came off the highest levels in the fourth quarter of 2021, while high raw material and energy costs put increasing pressure on margins. More generally and in sum, the relationship between input (and in particular raw material) costs and steel selling prices and the time lag between them structurally subjects the profitability of steel manufacturers in general and ArcelorMittal in particular to the risk of a negative price-cost effect.
ArcelorMittal’s other principal input costs that affect its level of profitability are energy and transportation. Energy expenses are
sensitive to changes in electricity, energy transportation and fuel prices, including diesel fuel, natural gas and industrial gas. Prices for electricity, natural gas and fuel oils can fluctuate widely with availability and demand levels from other users, including fluctuations caused by the impact of the COVID-19 pandemic. During periods of peak usage, although some operations have contractual arrangements in place whereby they receive certain offsetting payments in exchange for electricity load reduction, supplies of energy in general may be curtailed and the Company may not be able to purchase them at historical rates. A disruption in the transmission of energy, inadequate energy transmission infrastructure, or the termination of any of the Group’s energy supply contracts could interrupt energy supply and adversely affect operations. While the Group has some long-term contracts with electrical, natural gas and industrial gas suppliers, it is exposed to fluctuations in energy, natural gas and industrial gas costs that can affect its production costs. Energy prices rose substantially in various markets in 2021, with attendant impacts on margins and in extreme cases production (e.g., the Company curtailed production at some of its Spanish plants during “peak hours” due to high electricity prices). Energy prices may rise further or be more volatile in 2022 due to the consequences of Russia’s invasion of Ukraine and of resulting Western sanctions (as well as potential Russian reactions).
Transportation costs include shipping, road and rail. These costs, and in particular shipping, also rose substantially in 2021 due to the post-lockdown demand recovery and logistic constraints. Further increases in or a sustained high level of transportation costs not offset by continued high steel selling prices would directly and mechanically weigh on ArcelorMittal’s profitability (although it would make imports into its markets less competitive).
Excess capacity and oversupply in the steel industry and in the iron ore mining industry have in the past and may continue in the future to weigh on the profitability of steel producers, including ArcelorMittal.
The steel industry is affected by global and regional production capacity and fluctuations in steel imports and exports, which are themselves affected by the existence and amounts of tariffs and customer and distributor stocking and destocking cycles. The steel industry has historically suffered from structural overcapacity globally, and the current global steelmaking capacity exceeds the current global consumption of steel, especially for long products. This overcapacity is affected by global macroeconomic trends and amplified during periods of global or regional economic weakness, leading to weaker global or regional demand. In particular, China is both the largest global steel consumer and the largest global steel producer by a large margin, and the balance between its domestic production and consumption has been an important factor influencing
global steel prices. At various points in recent years, reduced Chinese steel demand has not been fully offset by reduced Chinese steel production, which has led to a flood of Chinese steel exports into various regional markets, including the Company’s principal markets, weighing on and indeed depressing market prices. While most recently this phenomenon has been tempered by constraints imposed on Chinese steel production, the risk remains of excessive production and hence exports. Exports by steel producers in other developing countries and regions (such as the CIS, Turkey and India) into the Company’s principal markets are also a market feature. The extent of them depends on the demand/production balance in the producer’s home market as well as regional market pricing differentials (including any applicable import tariffs). The European steel market is particularly sensitive to the import threat due to remaining structural overcapacity. For example, lower demand and high imports led to low steel prices in Europe in the first half of 2019, to which steel producers (including the Company) responded with production cuts.
Market prices for iron ore also underpin those of steel (as its principal input component) to some extent, and iron ore prices depend both on supply and demand conditions. Excess iron ore supply relative to demand has led to depressed prices at various points in recent years and could recur, with potentially a corollary effect on steel prices. No assurance can be given that iron ore prices will not decline further, particularly if Chinese steel demand declines, worldwide capacity increases due to new mines coming online or steel demand declines again due to a resurgence of COVID-19 pandemic impacts. A renewed phase of steel and iron ore oversupply would likely have a material adverse effect on ArcelorMittal’s results of operations and financial condition.
Unfair trade practices, in ArcelorMittal’s home marketsimport tariffs and/or barriers to free trade could negatively affect steel prices and reduce ArcelorMittal’s profitability, while trade sanctions and barriers may have an adverse effect on ArcelorMittal'sresults of operations in various markets.
ArcelorMittal is exposed to the effects of “dumping” and other unfair trade and pricing practices by competitors. Moreover, government subsidization ofsubsidies to the steel industry remainsremain widespread in certain countries, particularly those with centrally-
centrally controlled economies such as China. In periods of lower global demand for steel, there is an increased risk of additional volumes of unfairly-traded steel exports into various markets, including Europe, North America and Europe and other markets such as South Africa, in which ArcelorMittal produces and sells its products. Such imports have had and could in the future have the effect of further reducing prices and demand for ArcelorMittal’s products.
Against this backdrop of increasing dumping and other unfair trade and pricing pressures, China is lobbying members of the World Trade Organization (“WTO”) for immediate “Market Economy Status” (“MES”) in light of the expiry on December 11, 2016 of certain protocols to its 2001 accession to the WTO. MES is a bilateral designation that is granted individually by a given country and can be made on the basis of a legal or political determination. Several countries, including several in markets in which ArcelorMittal operates, have already granted China MES. Disputes are ongoing before the WTO with respect to China’s MES and the methodologies used to calculate dumping margins. No assurance can be given as to whether or when the U.S., Brazil or other countries will grant MES to China. A country’s decision to grant MES to China or whether anti-dumping measures that have been adopted will withstand disputes could substantially reduce the anti-dumping duty margins that may be applied against China pursuant to the rules of WTO, which would encourage or at least fail to discourage China’s exportation of unfairly traded steel products into several markets in which ArcelorMittal operates. See “Item 4.B—Information on the Company—Business overview—Government Regulations—Foreign trade” and "—Government Regulations" for more information.
An increase in exportsExports of low-cost steel products from developing countries, along with a lack of effective remedial trade policies, couldcan depress steel prices in various markets globally, including in ArcelorMittal’s key markets. Conversely, ArcelorMittal is
exposed to the effects of import tariffs, other trade sanctions, barriers and protectionist policies more generally due to the global nature of its operations. Various countries have instituted, and may institute trade sanctionsimport tariffs and barriers that could, depending on the nature of the measures adopted, adversely affect ArcelorMittal’s business by limiting the Company’s access to or competitiveness in steel markets. While such protectionist measures can help the producers in the adopting country, they may be ineffective, raise the risk of exports being directed to markets where no such measures are in place or are less effective and/or result in retaliatory measures. For example, the adoption of protectionist measuresmeasures. Moreover, absent government intervention, European steel producers who will bear increasingly high costs to reduce carbon emissions (or pay for allowances) will be at a competitive disadvantage versus importers from developing countries with lower environmental standards. While certain changes in the United States in March 2018 in the form of Section 232 25% import tariffs on all steel product categoriesChinese policy have recently led to a surgedecreased exports from China (notably the cancellation of the 13% export tax rebate on commodity grades of steel imports in other markets (for example,(HRC, rebar as of May 1, 2021), the risk of increased exports from TurkeyChina remains, due to changes in particular surged in Europe inChinese policy, economic conditions or otherwise.
More generally, the first halfcurrent state of 2018) and consequently provoked retaliatory safeguard measures by other countries (the European Commission, Turkey, Canada and the Eurasian Economic Union all adopted provisional safeguard measures in the form of tariff quotas on steel products during 2018). See “Item 4.B—Information on the Company—Business overview—Government Regulations—Foreign trade” for more information. It is unclear what impact these protectionist measures will have in 2019, whether they will be effective in increasing or maintaining steel prices in the adopting country or countries and whether they will have an overall negative impact on global macroeconomic conditions. With regard to ArcelorMittal in particular, the measures may cause a reduction of its exports from Canada and Mexico into the United States and a redirection of cheaper exports from the U.S. market to Europe, the negative effects of which could offset the positive effect of increased selling prices in the United States for the Company's U.S. plants. In 2018, the positive effect of the Section 232 tariffs in the United States was partially offset by the negative effects on ArcelorMittal's exports from Canada and Mexico into the United States.
In February 2019, President Trump received from the US Department of Commerce the findings of another Section 232 investigation into whether imported vehicles pose a national security threattrade relations globally with trade disputes leading to the United States and will have 90 days to decide on any action such as tariffs. The imposition of such tariffs and then retaliatory measures, as seen in recent years in various markets (U.S./China, U.S./Europe, etc.) has and could weigh significantly on US demand for imported vehicles, particularly from Europe and hence on demand for steel from European auto manufacturers who are among ArcelorMittal Europe’s principal clients. The overall adverse impact on ArcelorMittal would depend in part oncontinue to directly (in the extent to which this decrease in demand is offset by an increase in demand from US auto manufacturer clients (who would benefit from the protectionistcase of tariffs) as well as from ones based in Canada and Mexico (which countries would benefit under existing agreements from a partial exemption from such tariffs), all of which would benefit ArcelorMittal NAFTA’s operations.
In addition, the Trump administration and the U.S. Congress may make substantial changes in legislation, regulation and government policy directly affecting ArcelorMittal’s business or indirectly affecting(in the Company becausecase of impacts on its customers and suppliers. In particular, the Company’s exports from Canada or Mexico into the United States may be negatively affected by the implementation of the Trump administration's replacement of the NAFTA trade agreement with Canada and Mexico. More generally, actions further to President Trump's suggestions that he may seek to renegotiate other free trade agreements or withdraw the United States from the WTO could have an adverse effect on the Company's operations. All of the above, including escalating tariffs on steel imports or a more general trade war, pose a degree of uncertainty which couldeconomic growth generally) have a significant adverse effect on demand for and the price of steel demand,and hence on ArcelorMittal’s results of operations and financial condition.
Russia’s invasion of Ukraine, international reaction to it (in particular in the form of sanctions) and any regional or global escalation of the conflict, could adversely affect the Company’s business, results of operations and financial condition.
The Company has significant operations in Ukraine, consisting of a steel plant, which produced 4.9 million tonnes of steel in 2021, and (captive) mines that produced 11.7 million tonnes of iron ore in 2021; the related property, plant and equipment had a carrying value of $2.3 billion on the Company’s balance sheet at December 31, 2021. In 2021, the Company’s Ukrainian operations (and in particular its Kryvyi Rih steel plant) recorded 4.6 million of steel shipments, generating $4.1 billion of sales including $0.9 billion of sales to customers located in Ukraine. Operations were not affected by the conflicts ongoing since 2014 in relation to Crimea and the Donbass region; they have, however, been affected by Russia’s invasion of Ukraine in late February 2022, in the wake of which the Company reduced steel production to minimum levels (approximately one-third of its normal production levels) and discontinued mining operations at its underground mines. On March 3, 2022, the Company then announced that it was beginning the process to idle its
steelmaking operations in Kryvyi Rih in order to ensure the safety and security of its people and assets. The Company cannot predict duration of the idling as it will depend on the remaining course of the conflict and the establishment of safe and stable operating and logistical conditions thereafter, as well as potential repairs of any damages sustained.
The imposition of extensive sanctions on Russia by the EU, the U.S., the UK and other countries affects the Company’s sourcing of raw materials and also, potentially, the markets for sales by the Group’s other operations in the CIS (the Group recorded $1.6 billion of sales to customers located in Russia in 2021).
More generally the conflict could have a material adverse effect on the overall macroeconomic conditions generally.environment, potentially affecting steel and iron ore demand and prices as well as increasing energy costs. Both the conflict itself and the sanctions imposed (and further sanctions that may be imposed), as well as potential Russian reactions, have had and could have further destabilizing effects on financial markets. The conflict, which has substantially exacerbated tensions between NATO and Russia, could escalate militarily both regionally and globally; any substantial escalation would have a material adverse effect on macroeconomic conditions. In addition, sanctions may remain in place beyond the duration of any military conflict and have a long-lasting impact on the region and globally, and could adversely impact the Group’s results of operations and financial condition.
Developments in the competitive environment in the steel industry could have an adverse effect on ArcelorMittal’s competitive position and hence its business, financial condition, results of operations or prospects.
The markets in which steel companies operate are highly competitive. Competition—Competition, in the form of established producers expanding in new markets, smaller producers increasing production in anticipation of demand increases or amid recoveries, or exporters selling excess capacity from markets such as China—China, could cause ArcelorMittal to lose market share, increase expenditures or reduce pricing. For example, in the CIS, if low-cost regional competitors with 100% self-sufficiency in raw materials, increase steel rolling capacity, ArcelorMittal’s market share may be affected, and downward pressure applied to globally traded steel prices. Any of these developments could have a material adverse effect on its business, financial condition, results of operations or prospects.
Competition from other materials and alternative steel-based technologies could reduce market prices and demand for steel products and thereby reduce ArcelorMittal’s cash flows and profitability.
In many applications, steel competes with other materials that may be used as substitutes, such as aluminum, concrete, composites, glass, plastic and wood. In particular, as a result of increasingly stringent regulatory requirements, as well as developments in alternative materials, designers, engineers and industrial manufacturers, especially those in the automotive industry are increasinghave increased their use of lighter weight and alternative materials, such as aluminum composites and plastics in their products.
In the automotive area, ArcelorMittal has introduced new advanced high-strength steel products, such as Usibor® 2000, Ductibor® 1000 and Fortiform® which is a new 3rdrange of third generation AHSSadvanced high strength steel for cold stamping, new engineering S-in motion® projects and a dedicated electric iCARe® range to respond to the shift toward electric cars. New martensitic products also offer a major potential for battery packs and the Multi Part Integration concept brings the possibility to drastically reduce the number of parts in a car. In the construction area, ArcelorMittal has launchedis deploying Steligence®, a unique holistic commercial approach to serve this market with a complete set of products, services and solutions. See “Item 4.B—Information on the Company—Business“Business overview—Competitive strengths—Sustainable development—Outcome 2: Products that accelerate more sustainable lifestyles”Research and “--Outcome 3: Products that create sustainable infrastructure.”development”. Despite these product innovations, a loss of market share to substitute materials, increased government regulatory initiatives favoring the use of alternative materials, as well as the development of additional new substitutes for steel products could significantly reduce market prices and demand for steel products and thereby reduce ArcelorMittal’s cash flows and profitability.
ArcelorMittal is subjectWhile in 2020, the Company started to strict environmental laws and regulations that could give riseoffer its customers equivalent green steel tonnes by way of a certification system linked to CO2 savings, achieved through investment in decarbonization technologies, a significant increasetrend which continued 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 hazardous2021, additive manufacturing 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, and compliance with new and more stringent obligations may require additional capital expenditures or modifications in operating practices. 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 ArcelorMittal’s efforts to comply with environmental laws and regulations, environmental incidents or accidents may occur that negatively affect the Company’s reputation or the operations of key facilities.
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 also be 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,technologies such as those relating to uncontrolled tailings breaches or other future events or to underestimated emissions of polluting substances. For example, the failure of a tailings ponds dam at ArcelorMittal’s mines could cause significant damage, including death, injury and environmental harm. While the Company carries out assessments of its facilities, it cannot guarantee that failures or breaches of a tailings ponds dam will not occur in the future. For example, in February 2019, the Company decided to implement the evacuation plan related to its dormant Serra Azul tailing dam with a 5.8Mm3 tailings volume in Brazil, evacuating the 119 person community situated downstream to the dam as a precautionary measure based on an updated site-based assessment following recent incidents in the Brazilian mining sector in order to undertake further testing and implement any necessary mitigation measures.
ArcelorMittal’s operations may be located in areas where individuals or communities may regard its activities as having a detrimental effect on their natural environment and conditions of life. Any actions taken by such individuals or communities in response to such concerns could compromise ArcelorMittal’s profitability or, in extreme cases, the viability of an operation or the development of new activities in the relevant region or country.
See “Item 4.B—Information on the Company—Business overview—Government regulations—Environmental laws and regulations” and note 8.3 to ArcelorMittal’s consolidated financial statements.
Laws and regulations restricting emissions of greenhouse gases could force ArcelorMittal to incur increased capital and operating costs and could have a material adverse effect on ArcelorMittal’s results of operations and financial condition.
Compliance with new and more stringent environmental obligations relating to greenhouse gas emissions may 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 EU has established greenhouse gas regulations and has revised its emission trading system for the period after 2020 in a manner that may require ArcelorMittal to incur additional costs to acquire emissions allowances. Delegated regulations in this regard are expected. In Kazakhstan, the government has installed a domestic trading system which currently is in a pilot phase but would be similar to the EU system. South Africa envisages to start with a CO2 tax system in 2019. The United States required reporting of greenhouse gas emissions from certain large sources beginning in 2011. Although at the federal level the current administration is seeking to delay further regulation of greenhouse gas emissions, emissions trading regimes and other initiatives are continuing to be pursued at the state and regional level. Various regulations are in consideration or recently implemented in Argentina, Ukraine and Canada.
Further measures may be enacted in the future. In particular, in December 2015, the 195 countries participating in the United National Framework Convention on Climate Change reached an international agreement (the "Paris Agreement"). The Paris Agreement aims to implement the necessary drivers to achieve drastic reductions of carbon emissions. The Company takes this message seriously and investigates its possibilities to contribute to this by developing research and development programs, investigating its technical possibilities to reduce emissions (the Company’s emission footprint in 2017 was approximately 200 million tonnes) and following the state of knowledge on climate change closely.
Such obligations, whether in the form of a national or international cap-and-trade emissions permit system, a carbon tax or acquisition of emission rights at market prices, emissions controls, reporting requirements, or other regulatory initiatives, could have a negative effect on ArcelorMittal’s production levels, income and cash flows. Such regulations could also have a negative effect on the Company’s suppliers and customers, whichfree steelmaking could result in higher costsa loss of market share if competitors develop and lower sales. Moreover, the EU Commission’s decision to further reduce the allocationdeploy this kind of CO2 emission rights to companies could negatively impact the global steel industry, as the amount of such rights is currently at the edge of covering technically achievable operating conditions. CO2 emissions regulations have already resulted in increased costs in Europe, and ArcelorMittal expects costs will continue to increase with the implementation of Phase IV of the European Union’s Emission Trading Scheme (“ETS”) starting in 2021.
Furthermore, many developing nations have not yet instituted significant greenhouse gas regulations, and the Paris Agreement specifically recognized that peaking of greenhouse gas emissions will occur later in developing countries. As the Paris Agreement recognizes that the Intended Nationally Determined Contributions (“INDC”) for developing nations may be less stringent in light of different national circumstances, ArcelorMittal may be at a competitive disadvantage relative to steelmakers having more or all of their production in such countries. Depending on the extent of the difference between the requirements in developed regions (such as Europe) and developing regions (such as China or the CIS), this competitive disadvantage could be severe and render production in the developed region structurally unprofitable.
In addition, as regulators and investors increasingly focus on climate change issues, the Company is exposed to the risk of frameworks and regulations being adopted that are ill-adapted to its operations. For example, the most established framework for carbon pricing and emissions trading schemes is currently the European Union's ETS. The Company has highlighted the importance that a carbon border adjustment be included in order to avoid competitive distortions (i.e., European steel becoming overpriced due to European carbon policy, prompting the market to outsource its steel from other regions where carbon is less expensive). With respect to investors, the European Commission has presented a package of measures to implement key actions
with respect to its sustainable finance plan, including a proposed regulation to create a unified classification system (“taxonomy”) on what can be considered an environmentally sustainable economic activity, as a step in the efforts to channel investments into sustainable activities. If the metrics adopted in the taxonomy are not appropriate for the Company or if investors begin to view investments in steel and mining as undesirable, it may become more difficult and/technology before, or more expensive for the Company to obtain financing. While the Company has taken significant steps and continues to adapt its operations in light of climate change and the need for sustainability, such steps may not be in line with future frameworks or regulations or market views of investment suitability.
See “Item 4.B—Information on the Company—Business overview—Government regulations—Environmental laws and regulations” and note 8.3 to ArcelorMittal’s consolidated financial statements.
ArcelorMittal is subject to stringent health and safety laws and regulations that give rise to significant costs and could give rise to significant liabilities and/or negatively impact ArcelorMittal's reputation.
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. In addition, under certain circumstances authorities could require ArcelorMittal facilities to curtail or suspend operations based on health and safety concerns.
Despite ArcelorMittal’s efforts to monitor and reduce accidents at its facilities (see “Item 4.B—Information on the Company—Business overview—Government regulations—Health and safety laws and regulations”), health and safety incidents do occur, some of which may result in costs and liabilities and negatively impact ArcelorMittal’s reputation or the operations of the affected facility. Such accidents could include explosions or gas leaks, fires or collapses in underground mining operations, vehicular accidents, and other accidents involving mobile equipment, or exposure to radioactive or other potentially hazardous materials. Some of ArcelorMittal’s 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 Company’s workers and facilities, as well as the environment. Such accidents 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.
See “Item 4.B—Information on the Company—Business overview—Government regulations—Environmental laws and regulations” and note 8.3 to ArcelorMittal’s consolidated financial statements.
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, 2018, ArcelorMittal had total debt outstanding of $12.5 billion ($12.6 billion including debt classified as held for sale), including $3.2 billion of short-term indebtedness (including payables to banks and the current portion of long-term debt) and $9.3 billion of long-term indebtedness. As of December 31, 2018, ArcelorMittal had $2.4 billion of cash and cash equivalents, including restricted cash of $0.2 billion, and $5.5 billion available to be drawn under existing credit facilities. The Company also relies on its true sale of receivables programs ($5.0 billion of trade receivables sold and outstanding at December 31, 2018), as a way to manage its working capital cycle.
An increase in ArcelorMittal’s level of debt outstanding could have adverse consequences, including 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. Substantial increases in the Company's gearing could affect its ability to, and the conditions under which it might, access financial markets to refinance maturing debt on acceptable terms. ArcelorMittal’s access to financial markets for refinancing also depends on the conditions in the global capital and credit markets, which are volatile. Under such circumstances as occurred during the 2008/2009 financial and economic crisis and again at the height of the eurozone sovereign debt crisis in 2012, the Company could experience difficulties in accessing the financial markets on acceptable terms or at all.
Moreover, ArcelorMittal could, in order to increase its financial flexibility and strengthen its balance sheet, implement capital raising measures such as equity offerings (as was done in May 2009, January 2013 and April 2016), which could (depending on how they are structured) dilute the interests of existing shareholders or require them to invest further funds to avoid such dilution. In addition, ArcelorMittal has undertaken and may undertake further asset disposals in order to reduce debt. These asset disposals are subject to execution risk and may fail to materialize, and the proceeds received from such disposals may not reflect values that management believes are achievable and/or cause substantial accounting losses (particularly if the disposals are done in difficult market conditions).effectively than, ArcelorMittal. In addition, to the extent that the asset disposals include the sale of all or part of core assets (including through an increase in the share of non-controlling interests), this could reduce ArcelorMittal’s consolidated cash flowsregulatory requirements and/or the economic interest of ArcelorMittal shareholders in such assets, whichcustomer demand for low carbon or carbon neutral steel increase, competition with respect to low CO2 steel technologies may be cash-generative and profitable ones.become more significant, leading to substantial input cost increases.
In addition, credit rating agencies could downgrade ArcelorMittal’s ratings either dueII. Risks related to factors specific to ArcelorMittal, a prolonged cyclical downturn in the steel industry and mining industries, macroeconomic trends (such as global or regional recessions) or trends in credit and capital markets more generally, and any future downgrades could lead to an increase in its cost of borrowing. The margin under ArcelorMittal’s principal credit facilities and certain of its outstanding bonds is subject to adjustment in the event of a change in its long-term credit ratings, and downgrades that occurred in 2012 and 2015 resulted in increased interest expense. ArcelorMittal's operations
ArcelorMittal’s principal credit facilities contain restrictive covenants. These covenants limit, inter alia, encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittal’s subsidiaries to incur debt and the ability of ArcelorMittal and its subsidiaries to dispose of assets in certain circumstances. ArcelorMittal’s principal credit facilities also include the following financial covenant: ArcelorMittal must ensure that the “Leverage Ratio”, being 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), 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 ArcelorMittal), is not greater than a ratio of 4.25 to one. As of December 31, 2018, the Company was in compliance with the Leverage Ratio.
These restrictive and financial covenants could limit ArcelorMittal’s operating and financial flexibility. Failure to comply with any covenant would enable the lenders to accelerate ArcelorMittal’s repayment obligations. Moreover, ArcelorMittal’s 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 the credit facilities. Any invocation of these cross-acceleration clauses could cause some or all of the other debt to accelerate, creating liquidity pressures. In addition, the mere market perception of a potential breach of any financial covenant could have a negative impact on ArcelorMittal’s ability to refinance its indebtedness on acceptable conditions.
Furthermore, some of ArcelorMittal’s debt is subject to floating rates of interest and thereby exposes ArcelorMittal to interest rate risk (i.e., if interest rates rise, ArcelorMittal’s debt service obligations on its floating rate indebtedness would increase). Depending on market conditions, ArcelorMittal from time to time uses interest-rate swaps or other financial instruments to hedge a portion of its interest rate exposure either from fixed to floating or from floating to fixed. ArcelorMittal had exposure to 83% of its long-term debt at fixed interest rates and 17% at floating rates as of December 31, 2018.
See “Item 5.B—Operating and financial review and prospects—Liquidity and capital resources”.
ArcelorMittal’s level of profitability and cash flow currently is and, depending on market and operating conditions, may in the future be, substantially affected by its ability to reduce costs and improve operating efficiency.
The steel industry has historically been cyclical, periodically experiencing difficult operating conditions. In light of this, ArcelorMittal has historically and increasingly in recent periods, taken initiatives to reduce its costs and increase its operating efficiency. These initiatives have includedefficiency including through various asset optimization and other programs throughoutprograms. In 2021, the Company. The most recentCompany achieved $0.6 billion of these programs is the Action 2020fixed cost savings relating to its previously announced $1.0 billion structural improvement plan, and has announced a new three year $1.5 billion value plan in February 2016 that includes, among other aspects, several efficiency improvement2022, focused on creating value through well-defined commercial and operational initiatives. WhileThese initiatives have been key to the Company has partially implemented the plan across all segments, continued implementation of cost savingCompany’s ability to control and efficiency improvementreduce costs, hence supporting profitability. Any inability to continue to roll-out such initiatives is subject to operational challenges and limitations. For example, the volume gains achieved in 2017 were reversed in 2018 due to operational disruptions. Failure to implement them fully such initiatives would prevent the attainment of announced profitability or cash flow improvement targets, and more generally could have a material adverse effect on the Company’s profitability and cash flow.flows.
The Group’s carbon emissions intensity reduction targets are based on current assumptions with respect to the costs, government and societal support for the reduction of carbon emissions in particular regions and the advancement of technology and infrastructure related to the reduction of carbon emissions over time. Future developments may affect such assumptions, and this may render the achievement of ArcelorMittal’s targets more difficult, or even impossible, to achieve for cost or other reasons.
To achieve its 2030 global carbon emissions intensity (covering the Scope 1 and 2 emissions attributable to the Company’s operations measured in accordance with the greenhouse gas ("GHG") Protocol reduction target of 25%, ArcelorMittal has estimated the gross capital cost required for the Group to be approximately $10 billion, with the expectation that 35% of these capital expenditures will be deployed up to 2025 and the remainder in the second part of the decade. In addition, the Company's decarbonization strategy includes the objective of carbon neutrality by 2050, which has also become in 2021 a legal obligation for its operations in the EU and Canada following the endorsement of the Climate Law and the Canadian Net-Zero Emissions Accountability Act, respectively. These targets and estimates are based on numerous assumptions, including the costs of green hydrogen (meaning hydrogen produced exclusively from renewable sources) and its evolution over time, the construction of DRI and EAF, the development of carbon capture, utilization and storage (“CCUS”) infrastructure and the timing of the introduction of greenhouse gas reduction requirements and supportive policies in applicable jurisdictions. The Company expects that low emissions technologies will
become more competitive over time as more stringent GHG reduction requirements or a carbon price are introduced and increased in each jurisdiction, alongside the introduction of effective policies to secure a level playing field, and the decarbonization technologies themselves become more mature and efficient. However, in the transition period (and through at least 2030), its investments in decarbonization will require support from host countries, first and foremost from the European Union and its member states, through supportive policies designed to avoid “carbon leakage” and provide compensation for the significantly higher costs, while at the same time maintaining a fair and competitive landscape. In particular, ArcelorMittal’s expectation is that public funding covers 50% of the total cost of decarbonization (capital expenditures and higher operating expenses) so that companies are not rendered uncompetitive during this transition period. The Company believes this expectation is reasonable, but such funding is subject to changes in government and policy, among other factors, and may not be achieved. A lack of governmental and societal support could make the Company’s targets more costly, more difficult or even impossible to achieve. If the Company is unable to make the necessary investments to decarbonize and reach its 2030 decarbonization targets due to the design of governmental policy in Europe or other jurisdictions where it operates (see “Changes in assumptions underlying the carrying value of certain assets, including as a result of adverse market conditions, could result in the impairment of such assets, including intangible assets such as goodwill” below), it may negatively affect its competitiveness, profitability, cash flows, results of operations and financial condition, as well as harm its reputation.
ArcelorMittal has incurred and may incur in the future operating costs when production capacity is idled or increased costs to resume production at idled facilities.
ArcelorMittal’s decisions about which facilities to operate and at which levels are made based upon customers’ orders for products as well as the capabilities and cost performance of the Company’s facilities. Considering temporary or structural overcapacity or other considerations, production operations are concentrated at several plant locations and certain facilities are idled in response to customer demand, although operating costs are still incurred at such idled facilities. Most recently ArcelorMittal idled several plants during the COVID-19 pandemic-related lockdowns and its Ukranian steel plant following the Russian invasion. When idled facilities are restarted, ArcelorMittal incurs costs to replenish raw material inventories, prepare the previously idled facilities for operation, perform the required repair and maintenance activities and prepare employees to return to work safely and resume production responsibilities. Such costs could have an adverse effect on its results of operations or financial condition.
ArcelorMittal could experience labor disputes that may disrupt its operations and its relationships with its customers and its ability to rationalize operations and reduce labor costs in certain markets may be limited in practice or encounter implementation difficulties.
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, negotiations preceding new collective bargaining agreements, during wage and benefits negotiations or during other periods for other reasons, in particular in connection with any announced intentions to adapt the footprint. ArcelorMittal may experience strikes and work stoppages at various facilities. Prolonged strikes or work stoppages could have an adverse effect on the operations and financial results of ArcelorMittal. In recent years ArcelorMittal has experienced significant strikes affecting operations at various plants, particularly in South Africa, France and Canada, relating to various causes, often in connection with labor contract renewal negotiations.
Disruptions to ArcelorMittal’s manufacturing processes caused for example by equipment failures, natural disasters, accidents, epidemics or pandemics, geopolitical conflicts or extreme weather events could adversely affect its operations, customer service levels and financial results and liabilities.
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, explosions, furnace breakdowns or as a result of natural disasters, accidents, epidemics or pandemics or severe weather conditions. ArcelorMittal’s manufacturing plants have experienced, and may in the future experience, plant shutdowns or periods of reduced production as a result of such events, for example the collapse of the oxygen and nitrogen pipelines in November 2018 at ArcelorMittal Temirtau, the fire in a conveyor belt of the coke plant in ArcelorMittal Asturias in October 2018, an electrical failure resulting in the temporary stoppage of the concentrator at AMMC in 2019, a fire in the gas cleaning section of the coke plant in Dunkirk in 2020, a blast furnace gas line explosion in Vanderbiljpark in 2020 in South Africa and an explosion in the Abayskaya mine in Kazakhstan in November 2021. Certain of these incidents have resulted or may result in governmental investigations or proceedings and/or in costs and liabilities and negatively impact the Company's reputation or the operations of the affected facilities. Such incidents could also lead to production stoppages, loss of key personnel, loss of key assets, or put at risk our employees (and those of sub-contractors and
suppliers) or persons living near affected sites. See risk “ArcelorMittal is subject to strict environmental, health and safety laws and regulations that could give rise to a significant increase in costs and liabilities". Conflicts may also cause interruptions to operations; see risk “Russia’s invasion of Ukraine, and any regional or global escalation of the conflict, could adversely affect the Company’s business and results of operations.”
In addition, natural disasters and severe weather conditions could lead to significant damage at ArcelorMittal’s production facilities and general infrastructure or cause shutdowns. For example, ArcelorMittal Mexico’s production facilities located in Lázaro Cárdenas, Michoacán, Mexico are located in or close to areas prone to earthquakes. The Lázaro Cárdenas area has, in addition, been subject to a number of tsunamis in the past. The site of the joint venture AM/NS Calvert (“Calvert”) in the United States is located in an area subject to tornados and hurricanes. ArcelorMittal also has assets in locations subject to bush fires, specifically in Kazakhstan and South Africa, and to Arctic freeze, specifically in Baffinland. More generally, changing weather patterns and climatic conditions in recent years, possibly due to climate change, have added to the unpredictability and frequency of natural disasters.
Severe weather conditions can also affect ArcelorMittal’s operations in particular due to the long supply chain for certain of its operations and the location of certain operations in areas subject to harsh winter conditions (i.e., Canada and Kazakhstan) or areas that are susceptible to droughts (i.e., South Africa, Mexico and Brazil). Water in particular is crucial to the steelmaking process, and the risk that the authorities may restrict license to withdraw water as a result of chronic drought could increase operating costs and reduce production capacity. Flooding has also affected ArcelorMittal's operations, including at ArcelorMittal Asturias in Aviles, Spain in June 2018 and, more regularly, in Liberia, when heavy rains during the wet season have caused handling and logistic constraints that impacted shipment volumes. The severe floods in Europe in July 2021 resulted in logistic constraints and decreased steel shipments. Damage to ArcelorMittal production facilities due to natural disasters and severe weather conditions could, to the extent that lost production cannot be compensated for by unaffected facilities, adversely affect its business, results of operations or financial condition. More generally, these severe weather conditions could increase in frequency and severity due to climate change.
ArcelorMittal’s 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 ArcelorMittal’s
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 such risks. ArcelorMittal’s insurance policies cover physical loss or damage to its property and equipment on a reinstatement basis as 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 ArcelorMittal’s property and equipment policies, some damages and losses caused by among others terrorism, war and other political violent events, as well as by certain natural disasters, such as earthquakes, floods and windstorms, are also covered.
ArcelorMittal also purchases worldwide third-party public and product liability insurance coverage for all of its subsidiaries. Various other types of insurance are also maintained, such as comprehensive construction and contractor insurance for its greenfield and major capital expenditures projects, directors and officers liability, transport, and charterers’ liability, as well as other customary policies such as car insurance, travel assistance and medical 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 industry, in order to protect it against the risk of non-payment due to customers’ insolvency or other causes. Not all of ArcelorMittal’s customers are or can be insured, and even when insurance is available, it may not fully cover the exposure.
Notwithstanding the insurance coverage that ArcelorMittal and its subsidiaries carry, the occurrence of an event or series of events (such as, among others, a pandemic or a war) that may result in losses in excess of limits specified under the relevant policy, or losses not covered by insurance policies, could materially harm ArcelorMittal’s financial condition and future operating results.
ArcelorMittal’s reputation and business could be materially harmed as a result of data breaches, data theft, unauthorized access or successful hacking.
ArcelorMittal’s operations depend on the secure and reliable performance of its information technology systems. An increasing number of companies, including ArcelorMittal, have experienced intrusion attempts or even breaches of their information technology security, some of which have involved sophisticated and highly targeted attacks on their computer networks. ArcelorMittal’s corporate website was the target of a hacking attack in January 2012, which brought the website down for several days, and phishing, ransomware and virus attacks have been increasing in more recent years through 2020, with WannaCry impacting the Company in March 2018
and ransomware Eight in South Africa in 2020. In March 2021, ArcelorMittal Liberia and Dofasco were subject to a Cobalt Strike BEACON malware attack. The attack initially occurred on the ArcelorMittal Liberia network, with a malicious file download leading to an infection by malware. The attacker then moved laterally within the ArcelorMittal Liberia network to the ArcelorMittal Dofasco environment, attempting to infect the ArcelorMittal Dofasco system. In April 2021, ArcelorMittal Dofasco engaged an outside firm to conduct an exhaustive review of the attack, and no evidence data access, staging or theft was found. Adverse consequences of technological advances like Industry 4.0, Cloud computing, Internet of Things, and Blockchain may increase threats or cause damage to ArcelorMittal, for example by impacting shop-floor systems supporting production and maintenance and thereby forcing plant operations to revert to manual mode with loss of production, resulting in new risks to ArcelorMittal's operations and systems. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement in a timely manner effective and efficient countermeasures. Although, ArcelorMittal performs annual cyber maturity assessments in many of its business units, which are supplemented by in-depth cyber audits and penetration testing exercises performed by ArcelorMittal Global Assurance, the risk of significant data breaches, data theft, unauthorized access or successful hacking cannot be eliminated. There may also be an increased risk of cybersecurity breaches due to ongoing geopolitical tensions involving Russia.
If unauthorized parties attempt or manage to bring down the Company’s website or force access into its information technology systems, they may be able to misappropriate personal and confidential information, cause interruptions in the Company’s operations, damage its computers or process control systems or otherwise damage its reputation and business. In such circumstances, the Company could be held liable or be subject to regulatory or other actions for breaching confidentiality and personal data protection rules including General Data Protection Regulation ("GDPR"). Any compromise of the security of the Company’s information technology systems could result in a loss of confidence in the Company’s security measures and subject it to litigation, civil or criminal penalties, and adverse publicity that could adversely affect its reputation, financial condition and results of operations.
III. Risks related to ArcelorMittal’s Mining activities
ArcelorMittal’s mining operations are subject to risks associated with mining activities.
ArcelorMittal's mining operations are subject to the 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, the hazards associated with open-pit mining operations include, among others:
•flooding of the open-pit;
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• | flooding of the open pit;
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• | collapse of the open-pit wall;
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• | accidents associated with the operation of large open-pit mining and rock transportation equipment;
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• | accidents associated with the preparation and ignition of large-scale open-pit blasting operations;
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• | production disruptions or difficulties associated with mining in extreme weather conditions;
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• | hazards associated with the disposal of mineralized waste water, such as groundwater and waterway contamination; and
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• | collapse of tailings ponds dams or dams.
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•collapse of the open-pit wall;
•accidents associated with the operation of large open-pit mining and rock transportation equipment;
•accidents associated with the preparation and ignition of large-scale open-pit blasting operations;
•production disruptions or difficulties associated with mining in extreme weather conditions;
•hazards associated with the disposal of mineralized waste water, such as groundwater and waterway contamination; and
•collapse of tailings ponds dams.
Hazards associated with underground mining operations, of which ArcelorMittal has several, include, among others:
•underground fires and explosions, including those caused by flammable gas;
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• | underground fires and explosions, including those caused by flammable gas;
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• | cave-ins or falls of ground;
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• | discharges of gases and toxic chemicals;
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• | sinkhole formation and ground subsidence; and
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• | blasting, removing, and processing material from an underground mine.
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•gas and coal outbursts;
•cave-ins or falls of ground;
•discharges of gases and toxic chemicals;
•flooding;
•sinkhole formation and ground subsidence; and
•blasting, removing, and processing material from an underground mine.
ArcelorMittal is exposed to all of these hazards. The occurrence of any of the events 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 ArcelorMittal’s reputation, both as a companyCompany focused on ensuring the health and safety of its employees and more generally.
ArcelorMittal’s reserve and resource estimates may materially differ from mineral quantities that it may be able to actually recover; ArcelorMittal’s estimates of mine life may prove inaccurate; and market price fluctuations and
changes in operating and capital costs may render certain ore reserves uneconomical to mine.
ArcelorMittal’s reportedThere is a degree of uncertainty attributable to the estimation of mineral reserves and resources. Until mineral reserves and resources are estimated quantities of the ore and metallurgical coal that it has determined can be economicallyactually mined and processed, under presentthe quantity of metal and anticipated conditions to extract their mineral content. There are numerous uncertainties inherent in estimating quantities of reservesgrades must be considered as estimates only and in projecting potential future rates of mineral production, including factors beyond ArcelorMittal’s control. The process of estimating reserves involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation and judgment. As a result, no assurance can be given that the estimated amountsindicated levels of ore or coalmetals will be recoveredproduced. In making determinations about whether to advance any of its projects to development, ArcelorMittal must rely upon estimated calculations for the mineral reserves and mineral resources and grades of mineralization on the Company's properties.
The estimation of mineral reserves and resources is a subjective process that is partially dependent upon the judgment of the qualified persons preparing such estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, statistical analysis of drilling and sampling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available.
ArcelorMittal’s estimates of mineral reserves and resources are based on geological interpretation and statistical inferences or that it will be recovered at the anticipated rates. Estimates may vary,assumptions drawn from drilling and resultssampling analysis made as of mining and production subsequent to the date of an estimate may lead to revisions ofsuch estimates. ReserveArcelorMittal periodically updates its mineral reserves and resources estimates and estimates of mine life may require revisions based on actual market conditions, productionthe conclusions of the relevant qualified persons with respect to new data from exploratory and infill drilling, results from technical studies and the experience acquired during the operation of the mine and other factors. Fluctuations inmetallurgical processing, as well as changes to the assumptions used to calculate these estimates.
Several of the assumptions used to calculate these estimates, including the market prices, of minerals and metals, reduced recovery rates or increased operating and capital costs dueand mining and metallurgical recovery rates, among others, can greatly fluctuate, which may result in significant changes to inflation, exchange rates, mining duties,the Company's current estimates. These changes in regulatory requirementsmay also render some or other factors may renderall of our proven and probable mineral reserves and measured and indicated mineral resources uneconomic to exploit and may ultimately result in a revisionreduction of reserves. mineral reserves and resources.
In particular,addition, inferred mineral resources have a prolonged periodgreat amount of low prices or other indicators could leaduncertainty as to their existence and their economic and legal feasibility. Readers should not assume that any part of an inferred mineral resource will be upgraded to a reviewhigher category or that any of the Group’smineral resources not already classified as mineral reserves will be reclassified as mineral reserves. Such review would reflect the Company’s view based on estimates, assumptions and judgments and could result in a reduction in the Group’s reported reserves. The Group’s reserve estimates reported in this annual report do not exceed the quantities that the Company estimates could be extracted economically if future prices were at similar levels to the average contracted price for the three years ended December 31, 2018. As a result, if the average contracted prices decline in 2019, in particular to near or below the low levels seen in the fourth quarter of 2015 and in the first half of 2016, the Company’s estimates of its reserves at year-end 2019 may decline.
In addition,Moreover, substantial time and expenditures are required to:
•establish mineral reserves through drilling;
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•Management report | establish mineral reserves through drilling;
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• | determine appropriate mining and metallurgical processes for optimizing the recovery of saleable product from iron ore and coal reserves;
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• | obtain environmental and other licenses or securing surface rights with local communities;
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• | construct mining and processing facilities and the infrastructure required for greenfield properties;
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• | extract the saleable products from the mined iron ore or coal; and
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• | maintain the appropriate blend of ore to ensure the final product qualities expected by the customer are achieved.
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•determine appropriate mining and metallurgical processes for optimizing the recovery of saleable product from iron ore and coal reserves;
•obtain environmental and other licenses or securing surface rights with local communities;
•construct mining and processing facilities and the infrastructure required for greenfield properties;
•extract the saleable products from the mined iron ore or coal; and
•maintain the appropriate blend of ore to ensure the final product qualities expected by the customer are achieved.
If a project proves not to be economically feasible by the time ArcelorMittal is able to exploit it, ArcelorMittal may incur substantial losses and be obliged to recognize impairments. In addition, potential changes or complications involving metallurgical and other technological processes that arise during the life of a project may result in delays and cost overruns that may render the project not economically feasible.
ArcelorMittal faces rising extraction costs over time as reserves deplete.
Reserves are gradually depleted in the ordinary course of a given mining operation. As mining progresses, distances to the primary crusher and to waste deposits become longer, pits become steeper and underground operations become deeper.deeper, all of which are considered in reserve estimates. As a result, ArcelorMittal usually experiences rising unit extraction costs over time with respect to each of its mines.
ArcelorMittal has incurredIV. Risks related to ArcelorMittal’s acquisitions and may incur in the future operating costs when production capacity is idled or increased costs to resume production at idled facilities. investments
ArcelorMittal’s decisions about which facilities to operate and at which levels are made based upon customers’ orders for products as well as the capabilities and cost performance of the Company’s facilities. Considering temporary or structural overcapacity in the current market situation, production operations are concentrated at several plant locations and certain facilities are idled in response to customer demand, although operating costs are still incurred at such idled facilities. When idled facilities are restarted, ArcelorMittal incurs costs to replenish raw material inventories, prepare the previously idled facilities for operation, perform the required repair and maintenance activities and prepare employees to return to work safely and resume production responsibilities. Such costs could have an adverse effect on its results of operations or financial condition.
ArcelorMittal has grown through acquisitions and may continue to do so. Failure to manage external growth and difficulties completing planned acquisitions or integrating acquired companies could harm ArcelorMittal’s future results of operations, financial condition and prospects.
The Company was formed and subsequently grew through mergers and acquisitions. After curtailing its large-scale M&A activity for several years following the 2008 financial crisis, it hasthe Company made several large acquisitions in recent years, including its acquisition (via a joint venture) of Calvert in 2014, its acquisition of Votorantimthe long steel business ArcelorMittal Sul Fluminense (“AMSF”) in 2018, ArcelorMittal Italia via a long-term lease and its acquisition of Ilva S.p.A.conditional purchase agreement in 2018 (renamed Acciaierie d'Italia and certain of its subsidiaries (“Ilva”), Europe’s largest single steel sitewhich became a joint venture in 2021) and only integrated steelmakerAMNS India Limited ("AMNS India") via a joint venture in Italy, also in 2018.2019.
To the extent ArcelorMittal continues to pursue significant acquisitions, financing of such acquisitions may (depending on the structure) result in increased debt, leverage and gearing. Acquisitions also entail increased operating costs, as well as greater allocation of management resources away from daily operations. Managing acquisitions requires the continued development of ArcelorMittal’s financial and management information control systems, the integration of acquired assets with existing operations, the adoption of manufacturing best practices, handling any labor disruptions that may arise, attracting and retaining qualified management and personnel (particularly to work at more remote sites where there is a shortage of skilled 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 manage acquisitions could have a material adverse effect on ArcelorMittal’s business, financial condition, results of operations or prospects.
ArcelorMittal may fail to implement its strategyencounter further difficulties with respect to Ilva.
The Company has encountered and may continue to encounter difficulties in integrating Ilva or in implementing its strategy with respect to Ilva.ArcelorMittal Italia (renamed Acciaierie d'Italia). In particular, pursuant to the initial agreement for the lease and subsequent conditional purchase of the business, ArcelorMittal isItalia began implementing a major improvements project involving substantial capital expenditures designed to bring IlvaArcelorMittal Italia up to and beyond EU environmental standards, to improve theits operational performance, of Ilva’s assets, to rebuild client confidence and to integrate Ilva’s personnel and apply the Company’s best practices and expertise. ThereThe implementation of these improvements has been subject to various obstacles, including the unexpected legal, regulatory and operational developments encountered in 2019 and the impact of the COVID-19 pandemic in Italy, which led to a significant reduction in the Taranto plant’s production for several months in 2020. These delays were particularly costly as ArcelorMittal Italia had been loss-making while it was consolidated in ArcelorMittal's results from November 2018 to December 2020.
On November 4, 2019, ArcelorMittal sent to the Commissioners managing the Ilva insolvency procedure (the “Commissioners”) a notice to withdraw from or terminate lease and conditional purchase agreement and return the business units to Ilva. This notice was based, among other things, on provisions of the agreement that allow withdrawal in the event that a new law affects the environmental plan for the Taranto plant in such a way that materially impairs the ability to operate the plant or implement the industrial plan; these provisions were triggered following the Italian Parliament’s removal, on November 3, 2019, of the legal protection necessary for ArcelorMittal Italia to implement its environmental plan without risk of criminal liability. In response, the Commissioners filed suit in Milan seeking an injunction to prevent ArcelorMittal’s withdrawal and termination
of the agreement. Following negotiation between the parties, on March 4, 2020, ArcelorMittal and the Commissioners agreed to settle this litigation and signed an amendment to the agreement.
The amendment included terms for investment by Italian state-sponsored and other private entities into ArcelorMittal Italia, a new industrial plan involving lower-carbon steelmaking technologies, a revised lease payment structure and certain revised commitments and additional conditions precedent related to the completion of the obligation to purchase (including the amendment of the existing environmental plan to account for changes in the new industrial plan; the lifting of all criminal seizures on the Taranto plant; and the absence of restrictive measures affecting Acciaierie d'Italia in the context of criminal proceedings where Ilva is a defendant) by May 2022. The Investment Agreement was signed on December 10, 2020, providing for Invitalia, an Italian state-owned company, to invest up to €1.1 billion in ArcelorMittal Italia, in two tranches (equity and €25 million as a loan). On April 14, 2021, following the initial injection by Invitalia of €400 million of new equity, ArcelorMittal and Invitalia formed a public-private partnership. The joint company was renamed Acciaierie d’Italia Holding “ADI Holding” (formerly AM InvestCo), and its main operating subsidiary ArcelorMittal Italia was renamed Acciaierie d’Italia. The investment agreement stipulates a second equity injection by Invitalia of up to €680 million, to fund the purchase of Ilva’s business by ADI Holding, subject to certain conditions precedent to be met by May 2022. At this point, Invitalia’s shareholding of ADI Holding would increase to 60% and ArcelorMittal would invest up to €70 million to retain a 40% shareholding and joint control over the company. Following the first equity injection, and given that ADI Holding would henceforth operate independently and in particular have its own funding plans, ArcelorMittal derecognized the assets and liabilities (including the remaining lease and purchase liability) of ADI Holding and its operating subsidiaries from its consolidated statement of financial position and accounts for its interest in the company under the equity method. While the first Invitalia investment has been made, no guaranteeassurance can be given that the Companypurchase will be successfulcompleted or that the conditions precedent to the investment agreement itself will be fulfilled by May 2022 (in case conditions precedent are not met or waived or the May 2022 deadline extended, ADI Holding would not be required to complete the purchase of Ilva's assets and a portion of its capital invested would be returned) or that further operational, financial, legal, regulatory, labor-related or political difficulties will not arise, potentially resulting in implementing its strategy or in realizing the expectedfailure to achieve the anticipated benefits of the acquisition in fullproject, further losses, renewed litigation and payments of substantial amounts or at all.other damages. For more information see note 9.3 to ArcelorMittal’s consolidated financial statements.
ArcelorMittal faces risks associated with its proposed acquisition, via a joint venture, of ESIL. AMNS India.
As discussed in “Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018,” ArcelorMittal is in the process of acquiring,acquired, via a joint venture with Nippon Steel & Sumitomo Metal Corporation (“NSSMC”NSC”), Essar SteelAMNS India Limited (“ESIL”)on December 16, 2019, in a bankruptcy resolution process. The joint venture’s proposal, set out in a resolution plan (the “Resolution Plan”) detailingthat detailed among other things the amount to be paid to existing creditors and towards capital infusion (totaling $6.8$7.1 billion and including approximately $340$417 million of guaranteed working capital adjustment) and the improvements and related capital expenditures (totaling $2.8$2.6 billion) to be made over the medium-term, has beenwas approved by the creditors’ committee and is pending final judicial review. Indian Supreme Court on November 15, 2019.
The Company provided a $567 million performance guarantee in connection with the executionimplementation of the Resolution Plan. Initial financing for the debt repayment and equity infusion has been secured through a $7 billion term facility (or “bridge financing”) agreement.
Should the Resolution Plan be implemented, as is currently expected, it would subjectsubjects ArcelorMittal to various risks. On the operational front, the industrial project to turnaround ESILAMNS India and further improve operational profitability is large-scale and ambitious. While ArcelorMittal has substantial experience in turnaround situations, the scale of this one is particularly
large and it is the Company’s inaugural large-scale acquisition in India, an emerging market. Moreover, AMNS India’s acquired assets did not include certain assets that are ancillary to the steel plant, such as port facilities. While AMNS India has since made additional acquisitions, such as Odisha Slurry Pipeline Infrastructure Limited and a power plant, without requiring additional shareholder funding, it is possible that the joint venture may make additional acquisitions financed in a manner similar to that of the AMNS India acquisition and subject the Company to similar risks. Capital expenditure in excess of budgeted amounts, delays and difficulties in achieving commercial objectives therefore cannot be ruled out. The risks in this respect are compounded to an extent by the fact that ESIL isAMNS India was emerging from bankruptcy (meaning, among other things, that maintenance capital expenditures were deferred) and it will beis owned and operated by a joint venture with attendant risks around strategic alignment, potential discord and deadlock. OnArcelorMittal is exposed to the financial front, there are uncertainties and risks in respectextent of ArcelorMittal’s exposure (viaits equity investment inand its guarantees of the joint venture and possible guaranteefinancings of the joint venture’s debt). While ArcelorMittal and NSSMC currently expect to financeventure. On March 16, 2020, AMNS Luxembourg, the joint venture through a combination of partnership equity (one-third) and debt (two-thirds), the exact ratio has not yet been determined, and the nature of the long-term debt financingparent company of the joint venture has not yet been defined (including, whether and/or what amounts will beAMNS India, entered into a $5.1 billion ten-year term loan agreement with several Japanese banks which is guaranteed by ArcelorMittal and NSSMC). Pending the implementation of long-term financing, ArcelorMittal will guarantee any amounts drawn byNSC in proportion to their interests in the joint venture underventure. See further information in note 2.4 to the bridge financing. consolidated financial statements.
ArcelorMittal’s greenfield, brownfield and brownfieldother investment projects are inherently subject to financing, execution and completion risks.
The Company has announced a number of greenfield or brownfield development projects in addition to Ilva and ESIL, some ofas well as other significant investment projects which are or may be ongoing.capital intensive. See “Item 4.D—Information on the Company—“Properties and capital expenditures—Property, plant and equipment—
Investments in joint ventures” and “Properties and capital expenditures—Capital expenditure projects—Updates on previously announced investment projects”expenditures” for further information on projects the Company has announced. Particularly significant recent projects include the Company’s announced projects in Liberia, Brazil, Ukraine and Mexico, involving estimated capital expenditures of approximately $2.9 billion over the 2022 to 2024 period. In addition, ArcelorMittal’s joint venture AMNS India has signed a memorandum of understanding with the Government of Odisha to set-up an integrated steel plant with a 12 million tonne per annum capacity in the Kendrapara district of Odisha and other joint ventures have ongoing significant investment projects.
To the extent these projects go forward, they would entail substantial capital expenditures, and their timely completion and successful operation 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, securing and maintaining adequate property rights to land and mineral resources, local opposition to land acquisition or project development, managing relationships with or obtaining consents from other shareholders, revision of economic viability projections, demand for the Company’s products, local environmental or health-related conditions, and general economic conditions. Any of these factors may cause the Company to delay, modify or forego some or all aspects of its development projects. For investment projects that the Company expects to fund primarily through internal sources, these sources may prove insufficient depending on the amount of internally generated cash flows and other uses of cash, and the Company may need to choose between incurring external financing or foregoing the investment. The Company cannot guarantee that it will be able to execute its greenfield, brownfield or brownfield developmentother investment 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. Conversely, should the Company decide to postpone or cancel development projects, it could incur various negative consequences such as litigation or impairment charges.charges, as well as loss of anticipated strategic benefits.
ArcelorMittal faces risks associated with its investments in joint ventures and associates.
ArcelorMittal has investments in variousnumerous joint ventures and associates. See “Properties and capital expenditures—Property, plant and equipment—Investments in joint ventures” and note 2.4 to ArcelorMittal’s consolidated financial statements. JointIn particular, it has structured significant growth transactions in recent years, including Calvert and AMNS India as joint ventures, and recently restructured ArcelorMittal Italia as a joint venture. These joint ventures subject ArcelorMittal to several types of risks.
First, risks that are endemic to joint ventures generally due to their nature as entities over which control is shared. These include the risk of dead-lock and/or coordination issues affecting the implementation of strategy. To the extent joint ventures and associates may beare controlled and managed by joint venture or controlling partners, thatthey may not fully comply with ArcelorMittal’s standards, controls and procedures, including ArcelorMittal’s health, safety, environment and community standards, whichstandards; this could lead to higher costs, reduced production or environmental, health and safety incidents or accidents, which could adversely affect ArcelorMittal’s results and reputation. Joint
Second, joint ventures may be the source of substantial expenditures and financial exposure. Although ArcelorMittal’s joint ventures are also subjectresponsible for their own funding and it does not consolidate their indebtedness, ArcelorMittal may make substantial cash contributions to the risk of dead-lockextend loans to and/or coordination issues affectingguarantee the implementationdebt of strategy.its joint ventures. This may particularly be the case for joint ventures that are strategic and that are expanding and developing, such as AMNS India and Calvert. As of December 31, 2021, ArcelorMittal had given $4.3 billion in guarantees on behalf of associates and joint ventures including $3.1 billion issued on behalf of AMNS India, $279 million issued on behalf of Calvert, $323 million in relation to outstanding lease liabilities for vessels operated by Global Chartering and $175 million on behalf of its joint venture Al Jubail (discussed further below). See notes 2.4.1, 2.4.2 and 9.4 to ArcelorMittal’s consolidated financial statements.
In addition, certain of theseThird, joint ventures and associates are currently experiencing,may experience financial difficulties. In such circumstances, ArcelorMittal may choose to restructure the joint venture, to contribute additional equity or to guarantee additional financing. The Company also may in the future experience, difficult operating conditions and/or incur losses. Difficult operating conditions in joint ventures and associates in which ArcelorMittal has invested may expose itbe exposed to loss of its investment requirements for additional investments or calls on existing guarantees. For example, the financial situation of ArcelorMittal’s joint venture in Saudi Arabia, Al Jubail’s financial situation has beenJubail, was negatively impacted by a slower than expected ramp-up of operations and required further funding in 2018 and 2019; it may require further funding.additional funding in the future. ArcelorMittal has provided shareholder loans to assist with funding and additional equity funding is expected from the other partners. ArcelorMittal’s loans and receivables to the joint venture were $163 million at December 31, 2018 after recognitionhas guaranteed some of its share in net losses. The Company has also guaranteed $397 million of Al Jubail’s external debt. Due to the failure of other shareholders to provide requisite equity funding by December 31, 2018, the joint venture’s indebtedness became technically in default as of such date. ArcelorMittal’s guarantee of such indebtedness has not been called by the lenders, and ArcelorMittal does not currently expect it to be called. ArcelorMittal is working with the other shareholders in the joint venture to resolve the situation through their contribution of the requisite equity and currently expects the technical default to be cured in the near term. The technical default relates only to the indebtedness of the joint venture and is not expected to affect the availability or maturity of any borrowings of ArcelorMittal. As of December 31, 2018, ArcelorMittal had given $1.1 billion in guarantees on behalf of other associates and joint ventures including $348 million issued on behalf of Calvert and the above mentioned Al Jubail guarantee. See notes 2.4.1, 2.4.2 and 8.3 to ArcelorMittal’s consolidated financial statements.(see above).
Finally, ArcelorMittal’s investments in joint ventures and associates may also result in impairments. For example, in 2015,In 2020, as a result of lower cash flow projections resulting from weaker market conditions partially linked to the COVID-19 pandemic, the Company recorded anrecognized a $211 million impairment charge of $283 million inwith respect ofto its joint venture investment in Kalagadi Manganese (Proprietary) Ltd. In May 2018, the Company announced the sale of its 50% shareholding in its joint venture investment in Macsteel Holdings Luxembourg S.à r.l and recorded an impairment of $132 million to adjust the carrying amount of the investment to the expected sale proceeds.associate DHS Group. As of December 31, 2018,2021, ArcelorMittal’s investments accounted for under the equity method had a book valuecarrying amount of $4.9$10.3 billion, including AMNS India ($3.3 billion), Acciaierie d'Italia ($1.2 billion), DHS Group ($1,015650 million), China Oriental ($952 million)1.3 billion), Gonvarri ($524617 million), Calvert ($866 million), Baffinland ($386 million) and BaffinlandVAMA ($380249 million).
The Significant Shareholder has the ability
V. Risks related to exercise significant influence over the outcome of shareholder votes.ArcelorMittal’s financial position and organizational structure
As of December 31, 2018, a trust (HSBC Trustee (C.I.) Limited, as trustee), of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries (referred to as the "Significant Shareholder"), beneficially owned (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) shares amounting (when aggregated with ordinary shares of ArcelorMittal and options to acquire ordinary shares held directly by Mr. and Mrs. Mittal) to 382,297,751 shares, representing 37.41% of ArcelorMittal’s outstanding shares. See “Item 7.A—Major shareholders and related party transactions—Major shareholders”. As a result, the Significant Shareholder 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. The Significant Shareholder 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 an 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 30 years 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 world’s 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 an adverse effect on ArcelorMittal’s business and prospects. ArcelorMittal does not maintain key person 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, and loss-making subsidiaries may drain cash flow necessary for such needs or distributions.
As a holding company, ArcelorMittal 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 ordinary shares or conduct share buy-backs. Significant cash or cash equivalent balances may be held from time to time at the Company’s international operating subsidiaries, including in particular those in France and the United States, where the Company maintains cash management systems under which most of its cash and cash equivalents are centralized, and in Brazil, Canada, India, Kazakhstan, South Africa and Ukraine. Some of these operating subsidiaries have debt outstanding or are subject to acquisition agreements that impose restrictions on such operating subsidiaries’ ability to pay dividends, but such restrictions are not significant in the context of ArcelorMittal’s overall liquidity. These subsidiaries may also experience operating difficulties that impact their cash flows. ArcelorMittal South Africa, for example, has been experiencing significant difficulties in recent years. In order to decrease its significant outstanding debt, in January 2016, ArcelorMittal South Africa conducted a rights offering entirely underwritten by ArcelorMittal that resulted, via the repayment of an intragroup loan of R3.2 billion (R2.7 billion or $0.2 billion outstanding as of December 31, 2018) and an additional cash injection by ArcelorMittal of approximately R460 million, in ArcelorMittal’s shareholding in ArcelorMittal South Africa increasing from 52% to 71% (see note 2.2.1 to the consolidated financial statements for current ownership).
Repatriation of funds from operating subsidiaries may also be affected by tax and foreign exchange policies in place from time to time in the various countries where the Company operates, though none of these policies are currently significant in the context of ArcelorMittal’s overall liquidity. 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 the earnings and cash flows 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 the impairment of such assets, including intangible assets such as goodwill.
At each reporting date, in accordance with the Company’s accounting policy described in note 5.3 to ArcelorMittal’s consolidated financial statements, ArcelorMittal reviews the carrying amounts of its tangible and intangible assets (goodwill 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 (or cash generatingcash-generating unit) is reviewed in order to determine the amount of the impairment, if any.
If certain of management’s estimates change during a given period, such as the discount rate, capital expenditures, expected changes to average selling prices, growth rates, shipments and direct costs, the estimate of the recoverable amount of goodwill or the asset could fall significantly and result in impairment. While impairment does not affect reported cash flows, the decrease of the estimated recoverable amount and the related non-cash charge in the consolidated statements of operations could have a material adverse effect on ArcelorMittal’s results of operations. For example, in 20172019, the Company recognized $1.3 billion of impairments on the fixed assets of ArcelorMittal USA (of which $660 million was reversed in 2020 in connection with the agreed sale to Cleveland-Cliffs) and 2016,a $75 million impairment at ArcelorMittal South Africa following downward revisions of cash flow projections. In 2020, the Company recorded impairment charges as a resultof $196 million, including $92 million related to the permanent closure of the annual impairment test of $160 million and $156 million, respectively, related to tangible assetscoke plant in Florange (France) in the ACIS segment.first quarter and $104 million following the permanent closure of a blast furnace and steel plant in Krakow (Poland) in the third quarter. The Company also recognizes impairment in connection with intended sales, when the carrying amount of the disposal group is lowerhigher than the sale proceeds.fair value less cost to sell. In this context, in 2018, the Company recognized a total impairment charge of $994 million including(including $888 million in connection with the intended sale of the Ilva remediesArcelorMittal Italia remedy assets and $86 million in relation to the sale of the Votorantim remedies. Following theseremedy assets) in 2018, an additional impairment charges, substantialof $497 million in 2019 related to the remedy asset sales for the ArcelorMittal Italia acquisition and a $331 million impairment charge with respect the Company's plate assets in Europe in 2020. Substantial amounts of goodwill, tangible and intangible assets remain recorded on itsthe Company's consolidated statement of financial position. As of December 31, 2021, the Company's balance sheet (there was $5included $3.9 billion of goodwill for the Company, $3.4 billion of tangible assets and $0.8 billion of goodwill for ACIS on the balance sheet at December 31, 2018). Nogoodwill. More
generally, no assurance can be given as to the absence of significant further impairment losses in future periods, particularly if market conditions deteriorate.deteriorate or as a result of the Russian invasion of Ukraine and any resulting economic impacts. In particular, changes in key assumptions used in the Group’s impairment tests, due to market conditions, regulations (including environmental regulations) or other reasons may result in additional impairment losses being recognized in the future. In addition, for operations in jurisdictions where a legal obligation of carbon neutrality has been established (i.e., EU and Canada) the Company's assumptions include the significant long-term investments necessary to reach the Group's announced carbon emissions goals. With respect to operations in other jurisdictions where decarbonization will occur at a different pace, the Company increased risk premiums included in their discount rates until they are able to accelerate their decarbonization strategy to meet the 2050 carbon neutrality objective and a legal obligation arises in the relevant jurisdiction. The Company’s assumptions for future cash flows also include an estimate for costs that the Company expects to incur to acquire emission allowances, which primarily impacts the flat steel operations in Europe. The assumption for carbon emission cost is based on historical experience, expected opportunities to mitigate or otherwise offset such future costs and information available in respect of future changes. Due to economic developments, uncertainties over the pace of transition and available public funding support to implement low-emission technologies, political and environmental actions that will be taken to meet the carbon reduction goals, regulatory changes and emissions activity arising from climate-related matters, the Company’s assumptions used in the recoverable amount calculations, among others those relating to capital expenditure and carbon emission costs are inherently uncertain and may ultimately differ from actual amounts.
ArcelorMittal's indebtedness could have an adverse impact on its results of operations and financial position, and the market's perception of ArcelorMittal's leverage may affect its share price.
As of December 31, 2021, ArcelorMittal had total debt outstanding of $8.4 billion, including $1.9 billion of short-term indebtedness (including payables to banks and the current portion of long-term debt) and $6.5 billion of long-term indebtedness. As of December 31, 2021, ArcelorMittal had $4.4 billion of cash and cash equivalents, restricted cash and other restricted funds, and $5.5 billion available to be drawn under existing credit facilities. The Company also relies on its true sale of receivables programs ($5.2 billion of trade receivables sold at December 31, 2021), as a way to manage its working capital cycle.
While ArcelorMittal’s indebtedness has decreased significantly in recent years, were it to increase, this could contribute to the
Company’s vulnerability to adverse economic and competitive pressures in its industry, place the Company at a competitive disadvantage compared to competitors that have less debt; limit flexibility in planning for, or reacting to, changes in its business and industry; and limit its ability to borrow additional funds on terms that are acceptable to the Company or at all.
Moreover, ArcelorMittal could, in order to increase its financial flexibility and strengthen its balance sheet, implement capital raising measures such as equity offerings (as was done in May 2009, January 2013, April 2016 and May 2020), which could (depending on how they are structured) dilute the interests of existing shareholders or require them to invest further funds to avoid such dilution. In addition, ArcelorMittal has undertaken and may undertake asset disposals in order to reduce debt, as it did over several years through 2020.
In addition, credit rating agencies could downgrade ArcelorMittal’s ratings either due to factors specific to ArcelorMittal, a prolonged cyclical downturn in the steel industry and mining industries, macroeconomic trends (such as global or regional recessions or economic shocks such as that resulting from the COVID-19 pandemic) or trends in credit and capital markets more generally, and any future downgrades could lead to an increase in its cost of borrowing. The margin under ArcelorMittal’s principal credit facilities and certain of its outstanding bonds is subject to adjustment in the event of a change in its long-term credit ratings, and downgrades that occurred in 2012, 2015 and 2020 resulted in increased interest expense.
ArcelorMittal’s principal credit facilities contain restrictive covenants. These covenants limit, inter alia, encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittal’s subsidiaries to incur debt and the ability of ArcelorMittal and its subsidiaries to dispose of assets in certain circumstances. In April 2021, ArcelorMittal’s revolving credit facility was amended so that the leverage ratio financial covenant would permanently cease to apply in the event that the Company obtained an investment grade long-term credit rating (with a stable outlook) from two rating agencies (which occurred in 2021).
These restrictive covenants could limit ArcelorMittal’s operating and financial flexibility. Failure to comply with any covenant would enable the lenders to accelerate ArcelorMittal’s repayment obligations. Moreover, ArcelorMittal’s 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 the credit facilities. Any invocation of these cross-acceleration clauses could cause some or all of the other debt to accelerate, creating liquidity pressures. In addition, the mere market perception of a potential breach of any financial covenant, to the
extent in effect, could have a negative impact on ArcelorMittal’s ability to refinance its indebtedness on acceptable conditions.
Furthermore, some of ArcelorMittal’s debt is subject to floating rates of interest and thereby exposes ArcelorMittal to interest rate risk (i.e., if interest rates rise, ArcelorMittal’s debt service obligations on its floating rate indebtedness would increase). Depending on market conditions, ArcelorMittal from time to time uses interest-rate swaps or other financial instruments to hedge a portion of its interest rate exposure either from fixed to floating or from floating to fixed. ArcelorMittal had exposure to 93% of its long-term debt at fixed interest rates and 7% at floating rates as of December 31, 2021. In addition, in April 2021, ArcelorMittal’s revolving credit facility was amended so that the margin payable will be increased or decreased depending on the Company’s performance against two metrics measured annually against pre-defined targets with respect to its environmental and sustainability performance (CO2e intensity of the Company’s European operations and the number of facilities which have been certified by ResponsibleSteel™).
In addition to the foregoing specific risks relating to ArcelorMittal’s indebtedness, its share price is affected by the markets’ perception of its leverage.
For further information on ArcelorMittal's indebtedness see “Operating and financial review—Liquidity and capital resources” and note 6.1.2 to ArcelorMittal’s consolidated financial statements.
ArcelorMittal’s ability to fully utilize its recognized deferred tax assets depends on its profitability and future cash flows.
At December 31, 2018,2021, ArcelorMittal had $8.3$8.1 billion recorded as deferred tax assets on its consolidated statementsstatement of financial position of which $1.4representing a $0.2 billion was recorded in 2018increase as compared to December 31, 2020. In 2020, deferred tax assets decreased by $0.8 billion primarily due to the changes in the expectation of higher future profits mainly in Luxembourg, includingLuxembourg. In 2021, the impact of the share capital conversion. Following the approval of the extraordinary general meeting held on May 16, 2018 to change the share capital of ArcelorMittal S.A. from euro to U.S. dollar, the parent company will file consolidated tax returns in U.S. dollars for the main Luxembourg tax integration going forward, and the related euro denominated tax losses andCompany recorded deferred tax asset were translated into U.S. dollars effective asbenefit of January 1, 2018.$0.49 billion mainly due to the recognition of deferred tax assets in Luxembourg following increase in the future taxable income expectation on unrealized gains on emission rights and energy derivative instruments. The deferred tax assets can be utilized only if, and only to the extent that, ArcelorMittal’s 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, 2018,2021, the amount of future income required to recover ArcelorMittal’s deferred tax assets of $8.3$8.1 billion was at least $32$32.9 billion at certain operating subsidiaries.
ArcelorMittal’s 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. In addition, assumptions regarding the future recoverability of deferred tax assets depend on management’s estimates of future taxable income in accordance with the tax laws applicable to ArcelorMittal’s subsidiaries in the countries in which they operate. If in the course of its assessments management determines that the carrying amount of any of its deferred tax assets may not be recoverable pursuant to such prevailing tax laws, the recoverable amount of such deferred tax assets may be impaired.
The Company’s investment projects may add to its financing requirements and adversely affect its cash flows and results of operations.
The steelmaking and mining businesses are capital intensive requiring substantial ongoing maintenance capital expenditure. In addition, ArcelorMittal has announced significant investment projects in the past and some are or may be ongoing. See “Item 4.D—Information on the Company—Property, plant and equipment—Capital expenditure projects”, “Item 5.F—Operating and financial review and prospects—Tabular disclosure of contractual obligations” and note 8.4 to ArcelorMittal’s consolidated financial statements. ArcelorMittal expects to fund these capital expenditures primarily through internal sources. Such sources may not suffice, however, depending on the amount of internally generated cash flows and other
uses of cash, which may require ArcelorMittal to choose between incurring external financing, further increasing the Company’s level of indebtedness, or foregoing investments in projects targeted for profitable growth.
Underfunding of pension and other post-retirement benefit plans at some of ArcelorMittal’s 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 ArcelorMittal’s business.
ArcelorMittal’s principal operating subsidiaries in Brazil, Canada, Europe and South Africa and the United States provide defined benefit pension and other post-retirement benefit plans to their employees. Some of these plans are currently underfunded, see note 7.28.2 to ArcelorMittal’s consolidated financial statements for the total value of plan assets and any deficit.
ArcelorMittal’s funding obligations depend upon future asset performance, which is tied to equity and debt markets to a substantial extent, 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 ArcelorMittal’s pension plans and other post-employment benefit plans could be significantly higher than current estimates. Increases in the general life expectancy assumption have contributed to increases in the defined benefit obligation. ArcelorMittal also makes contributions to a multi-employer pension plan in the U.S. (the Steelworkers Pension Trust) for which it is one of the largest employers. If the other contributors were to default on their obligations, ArcelorMittal would become liable for the plan. In these circumstances, funding requirements could have a material adverse effect on ArcelorMittal’s business, financial condition, results of operations or prospects.
ArcelorMittal’s results of operations could be affected by fluctuations in foreign exchange rates, particularly the euro to U.S. dollar exchange rate, 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 experience labor disputes that may disruptbe adversely affected by fluctuations in exchange rates. A substantial portion of ArcelorMittal’s assets,
liabilities, operating costs, sales and earnings are denominated in currencies other than the U.S. dollar (ArcelorMittal’s reporting currency). Accordingly, its operations and its relationships with its customers and its ability to rationalize operations and reduce labor costs in certain markets may be limited in practice or encounter implementation difficulties.
A majorityresults of the employees of ArcelorMittal and of its contractors are represented by labor unions and are covered by collective bargaining or similar agreements, whichoperations are subject to periodic renegotiation. Strikes or work stoppages could occur prior to, or during, negotiations preceding new collective bargaining agreements, during wage and benefits negotiations or during other periods for other reasons, in particular in connection with any announced intentions to adapt the footprint. ArcelorMittal may experience strikes and work stoppages at various facilities. Prolonged strikes or work stoppages, which may increase in their severity and frequency, may have an adverse effect on the operations and financial results of ArcelorMittal. Thetranslation risk of strikes and work stoppages is particularly acute during collective bargaining agreement negotiations. For example, in 2017, there was a 72-hour strike notice given at ArcelorMittal Mont Wright (an iron ore mine in Northern Quebec) after the Company's contract offer was rejected. In 2018, workers at ArcelorMittal Liberia went on strike two times for a duration of 5 days in connection with an inter-union dispute and employee demands and, in May 2018, workers in the railway division of the Company's Kryvyi Rih steel mill in Ukraine went on strike for 4 days to demand higher wages. In(i.e., the U.S. dollar value of revenue and profits generated in September 2018,other currencies and its debt denominated in other currencies) and transaction risk (i.e., a mismatch between the United Steelworkers Union authorizedcurrency of costs and revenue). Foreign exchange loss for the year ended December 31, 2021 was $155 million as compared to a strike aftergain of $107 million for the Company and the Union were unable to reach an agreement prior to the expiration of the existing contract. The parties eventually concluded and ratified a labor agreement on November 29, 2018, without a strike being reported.year ended December 31, 2020.
Faced with temporaryMoreover, ArcelorMittal operates in several countries whose currencies are, or structural overcapacity in various markets, particularly developed ones, ArcelorMittal hashave in the past soughtbeen, subject to limitations imposed by those countries’ central banks, or which have experienced sudden and significant devaluations. In emerging countries where ArcelorMittal has operations and/or generates substantial revenue, such as Argentina, Brazil, India, South Africa, Venezuela, Kazakhstan and Ukraine, the risk of significant currency devaluation is high. For example, the Argentinian peso has continued to substantially depreciate since 2018, and in 2021, it depreciated approximately 22.1% versus the U.S dollar. Moreover, inflation in 2019 reached its highest point since 1991 at 53.8% attesting the hyperinflationary dimension of Argentina's economy. In order to slow peso depreciation, and in response to the economic situation, the Argentinian government enacted a series of currency controls which require central bank permission to exchange pesos for foreign currency.
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 “Business overview—Government regulations—Key currency regulations and exchange controls” and “Operating and financial review—Economic conditions—Impact of exchange rate movements”.
The Significant Shareholder has the ability to exercise significant influence over the outcome of shareholder votes.
At December 31, 2021, a trust (HSBC Trustee (C.I.) Limited, as trustee), of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries (referred to as the “Significant Shareholder”), beneficially owned (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) ordinary shares amounting (when aggregated with ordinary shares of ArcelorMittal held directly by Mr. and Mrs. Mittal) to 330,940,242 in the aggregate, representing 36.33% of ArcelorMittal’s then outstanding shares. The foregoing statement does not give effect to the ordinary shares resulting from the conversion of the mandatorily convertible subordinated notes issued in May 2020 outstanding as of December 31,
2021. Assuming conversion of all such outstanding mandatorily convertible subordinated notes (including those held by the Significant Shareholder), the Significant Shareholder would, together with Mr. and Mrs. Mittal, beneficially own 341,828,522 ordinary shares representing 32.58% of issued shares (assuming conversion of all notes at the maximum conversion ratio) or 340,206,842 ordinary shares representing 32.74% of issued shares (assuming conversion of all notes at the minimum conversion ratio). As a result, the Significant Shareholder 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 obtaining funding through debt. The Significant Shareholder also has the ability to significantly influence a change of control of ArcelorMittal. For further information on the Company’s major shareholders, see “Shareholders and markets—Major shareholders”.
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, and loss-making subsidiaries may drain cash flow necessary for such needs or distributions.
As a holding company, ArcelorMittal 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 ordinary shares or conduct share buy-backs. Cash and cash equivalents are primarily centralized at the parent level and are managed by ArcelorMittal Treasury SNC, although from time to time cash or cash equivalent balances may be held at the Company’s international subsidiaries or its holding companies. Some of these operating subsidiaries have debt outstanding or are subject to acquisition agreements that impose restrictions on such operating subsidiaries’ ability to pay dividends, but such restrictions are not significant in the context of ArcelorMittal’s overall liquidity. These subsidiaries may also experience operating difficulties that impact their cash flows. For example, ArcelorMittal South Africa has experienced significant difficulties in recent years, including significant outstanding debt, issues with market demands, supply chain disruptions, labor strikes, volatility of the rand vs. U.S. dollar, the effects of the COVID-19 pandemic and national lockdowns. Ongoing difficulties resulted in 2016 in a rights offering entirely underwritten by ArcelorMittal and an additional cash injection from ArcelorMittal, and the auditor reports for 2019 and 2020 included a material uncertainty related to going concern.
Repatriation of funds from operating subsidiaries may also be affected by tax and foreign exchange policies in place from time to time in the various countries where the Company operates,
though none of these policies are currently significant in the context of ArcelorMittal’s overall liquidity. Under the laws of Luxembourg, ArcelorMittal will be able to pay dividends or distributions through income from industrial franchise fees or 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 the earnings and cash flows 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.
VI. Legal and regulatory risks
ArcelorMittal is subject to strict environmental, health and safety laws and regulations that could give rise to a significant increase in costs and liabilities.
ArcelorMittal is subject to a broad range of environmental, health and safety laws and regulations in each of the jurisdictions in which it operates. These laws and regulations impose increasingly stringent standards regarding general health and safety, air emissions, wastewater storage, treatment and discharges, the use, handling and transportation of hazardous, toxic or dangerous materials, waste disposal practices and the remediation of environmental contamination, and health and safety matters, among other things. The costs of complying with, and the imposition of liabilities pursuant to these laws and regulations can be significant, and compliance with new and more stringent obligations may require additional capital expenditures or modifications in operating practices. 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.
In the EU, the Industrial Emissions Directive (“IED”) defines the so called Best Available Techniques (“BAT”) and sets the ranges of values that need to be established as limits in the environmental permits. The BAT are also used in other regions as reference, and are periodically reviewed (in theory, an eight-year cycle) to ensure a continuous improvement of environmental performance. The EU Commission has started the review of the IED, with a proposal expected in 2022, which might lead to the strengthening of the permitting framework, supported by growing general concerns about the effects of pollution on the environment and human health.
Despite ArcelorMittal’s efforts to comply with environmental, health and safety laws and regulations, and monitor and reduce accidents at its facilities, health, safety and environmental incidents or accidents, including those involving serious injury or death, have occurred and may in the future occur. Such accidents could include explosions or gas leaks, fires or collapses in underground mining operations, crushing incidents,
vehicular accidents, falls while working at heights, and other accidents involving mobile equipment, or exposure to radioactive or other potentially hazardous, toxic or dangerous materials, which could have significant adverse consequences for the Company’s workers and facilities, as well as the environment.
Certain of these incidents may result in costs and liabilities and negatively impact the Company's reputation or the operations of the affected facilities. Such accidents could lead to production stoppages, loss of personnel, loss of key assets, or put at risk the Company's employees (and those of sub-contractors and suppliers) or persons living near affected sites. Even if ArcelorMittal's liability were to be covered by insurance, its insurance premium may rise as a result. See also “ArcelorMittal’s insurance policies provide limited coverage, potentially leaving it uninsured against some business risks.” In addition, any gap between community and worker expectations and ArcelorMittal’s environmental, health and safety perceived performance, as a result of any accidents, safety incidents or even the perception of potential safety or environmental issues, may negatively impact community relations, labor relations, customer relations and the Company’s reputation and result in disruptions to the Company’s operations.
In addition, accidents may arise from the usage of certain types of equipment or from the adoption of operating practices that prove to be insufficiently safe or the failure to follow the Company's standard operating procedures. Accidents may also be caused by human error, the lack of knowledge by its employees on what to do in a given situation or the inability of its employees to follow the prescribed protocols in a given situation. Working in remote or hazardous conditions, where it may be more difficult to mitigate the consequences of an accident or put in place certain preventative measures, may further increase such risks. Furthermore, the Company's ability to conduct certain in-person health and safety training sessions for its employees has been impeded by restrictions resulting from the COVID-19 pandemic, which has had negative effects on ArcelorMittal's recent health and safety record. The occurrence of an accident also may lead to legal claims that seek to rationalizehold the Company liable, and it may not be successful in defending against such claims.
ArcelorMittal also incurs costs and liabilities associated with the assessment and remediation of contaminated sites, and in its mining activities, those resulting from tailings and sludge disposal, effluent management, and rehabilitation of land disturbed during mining processes. In addition to the impact on current facilities and operations, through temporaryenvironmental remediation obligations can give rise to substantial liabilities in respect of divested assets and past activities. This may also be the case for acquisitions when liabilities for past acts or permanent idling and/or closure of plants. These initiatives haveomissions are not adequately reflected in the pastterms 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.
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. For example, mining companies have incurred substantial liabilities in connection with the failure of tailing pond dams. In February 2019, the Company decided as a precautionary measure to implement its plan to evacuate the community situated downstream of its dormant Serra Azul tailing dam with a 5.8Mm3 tailings volume in Brazil. The decision was based on an updated site-based assessment following recent incidents in the Brazilian mining sector pending further testing and implementation of any necessary mitigation measures. In 2021, pursuant to the Complementary Agreement Term signed on June 7, 2021 between ArcelorMittal Brasil and the Federal and State Prosecutor Offices, ArcelorMittal Brasil incurred the obligation to execute an action plan to ensure the stability, safety and decommissioning of the Serra Azul tailing dam, and in the third quarter of 2021, recorded a $123 million provision related to expected costs required to strengthen the dam. See “Business overview—Sustainable development—Management Theme #4: Environment—Responsible water use”.
ArcelorMittal’s operations may also be located in areas where individuals or communities could regard its activities as having a detrimental effect on their natural environment and conditions of life. Any actions taken by such individuals or communities in response to such concerns could compromise ArcelorMittal’s profitability or, in extreme cases, the viability of an operation or the development of new activities in the relevant region or country.
For further information, see “Business overview—Government regulations—Health and safety laws and regulations” and “Business overview—Government regulations—Environmental laws" and regulations and note 9.1 to ArcelorMittal’s consolidated financial statements.
Laws and regulations restricting emissions of greenhouse gases could force ArcelorMittal to incur increased capital and operating costs and could have a material adverse effect on ArcelorMittal’s results of operations, financial condition and reputation.
Compliance with new and more stringent environmental obligations relating to GHG emissions may 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 EU has established GHG regulations and has revised its emission trading system for the period after 2020 in a manner that may require ArcelorMittal to incur additional costs to acquire emissions allowances, as discussed below. In July 2021, the European Climate Law was published, setting a new EU climate ambition target of at least a 55% reduction in GHG emissions in 2030 versus 1990 (compared with the current ambition of a 40% reduction) and reaching carbon neutrality by 2050. In July 2021, the European Commission published the so called “Fit for 55” package aimed at aligning the EU’s climate, energy, land use, transport and taxation policies with the 2030 ambition set by the Climate Law. To become EU law, this set of proposals now needs to be adopted by both the European Parliament and the Council of the European Union. The proposals are all interconnected, and they combine: tightening and extending of the existing EU Emissions Trading System; increased use of renewable energy; greater energy efficiency; a faster roll-out of low emission transport modes and the infrastructure and fuels to support them; an alignment of taxation policies with the European Green Deal objectives; a carbon border adjustment mechanism (“CBAM”) to prevent carbon leakage; and tools to preserve and grow ArcelorMittal's natural carbon sinks. Of particular relevance are the EU Emissions Trading System and CBAM proposals that will mainly impact the carbon emissions allowances second trading period of Phase IV, 2026-2030, in a manner that may require ArcelorMittal to incur additional costs to acquire emissions allowances. Given the controversial nature of the proposals and the expected social and economic impact, protracted negotiations and changes can be expected.
Other jurisdictions have also started to enact similar regulations, including South Africa, where a CO2 tax system was introduced in 2019 and in Kazakhstan, where the Emission Trading Scheme restarted operation on January 1, 2018 with new trading procedures and allocation methods supported by an online platform for monitoring, reporting and verifying emission sources and GHG.
Other regulations have been implemented in Argentina, Ukraine and Canada and additional measures may be enacted in the future in other jurisdictions, further increasing the complexity of compliance with environmental laws and regulations.
Following the international agreement reached by the United Nations Framework Convention on Climate Change in December 2015 with the aim to implement the necessary drivers to achieve drastic reductions of carbon emissions (the “Paris Agreement”), the environmental regulatory system has become more complex worldwide and the Company has taken steps to reduce its emission footprint, which in 2020 totaled approximately 124 million tonnes of CO2 (excluding ArcelorMittal USA and ArcelorMittal Italia), through various research and development initiatives, and announced in July
2021 a 2030 global carbon emissions intensity reduction target of 25%, an increase in its European 2030 carbon emissions intensity reduction target to 35% from 30% previously announced, and a Group-wide commitment to be carbon neutral by 2050. Whether in the form of a national or international cap-and-trade emissions permit system, a carbon tax or acquisition of emission rights at market prices, emissions controls, reporting requirements, or other regulatory initiatives, such environmental regulations could have a negative effect on ArcelorMittal’s production levels, income and cash flows. These laws could also negatively affect the Company’s suppliers and customers, which could translate into higher costs and lower sales. In particular, the EU Commission’s decision to further reduce the allocation of CO2 emission rights to companies (as discussed above) could negatively impact the global steel industry, as the amount of such rights is currently at the limit of technically achievable operating conditions. CO2 emissions regulations have already resulted in increased costs in Europe, and ArcelorMittal expects costs will continue to increase with the implementation of Phase IV of the ETS that started in 2021 and that has seen EU allowances prices increase significantly compared to 2020 levels. In addition, the COVID-19 pandemic and its economic consequences caused a decline in production at most EU sites in 2020. Given that, under Phase IV rules, the activity level in 2020 has an effect on the calculation of the allocation in 2021 and 2022 and also on the second trading period of Phase IV (2026-2030), the lower production levels might lead to reduced allocation.
Furthermore, many developing nations have not yet instituted significant GHG regulations, and the Paris Agreement specifically recognizes that GHG emissions will peak later in developing countries. As the Intended Nationally Determined Contributions (“INDC”) for developing nations under the Paris Agreement may be less stringent than for developed nations in light of different national circumstances, ArcelorMittal may be at a competitive disadvantage relative to steelmakers having more or all of their production in developing countries. Depending on the extent of the difference between the requirements in developed regions (such as Europe) and developing regions (such as China or the CIS), this competitive disadvantage could be severe and render production in the developed region structurally unprofitable. High carbon costs in combination with weakening demand, rising imports, high energy costs and high iron ore prices was one of the factors underlying the Company’s decision to implement production cuts in Europe in 2019. To address the resulting competitive disadvantage compared to imports, which is expected to increase in the future absent government intervention, the Company has been advocating vis-à-vis the European Commission to introduce a CBAM to the safeguard measures on steel imports in order to ensure that imports into Europe face the same carbon costs as producers in Europe. In July 2021, as part of Fit for 55 (discussed above), the
European Commission proposed a CBAM which will progressively phase out free allocation of CO2 emissions allowances through a 10% reduction per year starting in 2026. This would, if implemented, contribute to a very significant shortage in free allocation in the second trading period of Phase IV, therefore increasing the carbon costs ArcelorMittal will face. This could result in the Company incurring significant additional costs to acquire emissions allowances, the purchase of which may or may not be effectively hedged in the future. The financial impact of any reduction or phase out of free allocations will also depend on the timing of the implementation of changes (itself dependent on political and regulatory developments), and the Company’ s parallel progress in decarbonization, the cost of which may also be higher than currently expected. In addition, the effectiveness of the CBAM proposal against carbon leakage is untested and the provisions to address circumvention risks, including resource shuffling and cost absorption seem insufficient. No assurance can be given as to the timing or adoption of such proposal or its implementation.
In addition, as regulators and investors increasingly focus on climate change issues, the Company is exposed to the risk of frameworks and regulations being adopted that are ill-adapted to its operations. For example, the most established framework for carbon pricing and emissions trading schemes is currently the European Union's ETS discussed above. As mentioned above, the Company has highlighted the importance that a CBAM be included in this system in order to avoid competitive distortions such as European steel becoming overpriced due to European carbon policy, prompting the market to outsource its steel from other regions where carbon is less expensive. With respect to investors, the European Union has reached a political agreement on a package of measures to implement key actions with respect to its sustainable finance plan, and, in June 2020, the European Commission published the EU Taxonomy for Sustainable Finance, a unified classification system to define what can be considered an environmentally sustainable economic activity, as a step in the efforts to channel investments into sustainable activities by making it clearer which economic activities most contribute to meeting the EU's environmental objectives. The Taxonomy Delegated Act on climate mitigation and adaptation criteria is effective as of January 1, 2022 but Delegated Acts for the four other environmental objectives are still pending. A proposal for a Corporate Sustainability Reporting Directive (“CSRD”), which envisages the adoption of EU sustainability reporting standards to be developed by the European Financial Reporting Advisory Group (“EFRAG”), with such standards to be tailored to EU policies building on and contributing to international standardization initiatives, is to be adopted by October 2022. The SEC has also indicated that it plans to adopt new climate change disclosure requirements. If the standards or requirements adopted are not appropriate for the Company or if investors, financial institutions or other
stakeholders, including the public, begin to view investments in steel and mining as undesirable, it may become more difficult and/or more expensive for the Company to obtain financing. While the Company has taken significant steps and continues to adapt its operations in light of climate change and the need for sustainability, such steps may not be in line with future frameworks or regulations or market views of investment suitability. Moreover, the Company may in the future leadface increasing shareholder activism and/or litigation in relation to protracted labor disputessustainability matters. See also “The Group’s carbon emissions intensity reduction targets are based on current assumptions with respect to the costs, government and political controversy. societal support for the reduction of carbon emissions in particular regions and the advancement of technology and infrastructure related to the reduction of carbon emissions over time, which may not correspond in the future to ArcelorMittal’s current assumptions and may render its targets more costly, more difficult, or even impossible, to achieve”. For further information on environmental laws and regulations and how they affect the Company's operations, see “Business overview—Government regulations—Environmental laws and regulations” and note 9.1 to ArcelorMittal’s consolidated financial statements.
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, mining 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 national or local government budget requirements may increase the likelihood of the imposition of arbitrary or onerous taxes and penalties, which could have a material adverse effect on ArcelorMittal’s 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 10 to ArcelorMittal’s 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 ArcelorMittal’s 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 the Company’s 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 ArcelorMittal’s cash flows, liquidity and ability to pay dividends.
ArcelorMittal is subject to economic policy, political, military, social and legal risks and uncertainties in the emerging markets in which it operates or proposes to operate, and these uncertainties may have a material adverse effect on ArcelorMittal’s business, financial condition, results of operations or prospects.
ArcelorMittal operates, or proposes to operate, in a large number of emerging markets. In recent years, many of these countries have implemented measures aimed at improving the business environment and providing a stable platform for economic development. ArcelorMittal’s 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 this cannot be guaranteed. Any slowdown in the development of these economies could have a material adverse effect on ArcelorMittal’s 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 ArcelorMittal’s production.
Moreover, some of the countries in which ArcelorMittal operates have been undergoing substantial political transformations from centrally-controlledcentrally controlled command economies to market-oriented systems or from authoritarian regimes to democratically-electeddemocratically elected governments and vice-versa. Political, economic and legal reforms necessary to complete such transformation may not progress sufficiently. 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 these countries are vulnerable to their populations’ dissatisfaction with their government, reforms or the lack thereof, social and ethnic unrest and changes in governmental policies, any of which could have a material adverse effect on ArcelorMittal’s business, financial condition,
results of operations or prospects and its ability to continue to do business in these countries. ForAs an example, in Ukraine, politicalKazakhstan, there were widespread protests (and violent clashes between protestors and police) in early January 2022, resulting in a government crackdown (aided by Russian forces). The prospect of further unrest and intermittent combats between the Ukrainian army and pro-Russian rebels in the Donbass region have occurred since Russia’s purported annexation of Crimea in March 2014. In addition,resulting political or economic destabilization cannot be ruled out. Furthermore, certain of ArcelorMittal’s operations are also located in areas where acute drug-related violence (including executions and kidnappings of non-gang civilians) occurs and the largest drug cartels operate, such as the states of Michoacan,Michoacán, Sinaloa and Sonora in Mexico.
Certain emerging markets where ArcelorMittal has operations have experienced or are experiencing particularly difficult operating conditions. In Brazil, for example, despite a strong rebound post pandemic, GDP is emerging from a periodstill below its first quarter of severe recession and2014 peak amid continued political uncertainty. Economic growth in South Africa enteredhas been weak since entering a recession in the second quarter of 2018, and prior to this recession, the South African steel and mining industries have been subject to a challenging operating environment characterized by lower local demand, increased cheap imports and higher costs, resulting in losses in recent years for ArcelorMittal South Africa. Many emerging markets are also at risk of economic crises (be it external debt, currency, domestic corporate, household or public debt crises) usually brought on by an economic or political shock which can exacerbate existing domestic structural imbalances. Crises in Argentina and Turkey in 2018/19 were examples and had negative impacts on the Company’s core markets in Brazil and the EU, respectively. Other countries at risk of further economic crises include Turkey (renewed external debt/Lira crisis), South Africa (in relation to its public debt), Ukraine (external debt), Brazil (long term public debt sustainability) and to a lesser extent India (again in relation to its public debt).
Finally, ArcelorMittal's operations in certain countries may be affected by military conflicts. The current situation in Ukraine, where the Company has substantial operations, is an example. See "Russia’s invasion of Ukraine, international reaction to it and any regional or global escalation of the conflict, could adversely affect the Company’s business and results of operations."
In addition, epidemics and/or pandemics may affect ArcelorMittal’s operations in certain regions. Forregions and, in some cases, globally. See “Disruptions to ArcelorMittal’s manufacturing processes caused for example ArcelorMittal operates in Liberia, which underwent an Ebola virus disease epidemic in 2014 and 2015. This affected ArcelorMittal’s operations and projects in Liberia. There can be no assurance that otherby equipment failures, natural disasters, epidemics will notor pandemics or extreme weather events could adversely affect ArcelorMittal’s ongoingits operations, production targetscustomer service levels and expansion plans, if any, in other markets in which it operates.financial results” above.
In addition,Moreover, the legal systems in some of the countries in which ArcelorMittal operates remain less than fully developed,
particularly with respect to the independence of the judiciary, 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 because, among other reasons, 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 implemented a number of selective nationalizations of companies operating in the country to date. Although ArcelorMittal believes that the long-term growth potential in emerging 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 ArcelorMittal’s growth plans and its operations in such countries.
ArcelorMittal’s results of operations could be affected by fluctuations in foreign exchange rates, particularly the euro to U.S. dollar exchange rate, 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 ArcelorMittal’s assets, liabilities, operating costs, sales and earnings are denominated in currencies other than the U.S. dollar (ArcelorMittal’s reporting currency). Accordingly, its results of operations are subject to translation risk (i.e., the USD value of the revenues and profits generated in other currencies and its debt denominated in other currencies) and transaction risk (i.e., a mismatch between the currency of costs and revenues). Foreign exchange losses for the year ended December 31, 2018 were $235 million, primarily related to the effect of the depreciation of the U.S. dollar against the euro on the Company's euro denominated debt in the first quarter of 2018. As of April 1, 2018, the Company’s statement of operations no longer includes foreign exchange exposure on the euro denominated debt following the designation of the euro denominated debt as a hedge of certain euro denominated net investments in foreign operations. See note 6.3 to ArcelorMittal’s consolidated financial statements.
Moreover, ArcelorMittal 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. In emerging countries where ArcelorMittal has operations and/or generates substantial revenue, such as Argentina, Brazil, Venezuela, Kazakhstan and Ukraine, the risk of significant currency devaluation is high. For example, the Argentinian peso substantially depreciated during the third quarter of 2018 versus the U.S dollar. and the three-year cumulative inflation rate has exceeded 100% causing Argentina to be now considered as a hyperinflationary economy.
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 4.B—Information on the Company—Business overview—Government regulations—Key currency regulations and exchange controls” and “Item 5—Operating and Financial Review and Prospects—Impact of Exchange Rate Movements.”
Disruptions to ArcelorMittal’s manufacturing processes could adversely affect its 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, explosions or furnace breakdowns. ArcelorMittal’s 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, one example being the collapse of the oxygen and nitrogen pipelines in November 2018 at ArcelorMittal Temirtau or the fire in a conveyor belt of the coke plant in ArcelorMittal Asturias in Aviles in October 2018. Overall, in 2018, unanticipated operational disruptions reduced steel shipments by approximately 2.5 million tonnes.To the extent that lost production as a result of such a disruption cannot be compensated for by unaffected facilities, such disruptions could have an adverse effect on ArcelorMittal’s operations, customer service levels and results of operations.
Natural disasters or severe weather conditions could damage ArcelorMittal’s production facilities or adversely affect its operations.
Natural disasters could significantly damage ArcelorMittal’s production facilities and general infrastructure. For example, ArcelorMittal Mexico’s production facilities located in Lázaro Cárdenas, Michoacán, Mexico are located in or close to areas prone to earthquakes. The Lázaro Cárdenas area has, in addition, been subject to a number of tsunamis in the past. The site of the joint venture AM/NS Calvert (“Calvert”) in the United States is located in an area subject to tornados and hurricanes. ArcelorMittal also has assets in locations subject to bush fires, specifically in Kazakhstan and South Africa, and to Arctic freeze. More generally, changing weather patterns and climatic conditions in recent years, possibly due to the phenomenon of global warming, have added to the unpredictability and frequency of natural disasters. Damage to ArcelorMittal production facilities due to natural disasters could, to the extent that lost production cannot be compensated for by unaffected facilities, adversely affect its business, results of operations or financial condition.
In addition to natural disasters, ArcelorMittal’s operations can be affected by severe weather conditions. This is due in particular to the long supply chain for certain of its operations and the location of certain operations in areas subject to harsh winter conditions (i.e., the Great Lakes Region, Canada and Kazakhstan). However, other weather events can affect ArcelorMittal's plants like the unusually long period of drought in South Africa, leading to a water crisis situation in April 2018, which threatened the operations of ArcelorMittal Saldanha, and in Brazil, which has experienced a water crisis for the last few years that directly affects industrial production of ArcelorMittal Tubarão. Flooding also affected ArcelorMittal's operations at ArcelorMittal Asturias in Aviles, Spain in June 2018. Heavy rains during the wet season in Liberia may also cause handling and logistic constraints, as occurred in the third quarter of 2018, impacting shipment volumes.
ArcelorMittal’s 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 ArcelorMittal’s 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 such risks. ArcelorMittal’s insurance policies cover physical loss or damage to its property and equipment on a reinstatement basis as 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 ArcelorMittal’s property and equipment policies, damages and losses caused by certain natural disasters, such as earthquakes, floods and windstorms, are also covered.
ArcelorMittal also purchases worldwide third-party public and product liability insurance coverage for all of its subsidiaries. Various other types of insurance are also maintained, such as comprehensive construction and contractor insurance for its greenfield and major capital expenditures projects, directors and officers liability, transport, and charterers’ liability, as well as other customary policies such as car insurance, travel assistance and medical 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 industry, in order to protect it against the risk of non-payment due to customers’
insolvency or other causes. Not all of ArcelorMittal’s customers are or can be insured, and even when insurance is available, it may not fully cover the exposure.
Notwithstanding the insurance coverage that ArcelorMittal and its subsidiaries carry, the occurrence of an event 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 ArcelorMittal’s financial condition and future operating results.
Product liability claims could have a significant adverse financial impact on ArcelorMittal.
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, ArcelorMittal’s products are also sold to, and used in, certain safety-critical applications, such as, for example, pipes used in gas or oil pipelines and in automotive applications. There could be significant consequential damages resulting from the use of or defects in 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 the entirety of the award and, as a result, materially harm its financial condition and future operating results.
ArcelorMittal is subject to an extensive, complex and evolving regulatory and compliance risks,framework which may expose it and its subsidiaries, joint ventures and associates to investigations by governmental authorities, litigation and fines, in relation, among other things, to its pricingantitrust and marketing practices or other antitrustcompliance matters. The resolution of such matters could negatively affect the Company’s strategy, operations, profitability and cash flows in a particular period or harm its reputation.
ArcelorMittal’s business encompasses multiple jurisdictions and complex regulatory frameworks, including in relation to antitrust, and economic sanctions, anti-corruption and anti-money laundering matters. Laws and regulations in these areas are complex and constantly evolving and enforcement of them continues to increase. ArcelorMittal may as a result become subject to increasing limitations on its business activities and to the risk of fines or other sanctions for non-compliance. From time to time, the Company is subject to review by authorities that monitor market power in any of the markets in which it operates. To the extent that ArcelorMittal is the largest steel producer in the world. As a result, ArcelorMittal maydeemed by relevant authorities to exhibit significant market power, it can be subject to exacting scrutinyvarious regulatory obligations and restrictions, such as disposing of assets or granting access to its operations to third parties or being prevented from regulatory authoritiescompleting acquisitions, which could thereby adversely affect its results of operations and private parties, particularly regarding its trade practices and dealings with customers and counterparties.profitability. As a result of its position in the steel marketsindustry and its historically acquisitivehistorical growth strategy,through acquisitions, ArcelorMittal could be subject to governmental investigations and lawsuits by private parties based on antitrust laws in particular.laws. These could require significant expenditures and result in liabilities or governmental orders that could have a material adverse effect on ArcelorMittal’s 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. See note 8.3 to ArcelorMittal’s consolidated financial statements. Antitrust proceedings, investigations and follow-on claims involving ArcelorMittal subsidiaries are also currently pending in various countries including Brazil and Germany.
Spain. See note 9.3 to ArcelorMittal’s consolidated financial statements. Because of the fact-intensive nature of the issues involved and the inherent uncertainty of such litigation and investigations, the nature of the resolutions of such proceedings are difficult to forecast but 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 relatingNo assurance can be given that the Company will not be identified as having significant market power in any relevant markets in the future and that it will not be subject to additional regulatory requirements.
ArcelorMittal’s governance and compliance processes, which include the review of internal controls over financial reporting as well as a Code of Business Conduct and other companies, civil damages have been as high as hundredsrules and protocols for the conduct of millionsbusiness, may not prevent breaches of U.S. dollars in major civil antitrust proceedings during the last decade. In addition, ArcelorMittal operates in many jurisdictions around the world, increasing the risk of non-compliance with laws and regulations in relationor internal policies relating to anti-corruption, economic sanctionscompliance matters at ArcelorMittal or its subsidiaries, as well as to instances of non-compliant behavior by its employees, contractors or other agents. This risk is also present at ArcelorMittal’s joint ventures and other ethical matters, despite its compliance policiesassociates where ArcelorMittal has a non-controlling stake and does not control governance practices or accounting and reporting procedures.
Unfavorable outcomes in current and potential future litigation and investigations relating to anti-trust and compliance matters could reduce ArcelorMittal’s liquidity and negatively affect its profitability, cash flows, results of operations and financial condition, as well as harm its reputation.
ArcelorMittal is currently and in the future may be subject to legal proceedings or product liability claims, the resolution of which could negatively affect the Company’s profitability and cash flows in a particular period.
ArcelorMittal’s profitability or cash flows in a particular period could be affected by adverse rulings in current and future legal proceedings currently pending or by legal proceedings that may be filed against the Company in the future.Company. See note 8.39.3 to ArcelorMittal’s consolidated financial statements.
ArcelorMittal’s business is subject to an extensive, complex and evolving regulatory framework and its governance and compliance processes may fail to prevent regulatory penalties and reputational harm, whether at operating subsidiaries, joint ventures or associates.
ArcelorMittal operates in a global environment, and, at a time of increased enforcement activity and enforcement initiatives worldwide, its business straddles multiple jurisdictions and complex regulatory frameworks. Such regulatory frameworks, including but not limited to the area of economic sanctions, are constantly evolving, and ArcelorMittal may as a result become
subject to increasing limitations on its business activities and to the risk of fines or other sanctions for non-compliance. Moreover, ArcelorMittal’s governance and compliance processes, which include the review of internal controls over financial reporting, may not prevent breaches of law or accounting or governance standards at the Company or its subsidiaries. The risk of violation is also present at the Company’s joint ventures and associates where ArcelorMittal has only a non-controlling stake and does not control governance practices or accounting and reporting procedures.
In addition, ArcelorMittal sells products to major manufacturers engaged in manufacturing and selling a wide range of end products, including products used in certain safety-critical applications, such as, for example, pipes used in gas or oil pipelines and in automotive applications. ArcelorMittal also from time to time offers advice to these manufacturers. There could
be significant consequential damages resulting from the use of or defects in such products. While ArcelorMittal has a limited amount of product liability insurance coverage, a major claim for damages related to ArcelorMittal products sold and, as the case may be, subject to breachesadvice given in connection with such products, could leave ArcelorMittal uninsured against a portion or the entirety of its Code of Business Conduct, other rulessuch an award and protocols for the conduct of business, as well as to instances of fraudulent behavior and dishonesty bymaterially harm its employees, contractors or other agents. The Company’s failure to comply with applicable laws and other standards could subject it to fines, litigation, 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, mining 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 national or local government budget requirements may increase the likelihood of the imposition of arbitrary or onerous taxes and penalties, which could have a material adverse effect on ArcelorMittal’s 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 9 to ArcelorMittal’s consolidated financial statements.future operating results.
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 ArcelorMittal’s 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 the Company’s 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 ArcelorMittal’s cash flows, liquidity and ability to pay dividends.
ArcelorMittal’s reputation and business could be materially harmed as a result of data breaches, data theft, unauthorized access or successful hacking.
ArcelorMittal’s operations depend on the secure and reliable performance of its information technology systems. An increasing number of companies, including ArcelorMittal, have recently experienced intrusion attempts or even breaches of their information technology security, some of which have involved sophisticated and highly targeted attacks on their computer networks. ArcelorMittal’s corporate website was the target of a hacking attack in January 2012, which brought the website down for several days, and phishing, ransomware and virus attacks have been increasing in more recent years through 2018, with WannaCry impacting the Company in March 2018. Implementation of digitalization, Industry 4.0 and Cloud computing result in new risks with increasing threats to ArcelorMittal's operations and systems.
Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement in a timely manner effective and efficient countermeasures.
If unauthorized parties attempt or manage to bring down the Company’s website or force access into its information technology systems, they may be able to misappropriate confidential information, cause interruptions in the Company’s operations, damage its computers or process control systems or otherwise damage its reputation and business. In such circumstances, the Company could be held liable or be subject to regulatory or other actions for breaching confidentiality and personal data protection rules. Any compromise of the security of the Company’s information technology systems could result in a loss of confidence in the Company’s security measures and subject it to litigation, civil or criminal penalties, and adverse publicity that could adversely affect its reputation, financial condition and results of operations.
Changes to global data privacy laws and cross-border personal data transfer requirements could adversely affect ArcelorMittal's business and operations.
ArcelorMittal's business depends on the transfer of data between its affiliated entities, to and from its business partners, and with third-party service providers, which may be subject to global data privacy laws and cross-border transfer restrictions. While ArcelorMittal takes steps to comply with these legal requirements, the volatility and changes to the applicability of those laws, as well as evolving standards and judicial and regulatory interpretations of such laws may impact ArcelorMittal’s ability to effectively transfer data across borders in support of its business operations andthat may lead to possible administrative, civil, or criminal liability, as well as reputational harm to the Company and its employees. ArcelorMittal has taken actions necessary to comply with the European Union’s General Data Protection Regulation ("GDPR"),GDPR, which became enforceable in May 2018. The GDPR creates a range of compliance obligations for subject companies and increases financial penalties for non-compliance. Other countries in which ArcelorMittal operates or has a presence such as Brazil, India and South Africa have or are in the process of adopting similar legislation for the protection of personal information. Ensuring compliance will require investments to improve business processes, IT solutions and security solutions.The costs of compliance with GDPR and similar legislation for the protection of personal data and the potential for fines and penalties in the event of a breach of these laws may have an adverse effect on ArcelorMittal's business and operations.
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 ArcelorMittal’s directors and senior management are residents of jurisdictions outside of the United States. The majority of ArcelorMittal’s 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 ArcelorMittal’s directors and senior management and non-U.S. experts named in this annual report.
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ITEM 4. | INFORMATION ON THE COMPANY |
A. History and development of the Company
ArcelorMittal is the world’s leading integrated steel and mining company. It results from the merger in 2007 of its predecessor companies Mittal Steel Company N.V. and Arcelor, each of which had grown through acquisitions over many years. Since its creation ArcelorMittal has experienced periods of external growth as well consolidation and deleveraging (including through divestments), the latter in particular during the years following the global financial and economic crises of 2008-2010. In recent years ArcelorMittal has punctuated its overall deleveraging focus with targeted acquisitions. These have included the acquisition through a joint venture of the Calvert plant in the United States in 2014 and, in 2018 the acquisition of Votorantim S.A.'s long business in Brazil and Ilva in Italy, Europe's largest single steel site. Most recently the Company is poised (subject to favorable resolution of legal challenges) to acquire ESIL (via a joint venture with NSSMC), its bid having been selected by ESIL’s committee of creditors. For more information on the key transactions carried out in 2018, see “—Key transactions and events in 2018” below.
ArcelorMittal's success is built on its core values of sustainability, quality and leadership and the entrepreneurial boldness that has empowered its emergence as the first truly global steel and mining company. Acknowledging that a combination of structural issues and macroeconomic conditions will continue to challenge returns in its sector, the Company has adapted its footprint to the new demand realities, redoubled its efforts to control costs and repositioned its operations with a view toward
outperforming its competitors. ArcelorMittal’s research and development capability is strong and includes several major research centers as well as strong academic partnerships with universities and other scientific bodies.
Against this backdrop, ArcelorMittal's strategy is to leverage four distinctive attributes that will enable it to capture leading positions in the most attractive areas of the steel industry’s value chain, from mining at one end to distribution and first-stage processing at the other: global scale and scope; superior technical capabilities; a diverse portfolio of steel and related businesses, one of which is mining; and financial capabilities. The Company’s strategy is further detailed under “Item 4.B—Information on the Company—Business overview—Business strategy”.
Geography: ArcelorMittal is the largest steel producer in the Americas, Africa and Europe and is the fifth largest steel producer in the CIS region. ArcelorMittal has steel-making operations in 19 countries on four continents, including 48 integrated and mini-mill steel-making facilities. As of December 31, 2018, ArcelorMittal had approximately 209,000 employees.
ArcelorMittal’s steel-making operations have a high degree of geographic diversification. Approximately 38% of its crude steel is produced in the Americas, approximately 48% is produced in Europe and approximately 14% is produced in other countries, such as Kazakhstan, South Africa and Ukraine. In addition, ArcelorMittal’s sales of steel products are spread over both developed and developing markets, which have different consumption characteristics. ArcelorMittal’s mining operations, present in North and South America, Africa, Europe and the CIS region, are integrated with its global steel-making facilities and are important producers of iron ore and coal in their own right.
Products: ArcelorMittal produces a broad range of high-quality finished and semi-finished steel products (“semis”). Specifically, ArcelorMittal produces flat steel products, including sheet and plate, and long steel products, including bars, rods and structural shapes. In addition, ArcelorMittal produces pipes and tubes for various applications. ArcelorMittal sells its steel products primarily in local markets and through its centralized marketing organization to a diverse range of customers in approximately 160 countries including the automotive, appliance, engineering, construction and machinery industries. The Company also produces various types of mining products including iron ore lump, fines, concentrate and sinter feed, as well as coking, PCI and thermal coal.
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 higher value-added products in its product mix.
Automotive focus: ArcelorMittal has a leading market share in its core markets in the automotive steel business and is a leader in the fast-growing advanced high strength steels segment. ArcelorMittal is the first steel company in the world to embed its own engineers within an automotive customer to provide engineering support. The Company begins working with original equipment manufacturers (“OEMs”) as early as five years before a vehicle reaches the showroom, to provide generic steel solutions, co-engineering and help with the industrialization of the project. In November 2016, ArcelorMittal introduced a new generation of advanced high strength steels, including new press hardenable steels and martensitic steels. Together, these new steel grades aim to help automakers further reduce body-in-white weight to improve fuel economy without compromising vehicle safety or performance. In November 2017, ArcelorMittal launched the second generation of its iCARe® electrical steels. iCARe® steel grades play a central role in the construction of electric motors. See “Item 4.B— Information on the Company—Business overview—Competitive strengths—Research and development” below for further detail.
Mining Value Chain: ArcelorMittal has a significant portfolio of raw material and mining assets. In 2018, approximately 49% of ArcelorMittal’s iron-ore requirements and approximately 12% of its PCI and coal requirements were supplied from its own mines. The Company currently has iron ore mining activities in Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, Ukraine and the United States. The Company currently has coal mining activities in Kazakhstan and the United States.
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, which is produced from metallurgical coal and is a critical raw material for steel-making, satisfying 91% of its coke needs through its own production facilities. ArcelorMittal’s facilities have good access to shipping facilities, including through ArcelorMittal’s own, or partially owned, 15 deep-water port facilities and linked railway sidings.
ArcelorMittal has its own downstream steel distribution business, primarily run through its Europe segment. It also provides value-added and customized steel solutions through additional processing activities to meet specific customer requirements.
Key transactions and events in 2018
ArcelorMittal’s principal investments, acquisitions and disposals, and other key events that occurred during the year ended December 31, 2018 are summarized below. For further information on ArcelorMittal’s ongoing capital expenditure projects, see “Item 4.D—Information on the Company—property, plant and equipment—Capital expenditure projects”.
Acquisition of Ilva
On November 1, 2018, ArcelorMittal announced that AM InvestCo Italy S.r.l ("AM Investco") completed the acquisition of Ilva, after having been granted merger clearance by the European Commission ("EC") on May 7, 2018 on the basis of the Company’s committed divestment package (see below) and fulfilling all of the conditions precedent in ArcelorMittal’s contract with the Italian government for the lease and subsequent purchase of Ilva, including the labor agreement with Ilva’s trade unions, which was reached on September 6, 2018. Ilva is Europe’s largest single steel site and only integrated steelmaker in Italy with its main production facility based in Taranto. Ilva also has significant steel finishing capacity in Taranto, Novi Ligure and Genova. As a result of the lease agreement, the assets and liabilities subject to the transaction are leased by subsidiaries of AM InvestCo, including ArcelorMittal Italia S.p.A. The purchase price amounts to €1.8 billion ($2.1 billion) subject to certain adjustments, with annual leasing costs of €180 million ($206 million) to be paid in quarterly installments, with rental payments qualifying as down payments against the purchase price. The lease is for a minimum period of four years. The agreement includes industrial capital expenditure commitments of approximately €1.3 billion ($1.4 billion) over a seven-year period focused on blast furnaces including €0.2 billion revamping of blast furnace #5 intending to bring steel production to 8 million tonnes by 2024, steel shops and finishing lines and environmental capital expenditure commitments of approximately €0.8 billion ($0.9 billion) including €0.3 billion for stock pile coverage, €0.2 billion for reduction of emissions at coke ovens and €0.2 billion in waste water treatment. The agreement also includes environmental remediation obligations of approximately €0.5 billion ($0.6 billion), the latter of which will be funded with funds seized by the Italian Government from the former shareholder. As part of the labor agreement with Ilva’s trade unions, of Ilva’s 13,800 employees, 10,700 were hired by ArcelorMittal. In addition, between 2023 and 2025, the Company has committed to hire any workers who remain under Ilva’s extraordinary administration. The Company has identified synergies of €310 million, which are targeted to be realized by 2020. ArcelorMittal is the principal partner in AM InvestCo with a 94.45% equity stake in the consortium, with Banca Intesa Sanpaolo ("ISP") holding 5.55%. ISP's interest is subject to put and call option arrangements exercisable by ArcelorMittal and ISP between November 1, 2020 and November 1, 2025 and between November 1, 2021 and November 1, 2025, respectively. Following completion of the transaction, ArcelorMittal has assumed full management control of Ilva, which forms a new business cluster within ArcelorMittal Europe - Flat Products and has been renamed ArcelorMittal Italia. See Note 2.2.4 to ArcelorMittal’s consolidated financial statements for further details.
Ilva related Divestments
On October 12, 2018 and November 2, 2018 ArcelorMittal received two binding offers from Liberty House Group (“Liberty House”) for the acquisition of ArcelorMittal Ostrava (Czech Republic), ArcelorMittal Galati (Romania), ArcelorMittal Skopje (North Macedonia), ArcelorMittal Piombino (Italy), the Company's only galvanized steel plant in Italy, ArcelorMittal Dudelange (Luxembourg) and the following finishing lines at ArcelorMittal Liège (Belgium): hot dipped galvanizing lines 4 and 5 in Flémalle, hot-rolled pickling, cold rolling and tin packaging lines in Tilleur. All assets are part of a divestment package the Company agreed to with the EC during its merger control investigation into the Company’s acquisition of Ilva. On January 23, 2019, the Company submitted to the EC a revised offer from Liberty House in respect of the same package of assets. Transaction closing is conditional on EC approval and the conclusion of consultations with local and European Works Councils.
ESIL
On March 2, 2018, ArcelorMittal announced the signature of a joint venture formation agreement with NSSMC in relation to its offer to acquire ESIL, which was subsequently amended and restated on January 22, 2019. On April 2, 2018, ArcelorMittal submitted an offer (the "Offer") in the re-bidding process for ESIL. On October 17, 2018, following a judgment from the Supreme Court of India on October 4, 2018, ArcelorMittal announced that it had approved a payment of 7,469 crore
rupees (approximately $1 billion, subsequently paid) to the financial creditors of Uttam Galva and KSS Petron in order that the Offer would be eligible for consideration by ESIL's Committee of Creditors ("CoC"). ArcelorMittal had previously been a shareholder of Uttam Galva and HSBC Trustee (C. I.) Limited, as trustee of trusts of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries, had previously been a shareholder of KSS Petron. At the time of such payment, neither had any interest in such companies and, in particular, the trusts and their beneficiaries did not have any liability to KSS Petron or its creditors or other stakeholders and hence did not benefit from such payment. On October 19, 2018, ArcelorMittal was evaluated the H1 Resolution Applicant (the preferred bidder) by the CoC of ESIL and on October 26, 2018, ArcelorMittal announced that the CoC voted to approve the Company’s acquisition plan for ESIL (the "Resolution Plan"). ESIL’s Resolution Professional, on behalf of the CoC, issued the Company with a Letter of Intent ("LOI") stating that the Company was identified as the "Successful Resolution Applicant".
The Resolution Plan includes an upfront payment of 42,000 crore rupees (approximately $5.7 billion) towards ESIL’s debt resolution, with a further 8,000 crore rupees (approximately $1.1 billion) of capital injection into ESIL to support operational improvement, increase production levels and deliver enhanced levels of profitability. The Company provided a $0.6 billion performance guarantee in connection with the execution of the Resolution Plan.
In line with ESIL’s corporate insolvency process, ArcelorMittal’s Resolution Plan must now be formally accepted by India’s National Company Law Tribunal (“NCLT”) before completion. The NCLT has completed hearing the CoC's application for the approval of the Resolution Plan, as well as objections and challenges from different parties, including creditors of ESIL and the current shareholder. While it is difficult to predict the timing of an NCLT approval, a decision is expected in the first quarter of 2019 and the amounts of debt payment and capital injection specified in the Resolution Plan would become payable promptly after such approval is obtained.
ESIL is an integrated flat steel producer, and the largest steel company in western India. ESIL’s main steel manufacturing facility is located at Hazira, Gujarat in Western India. It also has:
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– | Two iron ore beneficiation plants close to the mines in Kirandul and Dabuna, with slurry pipelines that then transport the beneficiated iron ore slurry to the pellet plants in the Kirandul-Vizag and Dabuna-Paradeep systems;
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– | a downstream facility in Pune (including a pickling line, a cold rolling mill, a galvanizing mill, a color coating mill and a batch annealing plant); and
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– | seven service centers in the industrial clusters of Hazira, Bhuj, Indore, Bahadurgarh, Chennai, Kolkata and Pune. It has a complete range of flat rolled steel products, including value added products, and significant iron ore pellet capacity with two main pellet plant systems in Kirandul-Vizag and Dabuna-Paradeep, which have the potential for expansion. Its facilities are located close to ports with deep draft for movement of raw materials and finished goods.
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In terms of iron ore pellet capacity, the Kirandul-Vizag system has 8 million tonnes of annual pellet capacity and the Dabuna-Paradeep system has 6 million tonnes of annual pellet capacity, which is in the process of being expanded to a new capacity level of 12 million tonnes. This expansion would bring pellet capacity above Essar’s own requirements and provide the opportunity to improve operating income by fully utilizing such pellet capacity.
The Resolution Plan includes a capital expenditure plan of 18,697 crore (approximately $2.8 billion) to be implemented in two stages over six years. The first stage would involve investments to increase the production of finished steel goods sustainably to 6.5 million tonnes per annum and includes completion of ongoing capital expenditure projects with respect to a coke oven, second sinter plant, third line CSP caster, Paradeep pellet plant and Dabuna beneficiation plant. The first stage will also include investment in maintenance to restore current assets, the implementation of an environmental management plan and the implementation of ArcelorMittal’s best practices on raw material sourcing, plant operations, sales and product mix (in particular through greater sophistication of the quality and markets of the steel produced with a focus on developing sales to the automotive industry), people management and health & safety. The second stage would involve investments to increase the production of finished steel goods from 6.5 million tonnes per annum to 8.5 million tonnes per annum by the end of 2024, including asset reconfiguration and the addition of a coke oven, blast furnace and basic oven furnace.
There is also a long-term aspiration to increase finished steel shipments to between 12 and 15 million tonnes through the addition of new iron and steelmaking assets, so that ESIL can play an active role and fully benefit from the anticipated growth in the Indian steel industry.
After completion, ArcelorMittal expects jointly to own and operate ESIL in partnership with NSSMC, Japan’s largest steel producer and the third largest steel producer in the world, in-line with a joint venture formation agreement signed with NSSMC (the “Joint Venture”). ArcelorMittal and NSSMC currently expect to finance the Joint Venture through a combination of partnership equity (one-third) and debt (two-thirds), and ArcelorMittal anticipates that its investment in the Joint Venture will be equity accounted.
On November 20, 2018, ArcelorMittal entered into a $7 billion term facilities agreement (the “Term Facilities Agreement”) with a group of lenders in connection with the acquisition of ESIL. The agreement has a term of one year (i.e., until November 20, 2019), subject to ArcelorMittal’s option to extend the term by six months. The facility may be used for certain payments by ArcelorMittal as well as by the Joint Venture. Any amounts borrowed by the Joint Venture under the agreement are irrevocably and unconditionally guaranteed by ArcelorMittal. The Term Facilities Agreement includes the following financial covenant: ArcelorMittal must ensure that the “Leverage Ratio”, being 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), 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 ArcelorMittal), is not greater than a ratio of 4.25 to one. The Term Facilities Agreement is also subject to certain mandatory prepayment events, including as a result of the use of proceeds from debt capital market issuances by the Group or capital raising by the Joint Venture and certain other disposals, in each case above $1 billion.
ESIL’s assets do not include certain assets that are ancillary to the steel plant, such as a slurry pipeline, power plants and port facilities. AM and NSSMC are visiting some of these facilities in light of the planned acquisition of ESIL to understand the supply arrangements for raw materials and power for the steel mill.
Acquisition of Votorantim Siderurgia.
In February 2018, the Brazilian antitrust authority ("CADE") approved the acquisition by ArcelorMittal of Votorantim Siderurgia, subject to certain divestments. The closing of the transaction occurred on April 1, 2018, and Votorantim Siderurgia, under the new corporate name of ArcelorMittal Sul Fluminense (“AMSF”), became a subsidiary of ArcelorMittal Brasil.
The combination of the businesses resulted in a long product steel producer with annual crude steel capacity of 5.1 million metric tonnes. This acquisition aims to create value through cost, logistical and operational synergies totaling approximately $110 million per annum. See Note 2.2.4 to ArcelorMittal’s consolidated financial statements for further details. In particular, the combination results in geographically complementary production facilities (i.e., ArcelorMittal’s Monelevade, Juiz de Fora and Piracicaba facilities and Votorantim’s Barra Mansa and Resende plants and its 50% interest in the joint venture Sitrel in Três Lagoas).
CADE’s approval was subject to the fulfillment of certain divestment commitments which were completed in early May. The divestments included ArcelorMittal Brasil’s two production sites of Cariacica and Itaúna, as well as some wire drawing equipment. See Note 2.3.1 to ArcelorMittal’s consolidated financial statements for further details.
Other Events in 2018
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• | During 2018, ArcelorMittal completed several debt financing and repayment transactions. Please refer to “Item 5B—Operating and financial review and prospects—Liquidity and capital resources—Financings” for a summary of the transactions.
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On May 16, 2018, the extraordinary general meeting of shareholders of ArcelorMittal held in Luxembourg approved the resolution on the agenda to change the currency of the share capital from euro to U.S. dollar.
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• | On March 26, 2018, ArcelorMittal completed a share buyback program. ArcelorMittal repurchased 7 million shares for a total value €184 million ($226 million) at an average price per share of €26.34.
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On March 5, 2018, ArcelorMittal announced that Aditya Mittal, CFO of ArcelorMittal and CEO of ArcelorMittal Europe, was appointed as President, ArcelorMittal, in addition to his current responsibilities. This nomination reflects the increasing global strategic role Aditya Mittal has across the group, supporting the Chairman and CEO, Mr.
Lakshmi Mittal. As President and CFO, he will continue to report to the Chairman and CEO. Together, Mr. Mittal and Aditya Mittal comprise the CEO office.
Recent developments
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• | On February 19, 2019, ArcelorMittal announced the completion of its share buyback program on February 15, 2019 (the "2019 Program"). The Company repurchased 4 million shares for a total value of approximately $90 million (€80 million) at an approximate average price per share of €19.89 ($22.42) pursuant to the 2019 Program that was announced on February 7, 2019. The 2019 Program was completed under the authorization given by the annual general meeting of shareholders held on May 5, 2015 and applicable market abuse regulations. The shares acquired under the 2019 Program are intended to meet ArcelorMittal's obligations arising from employee share programs.
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Other information
ArcelorMittal is a public limited liability company (société anonyme) that was incorporated for an unlimited period under the laws of the Grand Duchy 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 ArcelorMittal’s registered office are:
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ArcelorMittal |
24-26, Boulevard d’Avranches |
L-1160 Luxembourg |
Grand Duchy of Luxembourg |
Telephone: +352 4792-1 |
ArcelorMittal’s agent for U.S. federal securities law purposes is:
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ArcelorMittal USA LLC |
1 South Dearborn Street, 19th floor |
Chicago, Illinois 60603 |
United States of America |
Telephone: + 1 312 899-3985 |
Internet site
ArcelorMittal maintains an Internet site at www.arcelormittal.com. Information contained on 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 information only.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
B. Business overview
Business strategy
ArcelorMittal’s success is built on its core values of sustainability, quality and leadership and the entrepreneurial boldness that has empowered its emergence as the first truly global steel and mining company. Acknowledging that a combination of structural issues and macroeconomic conditions will continue to challenge returns in its sector, the Company has adapted its footprint to the new demand realities, intensified its efforts to control costs and repositioned its operations to outperform its competitors. The Company is also developing and implementing a plan to decarbonize its steel and mining assets and achieve carbon neutrality by 2050.
Against this backdrop, ArcelorMittal's strategy is to leverage four distinctive attributes that will enable it to capture leading positions in the most attractive areas of the steel industry value chain, from mining at one end to distribution and first-stage processing at the other:
•Global scale and scope
•Unmatched technical capabilities
•Diverse portfolio of steel and related businesses, particularly mining
•Financial capability.
Three themes
Steel. ArcelorMittal looks to expand its leadership role in attractive markets and segments by leveraging the Company’s technical capabilities and its global scale and scope. These are critical differentiators for sophisticated customers that value the distinctive technical and service capabilities the Company offers. Such customers are typically found in the automotive, energy,
infrastructure and a number of smaller markets where ArcelorMittal is a market leader. In addition, the Company is present in, and will further develop, attractive steel businesses that benefit from favorable market structures or geographies. In developing attractive steel businesses, ArcelorMittal’s goal is to be the supplier of choice by anticipating customers’
requirements and exceeding their expectations. It will invest to develop and grow these businesses and enhance its ability to serve its customers. Given the current environment,volatile nature of the industry, that investment will be highly disciplined.disciplined, balancing financial and sustaining considerations with targeted strategic opportunities. Commodity steel markets will inevitably remain an important part of ArcelorMittal’s steel portfolio. Here, a lean cost structure should limit the downside in weak markets while allowing the Company to capture the upside in strong markets. Finally, ArcelorMittal is developing a strategic response to the challenges and opportunities posed by decarbonization, which will fundamentally change the market structure of the steel industry.
Mining. ArcelorMittal is working to continue to create value from its world-class mining business. Mining forms part of the steel value chain but typically enjoys a number of structural advantages, such as a steeper cost curve. The Company's strategy is to create value from its most significant assets, through selective expansion/de-bottlenecking, by controlling cost and capital expenditure, and by supplying products that are highly valued by steel producers. ArcelorMittal's financial capability allowed it to continue to invest in key mining assets (notably(in particular AMMC as well as ArcelorMittal Mines and Infrastructure Canada)Liberia), while the diversity of its steel and mining portfolio facilitates the ability of the mining business to optimize the value of its products in the steelmaking process. The Company's mining business aspires to be the supplier of choice for a balanced mix of both internal and external customers, while at the same time providing a natural hedge against market volatility for its steel operations.
All operations. ArcelorMittal strives to achieve best-in-class competitiveness. Operational excellence, including health and safety, the number one priority, is at the core of the Company's strategy in both steel and mining. The Company steadily optimizes its asset base to ensure it is achieving high operating rates at its best assets. Its technical capabilities and the diversity of its portfolio of businesses underpin a strong commitment to institutional learning and continuous improvement through measures such as benchmarking and best-practice sharing. Innovation in products and processes also plays an important role while supporting overall competitiveness. In addition, pursuant to the Company's July 2021 announcement to target a reduction in carbon emissions intensity by 2030 of 25% globally (both scope 1 and 2), the Group is progressing on various pathways to reduce carbon emissions across its asset base.
Five key strategic enablers
Critical to implementing this strategy are five key enablers:
A clear license to operate. Many of ArcelorMittal's businesses are located in regions that are in the early stages of economic
development. Practically all are resource-intensive. The Company recognizes that it has an obligation to act responsibly towards all stakeholders. ArcelorMittal's commitment to sustainability is outlined below. See "Item 4.B—Information on the Company—Business"Business overview—Competitive strengths—Sustainable development."development". Sustainability is a core value that underlies ArcelorMittal's efforts to be both the world’s safest steel and mining company and a responsible environmental steward.
A strong balance sheet. The Company has made good progress in recent years in strengthening its balance sheet. Although further deleveraging remains a priority, theThe progress achieved to date means that the Company is now in a position to have more balance and flexibility in its capital allocation and the Company can, on a selective basis, pursue organic or acquisitive growth opportunities.
A decentralized organizational structure. ArcelorMittal's scale and scope are defining characteristics that give it a competitive advantage. They also introduce complexity and the risks of inefficiency, bureaucracy and diffuse accountability. To manage these risks, the Company favors a structure in which the responsibility for profit and loss is focused on business units aligned with markets.
Active portfolio management. Throughout the Company's history, it has sought to grow and strengthen the business through acquisitions. That remains the case. The acquisition of existing assets and businesses is typically seen as a more attractive growth path than greenfield investment. The Company is, however, also willing to dispose of businesses that cannot meet its performance standards or that have more value to others.
The best talent. ArcelorMittal's success will depend on the quality of its people, and its ability to engage, motivate and reward them. As detailed below, the Company is committed to investing in its people and ensuring a strong leadership pipeline. See "Item 6.D—Directors, Senior Management"Management and Employees—Employees—Employee development."development". It will continue to improve its processes to attract, develop and retain the best talent.
Action 2020 Plan
On February 5, 2016, the Company announced its Action 2020 plan, which represents a strategic roadmap for each of ArcelorMittal’s main business segments. The Action 2020 plan goes over and above the Company’s ongoing management gains plan and seeks to deliver real structural improvements unique to ArcelorMittal’s business. The Action 2020 plan targets to improve the Company’s operating income by $3 billion, absent any recovery in steel spreads and raw materials prices from the levels at the beginning of 2016. The Company is approximately two-thirds of the way along the Action 2020 journey but made limited progress in 2018 with $0.4 billion in cost and product mix improvements, largely offset by volume reductions due to operational disruptions.
Some of the key segment initiatives included in the Action 2020 plan at the time of launch, and which the Company continues to pursue are as follows:
Europe: The Company plans to continue its successful asset optimization as an ongoing transformation plan, involving continued optimization, the clustering of finishing sites to remove substantial overhead, centralization of activities (including procurement), improvement of logistics and service and digital transformation. Together with expected higher added value (HAV) mix and volume gains, this targets delivering a $1 billion improvement in operating income over the period.
NAFTA: The downstream footprint optimization in the U.S. has been completed with substantial improvements in operating income. The Company has been continuing to ramp-up Calvert to full capacity since 2016. Other projects are expected to boost the HAV mix and generate further improvement.
Brazil: The Company plans to execute its value plan and targets an improvement in sales mix including a recovery of a share of higher margin domestic volumes, improved HAV mix by the end of 2020 and cost improvements.
ACIS: The Company plans to continue its strategic focus on operational excellence to deliver volumes that will leverage the new competitive cost base it has in the CIS (following competitive currency devaluation), realize savings in Ukraine at the coke oven battery and execute on the improved competitiveness plan in South Africa with a better mix following restart of coke oven battery and higher PCI usage.
The overall progress was limited in 2018 by operational disruptions which resulted in a volume loss of $0.3 billion effectively reversing the cumulative gains achieved in 2017. As a result, the cumulative savings from Action 2020 amount to $1.6 billion. The Company remains focused on achieving its 2020 targets. Volume is a key component of Action 2020 (5 million tonnes volume improvement) and the Company expects to see more progress in this area in 2019 and beyond, assuming market conditions remain favorable.
The above statements regarding Action 2020 are objectives. They constitute forward-looking statements and are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon various assumptions including with respect to future decisions, which are subject to change, and the Company's ability to implement its strategy and in particular cost saving and efficiency improvement initiatives, which are subject to operational challenges and limitations. Actual results may vary and those variations may be material. See “—Competitive strengths—Dynamic responses to market challenges and opportunities” for the Company’s progress against these objectives.
Competitive strengths
As shown by the following graph, ArcelorMittal has a diversified portfolio of steel and mining products to meet a wide range of customer needs across many steel-consuming sectors, including automotive, appliance, engineering, construction, energy and machinery and via distributors.
* Other steel sales mainly represent metal processing, machinery, electrical equipment and domestic appliances
**Other sales mainly represent mining, chemicals & water, slag, waste, sale of energy and shipping
The Company believes that the following factors contribute to ArcelorMittal’s success in the global steel and mining industry:
Market leader in steel.ArcelorMittal is the world’s largest steel producer, with annual achievable production capacity of approximately 118 million tonnes (112 million tonnes without Ilva remedies) of crude steel for the year ended December 31, 2018. Steel shipments for the year ended December 31, 2018 totaled 83.9 million tonnes.
ArcelorMittal is the largest producer of steel in North and South America and Africa and the fifth largest steel producer in the CIS region. It is also the largest steel producer in the EU, with significant operations in France, Germany, Belgium, Spain, Italy, Luxembourg, Poland, the Czech Republic and Romania. In addition, many of ArcelorMittal’s 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, India, Africa, CIS and Southeast Asia).
The Company sells its products in local markets and through a centralized marketing organization to customers in approximately 160 countries. ArcelorMittal’s 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 world’s major automobile and appliance manufacturers. The Company is a strategic partner to several of 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.
A world-class mining business. ArcelorMittal has a global portfolio of 13 operating units with mines in operation and development and is among the largest iron ore producers in the world. In the year ended December 31, 2018, ArcelorMittal mines produced 58.5 million tonnes of iron ore which supplied 49% of the Company’s iron ore requirements, and also produced 5.9 million tonnes of coking coal and PCI which supplied 12% of the Company’s PCI and metallurgical coal requirements.
The Company has iron ore mining activities in Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, Ukraine and the United States. The Company has coal mining activities in Kazakhstan and the United States. ArcelorMittal’s main mining
products include iron ore lump, fines, concentrate, pellets, sinter feed, coking coal, PCI and thermal coal. As of December 31, 2018, ArcelorMittal’s iron ore reserves were estimated at 3,742 million tonnes run of mine and its total coking coal reserves were estimated at 204 million tonnes run of mine or 110 million wet recoverable tonnes. See “Item 4D—Information on the Company—Property, plant and equipment—Reserves (iron ore and coal)” for a detailed list of the entities providing reserves and the ownership structure.
The Company’s long-life iron ore and coal reserves provide a measure of security of supply and an important natural hedge against raw material volatility and global supply constraints. The mining business is managed as a separate segment which enhances ArcelorMittal’s ability to optimize capital allocation.
Market-leading automotive steel business. The Company estimates that it has approximately 18% of the worldwide market share for the automotive industry, specifically for flat products as of December 31, 2018.
Long-term contracts add to the stability of the business. ArcelorMittal has built close relationships with its customers, often working with them at the vehicle design stage. These relationships are founded on the Company’s continuing investment in R&D and its ability to provide well-engineered solutions that help make vehicles lighter, safer and more fuel-efficient.
ArcelorMittal has a leading market share in its core markets and is a leader in the fast-growing advanced high strength steels segment. In 2012, ArcelorMittal initiated a development effort for hybrid vehicles with a dedicated S-in motion® project. Its S-in motion® line of solutions (C&D car segments, SUV, pick-up trucks, light commercial vehicles, truck cabs) is a unique offering for the automotive market that respond to OEMs’ requirements for safety, fuel economy and reduced CO2 emissions. By utilizing advanced high strength steels promoted in the S-in motion® projects, OEMs can achieve significant weight reduction using the Company's emerging grades solutions such as Fortiform®, the Company's third generation Advanced High Strength Steels ("AHSS") for cold forming, or Usibor® 2000 and Ductibor® 1000, the Company's latest AHSS grades for hot stamping. Further S-in motion® projects are currently underway for electrical cars in the C segment as well as for the plug-in hybrid C-segment with results expected in 2019. The growth of various types of electric vehicles will impact design and manufacturing. For instance, new large mass batteries change the mass distribution of a vehicle and impact the design and manufacturing of the chassis and wheels. Battery protection provides another example: both battery boxes and body structure have to protect batteries in the event of a crash. For these specific cases, AHSS and especially Ultra High Strength Steels will play a major role. AHSS products are among the most affordable solutions on the market for these specific applications. In a context where the supply of electric vehicles, and especially Battery Electric Vehicles ("BEVs") are expected to grow quickly, new projects have been launched to address these new trends. For further details on the new products under development, see "Item 4.B—Information on the Company—Business overview—Competitive strengths—Research and development.”
In parallel, ArcelorMittal continues to promote intensively the second generation of its iCARe® electrical steels. iCARe® steel grades play a central role in the construction of electric motors which are used in BEVs, hybrid vehicles ("HV"), plug in hybrid vehicles ("PHEV") and mild hybrid vehicles ("MHV"). This new iCARe® generation features optimized mechanical, magnetic and thermal properties of the steel as compared to the first generation of iCARe® electrical steels.
In the automotive industry, ArcelorMittal mainly supplies the geographic markets where its production facilities are located in Europe, North and South America and South Africa. The Company expanded its automotive footprint to China through Valin ArcelorMittal Automotive Steel Co., Ltd (“VAMA”), its joint venture with Hunan Valin, which has obtained approvals from international and domestic car manufacturers. VAMA’s product mix is oriented toward higher value products and mainly toward the OEMs to which the Company sells tailored solutions based on its products. With sales and service offices worldwide, production facilities in North and South America, South Africa, Europe and China, ArcelorMittal believes it is uniquely positioned to supply global automotive customers with the same products worldwide. The Company has multiple joint ventures and has also developed a global downstream network of partners through its distribution solutions activities. This provides the Company with a proximity advantage in virtually all regions where its global customers are present.
Research and development.
The Company’s Global Research and Development (“("R&D”&D" or "Global R&D") division provides the technical foundation for the sustainability and commercial success of the Company by stimulating innovative thinking and the continuous improvement of products and processes.
ArcelorMittal believes it possesses leading R&D capabilities among steel producers and is committed to maintaining and extending this advantage by anticipating and responding to major technological,
sustainability and social trends, and by maximizing opportunities inwhile also making a significant contribution towards achieving the digital economy. The
Company’s 10 Sustainable Development Outcomes (see “—Sustainable development” below).
To support this commitment, the Company operates 11 research sites around the world, and in 2018, ArcelorMittal's2021, ArcelorMittal’s R&D expense was $290 million.$270 million (compared to $245 million and $301 million in 2020 and 2019, respectively). In addition, the Company has capitalized $41 million research and development expenses.
Among its R&D aims to develop products that create value for customers, improve ArcelorMittal's competitiveness through process optimization, and make a significant contribution to a sustainable future through products and processes that support the Company's 10 Sustainable Development outcomes. In 2018, the Company's global R&D received 21 awards.
To support this commitment,initiatives, ArcelorMittal has developed over 15 years of expertise in lifecycle analysis (“LCA”Life Cycle Assessment ("LCA"), which analyzes the environmental impact of products during their production, use and disposal. LCA helps assess sustainability value atIn 2021, the product development stage, particularly in comparison to competing materials - which, in the case of steel, includes aluminum and concrete. The Company undertook a total of 3237 LCA studies in 2018 related to steel products and the processes used to produce them, all guided by ISO standard 14040-44.the relevant standards (ISO 14040-44).
ArcelorMittal'sArcelorMittal is a member of the CIRAIG International Lifecycle Chair, an international reference center for the lifecycle of products, processes and services, and the world largest research center on the topic. ArcelorMittal is also a member of the Product Social Impact Assessment Partnership
ArcelorMittal’s R&D strategy focuses on foursix main pillars:
Maintaining the competitiveness of the Company'sCompany’s steel among its unique automotive customer base.
R&D continually drives the innovation that enables the Company'sCompany’s strategic focus on higher-added-value products. A key focus is products designed to meet the complex and changing needs of the automotive industry - a sector that contributed approximately 19% of the Company’s revenues in 2018, including both flat and long products. The Company aims to maintain its leadership in this sector by responding to the trends of electrification and digitalization in transport, and harnessing its R&D capabilities to tailor its innovations to the makers of conventional, hybrid, and electric vehicles.industry.
For example, ArcelorMittal has developed its S-in motion® range of solutions, which showcaseshowcased the benefits of Advanced High Strength Steel (“AHSS”)AHSS grades and manufacturing processes that continue to help automotive customers meet demanding new targets for fuel economy, and thereby drive improvements in CO2CO2 emissions.
The
Company works closely with automotive customers - including through co-engineering efforts with North Americanhas finalized in particular a project dedicated to B-segment Battery Electric Vehicles (BEV), which are important in Europe and European car-makers - which enables themChina. This project also enabled the Company to accesspropose new battery pack concepts. A project was also carried out to illustrate the Company’s technology, information and expertise to drivepotential of the development of engineering solutions efficiently.latest hot rolled products for chassis applications. In addition, they can draw on the Company’s extensive lifecycle analysis expertise to consider the environmental footprintfield of products, including CO2 emissions, from manufacture, through use,new ultra-high strength solutions (1500 to final disposal and recycling. In 2018, ArcelorMittal won 21 technology-related awards, including the Honda R&D Americas Inc.'s Excellence in Innovation Award.
For further details1700MPa) have been industrialized; they offer outstanding combinations of developments in more sustainable solutionsmechanical properties that make them particularly attractive for the automotive sector in 2018, see “Item 4.B— Information on the Company—Business overview—Competitive strengths—Sustainable development—Outcome 2: Products that accelerate more sustainable lifestyles”.fast-growing battery pack market.
Creating a robust and diverse portfolio of niche non-automotive steel products to serve customers across multiple sectors.
Customers in many sectors share the automotive industry'sindustry’s demand for innovative products and processes. The Company aims to deliver similar breakthrough advances in these sectors by creating differentiated products and unique engineering solutions, all designed to ensure that steel is the customers'customer's material of choice.
ConstructionArcelorMittal is fully involved in the development of solutions dedicated to the Global Energy Transition. The Company has developed and patented corrosion resistant steels for use in wind towers or solar mounting systems. Notably, Magnelis® advanced coating combined with Hyper® high strength steels has become a key sectormaterial of choice for ArcelorMittal, accounting for approximately 20%light weight solar structures. Additionally, the Company is also working on the development of direct sales in 2018. The Company's R&D effort is focused on providing higher-value-added products which meet customer needs, including their sustainable development objectives. In 2018, ArcelorMittal launched Steligence®, a new conceptsolutions suitable for the holistichydrogen economy, electricity grids, carbon capture, storage & use of steel in construction.
ArcelorMittal is also developing innovative solutions for the energy segment, both renewable and conventional. For example, ArcelorMittal has improved the corrosion resistance of its line pipe steel, and has developed a high-strength pressure vessel steel which allows weight savings when used in offshore processing facilities. It has innovated steel for wind turbines, and its patented anti-corrosion steel coating Magnelis® is used extensively in framing solutions for photovoltaic (PV) modules. The Company's pioneering technology for electrical steels also benefits this market.
These and other projects are described further in “Item 4.B—Information on the Company—Business overview—Competitive strengths—Sustainable development—Outcome 3: Products that create sustainable infrastructure”.
Packaging is, in the Company'sCompany’s view, another important opportunity. ArcelorMittal maintains a dedicated R&D packaging center in Maizières-les-Metz, France, and continues to respond to the expectationsneed to meet evolving health and safety regulations, to achieve lightweight, cost-saving design, and to develop new functionalities. A major opportunity is also presented by the increasing pressure to reduce packaging made of plastics, as society becomes less and less accepting of packaging that is not in line with sustainable development objectives. With its customers in the packaging market; see “Item 4.B—Information on the Company—Business overview—Competitive strengths—Sustainable development—Outcome 2: Products that accelerate more sustainable lifestyles”.
Developing breakthrough process innovations to deliver cost reduction, sustainability benefits and new product development. The creation of unique processes creates value for the Company and its stakeholders by driving new cost competitiveness, promoting process-driven product development, and enabling environmental improvements, including carbon reductions. Process improvements deliver financial (management) gains for the Company.
The Company's jet vapor deposition ("JVD") technology is an example of process-led product development, which enables advanced steels for the automotive industry. See, "Item 4.B—Information on the Company—Business overview—Competitive strengths—Sustainable development—Outcome 2: Products that accelerate more sustainable lifestyles."
R&D also drives significant environmental improvements through new technology. ArcelorMittal implemented the hybrid filtration process in 2017 in Zenica (Bosnia), Gent (Belgium) and Dabrowa (Poland) and in 2018 the technology was extended to cover a broader scope of emissions in a pilot site in Gijon (Spain). Results indicate performance levels well within emerging emissions standards.
For other details of R&D's role in reducing ArcelorMittal's environmental impact, delivering energy saving programs and lowering emissions of solids, water and gases, see “Item 4.B—Information on the Company—Business overview—Competitive strengths—Sustainable development—Outcome 5: Trusted user of air, land and water” and “—Outcome 6: Responsible energy user that helps create a lower carbon future”.
Fully capitalizing on opportunities from the digital economy. ArcelorMittal sees significant opportunities in the transformational potential of digitalization and Artificial Intelligence. It believes digitalization will enable unparalleled efficiencies, unforeseen insights and new modes of operation, all of which are expected to generate substantial cost and environmental benefits.
Diversified and efficient producer. As a 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.
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• | Diversified production process. In 2018, approximately 71.8 million tonnes of crude steel were produced through the basic oxygen furnace process, approximately 17.6 million tonnes through the electric arc furnace process and approximately 3.1 million tonnes of crude steel through the open hearth furnace process. This provides ArcelorMittal with greater flexibility in its raw material and energy use, and increased ability to meet varying customer requirements in the markets it serves.
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• | Product and geographic diversification. By operating a portfolio of assets diversified across product segments and geographic areas, ArcelorMittal benefits from a number of natural hedges. As a global steel producer with a broad range of high-quality finished and semi-finished steel products, ArcelorMittal is able to meet the needs of diverse markets. Steel consumption and product requirements vary between mature economy markets and developing economy markets. Steel consumption in mature economies is largely from flat products and a higher value-added mix, while developing markets utilize a higher proportion of long products and commodity grades. As developing economies mature and as market needs evolve, local customers will require increasingly advanced steel products. 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.
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• | Upstream integration. ArcelorMittal believes that its own raw material production provides it with a competitive advantage over time. Additionally, ArcelorMittal benefits from the ability to optimize its steel-making facilities’ efficient use of raw materials, its global procurement strategy and the implementation of company-wide knowledge management practices with respect to raw materials. Certain of the Company’s operating units also have access to infrastructure, such as deep-water port facilities, railway sidings and engineering workshops that lower transportation and logistics costs.
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• | Downstream integration. ArcelorMittal’s downstream integration, primarily through its Europe segment for distribution solutions, enables it to provide customized steel solutions to its customers more effectively. The Company’s downstream assets have cut-to-length, slitting and other processing facilities, which provide value additions and help it to maximize operational efficiencies.
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Dynamic responses to market challenges and opportunities. ArcelorMittal’s management team has a strong track record and extensive experience in the steel and mining industries. In 2015, the Company completed a 3 year management gains program which generated savings of $3 billion from sustainable selling, general and administrative expenses (“SG&A”) and fixed and variable cost reductions. The program targeted cost savings related to reliability, fuel rate, yield and productivity with two-thirds of targeted costs being variable costs.
From late 2011 until 2015, the Company implemented an asset optimization initiative in Europe aimed at maximizing steel production at its lowest cost facilities. Implementation costs (consisting principally of restructuring costs and fixed asset impairments) totaled $2.1 billion (of which $0.8 billion was non-cash). Among other things, the initiatives included mothballing the liquid phase at the Florange site of ArcelorMittal Atlantique & Lorraine, France in 2012 and restructuring ArcelorMittal Liège (of which certain finishing lines are in the process of being sold to Liberty House as part of the divestment package related to the Ilva acquisition). In February 2016, the Company announced its Action 2020 plan (see “Item 4.B—Information on the Company––Business overview––Business strategy”) which targets an improvement in operating income of $3 billion, absent any recovery in steel spreads and raw materials prices from the levels at the beginning of 2016.
The Company has made measurable progress on its strategic Action 2020 plan resulting in a $0.6 billion contribution to 2017 operating income and $0.1 billion contribution to 2018 operating income, bringing the cumulative benefit to $1.6 billion. The Company is approximately two-thirds of the way along the Action 2020 journey with all segments contributing to the progress. In 2018, the Company achieved $0.4 billion in savings through combination of cost and product mix improvements including: savings in South Africa with improved cost performance driven by better mix following restart of coke oven battery and higher PCI usage, further optimization savings through digital transformations in Europe, savings in Ukraine related to the coke oven battery and cost and mix improvements in Brazil. However, these savings were largely offset by operational disruptions, which resulted in the loss in volume contribution of $0.3 billion or approximately 2.5 million metric tonnes. Volume is a key component of Action 2020 (which aims for a 5 million tonne volume improvement) and the Company expects to see more progress in this area in 2019 and beyond, assuming market conditions remain favorable.
Europe: The transformation program has progressed well. Savings at the cluster-leading plants continue to be made, with changesrecycled and to the operating modeleliminate hazardous elements, steel is well-positioned to restructureextend its applications in packaging and modernize the organization now well embedded. The organizationreplace an increasing volume of plastic packaging.
Construction equipment, agricultural machinery, and heavy transportation is benefiting fromanother important segment for which a more integrated, centrally coordinated approach, further reducing costs. Additional gains are being made with enhanced usefull range of and investment in digitalization in the manufacturing process, supply chain and commercial teams. Overall, net volume gains and improved mix contributed with higher hot strip mill production, offset in part by lower volumes caused by operational issues primarily in the long business.
NAFTA: Indiana Harbor footprint optimizationUltra-High-Strength steels has been completed: Savings achieved came from headcount rationalizationdeveloped. These Amstrong® steels allow customers to lightweight their equipment, increase payload and efficiencies following closure of its 84” hot strip mill ("HSM"), idling of the No.2reduce fuel consumption and CO2 emissions.
First 'XCarb® recycled and renewably produced' steels have been successfully launched. Due to their high recycled content and green energy steel shop, and ongoing benefits from a new caster at No.3 steel shop. Restoration of the 80” HSM and Indiana Harbor was completed in 2018.making route, these steels exhibit strongly reduced CO2 emissions.
NAFTA: Calvert ramp up is advancing with automotive qualifications proceeding and increased capacity utilization.
Brazil: Structural cost reductions are being implemented; improved HAV mix from flat business.
ACIS: Ukraine benefited from the construction of a new coke oven battery #5 (in 2018) and other PCI/energy saving initiatives.
Mining: The business remains focused on service, quality and asset reliability. Cost focus maintained: net cash provided by operating activities and capital expenditures breakeven point remains $40/t China CFR 62% Fe.
Proven expertise in acquisitions and turnarounds. ArcelorMittal’s 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 areas of expertise from different business units across the Company to evaluate new assets, conduct due diligence and monitor integration and post-acquisition performance. The Company has grown through a series of acquisitions and by improving the operating performance and financial management at acquired facilities. In particular, ArcelorMittal seeks to improve acquired businesses by eliminating operational bottlenecks, addressing any historical under-investments and increasing the capability of acquired facilities 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 improved the operating performance and quality of steel produced at such facilities.
In the 2009-2016 period, ArcelorMittal largely curtailed M&A and greenfield investment activity due to difficult economic and market conditions. The Company has focused on improving its costs through its management gains program, non-core asset disposals and resizing its operational footprint through asset optimization. The Company implemented a strategy to dispose of non-core assets, including for example, the disposal of Gallatin, Circuit Foil Luxembourg, the steel cord business, ATIC and others in 2014. In 2016, the Company sold its minority shareholding in Gestamp and the Laplace and Vinton Long Carbon facilities in the United States as part of this strategy. As global market conditions gradually improved, the Company took advantage of select growth opportunities. In 2014, ArcelorMittal completed a 50/50 joint venture of Calvert in the United States in partnership with Nippon Steel & Sumitomo Metal Corporation ("NSSMC"). In 2018, the Company completed the acquisition of Votorantim S.A.'s long business in Brazil and the acquisition of Ilva S.p.A. in Italy. Most recently the Company is poised (subject to favorable resolution of legal challenges) to acquire (via a joint venture with NSSMC), Essar Steel India Limited ("ESIL"), its bid having been selected by ESIL’s committee of creditors. See "Item 4.A— Information on the Company—History and development of the Company—Key transactions and events in 2018" for further information.
Sustainable development. ArcelorMittal aims tocreate long-term value for its shareholders and other stakeholders, while maintaining a profitable market share. The Company understands that to achieve this, it must anticipate and respond to the long-term environmental and social trends that are transforming the context in which it operates. Among these trends, the most material are: sector-by-sector decarbonization that contributes to wider efforts to limit global warming to two degrees Celsius or less; the transformation of many industries including transport, construction and energy in the shift towards a more sustainable economy; and the growing importance of sustainability standards within value chains, including as a competitive advantage for the Company’s customers.
As a result, the Company aims to ensure that ArcelorMittal steel is the material of choice in a circular, low-carbon economy, and contributes to the creation of high quality and sustainable lives in the coming decades, in support of the global ambitions expressed by the United Nation's Sustainable Development Goals ("SDGs"). The Company pursues its contribution not only by continually innovating the way it makes steel, but by enhancing the support its solutions can provide to the transformation of many sectors including transport, energy and construction in the transition towards a more sustainable economy.
The Company sees significant advantages in developing an integrated marketing offer for its customers: being the supplier of choice for innovative products and processes made from trusted raw materials, in ways that meet and exceed customers' sustainability expectations, including on carbon. This is at the heart of the Company's approach to Sustainable Development ("SD").
ArcelorMittal's SD framework, launched in 2015, outlines the 10 SD outcomes it needs to achieve in order to create long-term value for all its stakeholders. The Company believes these are aligned with, and contribute to, many of the UN's SDGs - these are referenced in the individual outcome sections below, and a mapping of this alignment is provided as part of the reporting index to ArcelorMittal's Integrated Annual Review (the 2017 Integrated Annual review is available at: https://annualreview2017.arcelormittal.com/).
In 2018, the Company’s Board of Directors established the Appointments, Remuneration & Corporate Governance and Sustainability Committee (the "ARCGS"), an expansion of the previous ARCG Committee, which oversees progress towards the 10 SD outcomes under the following five management themes:
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43 | Management themereport | Relevant SD outcome
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Health and safety | Outcome 1 |
Environment | Outcome 4, Outcome 5 |
Climate change | Outcome 6 |
Customer reassurance | Outcome 7 |
Social | Outcome 1, Outcome 8, Outcome 9 |
In addition toconstruction, the management themes above, the Board also oversees the product innovation agenda, which includes the Company’s SD Outcomes 2, 3 and 10.
The ARCGS's oversight underpins the Company’s overarching strategy to ensure that both corporate functions and business segments contribute to achieving the 10 SD outcomes. This strategyinnovative MegaColumn concept developed by R&D is made up of the following elements:
A set of Key Performance Indicators ("KPIs") for every business segment to report against, to be verified by third parties and overseen by the Board of Directors;
An expectation that each business segment, acting on its understanding of SD trends and through its engagement with stakeholders, develops a plan in pursuit of the 10 SD outcomes;
Leading contributions to SD from corporate functionsbeing used for the benefit of the group, including: progress towards low-carbon steelmaking; innovating steel solutions and steelmaking technologies with a positive SD impact; and developing a ‘mine to metal’ chain of assurance against multi-stakeholder environmental and social standards;
A robust articulation of the Company's approach and progress through clear narrative and transparent, third-party-assured reporting.
Climate change. While the Company continues to use the SD Framework of 10 SD Outcomes to report its progress towards SD, as summarizedfirst time in this section, it believes that it is important to contextualize this framework with a holistic discussion of the overarching theme of climate change - which affects many of the 10 SD Outcomes - as this discussion responds to the expectations of investors and other stakeholders.
The Paris Agreement, underpinned by a strong body of science, demonstrates the clear consensus that each and every business needs to understand and reduce their contribution to climate change. ArcelorMittal was one of 89 companies at the Climate Summit in Paris in December 2017 that affirmed the need to collectively change course, in order to bring about a drastic reduction of global greenhouse gas (GHG) emissions. The Company believes steel has a vital contribution to make in this respect. Lifecycle analysis studies show steel is a lower-carbon alternative over its lifecycle compared with other materials such as aluminum and concrete in many applications. ArcelorMittal's modern, specialist steels are already helping to make products and materials more carbon-efficient. At the same time, ArcelorMittal recognizes that it must go further to reduce its own emissions, while identifying the risks and opportunities that climate change presents.
In 2018, climate change was identified as one of five themes to be overseen by the ARCGS Committee. The ARCGS nominated senior officers to take responsibility for its low carbon transition strategy, its carbon performance, and its work on carbon-related government policy. They are supported by corporate functions covering strategy, technology, R&D, risk, corporate responsibility and communications, all of which report to one executive vice-president, who works closely with the CEO and CFO on climate issues.
The Company’s processes for identifying and assessing climate-related risks and opportunities, as with all forms of risk assessment, are continuous, dynamic and discrete and are integrated into both site and corporate management processes. A regular bottom-up process allows sites to identify short-term risks and opportunities, which are consolidated at the corporate level. Longer-term social, environmental, stakeholder, and technological trends are assessed at the corporate level by the strategy, R&D and sustainable development functions on an ongoing basis.
The Company sees the low-carbon transition as presenting significant opportunities for steel. Steelwhat is expected to be vital inbecome Canada’s tallest building, the application of new industrial technologies; and the market for steel to support the renewable energy transition is expected to
grow. ArcelorMittal develops innovative products and processes that help its customers reduce their carbon footprint, presenting further growth opportunities. These include light-weight steel for the automotive, construction and packaging industries; preparing by-products for use by other industries, such as blast furnace slag in place of Portland cement and the provision of community heating from waste heat; and facilitating the design of buildings with fewer resources and in ways that enable components to be dismantled and re-used. Progress in these areas is outlined in SD outcomes 2 (products), 3 (infrastructure) and 4 (resources) below.
At the same time, the Company acknowledges the reputational as well as regulatory risks that it may face if stakeholders do not understand or trust the Company's commitment to contributing to a low-carbon future.
The Company's most significant climate-related financial risk over the medium to long-term results from local carbon emissions regulations that require carbon reduction in domestic steel but do not regulate steel imports. Since steelOne Tower. There is a globally-traded commodity, such regulationsconstant challenge to minimize the size of the vertical structural elements, without compromising the economic feasibility of projects and limiting their impact on the floor plans of tall buildings. This technical solution brings several advantages:
•smaller footprint of the column;
•lower prices due to the simplicity of the system itself;
•safe and reliable (i.e. minimal welding is necessary on site and, fire protection can result in carbon leakage as well as an uncompetitive marketplace unlessbe achieved utilizing the surrounding concrete); and
•construction times are decreased dramatically due to off-site fabrication and faster erection.
For railway infrastructures, a completely new range of corrosion resistant rails, RailCor® was launched. These rails show outstanding protection properties from severe corrosion environments, whether they include a carbon border adjustment. The Company believes that the EU Emissions Trading Scheme (ETS) isare installed inside tunnels, city centers or coastal areas. This achievement has been made possible after more than two years of tests on rail tracks under the most immediate example of this, because its Phase 4 (2021 to 2030) requires a substantial reduction in the carbon intensity of European steel but does not include a carbon border adjustment for steel imports into Europe. The Company predicts that less regulated steel will out-compete European-made steel, and therefore carbon emissions will effectively be exported from the EU. Unless a carbon border adjustment is adopted or other adaptations made, the regulations would only change where steel is made, rather than how it is made.
ArcelorMittal engages openly and widely with stakeholders on the potential pathways for low-carbon steelmaking, and the policy conditions needed to support them. It has continuing and constructive dialogue on these topics with its customers and investors, and with global organizations such as the We Mean Business coalition, the World Business Council for Sustainable Development, the Carbon Disclosure Project, the Science-Based Targets Initiative and the International Energy Association.
The 10 SD Outcomes, and ArcelorMittal’s progress towards them, are summarized below:
Outcome 1: Safe, healthy, quality working lives for ArcelorMittal’s people
ArcelorMittal's employees are essential to its ambition to build a high-performing organization. The Company's intended outcome is that its workforce is safe and healthy, is committed to ArcelorMittal's success, and operates with integrity. ArcelorMittal aims to build an inclusive culture in which diversity is valued, and every individual is respected and their potential developed. Safety is the number one priority.
Safety
The Company-wide safety program, “Journey to Zero”, was introduced in 2007. It aims to achieve zero fatalities and lost-time injuries by creating a culture of shared vigilance in which risks and hazards are understood and monitored, best practices are shared, and appropriate action is taken at every level. The Company's remuneration policy links 10% of the bonuses of its leadership - from managers to the CEO to the lost-time injury frequency rate in the business where he or she works. The Company works with trade unions to drive safety improvements through a global partnership, which includes joint local Health and Safety Committees at every production unit and a Global Health and Safety Committee to which they report. This is supported internally by the ArcelorMittal Health and Safety Council.
The Company has seen significant improvements in its LTIFR (the “lost-time injury frequency rate” - the number of injuries per million hours worked that result in employees or contractors taking time off work) since the introduction of the Journey to Zero program. The LTIFR* in 2018 was its lowest ever, at 0.69* incidents per million hours worked, compared to 0.78 incidents per million hours worked in 2017. The industry average was 0.97 incidents per million hours worked in 2017, according to the World Steel Association. For comparison, ArcelorMittal recorded an LTIFR of 3.1 incidents per million hours worked in 2007, the year after the Company's formation.
Own personnel and contractors
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| Lost time injury frequency rate | | 2018 | | 2017 |
| Mining | | 0.61 | | 0.77 |
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| NAFTA | | 0.53 | | 0.73 |
| Brazil (LATAM) | | 0.36 | | 0.43 |
| Europe | | 0.93* | | 1.03 |
| ACIS | | 0.61 | | 0.61 |
| Total Steel | | 0.70* | | 0.78 |
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| Total (Steel and Mining) | | 0.69* | | 0.78 |
*Data does not include the LTIFR for Ilva (subsequently renamed ArcelorMittal Italia) which was acquired on November 1, 2018. ArcelorMittal Italia LTIFR for the last two months of 2018 was 8.20, and the total LTIFR for ArcelorMittal inclusive of this was 0.73.
ArcelorMittal recognizes that, more than improving its performance against LTIFR, it must work harder to ensure that its safety culture prevents fatalities and serious incidents. It is with deep regret that the Company reported 10 fatalities during 2018. No fatalities occurred in its mining operations. Any fatality is a cause of great distress to ArcelorMittal's leadership and the entire workforce. The Company's leadership is driving a campaign to ensure that a culture of vigilance and mutual accountability, in which every individual takes responsibility for the actions of those around them, prevails among the workforce. This includes a series of measures:
more and better detection, recording, and understanding of hazards and risks in order to prevent severe incidents;
improved safety leadership practices, supported by the launch in 2018 of the Target 21 Safety Leadership Program;
the Take Care! training program, rolled out and tracked for workers in every segment;
improved communications internally across the workforce using social media techniques; and
sharing lessons within the steel and other heavy industries.
Improving workers' ability to monitor and analyze potential severe injuries and fatalities ("PSIFs") is a key focus, as it provides a deeper understanding of how safety incidents can arise and therefore be avoided. The volume of incidents logged has increased more than three times since 2016. In 2018, the number of PSIFs recorded pro-actively - in other words where the incident was prevented and logged - increased from an average of 142 per month in 2017 to 205 per month in 2018. Reactive PSIFs - which are a known indicator of the risk of fatality - fell 16% in the same period. The Company believes this pro-active trend is having a positive impact on LTIFR. PSIF is now a KPI for the Company and, alongside fatalities and LTIFR, reported monthly to its leadership.
ArcelorMittal's Take Care! program delivers ‘experiential’ training through modules designed to embed an instinctive safety culture, and participation and completion is tracked across each segment. The Company’s annual health and safety day in 2018 saw more than 198,463 participants view We choose the safest way, its innovative film which won a gold medal at The Cannes Corporate Media & TV Awards.
ArcelorMittal investigates all accidents, and designated members of senior management review all fatalities to ensure lessons are learned throughout the Company. The Global Health and Safety Committee, which held 12 meetings in 2018, is included in this review, and in September 2018 launched a designated sub-group to improve the learning process. The Company supports sites where fatalities have occurred to ensure stronger alignment between Group-level safety strategy and implementation at the site level.
Health
ArcelorMittal takes a proactive approach to the health of employees. Alongside its objective of eliminating accidents, Journey to Zero aims to encourage healthy lifestyles and foster wellbeing, and to reduce occupational diseases to zero. At the local level, initiatives are run to prevent health issues arising from microclimatic conditions and the handling of chemicals, as well as from personal behaviors, such as smoking, or drug and alcohol use. For example, the "Mina Viva" project, developed at ArcelorMittal Mineração Serra Azul mine site for the prevention of alcohol and drug misuse, was the winner of the Protection Brazil 2018 Award, in the Quality of Life at Work category. Across the Company, a corporate initiative in 2018 sought to
identify sites with the highest priorities, and work with them on a one-to-one basis to improve performance. Wellbeing programs help employees address stress and fatigue, and encourage physical activity. The Company aims to continuously improve the hygiene standards within its facilities, and is a member of the International Occupational Hygiene Association. An annual health week provides activities with a local focus on these issues.
The Company runs a program to improve the health of workers in its coke plants, by sharing good practices in health management. It uses bio-monitoring to detect anomalies, measure the effect of the improvements being made, and as an employee engagement tool. Initially deployed in Europe, the project was extended to South Africa in 2018, where local teams began building action plans using best practices learned in Europe.
Other aspects of SD outcome 1
Finding and keeping the right people is key to building a high-performing organization, which is a strategic priority for ArcelorMittal. This means ensuring strong employee engagement and employee development whilst fostering a culture that is both diverse and inclusive. See “Item 6.D—Directors, senior management and employees—Employees”.
Outcome 2: Products that accelerate more sustainable lifestyles
Steel is strong, durable, versatile, formable and recyclable. These qualities suit it to innovative, sustainable solutions for the designers and manufacturers of products that support people's lifestyles, such as vehicles, packaging and household appliances.
ArcelorMittal aims for its steel to be the material of choice for these designers and manufacturers. In recent years, the Company has observed growing expectations for sustainability performance from its customers, adding to the expectations from regulators and investors. It aims to meet and exceed those expectations, and help customers design products that contribute to sustainable development through the energy and resource efficiency of the production process, the affordability of the end product, and their suitability for re-use, refurbishment or recyclability. The Company has developed a Sustainable Innovation ("SI") tool; its ultimate goal is to enable its researchers to evaluate the contribution to the sustainable development of all new products.
ArcelorMittal's global R&D teams work closely with car-makers and automotive suppliers to understand and apply steel solutions to future vehicle design, and the Company believes it is viewed as a leader in technology by most automotive customers, with a global market share of around 18% in 2018.
The Company's R&D offer to automotive customers, S-in motion®, includes new steel grades, processes and applications that further reduce the weight of the basic vehicle structure - technically, the 'body-in-white' - to improve fuel economy without compromising vehicle safety or performance. Examples include a global portfolio of products in its third generation, highly formable ("HF") Advanced High Strength Steel ("AHSS") range, and Press Hardenable Steel ("PHS") products, such as Ductibor® 1000 and Usibor® 2000. ArcelorMittal supports this innovation through investments that enable facilities in Europe and the U.S. to produce new PHS and third generation AHSS steels. For example, the Company introduced its unique jet vapor deposition ("JVD") line in 2017 in Liege, to create a new generation of coated products with improved quality and enhanced functionality (Jetgal®). To enable increased production of the Fortiform® range of automotive products, the Company is continuing to develop quenching and partitioning ("Q&P") technology, which is already installed at its facilities in Gent and Liege, Belgium, and at the Company's AM/NS Calvert joint venture with Nippon Steel and Sumitomo Metals Corp in Alabama, U.S.
ArcelorMittal also develops innovations for appliances and packaging steel to improve their sustainability - for example through new coating techniques, and techniques to reduce weight while maintaining the superior strength of steel. For the packaging sector, a circular economy forum is exploring the opportunities for steel in packaging, with an emphasis on carbon reduction and reuse. For example, specialized steel TH650N exhibits hardness up to six times that of aluminum, and excellent formability; test results in 2018 show that when TH650N is used in combination with TH550, the designed solution can reduce the weight of aerosol cans by around 17%. ArcelorMittal is working to highlight these advantages with aerosol manufacturers. The Company continues to respond to pending or anticipated new legislation requiring ecologically-friendly coatings with the development of steel for food packaging that avoids the need to use chromium VI and bisphenol A.
In 2018,2021, R&D launched 1524 new products and solutions to accelerate sustainable lifestyles, while also progressing further on 17 such product development programs. MS 1200 Jetgal® is one of these new products: this is a new Ultra High Strength Steel that aims to reduce the weight of roll-formed parts. Its mechanical properties are augmented by outstanding coating
uniformity and corrosion protection offered by the Jet Vapor Deposition ("JVD") process will make it particularly attractive for electric vehicle production.
The Company believes that its approach to product development will enable it, and its customers, to contribute to the global sustainable development agendaIn addition, in ways that are aligned to the UN's SDGs, particularly SDG 11 (Sustainable Cities and Communities). See “Item 4.B—Information on the Company—Business overview—Competitive strengths—Research and development” above for further detail.
Outcome 3: Products that create sustainable infrastructure
Steel has the potential to play a vital role in a low-carbon, circular economy. The qualities described in Outcome 2 above - strength, flexibility, durability, and recyclability - all lend themselves to the kind of low impact solutions increasingly sought by customers in the construction, energy, public transport and general industrial markets. ArcelorMittal is committed to raising understanding of the important contribution steel can make to sustainable development and the circular economy, and to innovating alongside and on behalf of its customers in ways that improve durability, reduce weight, cut pollution, or reduce construction times. It believes that it has an important contribution to make to a number of the UN's SDGs, including SDG 7 (Affordable and clean energy), SDG 9 (Industry, innovation and infrastructure), SDG 11 (Sustainable cities and communities) and SDG 13 (Climate action).
ArcelorMittal aims to offer solutions to customers at every stage of their projects. Global2021, R&D offers construction customers opportunities to engage at the design stage, and during product development, and provides access to quality information about the sustainability impacts of products. Innovation in organic coating at the production stage, for example, reduces energy, labor and other costs for customers.
In 2018, the R&D division launched 1127 products and solutions to support sustainable construction, infrastructure and infrastructure,energy generation, while also progressing further on 2117 such product development programs.
In 2018, ArcelorMittal launched Steligence® to highlightConstruction is one of the key sectors for ArcelorMittal. The Company’s R&D effort is focused on providing higher-added-value products that meet customer needs, including their sustainable development objectives.
Steligence® highlights the innovations the Company’s steel has to offer in the design and performance of a building, and to support its customers in their use. Steligence® aims to facilitate the next generation of high-performance buildings by harnessing the sustainability credentials of steel, not just in termsuse of its unmatched recyclability, but alsoproducts. Steligence® adds value through the potential for the re-use of steel components and the reduced use of materials. It is aits holistic approach which helps specialistof helping specialists in the architectural and engineering disciplines to meet the increasing demand for sustainability, in building design as well as the competing demands of flexibility, creativity and cost. Potential benefitscost in high-performance building design by harnessing the credentials of steel through its potential for customers adoptingrecyclability and the Steligence® approach include: more storeys within a given height than with traditional materials; lower costs for foundations becausereduction of weight reductions; and longer uninterrupted spans between columns, resulting in more flexibility for interior floor layouts.materials used.
A key concept within Steligence®Steligence® is makingto make buildings easier to assemble and dismantle. This makes themAs a result, buildings become quicker to build,construct, leading to significant efficiencies and cost savings; itsavings while also createscreating the potential for re-use. This reflects ArcelorMittal'sArcelorMittal’s wider interest in modularization and the potential re-use of steel components - a field it is discussing with customers and in lifecycle assessment ("LCA").its LCA assessments.
ArcelorMittal's INDI building in Ghent was constructed according to ArcelorMittal's Steligence® approach. This approach makes it possible to reconcile the competing requirements in terms of creativity, flexibility, sustainability and financing, using ArcelorMittal's innovative steel solutions. The approachentire life cycle of the building is demonstratedtaken into account, from design to renovation and demolition.
In March 2021, the first bridge in Europe combining prefabricated composite beam – filler beam (known as VFT-WiB®) and weathering steel was inaugurated in Poland. This composite bridge is built with ARCOROX® weathering steel beams, ensuring an external reinforcement for the Company's planned new Luxembourg headquarters, announced in 2017. The building has been designed so that nearly allconcrete bridge.
Due to XCarb® recycled and renewably produced steels, the Company is able to offer steel components can potentially be dismantledproduced with a CO2 footprint as low as 0.33 tonne of CO2 per tonne of sections and re-used in a new building withoutmerchant bars and 0.37 tonne of CO2 per tonne of the need for recycling. ArcelorMittal was presented with the Excellence in Life Cycle Assessment award for its use of LCA to support the Steligence® project at the World Steel Association's 'Steelie' awards in October 2018.
The Company’s expertise in LCA is an important asset in its construction business. LCA is a requirement ofEcoSheetPile™ Plus brand. With these two Environmental Product Declarations ("EPD"EPDs") for construction products in Europe and contributes to increasing, the Company's competitiveness inCompany is capable of supporting the construction sector. For example, an EPD contributesindustry to additional creditsmeet tougher requirements to reduce the embedded carbon footprint of buildings and infrastructure.
Developing breakthrough process innovations to deliver cost reduction, sustainability benefits to meet current and emerging environmental challenges, and new product development.
The creation of unique processes creates value for the Company and its stakeholders by: enhancing the performance of operations through cost efficiency and improved product quality; promoting process-driven product development; and increasingly enabling environmental improvements, including carbon reductions and improvements in Leadership in Energyair, land and Environmental Design certification, onewater. Process improvements contribute decisively to the future of the main international environmental standards for construction projects. The Company's EPDs are reviewed by third partiesCompany, both helping to preserve its license to operate and validated by the Institut Bauen und Umwelt, the Institute of Construction and Environment, and are made available via ArcelorMittal Europe's Constructalia website. The Company is also leading the development of a methodological framework for EPDs in Brazil, where it publishedensuring its first EPD in 2019.
ArcelorMittal also participates in the Worldsteel LCA expert group and the SOVAMAT initiative (SOcial VAlue of MATerials), an international network of experts on the social and environmental impacts of materials. It is a member of the CIRAIG International Lifecycle Chair, the international reference center for the lifecycle of products, processes and services,
and is active in particular in their circular economy working group. It is also a member of the Round table for Product Social Metrics.
In 2018, the Company participated in the EU-funded Sustainable BRIdges ("SBRI") project, aiming to develop a holistic approach to assessing steel-composite bridges by combining LCA, lifecycle costs and lifecycle performance. To reach a wide audience among bridge engineers and authorities, two design manuals were prepared with working examples, and an SBRI ‘app’ was launched to enable the calculation of case studies and comparative analysis of alternative solutions. See “Item 4.B— Information on the Company—Business overview—Competitive strengths—Research and development” above for further detail.
Outcome 4: Efficient use of resources and high recycling rates
ArcelorMittal aims to be acknowledged for using resources in the most efficient and effective ways - ways that create significant value for customers and shareholders as well as for the environment. The Company sees steel and steelmaking by-products as having a far larger role to play in the circular economy of the future and contributing to the UN's SDG 12 (Responsible consumption and production), including target 12.5, which aims "to substantially reduce waste generationfinancial sustainability through prevention, reduction, recycling and reuse".
The Company is one of the world's biggest recyclers, chiefly because of the volume of scrap steel it recycles; this also delivers substantial carbon benefits. It will continue to take advantage of these benefits as global scrap stocks increase, although currently scrap stocks can supply only one third of global demand for steel. See "—Recycling steel," below.
Within ArcelorMittal's operations, resource efficiency efforts take two main forms:
increasing the value created by the steelmaking process through re-using and recycling by-products, solids and waste gases; and
utilizing obsolete scrap steel as a feedstock for both the basic oxygen furnace ("BOF") and the electric arc furnace ("EAF").
Re-use and recycling of by-products. Resource efficiency efforts provide scope for creating considerable value. Wherever possible, by-products are re-used within the steelmaking process; gases, for example, can be re-used as energy on site and for neighboring communities. Dust, slag and sludges can all be re-used in either the integrated steelmaking route (with sinter plant, blast furnaces and BOF) or the EAF route. This reduces the amount of virgin inputs required, reducing both raw material costs and environmental impact. At its Gent site, in 2018 the Company began exploring the use of BOF slag for building protection walls to reduce noise and dust; it is also using BOF slag for internal dust reduction works at Fos and Bremen.
By-products are also bought and re-used by other industries. Mill scale, produced during hot-rolling, is used to make counterweights by manufacturers of washing machines and lifts. Slag by-products are used in road construction, fertilizers and the cement industry. ArcelorMittal has a joint venture with the cement group Ecocem France,circular economy. using granulating blast furnace ("BF")Work in this area includes the re-use of slag as a partial replacementvaluable product for Portland cement. In 2018, the Company opened a new facility at its Dunkirk site,many applications, which will produce 750,000 tonnes of ground granulated BF slag per year. The facility uses the site’s BF off-gas instead of natural gas to dry the material, creating further efficiencies and carbon reductions. It has also begun a collaboration with a consortium of academics to investigate ways to improve the process of ground granulated BF slag for use in concrete.
The Company’s global R&D division continues to explore the development of by-products for the circular economy. In 2018, it completed research on the impact of re-using slag as ballast in offshore wind turbine foundations, to replace ballast made from natural stones and sand. This research has demonstrated that its environmental impact is neutral compared with natural stone,reduces waste while avoiding the ecosystem disruption that can result from the extraction of other materials such as natural stone or sand. The applicationFor example, the Company is already licensed in several countries; where it is not, this research can provide up-to-date impact data to the relevant authorities.
A partnership between global R&D, ArcelorMittal Dunkirk and the Paul Wurth Group aims to demonstrate anmaking innovative treatment for BF sludge, previously a challenging residue to address because it contains zinc. The new hydrometallurgy technique isolates valuable sintering raw materialsre-use of slag in the sludge, enabling 85% of itfollowing applications: ballast in offshore wind turbine foundations to be re-used internally, and is providingreplace natural ballast; a valuable residue to the non-ferro industry to produce zinc. The breakthrough will allow ArcelorMittal
construction material for building protection walls to reduce energy, disposal costs, raw material inputsnoise and CO2 emissions. Engineering ondust; a facility to treat 15,000 tonnes of BF sludge per year began at the Company's Dunkirk site in 2018. The project is supported by public funding from the “Région Hauts-de-France”fertilizer source for agriculture; and the European Regional Development Fund.
The Company is also investigating the potential re-use of slag from furnaces in water filtration and greenhouse gas capture. At the same time, it is seeking ways to reduce the volume of residues left by the steelmaking process where local markets for them do not yet exist.
Global R&D’s miningOther circular economy initiative, led by its Technology for Sustainable Resources ("T4SURE") team, isinitiatives include: working on the use of mining tailings as a secondary raw material, either by finding marketable solutions or generating valuable products to be used in-house.
Recycling steel.Improvement in air, land, water. ScrapWork in this area includes research in technology for cleaning fumes from stacks, reducing dust diffusive emissions, cleaning water discharges, and solving water scarcity issues. In 2021, the Company made progress in supporting slag-cement business by starting to market the granulated blast furnace slag and developed a slag roadmap for its operations in Kazakhstan, focusing on asphalt agglomerates, winter abrasives and railway ballasts.
Progress against air pollution. In 2021, ArcelorMittal's Global R&D division has continued its intensive work to identify the sources of all kinds of dust emissions in some of its plants, based on advanced sensors and new digital tools. In parallel, it has continued to research technologies to control de-dusting in yards and open areas and delivered a first version of Toolbox solutions to the Company’s operations. ArcelorMittal has continued with the industrialization of advanced filtration technologies to reduce emissions at stacks.
Reduction of carbon emissions and energy use. ArcelorMittal’s Global R&D division also continues to research processes to support carbon neutrality (scopes 1 and 2) by 2050. In 2021, the research roadmap was adapted to the Company’s decision for implementing a fast track towards decarbonization (see "—Sustainable Development—Management Theme#2: Climate change") based on innovative DRI and melting technologies (EAF, open slag bath furnace and submerged arc furnace), while also continuing to pursue the Smart Carbon and Siderwin paths. The Company also continued projects which began in 2020. With respect to the Hamburg Hydrogen project, the operating conditions of the new hydrogen-based direct reduction furnace were optimized to avoid the sticking and re-oxidation of the metallic pellets produced in the furnace. The pilot for cold electrolysis of iron, the "SIDERWIN" project, was commissioned at the end of 2021. A bio-char test using VeLoSint (very low sintering technology) showed that it may be possible to reduce carbon emissions by as much as 49%. The R&D Division also supported the European plants in the reduction of their CO2 footprint. The coke consumption in the blast furnace has been significantly reduced due to the development and implementation of technologies enabling the injection off massive amount of hydrogen-rich reducing gases (e.g. coke
oven gas, methane, etc.). Moreover it has been proven that the scrap rate in the Basic Oxygen Furnace ("BOF") converter can be further increased, thus reducing the CO2 emissions, with a new post combustion lance which was designed internally. The R&D division has elaborated a roadmap for developing a proprietary full expert system (a computer system emulating the decision making skills of human expert) to operate the future DRI and new EAFs in a unique, highly variable and challenging conditions (high complexity for obtaining highest quality products with heterogenous raw materials feedstock).
In order to assist with the decarbonization of the Group, ArcelorMittal Mining together with Global R&D are investing significantly in the decarbonization of pellets production by creating programs such as cold bounded products, which means pellets, briquettes and extruded products and also the development of new energy sources for the pelletizing process such as hydrogen and biomass.
Mining process improvements. Global R&D has developed the capabilities to upgrade and digitalize its systems using satellites, drones, wireless sensors and robots to feed a geographic information system for detailed monitoring of tailings dams, in compliance with the Company’s tailings management standard (See "—Sustainable Development—Managing tailings storage facilities"). In the future, this will be extended to both plants and wildlife, thus helping the Company respond to increasing expectations from stakeholders looking for reassurance that biodiversity hotspots are not negatively impacted by the Company’s mining operations. In addition, in 2021, Global R&D participated in the elaboration of a risk assessment for all ArcelorMittal tailings facilities across the globe. With respect to the expansion of the Company's mining operations in Liberia, Global R&D has also been critical in providing modifications that allowed higher recovery rates, reduction of tailings volume and keeping the high-grade concentrate. At the same time, Global R&D started developing the dry stacking tailings program for the project, in compliance with the Company's tailings management standard. For more information on environmental impact, delivering energy saving programs and lowering emissions of solids, water and gases, see “—Sustainable development—Management Theme #2: Climate change and Management Theme #4: Environment”.
Fully capitalizing on opportunities from the digital economy.
ArcelorMittal envisages itself as a fully digital enterprise where everything is connected. ArcelorMittal invested early and significantly in automation systems, and for decades the Company has been a pioneer in the introduction and use of artificial neural networks. ArcelorMittal is currently fully committed to a total digital transformation, including significant advances in a number of fields and relies on the secure and reliable performance of its digital technology platforms,
information technology systems, continuously updating its security measures to avoid data breaches or data theft (see also “Introduction—Risk factors”). The Company is focusing its efforts on:
•Global platforms (Big Data, Industrial Internet of Things ("IIoT"), Collaborative Digital Product Development);
•Manufacturing digitalization (Production, Quality and Maintenance); and
•Business digitalization (Procurement, Commercial, Supply Chain, Strategy, Finance).
The Company's global standard platform for Big Data storage and analytics (ARTHUR) and Industrial Internet of Things (DASHIELL) avoids the use of a mosaic of technologies and facilitates the global sharing and rapid implementation of Artificial Intelligence ("AI") models with proven results among all units. This approach makes the Company’s size a key advantage.
In its digital strategy, the Company makes use of solutions that are directly acquired in the market, solutions that are co-developed with technology suppliers, and solutions that are fully developed internally to take advantage of the rich knowledge interfaces the Company has (process, product, AI, math optimization). This combination leads to algorithms with performance superiority to what is available in the market for the Company's core business and is thoroughly benchmarked.
The main driver for digitalization at ArcelorMittal is a competitive advantage, with new technologies and especially developing cutting-edge AI and mathematical optimization algorithms.
In 2021, the Company has continued with significant advances aligned with its digital plan and global strategy, where it can highlight a few examples:
•Complete design of digital architecture and map of R&D models as standard solution for ArcelorMittal's new decarbonized footprint based on hydrogen DRI and EAF units, in agreement with the Company Digital Council.
•Increased number of decision-based tasks for ArcelorMittal's workforce are taken by algorithms and artificial intelligence improving results and efficiency. For instance, production scheduling of one shift in one of the Company's most complex mills used to take around 3 hours for a person to achieve a technically feasible schedule while it now takes 10 minutes to achieve an optimal one. Additionally, the R&D cutting-edge algorithms developed in the past for finishing operations have been adapted and complemented with
new mathematical optimization techniques for upstream manufacturing, presenting significant performance improvements in productivity and production cost.
•Global R&D has invested time and effort in mastering new mathematical techniques combined with AI to better deal with uncertainty management. The Company has applied these techniques successfully on strategic raw material inventory, reducing the need for certain materials during the winter season and reducing operating costs while controlling risk.
•ArcelorMittal's web sales platforms now offer additional material available for immediate purchase and short lead-time. This has been very well received by customers in Europe who already interact with the new system without any human intervention. Together with ArcelorMittal’s commercial workforce, the R&D division has developed additional specific algorithms and recommendation systems that are implemented in new IT commercial platforms adding value to ArcelorMittal's customers, who are also increasing the digital nature of their activities and ways of doing business.
•The best product quality, through better prediction using advanced analytics made possible through Big Data and distributed computing. This means production issues can be detected before they happen, enabling adjustments to be made to production parameters to avoid them.
•Maximizing equipment operational time and avoiding unplanned stoppages via predictive maintenance. The Company is already seeing positive results in several production units and is further deploying these solutions across the Company.
•While the implementation of large-scale digital and industry 4.0 projects is challenging in a company of ArcelorMittal’s size, once implemented these projects bring major benefits and value because of the Company’s scale and complexity. The global standard platforms strategy has contributed significantly to this initiative.
ArcelorMittal’s approach is to work with a broad range of entities, thus maximizing the knowledge transference into its capabilities. This has led to the development of new algorithms using Big Data technologies that can solve problems in ways that were not possible before, mainly due to limitations in the manipulation of large volumes of data.
Seizing the potential of additive manufacturing. ArcelorMittal expects significant potential in additive manufacturing/3D
printing. During 2021, the Company’s operations have progressively increased the use of 3D-printed spare parts, specifically through the Company’s joint venture Thesteelprinters, S.L ("Steel Printers") with Frankstahl. The printed spare parts from Steel Printers have been used in the production process at Company’s plants in four countries. As 3D technology matures, it will have an increasing impact on the way the Company and its customers do business. In 2021, the Company announced its intention to become a key player in the supply of steel powders and wires to the additive manufacturing industry and large progress has been made in the ATOM project (proof of concept project which will show the viability of producing and selling steel powders which will be used for 3D-printed steel parts), aiming at producing first ArcelorMittal’s steel powders during 2023.
Sustainable development
ArcelorMittal recognizes the important contribution that its products and processes make to Sustainable Development (“SD”). As part of this, it aims to ensure that its steels are the materials of choice in the transition toward a circular and low-carbon economy. This means preparing for and responding to the most significant long-term environmental and social trends that are transforming the context in which the Company operates. These include sector-focused decarbonization ambitions aligned with the Paris Agreement, the transformation of society toward a circular economy, and the growing demand from customers for adherence to sustainability standards across supply chains, from mine sites to product delivery.
Launched in 2015, ArcelorMittal’s SD framework sets out the 10 SD outcomes that it needs to achieve in order to protect and grow long-term value for its stakeholders. These are aligned with, and aim to contribute to, many of the United Nation’s Sustainable Development Goals (“SDGs”). Details of the relationship between the 10 SD outcomes and the SDGs are included in the reporting index to the Company’s Integrated Annual Review 2020, which is available on the corporate website and will be updated for 2021 in the first half of 2022. The outcomes provide the basis for engaging ArcelorMittal’s workforce on SD issues, and support the development, management and reporting of sustainability across its operations. The 10 SD outcomes are:
| | | | | |
| ArcelorMittal's 10 SD Outcomes: |
| 1 | Safe, healthy, quality working lives for ArcelorMittal’s people |
| 2 | Products that accelerate more sustainable lifestyles |
| 3 | Products that create sustainable infrastructure |
| 4 | Efficient use of resources and high recycling rates |
| 5 | Trusted user of air, land and water |
| 6 | Responsible energy user that helps create a lower-carbon future |
| 7 | Supply chains that ArcelorMittal’s customers trust |
| 8 | Active and welcomed member of the community |
| 9 | A pipeline of talented scientists and engineers for tomorrow |
| 10 | ArcelorMittal’s contribution to society measured, shared and valued |
To drive its purpose of “inventing smarter steels for a better world”, the Company recognizes the value in creating an integrated marketing offer that combines many aspects of its 10 SD outcomes. These include being the supplier of choice for innovative products while maintaining steel and mine sites that operate to standards that meet and exceed the sustainability expectations of customers and investors. This is at the heart of ArcelorMittal’s approach to SD. The Company listens carefully to stakeholders, both locally and globally, and recognizes a trend of rising expectations among them regarding community issues and the world’s transition toward a circular economy and the steel industry’s critical role in that.
Aware that stakeholder trust is a key value driver, ArcelorMittal adopts a Board-led strategic approach to strengthening trust through stakeholder engagement. As such, integrating SD into the business is essential for the Company to achieve long-term value for its shareholders and other stakeholders, while maintaining a profitable market share.
Over the last five years, ArcelorMittal has been incorporating the SD outcomes into its activities, beginning at the site level, by raising awareness about the need to factor SD into planning and results reporting. ArcelorMittal’s Integrated Annual Review, published every year, is a central element in the Company’s commitment to engage stakeholders and communicate its financial and non-financial performance. It forms part of the Company’s wider approach to reporting at a global and local level, supported by reports that provide details on specific areas of the Company’s work or are designed for the use of specific stakeholder groups. The local sustainability reports are available on respective country websites of the Group.
In 2018, the Company’s Board of Directors established the Appointments, Remuneration and Corporate Governance and Sustainability Committee, which included oversight of the Group’s sustainable development policies, strategy and performance centered on safety, climate change, environment, social and customer reassurance. In 2021, the sustainable
development component of board review was provided with it its own committee and renamed the Sustainability Committee (“SC”), which is led by Clarissa Lins, non-executive and independent director, who has specific professional expertise in the area of sustainable development. The Committee oversees the Group's sustainable development policies, strategy and performance centered on safety, climate change, environment, social and customer reassurance.
The SC reviews the Company’s progress against each of the below five management themes on a quarterly basis ensuring active, specific and robust governance.
| | | | | | | | |
| Management Theme | Relevant SD Outcome |
| 1 | Safety | 1 |
| 2 | Climate change | 6 |
| 3 | Customer reassurance | 7 |
| 4 | Environment | 4, 5 |
| 5 | Social | 1, 8, 9, 10 |
At the Executive level, a Sustainable Development Council ("SDC") also meets quarterly in between SC meetings to drive progress and respond to feedback from the SC. The SDC is chaired by Brad Davey, an Executive Vice President ("EVP") and head of corporate business optimization, who is responsible for technology, R&D, commercial coordination, capital goods, communications, corporate responsibility and global automotive. As SDC chair, he discusses environmental, social and governance ("ESG") issues with the Executive Office and recommends topics to be discussed with the SC and the Group Management Committee.
Given the importance of climate change and decarbonization to the business, the Company formalized the establishment of an Executive-level Climate Change Committee ("CCC") to provide recommendations and responses, to the Executive Office and SC as to the level of progress needed to maintain its chosen position as a global leader in the steel sector on climate change. It also guides the business in understanding the risks and opportunities across its value chain associated with the transition to the low carbon economy and adverse physical effects of climate change. Brad Davey is also the chair of the CCC.
The Company is committed to transparency, as demonstrated by the comprehensive SD disclosures made in the Integrated Annual Review and Fact-book each year. In addition, it published its first Climate Action Report in May 2019, a Climate Action in Europe report in May 2020, and the second Climate Action Report in July 2021. These serve as ArcelorMittal’s response to the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) as well as the Climate
Action 100 Net Zero benchmark. The Company is working towards full disclosure on these.
The Company has started the TCFD climate scenario analysis project to better understand the potential future financial impacts on the business resulting from policy, technology, market, legal and physical climate-related risks and opportunities. The project is expected to be finalized in the second quarter of 2022.
The Company is committed to adopting a leadership position in the decarbonization of the steel industry in terms of target-setting, performance and disclosure.
The Company now sees the need to go beyond transparency and invest in stakeholder dialogue by leading collaborative conversations with stakeholders on climate action and multi-stakeholder standard setting processes and certification for both steel sites and mines (see “Management Theme #3: Customer reassurance” below).
ArcelorMittal is a founding member, with Board seat, of the steel industry’s first global certification standard, ResponsibleSteel™. It aims to provide customers, investors and stakeholders with reassurance regarding sustainability throughout the steel value chain, as well as demonstrate the credibility and rigor of audits of the Company's social and environmental performance at its steel plants and mines.
ResponsibleSteel™ audits operations against the 12 ESG principles. The Company has certified ArcelorMittal Europe – Flat Products sites in Germany, Belgium and Luxembourg in 2021 and is planning to certify the rest of ArcelorMittal Europe – Flat Products sites and also ArcelorMittal Europe – Long Products and ArcelorMittal Brazil sites in 2022.
The Company has also committed to external certification by the Initiative for Responsible Mining Assurance (“IRMA”), an internationally recognized third-party verification and certification standard. ArcelorMittal's mining operations in Canada, Liberia, Brazil, Mexico and Ukraine have started the IRMA self-assessment process and are working towards transparency by end 2025. (see “Management Theme #3: Customer reassurance” below).
Both schemes will provide additional reassurance regarding ArcelorMittal’s sustainability standards and will also strengthen its governance standards. The Company’s approach to SD based on the five management themes is summarized in the following pages.
Management Theme #1: Safety
For ArcelorMittal, safeguarding the lives of people is the paramount priority, and the ultimate objective remains to reduce the number of accidents and fatalities to zero. While the Company is proud of the way in which its team has worked to
deal with COVID-19, it recognizes the need to improve its health and safety record and is working tirelessly towards this.
COVID-19
While the second year of the pandemic was different to the first, remaining vigilant is vital, as the recent new waves have shown. In 2021, ArcelorMittal sought to build on the lessons learned transitioning the business in the previous year. In particular, it focused on promoting vaccines wherever possible and joined forces with public bodies in several locations to make them available to not only Group employees, but also local residents. The Company continues to actively combat the impact of the pandemic, both on the business, by monitoring all sites and stress-testing its policies, and in regions where it operates, by donating essential medical supplies and equipment. See also Management Theme #5: Social below.
Increased focus on units with poorer performance
ArcelorMittal has made some progress regarding occupational health and safety. At the same time, its overall performance has been essentially flat for several years now, leaving considerable room for improvement.
Analysis of the fatalities over the past four years shows that the most common causes are moving machinery, vehicle injury and falls from height. The Company has sought to address all of these by introducing numerous measures. In cases involving moving machinery, for example, it has instituted annual reviews of its global Hazard Identification and Risk Assessment ("HIRA") tool, sought to take into account local conditions and introduced mandatory ‘Stop, Think and Act’ measures. Where vehicles have been involved, ArcelorMittal has modified and updated its Fatality Prevention Standard 006 to introduce mandatory alarms for safety belts and parking brake and proximity detectors for certain industrial vehicles, plus additional details about wheels and tire maintenance. To address falls from height, the Company has Fatality Prevention Standard 005, strengthening requirements for roofing activities, integrating learning points from fatalities in 2020, and adding measures regarding dock activities that led to deaths last year.
In 2021, 29 employees lost their lives while working at the Company’s facilities: 16 in the steel business and 13 in mining (including the tragic loss of life of six employees following a gas and coal outburst that occurred at the Abayskaya mine in ArcelorMittal Temirtau, Kazakhstan in November 2021).
The LTIFR for the Company, defined as the number of injuries per million hours worked that result in employees or contractors taking time off work, was at 0.79 in 2021 compared with 0.61 in 2020. For comparison, ArcelorMittal recorded an LTIFR of 3.1 incidents per million hours worked in 2007, the year after the
Company's formation. The table below shows the LTIFR by segment for the years ended December 31, 2021 and 2020:
| | | | | | | | | | |
| | For the year ended December 31, |
| Lost time injury frequency rate* | | 2021 | | 2020 |
| Mining | | 0.32 | | 0.27 |
| NAFTA | | 0.40 | | 0.49 |
| Brazil | | 0.22 | | 0.28 |
| Europe | | 1.19 | | 1.07 |
| ACIS | | 0.94 | | 0.64 |
| Total | | 0.79 | | 0.61 |
*Data does not include the LTIFR for ArcelorMittal Italia which was acquired on November 1, 2018 and became a public-private partnership on April 14, 2021.
The fatalities are tragic and unacceptable, and ArcelorMittal is doing its utmost to avoid any reoccurrence. The Executive Office, the Board and the SC review and discuss safety performance regularly and have instigated several changes designed to support incremental improvement in it. At the Executive level, this includes reconfiguring the Global Health and Safety Council ("GHSC") under the chairmanship of Jefferson De Paula, an Executive Vice President and CEO of ArcelorMittal South America Long. Additionally Brad Davey, EVP and head of business optimization, has taken up additional responsibility for corporate health and safety. The GHSC reports to Aditya Mittal, CEO of ArcelorMittal.
One major achievement of the GHSC is the development of a revised Group-wide safety plan. It supports the three pillars of the Company’s long-term safety strategy: namely, fatality prevention, risk management and safety leadership. It includes the following new objectives: conducting analysis to identify site-specific gaps; pairing high-performing sites with those that need more help; preparing detailed action plans to ensure quality and consistency when implementing ‘golden tools’; ensuring minimum requirements for in-house safety training; and carrying out close follow-up on leading KPIs to ensure improvement.
In addition to the GHSC meetings, additional safety meetings are being held regularly by the chairman of the council and his team follows up on specific identified actions. These meetings have particularly focused on those segments with the biggest safety challenges and the main causes of fatalities over the last three years, which have been identified as people crushed by moving machinery, crushed or rolled over by a vehicle, and falls from height.
Segment COOs have also been ‘twinned’ so they can learn directly from each other and ensure that change is led by the Company's most senior leaders.
Communication with leadership has also strengthened. Safety has always been a topic of the quarterly leadership presentations, led by the Executive Chairman and CEO. Now the chair of the safety council also provides an update on activity during the prior quarter with a summary of main lessons learned and actions implemented to take the entire Group to the interdependent stage of the Bradley Curve.
Chief executives and managers have been tasked with implementing safety culture programs for all employees and contractors, as well as ‘golden tools’ such as in-person training, hazard identification and risk analysis, pre-shift safety meetings and shop floor audits. One particular focus is identifying potential severe injuries and fatalities ("PSIFs") and unsafe situations through analysis, action and follow-up, thereby working to avoid them in the future. In 2021, the Company detected and addressed 4,300 PSIFs, compared with 3,700 in 2020. PSIFs alongside deaths and LTIFR are reported monthly to leadership as part of the governance process.
ArcelorMittal believes that the changes being implemented will make a significant positive difference. This includes looking at the health and safety impact of every capital expenditure decision. The Company is evaluating and tracking this progress regularly at the levels of the SC, Executive Office, Management Committee and the leadership group of 300 vice presidents and general managers, as well as with segment leadership teams.
Oversight
While the GHSC monitors progress on safety – using SWOT, KPI, GAP and other forms of analysis to devise action plans, monitor progress and identify next steps – the SC is responsible for oversight on behalf of the Board. The SC meets quarterly, and safety is at the top of every agenda. In addition, it calls ad hoc meetings regarding safety with executives and other leaders from across the business.
When a fatality occurs, all levels of management are informed and a comprehensive review takes place, including reviews with the chief executives of the site and segment involved. They are expected to inform the Executive Office and SC about the circumstances and proposed preventative measures, together with broader lessons for the Group. With a view to applying this as effectively as possible, ArcelorMittal reviews its safety tools and standards regularly.
While the Company expects all employees to be responsible for themselves and their colleagues, instilling a true safety culture begins at the top. As part of this, in 2021, ArcelorMittal increased the proportion of bonuses linked to safety-related KPIs for chief executives and managers from 10% to 15%. This includes PSIFs, which are considered a major indicator of safety performance. In addition, leaders are now expected to be
directly involved in training their teams in the area, another crucial part of bringing about cultural change.
Brazil in focus
ArcelorMittal’s operations in Brazil have had zero fatalities in over five years and reported an LTIFR of 0.22 for 2021, the lowest in the Group.
This achievement is largely due to a combination of constant vigilance, mutual accountability and strong leadership. Over the last five years, the business in Brazil has instilled a ‘culture of care’ throughout its activities, from training to shop floor leadership to consequence management. In doing so, it has reached the interdependent stage of the Bradley Curve. This is known to support the best safety results through not only strong tools and processes but also shared responsibility and ownership. Underpinning this is a strong belief that zero accidents is an important resource for steelmaking,achievable target.
Jefferson De Paula, one of the two CEOs in Brazil, was an obvious choice to be the first chair of the new GHSC. The Company has long used its global presence to share knowledge and drive progress, and the new body has taken this to the next level in two ways. First, by being a platform for safety coordinators to share best practice. Second, by convening the segment chief executives quarterly to drive Group safety performance through leadership.
Management Theme #2: Climate change
Introduction
Steel is already the circular material of choice due to its lower carbon footprint and infinite recyclability. And it has a vital role to play in a net-zero world. The Company believes that lower- emissions steel has the potential to be the backbone of the buildings, infrastructure, industry and machinery, packaging and transport systems that will enable governments, customers, and investors to meet their own net-zero commitments.
As a global industry leader, ArcelorMittal recognizes its responsibility to contribute to a sustainable future for the planet and society. As part of this, it is fully committed to the objectives of the Paris Agreement. In September 2020, it announced a Group-wide commitment to being net-zero by 2050. In July 2021, it published its second Climate Action Report, in which it announced a target to reduce its carbon emissions intensity by 2030 of 25% globally (scope 1 and 2, attributable to the Company's organizational and operational boundaries in accordance with the GHG Protocol), while increasing its target for Europe from 30% to 35% (Both targets cover scope 1 and 2, for steel and mining, per tonne of crude steel).
The 2030 group carbon emissions intensity reduction target announced this year reflects the unequal pace of change that is
the reality of the world’s decarbonization journey. In regions like Europe, the Company can be more ambitious. In other regions, ArcelorMittal must recognize that without sufficient incentives and policy support, it is much harder for steel industry to decarbonize and remain competitive. Policymaking therefore has a catalytic role to play, and the Company will continue to step up its advocacy for policies that support the acceleration of this transition (See below: Key drivers to support steel industry’s transition).
ArcelorMittal expects the pace of change to accelerate as other parts of the world become more ambitious with their transition plans and that optimism has given ArcelorMittal the confidence to commit to publishing a Science Based Target within two years.
Against this context, the Company believes it is sensible to continue to develop two pathways that have the potential to achieve zero carbon-emissions steel: Innovative DRI and Smart Carbon. A third pathway, direct electrolysis of iron, also represents considerable potential – albeit within a longer time horizon.
All three pathways could lead to low carbon-emissions steelmaking. However, they pose significant challenges in terms of new technology, expanded clean energy infrastructure needs, including infrastructure for the transport and storage of carbon dioxide. They also lead to structurally higher costs of steelmaking. As such, for them to become a reality, a combination of policy and market conditions are required.
The intention is that over time low emissions technologies will become more competitive as the carbon price increases and is applied globally, and as the technologies become more mature and efficient. We anticipate that this will take at least ten years. During this transition period support will be required for innovation because the capital expenditures will not yield an immediate return and will limit operational competitiveness.
To achieve this reduction the Company has estimated it will require a gross investment of approximately $10 billion of capital expenditure. Over time, and with the deployment of appropriate technologies, it is expected that low-carbon steel-making technologies will become more competitive than higher-carbon steel-making technologies. However, this is not the case today and therefore companies will need support through well-designed policy to help moderate the initial capital costs, which will not yield a reasonable return in the short-to-medium term, as well as the higher operating costs in the transition period that could otherwise render them uncompetitive. ArcelorMittal believes support of approximately 50% of total costs will be needed to enable companies to remain competitive regionally and globally through the transition period. The Company expects to deploy approximately 35% of this approximately $10
billion investment by 2025 with the remainder in the second part of this decade. In 2021, the Company has made meaningful progress in its decarbonization journey and announced further steelmaking transformation investment plans in Canada, Belgium, France and Spain with 19.5 million tonnes anticipated carbon emissions reductions for a total amount of $5.6 billion out of the $10 billion investment needed for its 2030 plan; alongside plans to create the world’s first full-scale zero carbon emissions steel plant in Sestao, Spain, by 2025 and plans for further steelmaking transformation in NAFTA (see below: Technologies pathways). See “Company overview—Key transactions and recent developments”.
These initiatives will enable ArcelorMittal to be ahead of its sector in the net-zero transition, and supplement the decarbonization projects it already has underway which enable the Company to pass its carbon emission reductions onto customers for the first time via an audited certification scheme. The first XCarb™ certified tonnes were sold in 2020. The amount of this product available increased to 120,000 tonnes in 2021. The Company expects a run rate of 600,000 tonnes by the end of 2022 as it continues to drive down its emissions following investments in new technologies (see below: ArcelorMittal's three XCarb™ initiatives).
ArcelorMittal is committed to playing a leading role in decarbonizing the steel industry and it actively and directly engages with policymakers and organizations that advocate for the policies and conditions that will enable steel to achieve its net zero transition. This includes both the Company’s research indicatesdirect advocacy activities with policymakers and its indirect influence via stakeholder climate initiatives and also industry associations (see below: Collaborations).
The Company’s activity and progress continues to be overseen by a robust governance structure that includes an executive-level Climate Change Committee and the Board Sustainable Committee, chaired by an independent non-executive director. Having set a 2030 Group target, ArcelorMittal will link this to executive remuneration (see "Management and employees—Compensation—Long-term incentive plan").
In terms of investment decision-making, each major capital expenditure project proposal is required to demonstrate its carbon impact to the Investment Allocation Committee ("IAC"). The IAC considers both the potential future carbon cost as well as the capital cost of decarbonization, to maximize the Company's chances of achieving its targets while ensuring each project is economically justifiable and earns its cost of capital. It is a crucial part of ArcelorMittal’s strategy to manage risk and deliver long-term growth.
The Company's targets
ArcelorMittal is committed to reaching net-zero on a global recycling ratesbasis by 2050. The Company has now adopted an ambitious set of carbon targets with which to lead the sector: by 2030, the Company is targeting a 25% reduction in its CO2e emissions intensity across its global steel and mining operations, with an increased European target of 35% (up from 30%). Both targets cover both scope 1 and 2. These targets create the milestones the Company needs to achieve in order to meet its long-term target of net-zero by 2050, and are set against its 2018 baseline. For the purpose of setting a Group target, the Company has made a key set of assumptions as a base case:
• The cost of green hydrogen will become increasingly competitive over the next decade but will still require government support.
• Carbon capture, utilization and storage infrastructure will take time to be built at scale. While Europe is expected to take the lead, CCUS infrastructure has the potential to expand quickly in the US and Canada – providing some potential upside to our assumptions.
• Different regions of the world will continue to move at very different paces and the level of climate ambition will differ between jurisdictions at any given time.
• The introduction of climate-friendly policies in other regions will be 5-10 years behind Europe.
• As it has been reported, 2060 may not be a realistic net-zero target for obsoletedeveloping economies, which may mean emissions do not peak until 2030.
These assumptions form the basis of the policy-based outlook outlined in the Company’s first Climate Action report, in which the Company demonstrated how the speed of decarbonization by steelmakers is linked to policy developments. ArcelorMittal’s decarbonization strategy in each part of the world where it
operates is now based on the same assumptions. In some countries, for example Europe and Canada, the Company sees sufficient policy incentives to enable ArcelorMittal to ‘Accelerate’ its decarbonization plans. Where these conditions do not yet exist, the Company will continue to make improvements to ‘Move’, but it is difficult to ‘Accelerate’ without becoming uncompetitive in that market.
The following table provides a summary of key metrics with 2018-2020 data excluding ArcelorMittal USA and Acciaierie d’Italia (ex ArcelorMittal Italia). The metrics for 2021 will be published with the Integrated Annual Review in 2022.
Net zero roadmap
In July 2021, in its second Climate Action Report, ArcelorMittal published a net-zero roadmap detailing its journey to net zero for the first time. It is based on five initiatives that will help to achieve carbon neutrality by 2050: transforming steelmaking, transforming energy, increasing scrap use, sourcing clean electricity, and offsetting residual emissions.
Transforming steelmaking: Over the coming decades, the steel industry will undergo a transition not seen for over 100 years. This includes switching ironmaking from blast and basic oxygen furnaces (“BF-BOF”) to DRI and iron ore preparation from sinter plants to pellet plants. DRI is usually coupled with the EAF method of steelmaking. Until now, the use of DRI-EAF has been limited except in regions where gas prices are low. However, given the rising cost of carbon and need to decarbonize, the potential of green hydrogen is now making this look increasingly economically feasible.
Transforming energy: In recent years, while energy use in BF-BOF steelmaking has become much more efficient and continues to evolve, it remains heavily dependent on fossil fuels. At the same time, a shift towards cleaner energy is underway. This will involve one of three approaches, or a combination thereof: clean electricity (which could be in the form of green hydrogen), continued use of fossil carbon coupled with carbon capture storage ("CCS") to ensure that no carbon is emitted, and use of circular carbon either through natural or synthetic carbon cycles. Natural carbon cycles include the use of sustainable forestry and agriculture residues, to produce bioenergy for steelmaking. Emissions from this will be captured by the regrowth of the biomass waste used. Synthetic carbon
cycles rely on the use of waste plastics as an energy source, transforming the carbon in waste gases through carbon capture usage ("CCU") into equivalent new plastics and ensuring that no emissions are generated.
Increasing scrap use: In addition to using scrap in EAF, the use of low-quality scrap in the BF-BOF steelmaking process can be increased in several ways. These include improving steel scrap sorting and classification, installing scrap pre-melting technology and adjusting the steelmaking process to accommodate increased amount of scrap.
Sourcing clean electricity: To reduce its Scope 2 emissions, ArcelorMittal will need to focus mainly on sourcing low-carbon electricity. This will be an increasing challenge, as it launches projects to transition from BF-BOF to scrap and DRI-EAF technology, which will result in electricity becoming a greater part of the energy mix used to make steel. As decarbonizing the overall electricity grid is unlikely, the Company plans to do this by purchasing renewable energy certificates and through direct power purchase agreements with suppliers from renewables projects.
Offsetting residual emissions: Despite the commitment to achieving net zero from operations, residual emissions are likely: those for which either there will be no feasible technological solution or an approach involving excessively high economic or social costs. ArcelorMittal currently standestimates these at 87%less than 5% of its overall emissions. To deal with them, it intends to buy high-quality offsets or launch projects to generate high-quality carbon credits that would not have happened without its intervention.
Technology pathways
The steel industry is a large carbon emitter and responsible for 7-9% of global CO2e emissions. The majority of this today is the result of BF-BOF steel production, which mainly uses coking coal in the blast furnace to turn iron oxide into iron which is then cast into steel. BF-BOF steelmaking currently accounts for 1.4 billion tonnes of the 1.9 billion tonnes in annual steel production and has an emissions intensity of an average of 2.2 tonnes of CO2e per tonne of steel (source: WSA, 2021; IEA, 2020).
While the use of scrap will increase for the coming decades that means achieving a zero carbon-emissions steel industry by 2050 is predominantly reliant on making net zero primary steel. While ArcelorMittal produces lower-carbon steel via scrap and EAF (approximately 11% of our global production is via this route), its efforts are focussed on successfully decarbonizing primary steel-making.
The Company is increasingly confident this is achievable and is actively developing two technology pathways (Innovative DRI and Smart Carbon) that have the potential to deliver zero-carbon emissions steel.
Innovative DRI: As renewable and low-carbon electricity becomes increasingly available, the production of affordable, industrial-scale green hydrogen becomes a possibility and the prospect of zero carbon emissions steel made via the green hydrogen-DRI-EAF route becomes viable. In Europe, the Company’s strategy is largely focused on the Innovative DRI pathway. This reflects the commitment in Europe to prioritize the availability of green hydrogen at competitive prices.
Smart Carbon: This involves modifying the blast furnace route to create near-carbon zero steelmaking through the recirculation of top gas, enrichment with hydrogen and the use of circular carbon – in the form of sustainable biomass or carbon containing waste streams – and CCU/CCS — all technologies that the International Energy Agency and the UN Intergovernmental Panel on Climate Change see as critical to achieving net-zero by 2050. Smart Carbon also has a potential to become carbon negative. ArcelorMittal has progressed well on constructing several commercial-scale projects to test and prove a range of Smart Carbon technologies.
Carbon neutrality in the Smart Carbon route can be achieved by relying on the earth’s natural carbon cycle and using biowaste materials, such as sustainable forestry and agriculture residues, to produce bioenergy for steelmaking. Other biomaterials such as waste plastics can also be used, thereby helping to reduce the world’s plastic waste challenge. Carbon by-products from steelmaking can further be converted back into biomaterials at the end of the steelmaking process in a fully circular fashion.
Direct Electrolysis of Iron: This is a third potential technology route, which is at an earlier stage of development, and so is not expected to mature in this decade. Nonetheless, the Company remains cautiously optimistic about this as a future route.
Supported by two net-zero pathways, innovation is escalating across the Company’s global footprint, driving ArcelorMittal towards its decarbonization ambitions.
Innovative DRI-EAF route
Sestao and Gijón, Spain
ArcelorMittal’s Sestao plant will become the world’s first full-scale zero carbon-emissions steel plant. This is enabled by an investment of €1 billion into the Company's plant in Gijón, for the construction of a hydrogen DRI plant and a new hybrid electric arc furnace. This investment is expected to deliver a reduction in carbon emissions at the Sestao site of up to 50% within the next five years. Around 1 million tonnes of DRI will be transported to Sestao to be used as feedstock for the plant’s two EAFs. As a result, by 2025, the Sestao plant is planned to produce 1.6 million tonnes of zero carbon-emissions steel. This will be achieved by increasing the proportion of circular, recycled scrap and using green hydrogen-produced DRI, powering steelmaking assets with renewable electricity, and utilizing carbon-neutral energy inputs, such as sustainable biomass, to replace the remaining use of fossil fuels in the steelmaking process. The Company has signed a Memorandum of Understanding with the Spanish government that will underpin the €1 billion required for the transition.
Hamburg H2 project
In Germany, ArcelorMittal already operates Europe’s only DRI-EAF plant in Hamburg, where the switch to using hydrogen instead of natural gas in the iron ore reduction process is being prepared. A project is underway to test the ability of hydrogen DRI on an industrial scale, as well as testing carbon-free DRI in the EAF steelmaking process. The objective is to reach industrial commercial maturity of the technology by 2025, initially producing 100,000 tonnes of DRI a year. The German Federal Government has expressed its intention to provide €55 million of funding support towards the plant’s construction.
Bremen and Eisenhüttenstadt
ArcelorMittal is planning to build a large-scale industrial plant for the DRI-EAF based steelmaking at its site in Bremen, as well as an innovative DRI pilot plant in addition to an EAF in Eisenhüttenstadt, following the announcement of the planned expansion of Germany’s hydrogen infrastructure and alongside its existing H2 Hamburg project. The Bremen plant will produce ~2 million tonnes of DRI per year and supply ArcelorMittal EAFs in Bremen and Eisenhüttenstadt. Bremen and Eisenhüttenstadt will produce up to 3.5 million tonnes of steel by 2030, with significantly lower CO2e emissions. Depending on the amount of hydrogen available, CO2e savings of more than 5 million tonnes could be possible.
The technology conversion requires investments which are estimated to be in the range of €1-1.5 billion.
The feasibility of the project depends strongly on the governmental support and the availability of economically viable energy infrastructure and supply.
To support and enable the availability of hydrogen for steel production, ArcelorMittal is participating in the establishment of regional hydrogen networks. These include North German hydrogen projects: the Clean Hydrogen Coastline to benefit Bremen and the Hydrogen Cluster East Brandenburg to enable hydrogen supply for Eisenhüttenstadt. ArcelorMittal is also collaborating with Shell, Mitsubishi and other cross-industry companies to form the Hamburg Green Hydrogen Hub, with the goal of generating energy from renewable sources.
Fos-Sur-Mer and Dunkirk
ArcelorMittal will implement €1.7 billion of investments by 2030 to accelerate the decarbonization of its steelmaking sites in Fos-sur-Mer and Dunkirk while maintaining equivalent production capacities:
–In Fos-sur-Mer, ArcelorMittal will build an EAF. This new unit will complement the ladle furnace announced last March and supported by France’s recovery plan, ‘France Relance’. Together these investments will turn Fos-sur-Mer into a reference site for the production of low carbon, circular steel, made from recycled steel;
–In Dunkirk, ArcelorMittal will build a 2.5 million tonnes DRI unit to transform iron ore using hydrogen instead of coal. This DRI will be coupled with an innovative technology electric furnace and completed by an additional EAF. Other investments are already under way to continue to increase the proportion of scrap steel used.
This investment will enable a transformation of steelmaking in France and a total reduction of approximately 40% or 7.8 million tonnes per year in ArcelorMittal’s CO2 emissions in France by
2030 and will represent a 10% reduction in greenhouse gas emissions from the manufacturing industry in France and put France’s steelmaking industry on the path of the Paris Agreement.
The new industrial facilities will be operational starting in 2027 and will gradually replace 3 out of 5 of ArcelorMittal’s blast furnaces in France by 2030 (2 out of 3 in Dunkirk, 1 out of 2 in Fos).
Decarbonizing the Fos-sur-Mer and Dunkirk sites will contribute to maintaining and developing the French steelmaking industry. It will also support the strengthening and development of local ecosystems, generating positive and sustainable dynamics for employment and industrial activity in France, especially in the Dunkirk and Fos-sur-Mer areas.
This investment program will be supported by the French Government.
ArcelorMittal is also currently studying the implementation of an innovative solution to produce low carbon steel in Dunkirk in partnership with Air Liquide. The project aims to combine a Direct Reduction Plant with arc furnaces to produce 2 Mt/y hot metal which would be a first of its kind. The project includes low carbon hydrogen use and would lead to CO2e savings. Commissioning is planned for 2025. This partnership between Air Liquide and ArcelorMittal is a first step towards the creation of an ecosystem at the forefront of low-carbon hydrogen and CO2 capture solutions that will be a source of competitiveness and attractiveness for various players in the Dunkirk industrial and port basin.
Ghent, Belgium
ArcelorMittal Belgium will reduce carbon emissions by 3.9 million tonnes per year by 2030, by building a 2.5 million-tonnes DRI plant and EAF facility at its Ghent site. This is a result of a recent letter of intent agreed between ArcelorMittal and the governments of Belgium and Flanders to invest €1.1 billion in the flagship Ghent plant’s decarbonization technologies. The DRI plant and electric furnaces will operate alongside Ghent’s state-of-the-art blast furnace that is ready to take waste wood and plastic as a substitute for fossil carbon. The combination of the new DRI plant alongside a sustainable, state-of-the-art blast furnace enables the creation of unique synergies in ArcelorMittal Belgium’s roadmap to net zero carbon-emissions steelmaking. The support of both the national and the Flanders governments in this project is crucial, and welcomed, given the significant cost associated with the transition.
Hamilton, Canada
ArcelorMittal and the Governments of Canada and Ontario announced an investment of CAD$1.8 billion in decarbonization technologies at ArcelorMittal Dofasco’s plant in Hamilton in the
province of Ontario. The intended investments will mean the Hamilton plant will transition away from the blast furnace-basic oxygen furnace steelmaking production route to the DRI–EAF production route. This will carry a significantly lower carbon footprint, reducing the Hamilton plant’s annual carbon emissions by 60%, within the next seven years. The investment was contingent on support from the governments of Canada and Ontario. In July 2021 the Government of Canada announced it will invest CAD$400 million in the project and in February 2022, the Government of Ontario announced it will invest CAD$500 million in the project. This secures project funding and firms up the investment. The project is scheduled to be completed by 2028, although the Company is looking for opportunities to accelerate the project timelines. The new manufacturing processes contribute to a considerable reduction of CO2 emissions and deliver other positive environmental impacts including the elimination of emissions and flaring from coke making and ironmaking operations.
ArcelorMittal Canada, Contrecoeur
ArcelorMittal’s existing DRI plant in Quebec produces 1.7 million tonnes of DRI each year. In 2021, the Company tested hydrogen injection in its DRI facility. The test is a “proof of principle” type aiming at building the Company’s knowledge about this greenhouse emission abatement technique and exploring its potential and viability beyond theoretical calculations or process modelling. The test will start with a limited injection of 5% within the energy mix and further phases are planned in the future. This is mostly attractive because renewable sources – specifically hydroelectric – provide 99% of Quebec’s energy.
The smart carbon route
Torero
ArcelorMittal is constructing an industrial-scale demonstration plant that converts waste wood into renewable energy through a process called torrefaction. This source of waste wood is considered hazardous material if burnt in an incinerator as it emits harmful gasses. However, in a blast furnace no such pollutants can be formed. At the Ghent plant, two reactors will each produce 40,000 tonnes of bio-coal annually that can be used in the blast furnace as a substitute for coal. Construction of the €55 million project started in 2018: reactor #1 is expected to start production in 2022 and reactor #2 in 2024.
Carbalyst
Carbalyst® is a family of technologies which allows us to use steelmaking waste gases to produce basic chemicals such as bioethanol, which are the key building blocks of plastics. The Company is in the process of constructing €180 million industrial scale Steelanol demonstration plant in Ghent and aims to start producing Carbalyst® bio-products by the end of 2022, at a scale of 80 million liters of bioethanol per year and is working to
develop partnerships with potential customers in the use of this new product. The sales of bioethanol from the Company's Carbalyst® process are forecast to translate into increased revenues, forecast initially at €75 million per year. These could expand as the Company develops other biochemicals and biomaterials, including bioplastic, biofabrics and biochemicals.
IGAR (Injection of Gas Reductant in blast furnace)
IGAR is a transformative technology for the blast furnace, key to transition to carbon neutral blast furnace technology. It increases the re-use of off-gases in the blast furnace, reducing the consumption of coal per tonne of steel produced and cutting CO2e emissions by up to 20%. It will capture waste carbon monoxide and hydrogen from steel gases and reinject into the blast furnace as a reductant gas. Additionally, this technology increases the concentration of hydrogen in blast furnace off-gases, increasing the amount of carbon captured in Carbalyst processes by increasing the production of biofuels and biochemicals. This technology will also allow green hydrogen to be injected directly into the blast furnace, as and when it becomes available and commercially viable. This technology can be further leveraged by injecting additional carbon monoxide and hydrogen from external clean energy sources, such as green hydrogen, further reducing coal use, CO2e emissions and waste gases of other industries e.g. chemicals.
3D
A pilot project in Dunkirk aims to capture CO2 off-gases at a rate of 0.5 metric tonnes of CO2 per hour for transport and storage. The process uses low temperature heat available across the plant to separate CO2 from other off-gases from the blast furnace to create a pure low-pressure CO2 gas stream suitable for internal reuse or piping for storage. This process could significantly lower CO2 capture costs versus alternative technologies. Regional infrastructure would be requested for all local industrial companies in order to optimize usage and efficiency of the solution. Expected completion date is 2023.
This carbon capture technology has the potential to be adopted across our blast furnace footprint but scaling will be highly dependent on development of CO2 transport and storage infrastructure in the regions we operate. The Company is actively engaged in carbon transport and storage at several locations in Europe and exploring the possibility in other regions. Deployment of the 3D technology will be linked to the development of CO2 pipeline infrastructure, as well as deployment of CO2 reuse technologies in the Company's blast furnaces.
ArcelorMittal's three XCarb™ initiatives
To meet the scale of the decarbonization challenge, ArcelorMittal is committed to continuously innovating to drive the Company towards its goals and help the world reach net zero
faster. As part of its journey to deliver on its 2050 net-zero commitment it also launched its first three XCarb™ initiatives. XCarb™ brings together all of ArcelorMittal’s reduced, low and zero carbon-emissions products and steelmaking activities, as well as wider initiatives and green innovation projects, into a single effort focused on achieving demonstrable progress towards net zero steel. The three XCarb™ branded initiatives launched include: XCarb™ green steel certificates, XCarb™ recycled and renewably produced and the XCarb™ innovation fund.
The Company’s progress enables it to pass its carbon emission reductions onto customers for the first time via an audited certification scheme. The first XCarb™ certified tonnes of carbon emission savings were sold in 2020. The amount of this product available increased to 120,000 tonnes in 2021. The Company expects a run rate of 600,000 tonnes by the end of 2022 as it continues to drive down emissions following investments in new technologies.
An independent auditor will verify the tonnes of carbon savings achieved through the Company’s investment in decarbonization technologies in Europe, in accordance with the GHG Protocol Project Accounting standard. These savings can be passed on to customers in the form of verified certificates. They can then use those to report an equivalent reduction in their Scope 3 emissions, in accordance with the GHG Protocol Corporate Accounting and Reporting Standard.
Similarly, ‘XCarb™ recycled and renewably produced’ is ArcelorMittal’s product range made via the EAF route using scrap steel, providing customers with greater options of steel produced with an extremely low carbon footprint.
ArcelorMittal’s XCarb™ innovation fund
The ArcelorMittal’s XCarb™ innovation fund is supplementary to the numerous technologies the Company is already developing and deploying across its operations. The XCarb™ innovation fund is intended to serve as a point of access to the integrated routebest and brightest ideas and is investing in companies developing breakthrough technologies that will accelerate the steel industry’s transition to carbon neutral steelmaking.
Heliogen – unlocking the power of sunlight to replace fossil fuels
Through XCarb™, ArcelorMittal has invested an initial $20 million in Heliogen, a renewable energy technology company. Heliogen’s technology will harness solar energy by using a field of mirrors which will act as a multi-acre magnifying glass to concentrate and capture sunlight. The sunlight will then be subsequently converted into heat (HelioHeat™), electricity (HelioPower™) or clean fuels (HelioFuel™). All three Heliogen
products have the potential to be applicable to the steelmaking process and support the steel industry’s transition to net zero.
Form Energy – scaling low-cost and reliable battery technology
ArcelorMittal is lead investor in Form Energy’s $200 million Series D financing round, with a $25 million equity injection delivered through XCarb™. Form Energy, which was founded in 2017 is working to accelerate the development of its breakthrough low-cost energy storage technology to enable a reliable, secure, and fully-renewable electric grid year-round. It has recently unveiled a new iron-air battery which is: low cost (approximately one-tenth the cost of lithium-ion battery technology); has multi-day reliability (100-hour duration hence overcomes the intermittent nature of renewable energy generation); scalable; and can be sited anywhere.
Breakthrough Energy’s Catalyst program – driving adoption of next-generation clean technologies
ArcelorMittal is an anchor partner in Breakthrough Energy’s Catalyst program and has committed to an equity investment of $100 million over the next five years through XCarb™. Founded by Bill Gates, Breakthrough Energy is committed to scaling the technologies the world needs to reach net-zero emissions by 2050. Breakthrough Energy’s efforts include investment vehicles, philanthropic programs, policy advocacy, and other initiatives, including Catalyst. Catalyst is a new model for how companies, governments, and private philanthropy can finance, produce, and ensure widespread adoption of next-generation clean technologies. The program will initially focus on four decarbonization technologies: direct air capture; green hydrogen; long-duration energy storage; and sustainable aviation fuel.
LanzaTech
ArcelorMittal expanded partnership and announced a $30 million investment in carbon recycling company, LanzaTech through its XCarb™ innovation fund, the fourth investment the Company has made through the fund since its launch in March 2021.
H2Pro
The Company invested $5 million in H2Pro through its XCarb™ innovation fund, bringing the fund’s total investment commitments to $180 million since its launch in March 2021.
The investment is part of a $75 million Series B fundraise by H2Pro, with other investors including Temasek, Horizons Ventures, Breakthrough Energy Ventures and Yara.
H2Pro was founded in 2019 by three leading hydrogen experts from Technion (see below) and is developing a disruptive way of producing hydrogen from water. Similar to electrolysis, its technology, E-TAC (Electrochemical – Thermally Activated Chemical), uses electricity to split water into hydrogen and
oxygen. Unlike conventional electrolysis however, hydrogen and oxygen are generated separately in different steps – an Electrochemical step and a Thermally Activated Chemical step.
The technology was developed at Technion, Israel Institute of Technology. E-TAC water splitting offers energy efficiency of over 95%, significantly higher than traditional water electrolysis technologies which typically deliver energy efficiency of around 70%. E-TAC is also expected to prove more cost effective than traditional electrolysis, with capital expenditure costs anticipated to be broadly halved, alongside lower operational costs. H2Pro is targeting producing hydrogen at a cost of under US$2/kg by 2023, when its first commercial, megawatt scale project is anticipated to move into production, and at a cost of under US$1/kg by 2030.
Further projects under development
The Company’s 2030 target also includes projects that are currently under discussion and development but have not yet been announced. These include but are not limited to the following:
Europe: further investment in DRI and EAF installations linked to certain BF relines scheduled within the next decade; additional smart carbon projects if and when current pilot projects prove successful.
ROW: implementation of upstream optimization, specifically in the basic oxygen furnace. ArcelorMittal'sCIS region; increased use of scrap input rate each yearand natural gas within the current footprint; implementation of pelletizing projects which will over time replace Group sintering processes.
ArcelorMittal is in the region of 30%.
The Company recognizes that some stakeholders expect itdeveloping different solutions to reduce its carbon footprintGHG emissions from its mining operations. In November 2021, it announced a CAD$205 million investment in its flagship Canadian mining operations with support from the Quebec government, enabling this facility to convert its entire 10 million tonne annual pellet production to DRI pellets by the end of 2025.
The investment, in which the Quebec government will contribute through an electricity rebate of up to CAD$80 million, will enable the usePort Cartier plant to become one of more scrap. The Company's vision is that eventually, all steel will be made with scrap, maximizing the potentialworld’s largest producers of steelDRI pellets, the raw material feedstock for ironmaking in a circular economy. However, globally,DRI furnace. The project includes the implementation of a flotation system that will enable a significant reduction of silica in the iron ore pellets, facilitating the production of a very high-quality pellet.
The project will also deliver a direct annual carbon reduction of approximately 200,000 tonnes at AMMC’s Port-Cartier pellet plant, equivalent to over 20% of the pellet plant’s total annual carbon emissions. This reduction in carbon emissions will be achieved through a reduction in the energy required during the pelletizing process.
A DRI plant uses natural gas to reduce iron ore, resulting in a significant reduction in CO2 emissions compared with coal-based blast furnace ironmaking. In Hamburg, Germany, ArcelorMittal is trialing replacing natural gas with hydrogen to make DRI, with its industrial scale pilot project anticipated to be commissioned before the end of 2025. The DRI installations the Company has announced it is developing in Belgium, Canada and Spain are all being constructed to be hydrogen-ready, so as and when green hydrogen is available in sufficient quantities at affordable prices the Company can produce DRI with near zero-carbon emissions.
Key drivers to support steel industry's transition
ArcelorMittal believes that several key factors are critical to driving an effective and equitable steel industry’s net-zero transition: a technology, an energy transition plan in every country, market demand signals, public funding support and effective policies. Together, these will propel the industry’s efforts to achieve individual and collective targets over the short, medium and long term.
Technology: Progress here has been encouraging. The Company remains confident that both of the main routes – Innovative DRI, and Smart Carbon – offer the potential to achieve net zero by 2050. In addition, it is currently three times higherdeveloping a third technology, Direct Electrolysis of Iron. Several low and zero carbon-emissions steelmaking projects are in development or planned, and the first - in Ghent - is expected to be operational in 2022.
Demand signals: One major challenge to the transition is that low-carbon steelmaking costs considerably more than existing methods. As such, a demand signal for the premium offering will be vital. In 2021, ArcelorMittal launched the first XCarb™ products. The green steel certificates and recycled and renewably produced steel under the new brand have both been extremely well received by customers and attracted a premium price. This gives a real demand signal, at least in Europe, where the first products have launched (see more below). There are also encouraging signals from the First Movers Coalition of companies, and the IDDI’s (Industrial Deep Decarbonization Initiative) work to drive government pledges of green procurement for public infrastructure projects.
Clean energy infrastructure: Access to affordable clean energy will be critical to accelerate decarbonization of the steel industry and policymakers can play an important role in incentivizing the development of sufficient clean energy infrastructure and the necessary scale up of carbon-neutral technologies. This will require concerted cross-sector and government efforts to develop the necessary clean energy infrastructure and to guarantee sufficient supply of scraprenewable energy for the transition of heavy industry.
The clean energy infrastructure for each country and region will vary significantly based on the availability and effectiveness of different clean energies available, including wind, solar, bioenergy and CCS. Working with local policymakers to unlock the optimum clean energy infrastructure will be critical. An example of this is the Company’s work with the Brazilian government to ensure use of existing sustainable bioenergy in the steel industry is recognized and supported as a clean energy.
There were some important developments for steel industry at 26.th In effect, virtually allannual Conference of the post-consumer scrap availableParties ("COP26"). The steel sector was included in the ‘Glasgow Breakthroughs’ which aim to make clean technologies and sustainable solutions the most affordable, accessible and attractive option in emitting sectors globally before 2030. The Green Hydrogen Catapult set a goal of 45 gigawatts of electrolyzers – enough to power 45 average-sized steel mills – powered with green electricity, to be developed with secured financing by 2026 with targeted commissioning in 2027.
Effective policies: It is already being recycled. Only as moreclear that a supportive policy environment will be vital for the steel products become obsolete canindustry to make significant progress on decarbonization. Encouragingly, some multi-stakeholder policy positions are emerging. For now though, policies around the world producelargely remain unaligned, meaning that the more recycledambitious regions will decarbonize their steelmaking industries faster (if they protect against carbon leakage).
Steel is a globally traded commodity and not all regions of the world are moving at the same pace when it comes to the introduction of regulation to address climate change. Furthermore, the low margins and high capital costs associated with the industry mean there is limited headroom to make the investments required and remain competitive without policy intervention.
Ensuring all market participants operate under the same competitive rules is key in these market conditions. The greater the level of global coordination in developing effective policies, the better progress the Company will make towards decarbonization.
The Company believes, however, there are many policies developed for other industries that can be implemented for the steel industry. One example is contracts-for-difference, which have provided valuable policy support and customer demand signal for the renewables industry for many years. New policies will also need to be developed, such as a CBAM that ensures domestic producers and imports share the same carbon cost on the road to decarbonization.
The Company believes that policy instruments need to deliver five market conditions to ensure that low and zero carbon-
emissions steelmaking is at least as competitive as higher carbon-emissions steel:
1.Measures to incentivize the transition to low and zero carbon-emissions steelmaking.
2.A fair competitive landscape that accounts for the global nature of the steel market, ensuring domestic production, import and exports are subject to equivalent GHG reduction regulations.
3.Financial support to innovate and make long-term investments and neutralize the higher operating costs of low and zero carbon-emissions steelmaking.
4.Access to sufficient clean energies at affordable price level.
5.Incentives to encourage the consumption of low and zero carbon-emissions steel over higher carbon-emissions steel.
Funding support: Given the high levels of capital expenditures and operating costs required for the transition, funding will be needed to support the regional and global assets that are the first movers. Progress on this front remains encouraging, with governments on the both the national and continental levels making considerable funds available. As discussed above, during 2021, the Company made several announcements regarding decarbonization projects in Spain, Belgium, France and Canada with expected governmental support. See “Introduction—Key transactions and events in 2021" and "Properties and capital expenditures—Property, plant and equipment".
Financial institutions will also play a vital role to play and the creation of a sub-group of the Centre for Climate Aligned Finance to look specifically at the steel sector is welcome development. It is critical that both funding and finance is available to companies for which the transition is costly, but which cannot finance the transition themselves.
Collaborations
The latest climate science outlined in the Intergovernmental Panel on Climate Change ("IPPC")’s 6th Assessment Report indicates that urgent progress is needed. For heavy industry in particular, where the challenges are immense, progress will be faster if industry stakeholders collaborate. Since the publication of its first Climate Action Report in July 2019, the Company has worked with numerous important platforms that unite key stakeholders to identify the main challenges and requirements for the steel sector’s transition. These include the Energy Transition Commission ("ETC"), World Economic Forum and the Rocky Mountain Institute ("RMI") – all part of the Mission Possible Partnership – as well as others involved in driving progress, such as the International Energy Agency, the Science-Based Targets Initiative, ResponsibleSteel and the Industry Deep Decarbonization Initiative ("IDDI").
The Company led work with its peers across the steel sector in the Net Zero Steel Pathway Methodology Project ("NZSPMP"), which published its recommendations in July 2020. This work should accelerate progress not only for the Company but also across the entire sector, by establishing a set of principles that ensure that the carbon emissions and targets of steel companies and the industry are assessed in a like-for-like way.
The Company also worked with the ETC to inform their development of two 1.5C scenarios for the steel sector. The Tech Moratorium ("TM") scenario envisages significant carbon reductions over the next decade, with no new blast furnaces beyond 2030 and a steep decarbonization thereafter. The Carbon Cost scenario illustrates a more rapid acceleration in the presence of a global carbon price or equivalent.
The RMI’s Center for Climate Aligned Finance has reflected both the TM scenario and many of the NZSPMP principles in a mechanism which enables the banking sector to assess the alignment of steel companies with the 1.5C expectations for their sector.
The Company is now collaborating with the SBTi on a project to define a fit-for-purpose methodology to develop additional science-based target resources for the steel industry, which began in November 2021. The Company has committed to adopting a Science Based Target within two years.
On January 27, 2022, ArcelorMittal published its second Climate Advocacy Alignment Report which maps the policy positions of the 61 associations of which the Company is a member, against the objectives of the Paris agreement and the five policy priorities ArcelorMittal outlined in its second Climate Action Report.
Management Theme #3: Customer reassurance
ArcelorMittal expects the momentum behind supply chain accountability to continue to grow and a particular focus to be on mined raw materials. Consumer-facing brands seek to demonstrate responsible sourcing, and customers are uniting to demand and validate higher standards in supply chains through their own due diligence processes. For the Company, this is expressed through growing demand from its customers for assurance regarding environmental and social standards.
As such, ArcelorMittal regards supply chain certification and assurance as a vital opportunity to forge closer links with customers and believes that taking a leading role in multi-stakeholder engagement is one of the most effective ways to achieve results. It is working with steel and mining peers, and with other stakeholders, to advance the development of new third-party standards. To establish a global approach for the entire ‘mine-to-metal’ steel value chain, and in response to the strong trend of rising assurance expectations from customers, the Company has been playing a leading role in developing and implementing the requirements of third-party standards such as ResponsibleSteel™, the Initiative for Responsible Mining Assurance ("IRMA") and Mining Association of Canada’s ‘Towards Sustainable Mining’ ("TSM").
ResponsibleSteel™ is the steel industry’s only global multi-stakeholder certification initiative. It has over 100 members and associates, including steelmakers, mining companies, NGOs, steel-consuming customers, financial institutions and industry bodies. It enables steelmakers to demonstrate that their operational processes and products meet rigorously defined standards across a broad range of social, environmental and ethical criteria. It also improves responsible sourcing of the raw materials used in steelmaking and reduces supply chain risk.
In November 2019, following a robust accreditation process, ResponsibleSteel™ launched its first site certification standard. It is based on 12 principles underpinned by over 50 criteria and over 200 auditable requirements that address health and safety, human rights, local communities, biodiversity GHGs, among other sustainability and assurance issues.
In 2020, the Company carried out readiness assessments using the ResponsibleSteel™ standard across all its European flat product sites, and the results were positive. In 2021, its sites in Belgium (Geel, Genk, Ghent and Liège), Germany (Bremen and Eisenhüttenstadt) and Luxembourg (Belval, Differdange and Rodange) have been certified as being in compliance with it. They were the first in the world to be independently audited and meet the standards required.
The ResponsibleSteel™ audit enables each site to prove that its production processes meet rigorously defined standards across a broad range of ESG criteria, including:
a.Climate change and GHG emissions
b.Water stewardship and biodiversity
c.Human rights and labor rights
d.Community relations and business integrity
To be awarded ResponsibleSteel™ certification, each site has to undergo a detailed third-party audit, and an independent Certification Committee makes the final decision. ArcelorMittal has worked with international auditor AFNOR Group and its German subsidiary GUTcert, both specialist companies providing certification and assessment services.
The Company is currently working on a site assessment and verification plan and is on track to seek certification for its ArcelorMittal – European Long Products and ArcelorMittal Brazil sites in 2022.
The Company believes that its leading role in the development of ResponsibleSteel™, and its commitment to achieve certification, will enable it to improve customer relations, increase market share among customers already seeking certification and otherscreate demand for certified products. Assurance needs to create an authoritative sourcecover the full steel value chain, including sourcing of data on steel stocksprimary raw materials. This is why ArcelorMittal also plays a leading role in the wider movement towards establishing social and recoveryenvironmental standards for mining that stakeholders recognize and recycling ratesvalue.
As a member of the IRMA steering committee, the Company participates in the multi-stakeholder expert panels shaping its standards. The Company is also looking into implementing IRMA across its mines to assure its customers that raw materials have been sourced and produced responsibly. Its mining operations in Canada, Liberia, Brazil, Mexico and Ukraine have started the world,IRMA self-assessment process and commissioned a third-party studyare working towards transparency by end 2025.
Another example is the Company’s commitment to the Mining Association of Canada’s Towards Sustainable Mining initiative ("TSM") at its mines in 2016Canada, which helps to modelmonitor and improve performance and assurance. AMMC has been implementing the impactsprotocols of increasing scrap availability onTSM since 2004, and the Company's mines in Canada are all TSM-assured and 5-star rated.
Both schemes will provide customers, investors and stakeholders with assurance regarding sustainability throughout the steel industry. The study foundvalue chain and demonstrate the credibility and rigor that only beyond 2070 will scrap stocks increase sufficientlyhas gone into auditing social and environmental performance at ArcelorMittal’s steel plants and mines (see description above and “Sustainable development governance” below).
In Ford’s World Excellence Awards, the Company won the Supplier Sustainability Award for its supply chain efforts and commitment to enable steel made from scrap to become predominant.
ArcelorMittal engages directly on responsible supply chain issues with customers from the automotive, rail and other sectors, including construction, household goods and packaging. It is also collaborating withopen to involvement in initiatives used by customers to share their processes for assessing supply chain risk, such as Drive Sustainability, EcoVadis and the UniversityGreen Building Council.
Alongside these multi-stakeholder, customer-focused initiatives, the Company is committed to driving standards in its own supply chain. It has been engaging with its key raw material suppliers and recommending that they follow one of Cambridgethe certification routes. Implementing certification standards in mining is the best way to look atimprove responsible sourcing of the efficiencies of steel flows downstreamraw materials used in steelmaking and reduce supply chain risk.
In 2020, to encourage suppliers to adopt an assurance scheme, ArcelorMittal revised its Code for Responsible Sourcing ("Code") to include explicit references to its commitment to ResponsibleSteel™, IRMA and other industry initiatives. The Code sets out the minimum standards that the Company expects from its operations,core suppliers, in areas such as health and identify where there is potential for greater carbon-safety, human rights and cost- efficiencies throughethics. The updated Code now includes its expectations that suppliers will adopt practices in line with the reductionResponsibleSteel™ standard.
Every year, the Company assesses several of pre-consumer scrap.
The useCompany may also conduct site visits. If breaches of obsolete scrapthe Code are found, it discusses how to address them and agrees a timeline and process. Mitigation actions can include engaging with the supplier to encourage them to commit to certification, sharing support and knowledge to address specific challenges, and encouraging the supplier to join a wider initiative if the issue is endemic in steel production is made more attractivethe industry.
ArcelorMittal continues to carry out additional ESG risk mapping and analysis, as well as further phases of due diligence based on OECD guidelines where its impurities from other materials are easily accommodated, typically in constructionassessments highlight areas of social and infrastructure products,environmental concern. In addition, it develops action plans where needed; pays particular attention to ‘conflict minerals’, such as tin and tungsten, which are usually made vianeeded in small quantities for effective steelmaking; and engages with suppliers regarding ESG concerns identified. The Company also
publishes a Special Disclosure Report in compliance with the EAF route. ArcelorMittal wantsUS Dodd Frank Act Section 1502 and has done work to improvemeet the qualityrequirements of the scrap it uses,EU’s new conflict minerals regulation. In addition, the Company is developing plans to ensure compliance with the new European supply chain due diligence laws.
Management Theme #4: Environment
Behind the sustainable development goals (“SDGs”) to which ArcelorMittal is committed is a vision of progress that leaves no one behind. The Company focuses on making steel in ways that work for society while mitigating carbon footprints (as discussed in “Management Theme #2: Climate Change“ above) and its global R&D division explores automated sorting processes for treating scrap by removing non-magnetic material.other negative environmental impacts. It has already invested in improved sorting, shearing and shredding machines at a number of sites; this could increase the Company's capacityalso aims to recycle scrap in its production processes.
See “Item 5—Operating and financial review and prospects—Scrap” for further details onmeet stakeholder expectations regarding the use of scrap and the price differential.
Outcome 5: Trusted user of air, land and water
ArcelorMittal sharesshared resources, particularly natural capitalones such as air, land and water with many stakeholders,water. Operating transparently and aims to winresponsibly in these areas is essential for retaining stakeholder trust by operating transparently and responsibly.the Company's license to operate relies heavily on its environmental stewardship. This can be achieved only over the medium to long term through dedication. As part of this, the Company is committed to making progress globally wherever possible through ongoing investment in environmental initiatives, governance improvements and stakeholder engagement, among other measures.
Some of the challenges affecting air, land and water are global in nature, and ArcelorMittalthe Company engages in multi-stakeholder forums aimed at addressing them. Where the issues and the means of addressing them are local, country managersthe leadership teams on location engage with stakeholders at every level, including site-by-site.
Before developing any new mine or steel plant, the Company carries out detailed environmental impact assessments and establishes an environmental management plan. At all existing production sites, it monitors air, water, energy and residue data, and publishes datathis annually in its Integrated Annual Review and country levelcountry-level sustainability reports, of which 16 were published in 2018. The Companyreports. ArcelorMittal monitors regulatory developments and aims to be in compliancefully compliant with all regulatory standards. See "Item 4B -Informationapplicable regulations (see “Business overview—Government regulations”).
For example, the Tubarão unit in Brazil monitors impacts such as air and noise pollution and odors, as well as those on local traffic. Potential risks at the Company-Business overview -Government regulations."site include injuries, respiratory
diseases and water and soil contamination. At the Vega unit in Brazil, impacts monitored include the quality of effluents and waste treatment, air emissions and transportation of material.
The Company also aims to listen to concerns wherever they are raised, and to respond appropriately, including by acknowledging where standards have fallen short.
Addressing air quality concerns.concerns
ArcelorMittal understands that air quality is among the most salient issues for the communities around its operations.in which it operates. It is also a continuing focus for regulators, and ourthe Company’s goal is to becomply fully compliant with regulatory standards. Although theWhile specific sources of pollutants, particularly in urban and industrial areas, are not always
identifiable the Companyand not easily quantifiable, ArcelorMittal aims to listen to any concerns wherever they are raised, and to respond appropriately. The CompanyIt also continues to make significant environmental investments that address air quality. These include the following:
Where non-compliances are likelyIn Fos-sur-Mer, France, a 10-year €100 million investment program has reduced SOx and NOx levels by 45% each and dust emissions by 70%. Several environmental protection units have been commissioned, including to occur,desulphurize coke oven gases and to remove dust at the steel plant furnace, as well as low NOx burners in the slab furnace of the hot strip mill.
In parallel with this program, the Company takes immediate actionhas invested €150 million in fully renovating the coking plant’s 126 ovens. This has brought crucial progress.
Between 2021 and 2023, the site will invest another €50 million in environmental projects. The main initiative underway concerns the sinter plant, where an innovative filter is being installed, the coke plant and the steel shop where water treatment plants are being commissioned. The equipment, which involves investment of €20 million and will be commissioned in 2022, will reduce dust emissions from the production unit by 40%. Other projects include the construction of a new blast furnace gas storage facility and the commissioning of a new charger at the coking plant.
The site management regularly meets with local residents to avoid this. For example,review environmental projects and results. In the Etang de Berre region, ArcelorMittal is taking part in Fos-sur-Mer (France)the “Réponses” initiative on air quality in 2018, it initiatedthe 21 municipalities. It is led by a €14 million improvement programmulti-party group comprising the state, local authorities, associations, employees, industrialists and a panel of citizens. The panel is regularly invited to refurbish allmeetings with local residents.
ArcelorMittal Kryvyi Rih, Ukraine
In the past 15 years, ArcelorMittal Kryvyi Rih reduced its coke ovensdust, CO, SOx and bring them into line withNOx emissions by more than 50% and wastewater discharge by almost 65%. This journey will continue
in the standards in force during 2018. By the end of 2018, 108next years. ArcelorMittal Kryvyi Rih started building a new pellet plant to replace two old sinter plants. It is also modernizing sinter plant #2. Together, they represent 75% of the 126 kilnssite’s total emissions. The new pellet plant will reduce CO2 emissions by 750 thousand tonnes per annum and dust, CO, SOx and NOx emissions by 78 thousand tonnes. Production is expected to start in the fourth quarter of 2023. See "Properties and capital expenditures—Capital expenditures".
Among other initiatives, the Company has started building a new pellet plant to replace two old sinter facilities and is modernizing a third sinter one. Together, they represent 75% of the site’s dust emissions. The new pellet unit will reduce pollution by 78,000 tonnes a year and CO2 emissions by 750,000 metric tonnes annually. It is expected to be operational by the fourth quarter of 2023 (see "Properties and capital expenditures—Capital expenditures").
ArcelorMittal Temirtau, Kazakhstan
In the next four years, ArcelorMittal is to invest more than $380 million as part of an environmental action plan to reduce emissions and improve overall environmental performance. In 2021, it completed the installation of a new electrostatic precipitator ("ESP") for sinter machine 5 and a new ESP for the lime shop. In 2022, a new boiler with emissions control equipment will be installed. Other upcoming investments include filters for sinter machines 6 and 7, a gas cleaning plant in the coke battery, a new coke plant were returned to values below regulatory limits and since the remaining 18 kilns remained non-compliant, the site was subject to a finetwo new boilers in December.power plant 1. Completion of the work onfull plan is expected to reduce emissions by 39%.
ArcelorMittal Asturias, Spain
Between 2017 and 2022, the remaining furnacesCompany intends to invest €210 million in environmental upgrades that are expected to reduce the site’s diffuse emissions by 50%. Among other initiatives, it has installed a new €12 million bag filter at sinter plant A. Completed in 2021, it is planned forexpected to reduce particulate emissions from the first half of 2019. Environmental investments represent 40-50% of the investments made at Fos in recent years, totaling more than €100 million between 2012 and 2017. Over the last decade, these sustained and constant efforts have contributed to a very significant reduction in emissions at the site: a 49% reduction in dust between 2007 and 2017; a 50% reduction in sulfur dioxide (same period); 4% less nitrous oxides (same period) and a 70% cut in dioxins since 2009.
In 2018, ArcelorMittal's Investment Allocation Committee approvedaddition, ArcelorMittal has completed a total of 33 such projects totaling $405 million for new investment in environmental capital projects, most of them aimed at air quality improvements. These include innovative solutions developed by the Company's global R&D division, which continuesproject to focus on dust and other emissions, including diffuse or fugitive dust emissions from yards and other facilities. For example, in 2018 the Company's Asturias plant became the first in the world to implement an innovative chemical treatment to reduce diffuse emissions in the unloading of sinter materialintroduce coke oven injection in blast furnace bunkers. The Company's R&D department has also developed a pioneering hybrid filtration technology that has proven efficientB at reducing dust emissions. In 2018, the technology was operational in Zenica (Bosnia), Gent (Belgium) and Dabrowa Gornica (Poland), and the Company began feasibility studies for installing it at further sites. A pilot to test its application to a broader set of air emissions is showing positive results.
ArcelorMittal continues to engage with community concerns, including over dust and industrial noise. During 2018, for example, the Company received concerns from stakeholders that high ambient levels of pollutants in Termitau (Kazakhstan), may have been caused by ArcelorMittal’s operations. Since 2011, ArcelorMittal Temirtau has invested $239 million in environmental improvements, which resulted in a 22.8% improvement in dust between 2011 and 2017. It has planned a further $198 million in environmental capital expenditures over the period 2018-2023. The Company is committed to participating in quality research to further understand the link between the steel plant and the health of local communities.
The Company works with its neighbors and local authorities to mitigate impacts. For example, in Brazil the Company is working on 14 large environmental projects as part of the 'air master plan' at its Tubarão site, which was extended in 2018 as part of the agreement with the public attorney and state government. In Asturias (Spain), the Company is targetting a 34% reduction in dustGijón plant. This will reduce CO2 emissions by 2020 compared125,000 tonnes a year, which is equivalent to 2017, and a further 22% by 2022. More information on the Company's work with communities on air quality can be found in "—Outcome 8: Active and welcomed member of the community,” below.annual emissions from 84,000 Spanish households using natural gas-based heating systems.
ArcelorMittal Italia became the new operator of the Ilva steel plant in Taranto, Italy in 2018, inheriting environmental challenges that have caused longstanding concerns among local communities. ArcelorMittal is determined to have a positive impact there. In Taranto, the Company has identified and prioritized environmental investment projects that should create significant benefits for its neighbors in a €0.8 billion ($0.9 billion) environmental investment program over a seven-year period, applying best practice, innovation and expertise from across ArcelorMittal’s operations. It has committed to addressing air and water quality issues urgently as it builds the steel plant towards industry-leading performance.
The Company recognizes all of the SDGs linked to environmental protection, of which the most important is SDG 9, which calls for the adoption of clean and environmentally sound industrial processes. ArcelorMittal’s ongoing program of investments to reduce its environmental footprint is aligned with this.
Improving land use and biodiversity.biodiversity
ArcelorMittal aims to practice goodprudent land use management and to protect biodiversity in the environments where it operates, including through partnerships with local environmental organizations and others to improve and research local biodiversity.
flora and fauna. Mining is a key focus both in terms of both responsible land management and biodiversity. In 2021, the Company has
increased its efforts regarding reclamation and closure planning of mines and issued new corporate guidance.
As well as managing its own environmental footprint, ArcelorMittal looks for ways to help to protect local habitats. It is particularly proud of its 20-year support for the TAMAR project in Brazil, run by the Chico Mendes Institute for Biodiversity Conservation. The stabilityinitiative focuses on protecting local marine habitats and species, such as endangered sea turtles, including a colony that lives near the Company’s Tubarão site.
Also in Brazil, through the Serra Azul facility, ArcelorMittal manages more than 1,000 hectares of tailings damsthe Atlantic forest, one of the world’s most ecologically diverse regions. The area is five times larger than that set aside for iron ore extraction. To preserve the forest for future generations, the Company works with the Velhas River Basin Committee and its in-house nursery, which grows and donates seedlings from more than 60 native species. The goal is to plant 300,000 new seedlings by 2022.
Another example is the work by ArcelorMittal Liberia ("AML"). It has been mining iron ore in the Nimba region of northern Liberia since 2011, although exploration and mining had taken place intermittently there since the 1950s. Located to the east of AML’s mining operations, the Nimba mountain range extends from Liberia into Guinea and the Ivory Coast, and is covered in moist evergreen, montane and secondary forests. Both it and the Western range have global conservation value and are home to a riskremarkable diversity of species and habitats, many of which are highly threatened. They also include numerous restricted species, several of which occur nowhere else in the world. Forest ecosystems are under severe pressure from extractive industries, as are the livelihoods of rural communities, which depend on bushmeat, charcoal, firewood, medicinal plants and subsistence agriculture.
In 2011, AML launched the Biodiversity Conservation Programme ("BCP") to compensate for biodiversity impacts from its mining operations that everycould not be avoided, minimized or restored. Designed to achieve a net gain for biodiversity, the BCP is multidisciplinary in its approach. It seeks to address multiple threats to biodiversity, including underlying drivers of livelihood insecurity and unsustainable farming practices, and is designed to deliver numerous benefits.
The BCP is delivered at landscape scale, focusing on the protection and management of a much larger area than that of the direct footprint of the mining company faces,operations and associated infrastructure. The main components include improving the management of the East Nimba Nature Reserve and three community forests; negotiating and managing them carefully is a vital aspectconservation agreements with communities to reduce illegal activity and deforestation through an incentive-based scheme; and promoting the uptake of ArcelorMittal’s responsibility as a mining company.sustainable agriculture to improve
production per area of land and food security. The Company has 21 Tailings Storage Facilities (TSFs), of which 14 are activeBCP also involves education and 7 dormant,awareness raising, wildlife assessments and employs a strong governance model based on the Mining Association of Canada (MAC) guidelines for TSFs. Each of the Company’s tailing dams has undergone rigorous internal and external audits and has been benchmarked against international best practiceresearch.
guidance, for example that provided by MAC, and it is now transitioning to remote monitoring of its dams, using of satellite-based systems.
The recent incidents in the Brazilian mining sector show that, despite robust management systems for TSF and regular auditing, each mining company must always proactively manage its TSFs. Therefore, in addition to the ongoing process of strengthening our TSF monitoring methods, it is looking into how it can accelerate non-wet disposal options such as co-disposal, which we already employ in Mexico and Brazil iron ore mines, thickened paste tailings or dry tailings for existing and greenfield projects. Since 2018 all new projects must include dry tailings solutions.
As part of its layered external audits program, the Company undertook additional stress assessments in February at its dormant TSF at Serra Azul in Brazil, applying early observations available from the Feijao dam failure. Based on a range of safety evaluation factors, a decision was taken to put in practice an evacuation plan for all residents as a precautionary measure while further testing is undertaken and any mitigation measures can be implemented. The community, which was living 5km from the dam has been moved into temporary accommodation. If permanent resettlement is necessary, ArcelorMittal will follow international best practice in the treatment of these residents.
For detailed monitoring of tailings dams, Global R&D’s T4SURE team has developed the capabilities to upgrade and digitalize its systems using satellites, drones, wireless sensors and robots to feed a geographic information system. In the future, this will be extended to both plants and wildlife. This will help the Company to respond to increasing expectations from stakeholders looking for reassurance that biodiversity hotspots are not negatively impacted by the Company's mining operations.
At ArcelorMittal Liberia's iron ore mines, it is engaged in major biodiversity investments. In 2017, the Company renewed its environmental permit and updated its environmental and social impact assessment. This includes increased requirements for sediment control, water discharge and biodiversity conservation. In 2018, the Company continued to respond to increased expectations from regulators on water management.
Responsible water use.use
Water is a vital resource to the Company and its stakeholders,for everyone, and ArcelorMittal aims to be responsible in terms of both in the amount of waterthat it consumes and in the quality of the water discharged bythat its sites discharge into the environment. Its work in the area is aligned towith the UN'sUN‘s SDG 6 (Clean(“Clean water and sanitation)sanitation”), with particular reference to the targets concerned with water recycling (6.3)6.3 (water recycling), efficiency (6.4)6.4 (water efficiency) and management (6.5)6.5 (water management).
The Company'sCompany‘s net water use in steelmaking, -defined as the difference between the water that it withdraws and the water discharged -discharges, is measured, monitored and managed at each site by a dedicated team. In general, steel plants treat and recycle the same intake of water repeatedly, losing waterit only through evaporation. Water withdrawnWithdrawals from groundwater sources makesmake up less than 1% of the Company'sArcelorMittal‘s water intake. Water treatment
Treatment facilities play a vital role in managinghow the Company manages its emissions todischarges into water and in improving the waterimproves efficiency of use in its operations.
Unlike reducing carbon emissions, which is a global challenge, water use is a more localized issue. Where freshwater is scarce, or when there is a drought, the CompanyArcelorMittal works with local municipal and water authorities to explore the bestalternative sources, for water, including seawater, rainwater and wastewater from water treatment plants. When issues occur, it aims to work swiftly and closely with local authorities.
The Company’s application of new water technologies takes into account local conditions. In the search for alternative sources to contribute to water security, ArcelorMittal Tubarão is constructing an innovative and pioneering project in Brazil, for example, where drought causedand a state of emergency in some states in 2014, the Company's water master plan resulted in a reduction of water intake by more than 6,000,000 m3 /year, despite a 17% increase in production. This program won the 2018 Steelie Awardfirst in the ‘ExcellenceGroup: a sea water desalination plant. It mainly aims to increase water security and ensure the stability of operations, with an appropriate strategy for future adaptation to climate change.
Work has started this year and is expected to be completed within two years. The plant will produce up to 500m³/h of industrial water for its system, providing an alternative source to freshwater from the Santa Maria da Vitória River. Today, freshwater represents 3.5% of the water consumed by ArcelorMittal Tubarão (96.5% is sea water), part of which is treated, transformed into potable water and used for human consumption.
The process aims to mitigate environmental impacts. It consists of collecting sea water and transforming it into industrial water using reverse osmosis, a technology already established and applied in Sustainability’ category.many countries, including Israel, Spain, Australia, Argentina and the US. The Companytechnology will also support the
future development of skilled labor in the country, as technicians and engineers at the local academy can be trained in it.
The BRL50 million (approximately $13.4 million) investment will cover all of the necessary infrastructure to collect and filter sea water, desalinize it through reverse osmosis, and then store and distribute the end product. The facility will be located near ArcelorMittal Tubarão’s thermoelectric power plants and occupy an area of around 6,000 m², making it the largest desalination plant in Brazil. Its initial capacity will be 500 m³/hour (12,000 m³/day) with the potential for further expansion.
The brine (liquid with a higher concentration of salts after separation) will be returned to the sea, with no negative impact, through the return channel used by ArcelorMittal Tubarão’s existing cooling equipment: that is, the condensers in its thermoelectric plants.
ArcelorMittal Tubarão will produce the energy consumed in the desalination process, which is about 3MW, or less than 1% of its total energy generation. The environmental licensing process for the project has already begun at Instituto Estadual de Meio Ambiente, and the reference terms and environmental control plan are being prepared.
ArcelorMittal Tubarão’s project implementation studies include leading technologies and suppliers. The research, undertaken over two years, involved the Company’s Research and Development Centre and experts from Brazil and Spain (Asturias).
ArcelorMittal Tubarão is also pursuing a comprehensivedeveloping other initiatives in line with the Brazilian government’s water management planstrategy and the state water resources plan. These include:
•Studies with the government of Espírito Santo state, through Cesan, to use treated sewage for industrial purposes.
•A project to recover springs in the Western CapeSanta Maria da Vitória basin, in partnership with the Santa Maria da Vitória Basin Committee; Capixaba Institute for Research, Technical Assistance and Rural Extension (Incaper); Secretariat for Environment and Water Resources of South Africa, where drought presents the riskEspírito Santo state; Public Prosecutor’s Office of impeded access to water supplies.
The Company seeks to improve water useEspírito Santo state and of Santa Leopoldina region; and the qualityadministration of effluent discharge at its mine sitesSanta Leopoldina city. As a pilot in the city of Santa Leopoldina, the initiative aims to study the best techniques to recover and conducts regular water quality monitoring as standard at all operations. Run-off fromfence 55 springs in the Company'sCrubixá region.
In the Company’s mining operations, some sites recycle as much as 98% of their water. For example, AMMC is treated either chemically or through sediment control dams and tested before being released into surface water bodies or reused elsewhere at the mine. Where possible, water is reused for processing, for example, as part of the cooling process during pellet production. At ArcelorMittal Mines and Infrastructure Canada ("AMMIC"),working on a $36 million multi-year holistic water management project aimed at controlling thethat includes installing treatment units to control surface effluents on the
waste rock piles andpiles. It will eventually help to achieve compliance with federal regulationsrelease treated water back into the natural supply. The investment is ongoing. This consists of the construction of collector ditches on the perimeter of the waste rock piles and the installation of temporary and permanent water treatment units in Mont Wright and Fire-Lake.
Carefully managing tailings pondsexpected to ensure they are structurally sound is vital and ArcelorMittal continues to manage and enhance its governance of tailings facilities through the Tailings Stewardship Program. The Tailings Stewardship Program commenced in January 2018 and provides for comprehensive stewardship of all wet tailings dams including physical and satellite monitoring, proactive risk reduction planning, annual deep dive reviews at each site by internal Company experts and an annual independent third party assurance program. This program has identified the higher risk sites and program activities are prioritized on the basis of risk. Action plans are in place for each site and progress against these action plans is monitored regularly.
The Serra Azul iron ore mine in Brazil is currently using in-pit dumping which allows tailings to dry naturally before the earth is reclaimed and placed in a dry stack dump. Elsewhere in Brazil, the Andrade mine commenced production of concentrate in 2018 which means that more of the ore mined will be used and the life of mine can therefore be extended. Dry stacking is also taking place at Andrade. The Company continues to explore opportunities to replace wet dams with dry treatment methods and this work is supportedcompleted by the Company’s global R&D function.end of 2022.
Where possible, removing legacy tailings dams is an objective of the Company not onlyTo support broader industry efforts to reduce water consumption, ArcelorMittal took part in two EU-funded projects: SPOTVIEW and INSPIREWATER. Both explored new technologies and water management practices that could help the environmental risk but also to minimize long-term liabilities. This can be effected by treating iron-bearing tailings through concentration.
Outcome 6: Responsible energy user that helps create a lower carbon future
ArcelorMittal is committed to making a positive contribution to a sustainable steel industry and to the UN's SDG 13 (Climate Action), by planning for a low carbon future. It aims to achieve this by reducingreduce consumption, energy use and carbon emissions, including through energy recycling, the use of renewables, and the development of new 'smart carbon' technological pathways to decarbonizing steel.
Managing tailings storage facilitiesEnergy efficiency and energy re-use. Since 2007, the Company has pursued a carbon reduction target of 8% by 2020 through energy and carbon efficiency: good management, the application of technology, capital investment and innovation have all contributed to the progress to date. Sites undergo an energy audit process which assesses performance and identifies areas for improvement, and a significant number of ArcelorMittal’s large sites are ISO50001 standard certified or equivalent.
Each year, the Company’s Investment Allocation Committee ("IAC") approves a number of capital investments to bring significant energy and carbon efficiency improvements. In 2018, 26 further projects were approved, involving a capital allocation of $247 million, including the building of a coke oven gas ("COG") recycling plant in Vanderbijlpark. By replacing two existing natural gas plants, the project is expected to reduce operational costs and carbon emissions. ArcelorMittal also enters into energy performance service contracts for various energy efficiency initiatives, such as LED lighting, waste heat recovery and variable speed drives across its European sites, with notable social benefits alongside energy and carbon savings. ArcelorMittal’s global R&D division also continues to develop processes to support carbon and energy efficiency, and in 2018 deployed 19 such new processes across its portfolio. For example, smart oxygen sensors developed for the reheating furnaces in hot strip rolling mills have allowed reductions in energy and CO2 of three to four percent.
In the U.S., the Company is working to reduce energy consumption at all of its facilities by 10% over a ten-year period, with 2013 as the baseline year. This objective is aligned with a voluntary agreement under the U.S. Department of Energy's Better Plants Partnership.
For decades, the Company has found ways to re-use waste energy from the steel-making process - either by recycling it within its own operations or exporting it as heat, steam or electricity, all of which enable carbon benefits for the Company or its partners. For example, ArcelorMittal exports its process gases to power generation companies; it also supplies community heating to the residents of Zenica (Bosnia and Herzegovina), Zdzieszowice (Poland), Dunkirk (France) and Tubarão (Brazil). In order to achieve optimal re-use of waste gases and avoid unnecessary flaring, the Company is now reviewing its systems and, where improvements projects are identified, it has been able to drive these using the expertise of specialist service providers. In 2018, two top pressure recovery turbines ("TRT") with a 25MW total capacity were installed at a joint venture power station operated by Tameh at the Company's Dabrowa Gornicza site, using the pressure from blast furnace flue gas to generate emissions-free electricity. In addition, it entered into a new agreement to provide extended community heating in Dunkirk (France) and commissioned a new system in Belval (Luxembourg).
In 2017, the Company developed a carbon reduction plan for its European steel sites to enable it to withstand the impact of the EU ETS Phase 4. This was followed in 2018 by a ‘bottom up’ process to identify the carbon reduction potential using existing technology at all sites across the Company’s global portfolio.
The Company is also seeking significant carbon and energy improvements in its mining sites. In 2018, a range of projects were planned to reduce CO2 emissions by a total of 3.25 million tonnes per year. These included powerline replacement and fuel substitution projects. The Company also received approval for a project to capture, concentrate and burn coal-bed methane for heat and power generation at its coal mine in Kazakhstan, which is expected to have a significant impact on greenhouse gas emissions. The joint venturebetween Satbayev University and ArcelorMittal Temirtau will focus on geological exploration of methane reserves and methane extraction from coal mines. This gas could be used to produce electricity in gas power stations or in converted vehicles.
Renewables. Renewable energy is generated at a number of ArcelorMittal sites, for example through wind turbines at its Gent, Bremen and Hamburg plants, and through 15 hectares of solar panels at Fos-sur-Mer. At ArcelorMittal Hamburg, which is close to coastal wind power facilities, a "time shift" process regulates the power consumption of the electric arc furnace to absorb surplus electricity from wind power generation. The Company is actively exploring the potential for power purchase agreements ("PPAs") to supply its steel plants with renewable energy wherever prices are competitive. In 2018, it concluded an agreement to purchase electricity from a solar farm in Spain.
Developing new lower-carbon steelmaking technologies. At the same time, the Company is assessing the potential of its portfolio for emerging breakthrough technologies. ArcelorMittal believes that, provided there is significant policy support for resourcing the technical challenge, the steel industry can adapt its technology over the coming decades to meet the challenge of decarbonization. Alongside a carbon border adjustment in Europe, this will require access to sufficient finance and competitively priced, renewable energy.
The Company sees a numberhas 26 tailings storage facilities ("TSFs"), including conventional, paste, dry-stack and in-pit facilities, of technological pathways to decarbonizing steel in the long term: the use of sustainable biological sources of carbon in place of coal, together with carbon capture utilization ("CCU"); electrolysis or hydrogen-based steelmaking powered by large volumes of renewable energy;which 15 are active, 10 are inactive and carbon capture and storage alongside the continued use of fossil fuels. The Companyone is advancing a range of technologies for low-emissions steelmaking to support the various possible pathways.
The first of these may be referred to as the 'smart carbon pathway'. Smart carbon describes any process that enables a cycle of waste carbon to be used as valuable resources to replace fossil fuels: converting biomass waste and plastic waste from other industries back into reduction gas for the steelmaking process and using CCU technologies to convert steel waste carbon gases into commercially viable products such as bio-oils, chemicals, plastics and fuels. When successful, novel products made out of “recycled carbon” can be produced at scale, and contribute significantly to the low-carbon economy.
The Company is taking the lead in demonstrating this pathway. For example, ArcelorMittal is piloting its Torero project in Gent (Belgium), to use bio-waste in the blast furnace in place of coal. It is also developing IGAR technology in Dunkirk (France) to reform waste carbon gases into fuel for the blast furnace - formally a Low-Impact Steelmaking project. It aims to reach the industrial pilot phase for IGAR in 2020, and began engineering work in 2018.
A third smart carbon technology, run in partnership with LanzaTech, is the most advanced; it converts waste carbon monoxide from blast furnace gas into ethanol. This process requires low-energy input. When this ethanol is used in place of fossil fuel-based commodities for the production of transport fuels, plastics and chemicals, it generates high greenhouse gas savings. During 2018, work began on a €150 million industrial-scale demonstration in Gent, and in 2019 the Company will begin building the ethanol plant. This is expected to start producing ethanol in 2020, with annual CO2 savings equivalent to 600 Boeing 747 flights between London and New York, or 100,000 passenger cars. The Company is exploring the potential for scaling up the process at its other blast furnaces.
A further CCU project is an experiment in Fos-sur-Mer which tests the viability of using flue gases to grow microalgae, which could be converted into bio-crude or valuable chemicals.
Outcome 7: Supply chains that ArcelorMittal’s customers trustclosed.
ArcelorMittal considers responsible supply chain management to be a commercial and logistical necessity, both withinhas developed its own supply chain, and as a key offer totailings strategy based on the customers it supplies. It sees the development of a ‘mine to metal’ chain of
assurance against multi-stakeholder environmental and social standards as a significant competitive advantage. It aims to be a leader in this field, and win the trust of its customers by meeting or surpassing their standards, both in its own steel and mining operations, and in its supply chain.
The Company sees the momentum behind supply chain accountability continuing to grow, with a particular focus on mined raw materials. Consumer-facing brands want to demonstrate responsible sourcing, and customers are joining together to demand, and validate, higher standards in their supply chains, driven by their own due diligence processes. This is expressed through growing demandleading industry guidelines: from the Company's customers for reassurance on environmental and social standards. As a result, ArcelorMittal regards supply chain certification and assurance as a vital commercial opportunity to forge closer links with customers, and believes that taking a leading role in multi-stakeholder engagement is one of the most effective ways to achieve them. It is working with peers in the steel and mining industries, and with other stakeholders, to advance the development of new third party standards. It has also been a key actor in creating two new assurance organizations: IRMA (the Initiative for Responsible Mining Assurance) and ResponsibleSteelTM. In 2018, ArcelorMittal joined the Responsible Minerals Initiative.
As a member of the IRMA steering committee, ArcelorMittal participates in the multi-stakeholder expert panels shaping its standards. As a key member of ResponsibleSteel, it began testing the first draft of the ResponsibleSteelTM standard at several of its European operations in 2017, a process which continued in 2018. The Company began expanding this testing process across its global business in 2018.
AMMIC is a member of the Mining Association of Canada ("MAC"), Canadian Dam Association ("CDA") and Global Industry Standard for Tailings Management ("GISTM"). AsIts evolving governance model takes into account the principles laid out in the GISTM and aims to ensure that its TSFs are structurally sound and safe, with all efforts directed at minimizing risk.
To ensure the safety of all of its TSFs, the Company has a review process that includes internal and external audit. The internal part is conducted at the corporate level to assess compliance with ArcelorMittal’s tailings management standard. The external audit and review includes ‘engineer of MAC's Toward Sustainable Mining ("TSM") program, AMMIC'srecord’ performance reviews and annual performance resultsengineering inspections in addition to an independent technical review panel evaluation by a panel of industry specialists. These are published on the MAC website. Because the TSM standard is internationally recognized by responsible sourcing programs, in 2018 ArcelorMittal committed to assessing all its marketable minesbenchmarked against it,international guidelines and its Mont Wright iron ore mine has been certified. The Company began training at all relevant sites as part of a progression that will result in published assessments commencing in 2021. are considered best practice.
The Company is also seeking continuous improvement in its tailings management program to reduce exposure to risks associated with conventional TSFs by using best available technologies. This includes reducing the risk of existing conventional operations by promoting reduced moisture disposal methodologies, such as high density thickened tailings (paste) or filtered tailings where appropriate; and using latest and proven new technologies such as high precision radar, InSAR satellite monitoring and remote instrumentation to monitor facilities globally in real time.
ArcelorMittal is assessing all its mining operations for transition in line with these principles, and developing customized design solutions for non-conventional tailings system management. It has implemented tailings thickening steps in assets in Mexico, reduced moisture disposal methodologies in Brazil and Canada, and further studies are ongoing across the Group.
On February 8, 2019, ArcelorMittal preventively relocated residents from the Pinheiros community (Itatiaiuçu - MG), due to the activation of the Emergency Action Plan (PAEBM) of the Serra Azul dam. The change in the emergency level occurred after a member of a multi-stakeholder collaboration on sustainable tin productionmore conservative methodology was applied by the independent auditor responsible for the dam stability declaration, following recent mining accidents in Indonesia, the Tin Working Group ("TWG").
The Company also engages directlyunderstands how disruptive this move was for those impacted, but reiterates that the action was carried out on these issuesa preventive basis, that is in line with customers fromits main priority, which is to ensure safety first. Throughout the automotive, railprocess, the Company has acted with total transparency and other sectors, including construction, household goodsprudence, maintaining active support to dislodged families and packaging, as well asthe community to mitigate the impacts caused.
In June 2021, ArcelorMittal reached an agreement with initiatives usedthe Federal and State Public Prosecutor's Office and affected families regarding compensation parameters for the impacts caused by customers to share theirpreventive evacuation. The parameters of the collective agreement encompass (i) housing (real estate indemnification and acquisition); (ii) economic damages (loss of profits); and (iii) moral damages. This was the first extrajudicial agreement with the state and federal prosecutors in the context of reparation processes for assessing supply chain risk, such as DRIVE Sustainability, Electronic Industry Citizen Coalition, Railsponsible, EcoVadis andfamilies that were preventively evacuated due to the Green Building Council.
Alongside these multi-stakeholder, customer-focused initiatives, the Company is committed to driving standards in its own supply chain. Since 2011, the Company’s Code for Responsible Sourcing has set out minimum standards for its suppliers, and described how it will work with suppliers to achieve them. In 2018, the Company continued to ask all new global suppliers to sign the Code, and surveyed key suppliers for their implementationactivation of the Code. Atdam emergency plans. Individual negotiations with the same time, it reinforced its risk mappingaffected families started in October 2021 and analysis, with particular reference to its raw material suppliers. This process aims to identify social and environmental areas of concern, and the key hotspots for further due diligence; the Company is developing action plans where these are needed. It also identifies those suppliers which have the potential to take part in certification schemes in the future.ongoing.
Overall, the Company is shaping its supplier process to be better aligned to the OECD guidelines on due diligence on supply chains - in particular for conflict minerals, which reflect continued concern that some conflicts around the worldFurthermore, engineering projects are being financed by the trade in minerals such as tin, tantalum, tungsten and gold. From a portfolio of more than 2,000 steel products, only a very limited number of ArcelorMittal products contain tin and tungsten, which are necessarydeveloped for the functionality or productionconstruction of certain products.a downstream containment structure and also for the dam decommissioning. The Company publishes a Special Disclosure Report in compliance with the US Dodd Frank Act Section 1502, and is preparing to meet the requirementsconstruction of the EU's new conflict minerals regulation.check structure is a legal requirement to start the dam decommissioning process.
Outcome 8: Active and welcomed member of the communityManagement Theme #5: Social
ArcelorMittal wants communities to have confidence that it will address the impacts it has on them and their environment, and to seerecognize it as a pro-activegood neighbor, one that actively engages with local stakeholders to make a positive contribution by creating economic and social value through employment, procurement, taxation, sustainable development initiatives, strong risk management and respect for human rights. To do this, the Company understands that it must take a partnership approach by listening to stakeholder concerns at the site, country and segment levels; engaging in open conversations about challenges and concerns; and discussing the best ways to respond. This will help to balance the financial demands of the business with the needs of others now and in the future.
ArcelorMittal seeks to be a proactive partner in local socio-economicsocioeconomic development, which isone trusted to havemaintain an open dialogue and find constructive solutions when challenges arise. This approach is an essential part of its integrated approach to managing risks and impacts, and therefore maintaining its social
license. Local operations are responsible for directly managing community issues and monitoring local risks and opportunities, including how they are being addressed.
The Company is committed to providing stakeholders with assurance regarding sustainability throughout the steel value chain and informing them about the credibility and rigor of social and environmental performance audits at its steel plants and mines. As part of this, it aims to:is leading the steel industry’s first global certification standard, ResponsibleSteel™, and implementing IRMA standards for its mining operations.
UnderstandAs the ResponsibleSteel™ certification is being rolled out, ArcelorMittal sites have been preparing for the rigorous audits against a range of ESG issues, including social ones such as human rights, health and safety and stakeholder engagement. The process is meticulous and has been enormously valuable, having helped the Company to improve its contextsocial management approach to local communities, employees and impacts - from landcontractors working on site. ResponsibleSteel™ involves taking a more management systems-based approach to areas such as human rights, diversity and water use,labor rights. As a result, the Company’s aim is to air pollution, taxes paid,now manage social topics with the same systematic rigor with which quality, environment and employment provided;safety topics are handled.
ListenThe audit takes place in two stages: sites carry out a self-assessment against the 400+ requirements, then there is an in-person audit involving in-depth interviews and more detailed inspections. Any non-conformities are detailed in a report, and sites are expected to address them within a certain time frame before the auditor can recommend certification. Some examples of minor non-conformities identified at ArcelorMittal’s sites include the need to be more transparent about the criteria for selecting charities, which will be addressed by publishing more detailed information about them and the level of support; to ensure that local grievance mechanisms are easier to access and allow anonymity; and to engage with communities more regularly, especially on those issues that matter to understand whatthem most.
As part of the audits to prepare for ResponsibleSteel™ accreditation, it is encouraging to see that the community relations guidance and a toolkit for local teams developed in 2019 were used at some sites.
In 2021, the Company has issued an asset sustainability plan for stakeholder engagement and grievance mechanism guidelines for its mining operations, aligned with the IRMA standard. In addition, it is in the process of reviewing and updating its policies to ensure that they thinkare fully aligned with the ResponsibleSteel™ and IRMA requirements. It is important,also working on developing the Social Performance Framework and how they wantguidance manual, based on the existing Community Relations Guidance Toolkit. This will include a Social Risk Assessment and Management Plan, a Stakeholder Engagement Plan and
Community Grievance Mechanism, and a Community Development Plan.
Many communities’ concerns are specific to engage;
Develop environmentalthem. For example, issues such as lack of skills training and social development programs that best meetare particularly important in Liberia’s emerging economy. Since 2017, AML Vocational Training Centre has helped young people to develop globally recognized vocational skills. In 2021, 97 students enrolled, and the objectivesfirst group of 45 apprentices graduated from the three-year residential program in May. As part of the communityexpansion, AML has also launched a training and development program for high potential Liberian employees who will gain on the Company's operations;job experience and
Communicate regularly with communities knowledge in ways they find accessibleArcelorMittal Mining operations globally. The employees will receive advanced training in the fields of mining production and trustworthy.
ArcelorMittal employed approximately 209,000 people directly,operation optimization, plant maintenance, planning and execution, plant electrical operation systems, and electrical maintenance. Other training areas include plant-fitting and heavy-duty mobile equipment maintenance, as well as a large numbermine production and operations.
Meanwhile, the Community Development Social Fund helps to support broader projects in areas such as agriculture and infrastructure. In 2020, the Liberian government agreed that 20% of contractorsthe fund would support those living closest to the Company’s operations. The projects are selected by beneficiary committees and part-time workersapproved by local county approval committees. AML manages all contracts for goods and services and distributes payments.
ArcelorMittal strives to address the issues that matter most to the communities living near its sites. In 2021, for example, it continued the work on human rights. The Company expects all sites to follow its policy in 2018; it has significant procurement expense,this area. This includes working with public and private security forces in 2018 paid $629 millionways that meet relevant country and international standards, including the Voluntary Principles on Security and Human Rights ("VPSHR"), which is consistent with IRMA. When issues occur, ArcelorMittal expects sites to address them, and this begins with education and training. For example, in income tax and more in other taxes. This economic contribution is aligned with the UN's SDG 8 (Decent work and economic growth) -Liberia, the Company recognizes, however, that nothas introduced VPSHR scenario-based workshop sessions. It trained 383 employees in 2020 and another 237 completed the instruction by the end of 2021.
In Mexico, the ArcelorMittal ‘Women of Steel’ program received recognition from the Mexican Center for Philanthropy ("CEMEFI") for 36 successful initiatives focusing on the development of local communities over 11 years. It promotes the development, integration and empowerment of communities in the Lazaro Cardenas region and beyond. The program’s ultimate goal is to empower communities to be agents of change, transforming their ideas into reality using their knowledge and skills and contributing to the formation of a more
just society. It also seeks to raise awareness of the importance of taking part in creating a better social environment.
The program began in 2009 and has seen more than 43,000 people of all ages participate so far. It has also involved work with several private and government institutions, which has created momentum for development.
Working towards a just transition
Over the next two decades, the steel industry will undergo a transformation unparalleled since the 19th century, with many aspects of industrial activity along the value chain changing beyond recognition. An important aspect of this contributionwill be the social transformation that accompanies it, and the enhanced quality of life and standard of living that this brings across the value chain.
As ArcelorMittal plans for the transition of each of its steelmaking sites, it is felt directlyworking with government and unions to optimize these impacts. In Spain, for example, where the Company is moving from blast furnace steelmaking to the DRI-EAF route, it anticipates a positive employment impact along the value chain, from the construction of new assets and decommissioning of existing ones to the development of renewable energy infrastructure and hydrogen production and transportation systems. In addition, the transition will contribute to improvements in environmental impact across the value chain.
ArcelorMittal has also developed a tool that will help it to understand the social impact of its decarbonization strategy, based on best-practice principles developed by the United Nations Environment Program and the Social LCA project. The Company will be able to use this tool alongside its environmental impact expertise to consider the overall impact of its transition plans, starting with a pilot at its facility in Sestao, Spain. This will provide further data to support work with key stakeholders, including the need for policy to support the industrial and social transition.
Responding to COVID-19
Like many in the private sector, ArcelorMittal has been attempting to harness skills and resources in a useful and collaborative way to address the challenges presented by COVID-19 and provide social and humanitarian support during this time. It has been collaborating to address the severe lack of required safety and medical equipment, including face masks and ventilators. Its businesses across the world have collectively donated to various initiatives, including financial donations to healthcare facilities in communities where it works, and that local stakeholders have issues and concerns.
Everywhere it operates, ArcelorMittal encourages people to share their concerns, and aims to understand in detail what its community impacts are, both positive and negative, so that it can adapt, prevent issues from arising where possible, and respond to those which have escalated. Where stakeholders have a grievance, ArcelorMittal is committed to giving them a fair hearing and, where the grievance is legitimate and concerns something in the Company's control, providing access to remedies. Overall, the Company aimsoperates. Where excess capacity existed, it offered space to increasemedical facilities to host additional wards.
ArcelorMittal has also offered support by conducting vaccination awareness campaigns and delivering vaccines. For example, as part of a collaborative health strategy between the public health administration and the Confederation of Companies of Valencia, more than 500 workers at its oversight of local community engagementfacility in Sagunto, Spain, were vaccinated against COVID-19 at the corporate level,plant’s medical service, which relieved pressure on the public hospital system. The vaccination campaign began in early July and to identify best practices so it can improve management systems where needed. The Company's work with third-party assurance schemes such as TSMended in mid-August. To achieve the expected results, robust coordination was needed between the internal medical services and ResponsibleSteelTM is providing insights for this, see "—Outcome 7: Supply chains that ArcelorMittal’s customers trust," above for more details on these schemes.the public health services, in terms of accurate cross-data utilization, timing of vial delivery and administration of vaccines without waste.
In 2018, the Company continued to identify priority sites for strengthening community engagement. These included establishing best-practice community relationships at the Company's Ilva acquisition,France, ArcelorMittal Italia,has both offered vaccines internally and a concerted communication campaignworked with local communities around its mine sites in Liberia, accompanied by a survey of social impact.ArcelorMittal Liberia has also opened a $7 million vocational training center in Yekepa, see "—Outcome 9: Pipeline of talented scientists and engineers for tomorrow," below.
The Company works with local stakeholders on key issues. In Brazil, for example, in 2018 ArcelorMittal Brazil signed a cooperation agreement worth R$3.9 million with the State of Espirito Santo Federal Universitypublic authorities to support their studycampaigns to identifymake available not only immunization, but also antigen and PCR tests. In addition, the relationship between pollutantsCompany has paid particular attention to the wellbeing of employees during the pandemic. This has included providing advice on physical and asthma casesmental health, updates about the situation in Vitoria, Brazil. The three-year study involves 20 engineeringregions where it is present and health specialists from the university, and aims to identify which pollutants, from particulate matters and gases, most influence the intensification of asthma symptoms in children and adolescents. In Mexico, Ejido representatives at the Las Truchas mine blockaded the site in September 2018 following the expiration of the lease agreement for some of the surface rights. This resulted in the temporary closure of mining operations. In November 2018, a temporary arrangement was agreed while negotiations for a new lease agreement valid until May 2019 were completed in February 2019. Negotiations are ongoing to reach a long-term agreement.
To support local economic development, ArcelorMittal has established a number of local supplier initiatives, including the Integrated Program for Supplier Development and Qualification in Brazil, the Minority and Women Business Enterprises Program in the U.S., and the Enterprise and Supplier Development Program in South Africa, which is supported by the Company’s "incubation hub." It has developed public-private partnerships in the U.S., Ukraine, and Poland.
Community partnerships are also regarded as a key driver for employee retention and engagement. Annual external reputation surveys specifically highlightreminders about the importance of social distancing and other preventative measures.
In Liberia, the Company conducted awareness campaigns on preventing the virus, keeping safe and having vaccinations. It also strengthened the response capacity of medical facilities in Buchanan and Yekepa by establishing precautionary observation centers and COVID-19 treatment units, recruiting short-term staff and procuring various medical supplies and equipment. In addition, it supported national and local response efforts by pledging over $200,000 for medical supplies and equipment, including for washing hands, checking temperatures and covering faces, as well as strengthening its partnerships with the Ministry of Health and the National Public Health Institute at the national and country level. Nearly 1,700 workers and associates of AML have been voluntarily vaccinated through a collaborative effort with the Ministry of Health.
STEM
Alongside responding to communities’ needs and concerns, ArcelorMittal’s community investment strategy focuses on developing skills in employees’ sentiment about ArcelorMittal. To drive this sense of shared value for employees,STEM (science, technology, engineering and mathematics). This reflects the Company actively encourages employee volunteering.
Outcome 9: Pipeline of talented scientists and engineers for tomorrow
Talentedimportant role that scientists and engineers will play a critical part in building a sustainable future for society at large, for the steel industry and for the Company. Developing skills in STEM (science, technology, engineering and mathematics) is the global theme for the Company’s community investment strategy, reflecting the importance of these skills to the Company's own business future and to society more widely.
The Company plans its investment in STEM based on the need for people with both professional skills and the ability to adapt to change, exploit new technology, and thrive in an increasingly complex workplace. The strategy is locally led according to the needs of country operations and is intended to build a long talent pipeline by reaching various age groups. Overall, it seeks to inspire children to explore STEM concepts, offer guidance and encouragement to school students considering STEM, and support and attract undergraduates and graduates with relevant skills, including in areas such as lifecycle analysis, robotics,
data analysis, nanotechnologies, circular economics, and 3D metallurgy. It also seeks to retain technical talent, and a key element in the pipeline is ensuring that knowledge and skills within the business are passed on.
The strategy is delivered in many ways: from providing teaching aids and technological support, throughto inviting students to steel plants, and to the Company'sdeveloping long-term partnerships with leading academic organizations around the world, including technical schoolsworld. For details about human-resource-related matters and numerous universities in continental Europe, Brown University and MIT inits efforts to build the U.S., Cambridge in the UK, Lausanne in Switzerland, McMasters in Canada, and the China Central University. The Company wants to encourage and attract talent as widely as possible, and it has developed STEM initiatives that specifically focus on women and girls, who are historically underrepresented in STEM professions. A Company survey‘workplace of these activities in 2017 indicated that 64% of its countries were running STEM projects focused on women and girls.
Since 2017, ArcelorMittal has run a global internal STEM network which draws on experts from across the business to share best practice on STEM outreach. The network holds quarterly meetings and shares tools through an internal portal.
In 2018, the Company launched or supported a wide range of programs and initiatives. These included the ArcelorMittal Science program in Brazil, and in Liberia, support for the Annual Leadership Camp run by the Society of Women Engineers at the University of Michigan in the USA (SWE at UM)tomorrow’, which helps Liberian female undergraduate engineering students develop engineering leadershipis part of Management Theme #5: Social, see "Management and organizational development skills.employees—Employees".
The Company also offers internships and sponsorship of PhDs through joint research projects. These partnerships are designedIn 2021, ArcelorMittal continued to develop productive collaboration on specific issues, and help attract the best graduates. In 2018, in R&D alone, the Company hosted more than 90 engineering students in their final year on long-term internships, and 40 PhD students on a variety of different programs.
The Company has supported a range of activities around STEM social promotion in a number of countries. In Spain, for example, programs focusing on children and teenagers include STEM sessions in schools, high schools and in R&D labs. STEM+D sessions, which include sessions for high capability students, focus on key technology megatrends and digitalization, and are conducted by junior researchers from global R&D.
ArcelorMittal also supports a number of awardspursue numerous initiatives aimed at promoting STEM. These include the ArcelorMittal Environment AwardSTEM disciplines among young people. In France, for example, it does this through both social networks and a strong presence at school forums. In November, it participated in Brazil, dedicatedthe second Usine Extraordinaire forum, which is fully online this year and aims to raising awarenesschange perceptions of environmental issuesthe industry among elementary school students and employees’ children,young people and the Prix des Innovateurs in France, which rewards young entrepreneurs, students and researchers who have developed innovative science or engineering projects.
In 2018, for the second year running, ArcelorMittal Belgium and Microsoft jointly organized a hackathon called "The Challenge,", in which 65 participants were given 48 hours to come up with a creative solution for an industry-based problem, focused on welding fractures, for a share in €8,500 of prize money. A similar hackathon is run in Kryvyi Rih in Ukraine.
Outcome 10: ArcelorMittal’s contribution to society measured, shared and valued
Bothgeneral public. Other broader initiatives include giving presentations about the Company and its stakeholders can benefit from understandingindustry in educational institutions, and arranging virtual tours of facilities for engineering students, with a particular focus on decarbonization and the broader socialenvironment.
In Poland, for example, ArcelorMittal also undertook numerous activities to promote STEM. In April, it acted as a partner in a competition organized by the European BEST Engineering Competition. This international event, which took place in six cities in the country and economic value and impacts that ArcelorMittal creates, both directly and indirectly.
ArcelorMittal hasover 30 countries in Europe, aimed to understandencourage engineering knowledge, creativity and reportinnovative thinking among students at technical universities. In September, the Company took part in an IT career job fair for candidates interested in programming, database management and industry 4.0. At the event, a representative gave a presentation on the social, environmentaluse of Python in data analysis and economic valueproduction models.
Meanwhile, in Krakow, the Company began a fourth scholarship program for the most talented students at the AGH University of Science and Technology, this time focusing on materials science. In addition, it creates against its 10 SD outcomes as its own articulationlaunched the ‘Spin the Wheel with ArcelorMittal Poland’ project, which aims to support research clubs at the AGH University of the UN's Sustainable Development Goals. It believes that steel has a vital role to playScience and Technology; and acted as a material ofpartner in the future in a low-carbon circular economy, given its strength, durability, reusability and endless recyclability. As such, steel’s contribution‘UP – Level Your Skills Up’ event, which offers technical students the chance to society will continue as an essential material in building sustainable cities and communities (SDG11), while the Company’s efforts to improve the sustainability performance of its steelmaking and its supply chains contribute to sustainable industry (SDG 9), responsible production and consumption (SDG 12) and climate action (SDG 13), as well as decent work and economic growth (SDG 8).consult with recruitment specialists about their careers.
ArcelorMittal believes that transparency about the social and environmental impacts of its operations help build stakeholder trust. The Company is continuously enhancing its disclosures through its corporate Integrated Annual Review, country level reports, and disclosures to the Carbon Disclosure Project and a number of investor and customer surveys. In 2018, it published its Report on Payments to Governments in respect of Extractive Activities for the year ended December 31, 2017.
ArcelorMittal's overall reporting framework also reflects UN SDG 12's specific target 12.6 ("Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle"). The impact of ArcelorMittal's social license continues to be measured and reported at the country level, through a number of country-level sustainable development reports, which can be found on the corporate website at https://corporate.arcelormittal.com/sustainability/reporting-hub/country-reports. Many of these include basic data on the Company’s direct contributions to the economy, reflect a balance between positive and negative impacts, and acknowledge the importance of demonstrating stakeholder value as part of maintaining a social license to operate. Recent examples include reports from the Company’s operations in South Africa, Poland, Mexico, Argentina, and the United States.
The connections between the stakeholder value the Company creates and its business success has been an important aspect of ArcelorMittal’s integrated reporting and integrated thinking, demonstrated in its integrated annual review published each year in advance of its Annual General Meeting. For example, the Company acknowledges the importance of creating a safe, inclusive workforce culture, good community relations, and climate-related value (via reduced emissions) to its long-term future.
These outcomes are underpinned by Transparent Good Governance
The Company’s commitment to integrity is enshrined in its codeCode of business conductBusiness Conduct and is supported by a comprehensive framework of policies in areas such as human rights, anti-corruption and insider dealing. These reflect the principles and concepts of the UN Global Compact, the OECD Guidelines on Multinational Enterprises and UN Sustainable Development GoalSDG 16 - (“Peace, justice and strong institutions.institutions”). See also “Item 16.B—Code of Ethics”“Management and “Item 6.C—Directors, senior management and employees—Board practices/corporateCorporate governance”.
Listening, learning, respect and transparency are key to the integrity of the Company’s leadership and governance, which helps to ensure that ArcelorMittal operates effectively and ethically in all parts of the world.
ArcelorMittalworldwide. The Company considers its relationships with its various stakeholders to be vital to its success. ConductedManaged in the right way, these relationships help the CompanyArcelorMittal to know how best to respond to challenges, to anticipate future problems and to earn trust.
In each country, ArcelorMittal’s operations in each country are encouraged to assess their stakeholders'stakeholders’ expectations and concerns, in order to inform their approach to the 10 SD outcomes.outcomes and five management themes. Working with customers, suppliers, unions and others can also contribute to UN SDG 17 ("Partnership(“Partnerships for the goals"goals”).
ArcelorMittal continues•Key Performance Indicators the Company reports against, overseen by the SC;
•SD-focused Business Plans. An expectation that SD is integrated into each segment’s business plan, acting on the relevant SD issues material to be a memberthe business;
•SD-focused Corporate Initiatives. A ‘mine to metal’ chain of assurance, measured against multi-stakeholder environmental and social standards. These provide customers, investors and stakeholders with assurance regarding sustainability throughout the steel value chain and inform them about the credibility and rigor that has gone into auditing social and environmental performance at ArcelorMittal’s steel plants and mines. Corporate SD initiatives for the benefit of the Extractive Industries Transparency Initiative.Company, which include, for example, accelerating progress toward low-carbon steelmaking and devising innovative steel solutions for a positive SD impact;
•SD-focused Reporting. A robust articulation of ArcelorMittal’s approach and progress through clear narrative and transparent reporting verified by a third party.
In Brazil, where transparency is2021, the Company also continued to deepen its understanding of particular stakeholder concern, ArcelorMittal partners with the non-governmental organization Transparency International.relevant risks in its supply chain by strengthening its supply chain risk management and audit processes. To do this, it focused on implementing ResponsibleSteel™ (see “Management Theme #3: Customer reassurance” above) at the steel sites and IRMA at the mining sites. Both standards aim to ensure that both its own sites and its supply chain uphold international human rights and ESG standards.
ArcelorMittal'sArcelorMittal’s human rights policy draws on the UN Universal Declaration of Human Rights, the International Bill of Human
Rights and the core conventions of the International Labor Organization and the UN Global Compact; itCompact. It also aims to contribute to UN SDG 8's focus on decent working conditions,8 (“Decent work and economic growth”), including target 8.7 on modern slavery. The policy includes commitments to workers, local communities and business partners, and covers health and safety, labor rights and the rights of indigenous people. Employees working
Every three years, employees in relevant functions are required to undertake training inon the Company’s policy every three years, and in 2018, 94.1%policy. In 2021, 94.83% of the Company’sArcelorMittal’s relevant workforce had completed up-to-date human rights training, upan increase from 66%89.5% in 2017.2020. Where appropriate, ArcelorMittalthe Company provides face-to-face training for employees on human rights.
The Companyinstruction. It also conducts wider ethical and integrity training: in 2018, 87.5%2021, 91.32% of ArcelorMittal'sArcelorMittal’s employees had completed up to dateup-to-date training inon the Code of Business Conduct, and 90.4% had completed their Anti- Corruption training.
In 2018, the Company continued to deepen its understanding96.20% of the relevant risksworkforce had completed anti-corruption training.
Reporting is central to the Company's promise of openness with stakeholders. ArcelorMittal is committed to applying best practice standards in corporate governance in its supply chain by strengtheningdealings with shareholders and other stakeholders, and with respect to transparency, balance and quality of disclosure and reporting. This commitment underpins Integrated Annual Reviews and the Company's Climate Action Reports. ArcelorMittal also published several country sustainability reports in 2021, alongside its supply chain risk managementdisclosures to the CDP on climate change and audit processes. Its workwater, and a number of investor and customer surveys. In 2021, the Company published its Report on Payments to develop ResponsibleSteel™, a third party certification standard, as well as several mining certification standards aimed at ensuring that both its own sites and its supply chain uphold international human rights, environmental and governance standards.Governments in respect of Extractive Activities for the year ended December 31, 2020.
Products
Information regarding segment sales by geographic area and sales by type of products can be found in note 3 to ArcelorMittal’s 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 with different specifications, including many complex and highly technical and sophisticated products that it sells to demanding customers for use in high-end applications.
ArcelorMittal’s principal steel products include:
•semi-finished flat products such as slabs;
•finished flat products such as plates, hot- and cold-rolled coils and sheets, hot-dipped and electro-galvanized coils and sheets, tinplate and color coated coils and sheets;
•semi-finished long products such as blooms and billets;
•finished long products such as bars, wire-rods, structural sections, rails, sheet piles and wire-products; and
•seamless and welded pipes and tubes.
ArcelorMittal’s main mining products include:
•iron ore lump, fines, concentrate, pellets and sinter feed; and
•coking and PCI and thermal coal.
Steel-making process
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”.
Integrated steel-making
In integrated steel production, coal is converted to coke in a coke oven, and then combined in a blast furnace with iron ore and limestonefluxes to produce pig iron. Pig ironhot metal. This is then combined with scrap in a converter, which is generallymainly 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 whichor cast directly as ingots. The cast steel 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 generation. Integrated mills are substantially dependent upon iron ore and coking coal which, due to supply and demand imbalances, shortening of contract durations and the linkage between contract prices and spot prices, have been characterized by price volatility in recent years.
Mini-mills
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 the more efficient plant layouts of mini-mills.mini-mills and lower manpower. 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 in recent years, and the cost of electricity.
Integrated mini-mills
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 continues to be subject to price volatility. 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. BecauseIntegrated mini-mills are substantially dependent upon iron ore which, due to supply and demand imbalances, shortening of contract durations and the linkage between contract prices and spot prices, have been characterized by price volatility in recent years. In addition, 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 also than are mini-mills using scrap.
Key steel products
Steel-makers primarily produce two types of steel products: flat products and long products. 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.
Flat products
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, plates). Slabs are typically between 200 and 250mm thick.
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.typically between 2 and 25 millimeters, depending on the final product. Flat-rolled steel sheet that has been wound is referred to as “coiled”. Alternatively, hot-rolled sheet can be produced using the thin slab casting and rolling process, where the hot-rolled sheet thickness produced can be less than one millimeter. This process is generally used in a flat products mini-mill, but some integrated examples exist as well.
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 steel’s 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.
Electrical steelssteels.. There are three principal types of electrical steel: grain-oriented steels, non-grain oriented fully processed
steels and non-grain oriented semi-processed steels.
Grain-oriented steels are 3% silicon-iron alloys developed with a grain orientation to provide very low power loss and high permeability in the rolling direction, for high efficiency transformers.
Non-grain oriented fully processed steels are iron-silicon alloys with varying silicon contents and have similar magnetic properties in all directions in the plane of the sheet. They are principally used for motors, generators, alternators, ballasts, small transformers and a variety of other electromagnetic applications. A wide range of products, including a newly developed thin gauge material for high frequency applications, are available.
Non-grain oriented semi-processed steels are largely non-silicon alloys sold in the not finally annealed condition to enhance punchability. Low power loss and good permeability properties are developed after final annealing of the laminations. These materials are sold under the Newcor and Polycor trademarks.
Long products
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 or rectangular 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, wire rod and 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 are the general terms 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 tubes. 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.
Steel sheet piles.Steel sheet piles are hot rolled products used in civil engineering for permanent and temporary retaining structures. Main applications are the construction of quay walls, jetties, breakwaters, locks and dams, river reinforcement and channel embankments, as well as bridge abutments and underpasses. Temporary structures like river cofferdams are made with steel sheet piles. A special combination of H beams and steel sheet piles are sometimes used for the construction of large container terminals and similar port structures.
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.
Mining products
ArcelorMittal’s principal mining products andwhich are also raw material input items for steel operations include iron ore and solid fuels (coking coal and PCI coal), metallics, alloys, base metals, energy and industrial gases.coke).
ArcelorMittal’s mining and raw materials supply strategy consists of:
•Acquiring and expanding production of certain raw materials, in particular iron ore, coal and manufacturing refractory products and developing diverse third-party customer relationships;
With respect to•Exploiting its global purchasing reach, pursuing the lowest unit price available based on the principles of total cost of ownership and value-in-use through aggregated purchasing, supply chain and consumption optimization; and
Exploiting its global purchasing reach; and
•Leveraging local and low cost advantages on a global scale.
Faced with lower and more volatile raw materials prices in recent years, ArcelorMittal’s priority has been to optimize output and production from its existing sources focused mainly on iron ore and coking coal rather than to further expand its portfolio of mining assets. Iron ore and coking coal are its two most important inputs in the steel-makingiron-making process.
ArcelorMittal is a party to contracts with other mining companies that provide long-term, stable sources of raw materials. The Company's largest iron ore supply contracts with Vale were renewed in 2017.2017 and a renewal process is currently ongoing. ArcelorMittal's principal international iron ore suppliers include Vale Cleveland-Cliffs Inc. in the United States, MetinvestBrazil, Anglo-American (Sishen in Ukraine, SeverstalSouth Africa and Minas Rio in Brazil), Metalloinvest in Russia, Luossavaara-Kirunavaara AB in Sweden, IOC (Rio Tinto Ltd.) and Baffinland Iron Mines Corporation ("Baffinland") in Canada and Sishen in South Africa.Canada. ArcelorMittal’s principal coal suppliers include the BHP Billiton Mitsubishi Alliance (“BMA”), Rio Tinto, Anglo Coal, Glencore and Peabody in Australia, Contura and Warrior in the United States, Teck Coal in Canada, and Vale in Mozambique.Mozambique and JSW in Poland.
ArcelorMittal believes that its portfolio of long-term supply contracts can play an important role in preventing disruptions in the production process. (see “Item 5—Operating“Operating and financial review and prospects—Key factors affecting results of operations——Economic conditions—Raw materials”).
In 2018, ArcelorMittal sourced a large portion of its raw materials from its own mines and facilities including finance leases. The table below sets forth information regarding ArcelorMittal’s raw material consumption in 2018.
|
| | | | | | | | |
| Millions of metric tonnes | | Consumption | | Sourced from own mines/facilities2 | | Other sources | | Self-sufficiency % |
| Iron ore | | 118.3 | | 58.3 | | 60.0 | | 49% |
PCI & coal1 | | 47.9 | | 5.8 | | 42.1 | | 12% |
| Coke | | 28.2 | | 25.7 | | 2.5 | | 91% |
| Scrap & DRI | | 36.3 | | 19.3 | | 17.0 | | 53% |
| |
1 | Includes coal only for the steelmaking process and excludes steam coal for power generation. ArcelorMittal's consumption of PCI and coal was 9.8 million tonnes and 38.1 million tonnes, respectively, for the year ended December 31, 2018. |
| |
2 | As of December 31, 2018, the Company does not have any strategic contracts. |
Iron ore
ArcelorMittal sources significant portions of its iron ore needs from its own mines in Kazakhstan, Ukraine, Bosnia, Canada, the United States, Mexico, Liberia and Brazil. Several of ArcelorMittal’s steel plants also have in place off-take arrangements with mineral suppliers located near its production facilities.
For further information on iron-oreMining segment iron ore production, see “Item 5.A—Operating“Operating and financial review and prospects—review—Operating results”. For further information on each of ArcelorMittal’s principal iron ore mining operations including total mining production of iron ore and coal, see “Item 4.D—Information on the Company—“—Property, plant and equipment”.
Solid fuels
Coking coal
As with iron ore, ArcelorMittal sources a percentage of its coking coal from its own coal mines in Kazakhstan and the United States.Kazakhstan. The Company’s mines in Kazakhstan supply substantially all of its requirements for its steelmaking operations at ArcelorMittal Temirtau, while the mines in the United States supply other steel plants within the ArcelorMittal group together with external customers.Temirtau.
For further information on coking coal mining production, see “Item 5.A—Operating"—Property, plant and financial reviewequipment— Reserves and prospects—Operating results.”resources (iron ore and coal)"
Coke
ArcelorMittal has its own coke-making facilities at most of its integrated mill sites, including in Bosnia, the United States, Canada, Mexico, Brazil, Spain, France, Germany, Belgium, Poland, Czech Republic, Kazakhstan, South Africa and Ukraine. While ArcelorMittal meets most of its own coke requirements, certain of ArcelorMittal’s operating subsidiaries buy coke from mostly domestic or regional sources to optimize cost savings from transport efficiencies, and certain of its subsidiaries sell, on occasion, excess coke at market prices to third parties. The remainder of the spot purchases of coke are made from China, Columbia and the United States.
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.and Colombia.
Other raw materials and energy
Metallics (scrap)
ArcelorMittal procures the majority of its scrap requirements locally and regionally, optimizing transport costs. Typically, scrap purchases are made in the spot market on a monthly/weekly basis or with short-term contracts. In Europe, ArcelorMittal has entered into certain contracts for scrap recycling.
Alloys
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.
Base metals
The majority of the Company’s base metal needs, including zinc, tin, aluminum and nickel are purchased under annual volume contracts. Pricing is based on the market-accepted indices. Material is sourced from both local and global producers.
Electricity
ArcelorMittal generally procures its electricity through tariff-based systems in regulated areas such as parts of the United States and South Africa, through direct access to markets in most of its European mills or through bilateral contracts elsewhere. The duration of these contracts varies significantly depending on the area and type of arrangement.
For integrated steel mills, plant off-gases from various process steps are utilized to generate a significant portion of the plant’s 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.
Natural gas
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 and Ukrainian operations, with a contractual mix of “all-in” bilateral supply and direct access to the market, ArcelorMittal sources its natural gas requirements
under the prevailing mix of oil-based pricing
systems and European short term/spot-indexed supply contracts. The remainder of ArcelorMittal’s natural gas consumption represents approximately 20% of ArcelorMittal’s total consumption and is generally sourced from regulated markets.
Industrial gases
Most of ArcelorMittal’s industrial gas requirements are produced and supplied under long-term contracts with various suppliers in different geographical regions.
Shipping
ArcelorMittal Shipping ("AM Shipping") provides ocean transportation solutions to ArcelorMittal’s manufacturing subsidiaries and affiliates. AM Shipping 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. AM Shipping is also responsible for providing shipping services to the Company’s sales organizations. It provides complete logistics solutions from plants to customer locations using various modes of transport.
In 2018,2021, AM Shipping arranged transportation for approximately 76.361.03 million tonnes of raw materials and about 13.98.71 million tonnes of finished products. The key objectives of AM Shipping are to ensure cost-effective and timely shipping services to all units. AM Shipping acts as an agentthe coordinator for a Mauritius-based shipping company, Global Chartering Ltd., Luxembourg-based ArcelorMittal Sourcing and Luxembourg based AM Mining SA. Global Chartering Ltd handles shipping of approximately 16% of the Company’s raw materials, which are transported by sea by chartering vessels on a short- to long-term basis. In its fleet are several Capesize, Panamax and Supramax vessels on a medium-to-long-term charter. AM Shipping’s strategy is to cover about 50% of the Company's cargo requirements onjoint venture with DryLog, a medium to long-term basis, and to arrange remaining transportation requirements on a spot basis.Monaco based shipping company.
Purchasing
ArcelorMittal has implemented a global procurement process for its major procurement requirements, including raw materials, capital expenditure items, energy and shipping. ArcelorMittal’s centralized procurement 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.
By engaging in these processes, 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. 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 its own raw materials sources.
ArcelorMittal has institutionalized the “total cost of ownership” methodology as its way of conducting its procurement activities across the Group. This methodology focuses on the total cost of ownership for 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 2018,2021, ArcelorMittal sold 83.962.9 million tonnes of steel products.
Sales
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 either at the business unit or at the production unit level. For certain specific markets, such as automotive, there is a global approach offering similar products manufactured in different production units around the world. 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. In the EU region and in South America, 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 ArcelorMittal’s customers. Distribution centers provide access to ArcelorMittal’s products to smaller customers that cannot or do not want to buy directly from the operating facility.
The Group prefers to sell exports through its international network of sales agencies to ensure that all ArcelorMittal products are presented to the market in a cost-efficient and coordinated manner.
Sales are executed at the local level, but are conducted in accordance with the Group’s sales and marketing and code of conduct policies.
For some global industries with customers in more than one of the geographical areas that ArcelorMittal serves, the Company has established customized sales and service functions. This is particularly the case for the automotive and packaging industries.industry. Sales through these channelsthis channel are coordinated at the Group level with respect to contract, price and payment conditions.
Marketing
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. Local marketing provides guidance to sales on forecasting and pricing. 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 a 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 each market.
Insurance
ArcelorMittal maintains insurance policies to cover physical loss or damage to its property and equipment on a reinstatement basis arising from a number of specified risks, including certain natural disasters, such as earthquakes, floods or windstorms, acts of terrorism floods and windstorms, and certain consequential losses, including business interruption arising from the occurrence of an insured event under the said policies.
ArcelorMittal also purchases worldwide third-party public and product liability insurance coverage for all of its subsidiaries.
Various other types of insurance are also maintained, such as comprehensive construction and contractor insurance for its greenfield and major capital expenditures projects, directors and officers liability, 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 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.
In addition, ArcelorMittal maintains trade credit insurance on receivables from selected customers, subject to limits that it believes are consistent with those in the industry, in order to protect it against the risk of non-payment due to customers’ insolvency or other causes. Not all of ArcelorMittal’s customers are or can be insured, and even when insurance is available, it may not fully cover the exposure.
ArcelorMittal believes that its insurance coverage is in line with industry practice and sufficient to cover normal risks in its operations. Notwithstanding the insurance coverage that
ArcelorMittal and its subsidiaries carry, the occurrence of an event 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 ArcelorMittal’s financial condition and future operating results.
Intellectual property
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 Company’s R&D and business sectors in order to optimize the global efficiency of the Company’s patent portfolio. The Company’s patent portfolio includes more than 7,00010,500 patents and patent applications, mostly recent and middle-aged,medium-term, for approximately 600more than 724 patent families, with 7077 inventions newly-protected in 2018.2021. 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, ArcelorMittal is constantly developing technical know-how and other unpatented proprietary information related to design, production process, decarbonization solutions for steel production and use of high quality steel products, leading to development of new applications or to improvement of steel solutions proposed to its customers, such as the ones aiming at weight reduction for vehicles. 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.
Government regulations
ArcelorMittal’s operations are subject to various regulatory regimes in the regions in which it conducts its operations. The following is a discussionan overview of the principal features of selectedthe Company's regulatory regimes, as of December 31, 2018,2021, that affect or are likely to affect the Company's operations.
See “Item 3.D—Key information—Risk“Risk factors” and note 8.39.3 to ArcelorMittal’s consolidated financial statements.
Environmental laws and regulations
ArcelorMittal’s operations are subject to a broad range of laws, directives and regulations relating to air emissions, surface and groundwater protection, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste management, recycling, treatment and disposal practices, the remediation of environmental contamination, the protection of soil, biodiversity and ecosystems or rehabilitation (including in Mining)mining).
In December 2019, the European Commission presented the Communication on the European Green Deal, which sets out a detailed vision to make Europe the first climate-neutral continent by 2050, safeguard biodiversity, establish a circular economy and eliminate pollution, while boosting the European Industry.
As these laws and regulations in the United States,European Union stemming from the EUGreen Deal and other jurisdictions continue to become more stringent, ArcelorMittal expects to expend substantial resources including operating and capital expenditures to achieve or maintain ongoing compliance. Further details regarding specific environmental proceedings involving ArcelorMittal, including provisions to cover environmental remedial activities and liabilities, decommissioning and asset retirement obligations are described in notes 8.1 and 8.3note 9.1 to ArcelorMittal’s consolidated financial statements.
SomeArcelorMittal anticipates that its expenditures with respect to environmental matters in the EU over the next several years will relate primarily to installations of additional air emission controls, to requirements imposed in the course of renewal of permits and authorizations, including those pursuant to ongoing implementation and upcoming revision of the IED (Directive 2010/75/EU), respecting achievement amongst others of dust, NOx and SO2 and to address GHG issues, including the reduction of emissions and purchase of allowances.
In relation to the joint venture Acciaierie d'Italia (formerly ArcelorMittal Italia), certain environmental obligations (decontamination and environmental capital expenditures) of the previous operators regarding the Taranto plant have been transferred to Acciaierie d'Italia, which operates the Taranto plant as lessee and, as such, is required to implement an environmental plan. This will require significant capital investments by Acciaierie d'Italia. See also further information on Acciaierie d'Italia in "Introduction—Risk factors" and "Introduction—Key transactions and recent developments" and "Properties and capital expenditures—Investments in joint ventures".
As the central directive to tackle industrial pollution, the IED represents a key pillar of the European Green Deal. Policy options to enhance its performance may include, for example, the improvement of the Best Available Techniques reference
documents ("BREF") elaboration process or furthering the contribution to circular economy objectives. The adoption by the EU Commission is planned for the beginning of 2022. A Commission proposal for a revised IED is expected by March 2022. It will look at the sectoral scope of the legislation and at how to make it fully consistent with climate, energy and circular economy policies.
Policy options to with respect to the IED may include, for example, a more central and authoritative role in industrial decarbonization; a more ambitious approach for how the IED promotes a transition to safer chemicals, resource efficiency and the circular economy; expanding the focus on supporting innovation and/or addressing issues associated with the effectiveness of the current Directive.
Moreover, with respect to waste shipments, the European Commission is revising the EU rules as the proposal in Europe seeks to enforce the principle that waste can only be exported if it is managed as sustainably as in the EU, otherwise companies will have to stop the export. In Brazil, the government has issued ordinance which creates the obligation to register a Waste Transportation Manifest nationwide.
Environmental requirements impacting industrial operations are also becoming more stringent in other jurisdictions. For example, in Canada, the Environment and Climate Change Canada Government Department (“ECCC”) updated the Base Level Industrial Emission Requirements (“BLIERs”) under the federal Air Quality Management System, thus incurring considerable investments to comply with emission regulations. Provincial regulations in Ontario and Quebec will also be requiring further emissions reduction.
In Ontario at ArcelorMittal Dofasco, the SO2 BLIER requires to install a full coke oven gas desulphurization by December 31, 2025. Currently, on a plant-wide basis, ArcelorMittal Dofasco’s facility is meeting its BLIERs objective. Moreover, the decarbonization project will impact ArcelorMittal Dofasco’s overall NOx emissions.
In Quebec, pursuant to Quebec 2011 Clean Air Regulation Act regulating particulate matter (“PM”), a combustion chamber and canopy hood volume increase at its Contrecoeur East facility is in progress with the expected completion date beginning of 2022.
In Kazakhstan, beginning in 2025, complex ecological permits for emissions into the environment will impose more stringent emissions standards and also outline measures for reducing emissions (production improvements). Moreover, in July 2021, the new Environmental Code of the Republic of Kazakhstan came into force, which introduces the “polluters pays” principle – therefore increasing liability risks.
In Ukraine, over the period of 2020-2021, a range of draft laws aimed at the environment protection have been submitted to the Ukrainian Parliament. The documents are to improve the policies and provide variety of instruments to regulate GHG and industrial emissions, waste management sector and strengthen the state environmental inspection. These draft laws will convey a substantial change into the environmental regulation within the next two years. In October 2021, the Ukrainian Government approved the Environmental Security and Climate Adaptation Strategy until 2030. Though this Strategy primarily deals with climate change mitigation measures, it also focuses on the industrial pollution reduction, the effective chemical safety system establishment, the rational use of natural resources, among others. The Strategy will be implemented in accordance with the approved action plan, setting out the list of measures for the consecutive three years. Ukraine is implementing EU directives on industrial emissions and waste. As a part of the IED implementation in Ukraine, the industrial emissions law will introduce a concept of BATs, which will be required for implementation by the largest facilities. Most of the large industrial companies, while planning modernization or new construction projects, have been already building their investment strategies upon BATs. The industrial emissions law and subsequent secondary legislation are expected to be adopted as early as 2022 and beyond, but the impact of this legislation is already currently visible. Also, in October 2021, the national Pollutant Release and Transfer Register (“PRTR”) was launched in Ukraine. The PRTR contains data on emissions of polluting substances released into the air and water, the volumes of waste generation as well as information on the environmental inspections carried out. The Ministry of Environmental Protection and Natural Resources of Ukraine has pledged to extend the scope of information and regularly update the register.
In Mexico, new waste legislation is under discussion. Pursuant to the last version of the proposal, dated September 2021, the standard on maximum permissible limits of wastewater discharges is currently under review in order to reduce maximum permissible limits. Such a regulatory change would incur increased costs, as ArcelorMittal would need to invest on new waste treatment systems in order to fulfill the new requirements. Moreover, ArcelorMittal needs to comply by July 1, 2022 with new rules on the measurement of national waters that mandates continuous data monitoring.
ArcelorMittal’s most importantmining activities also are subject to increasingly stringent environmental and safety requirements.
For example, in Brazil, regulations from the National Mining Agency (“ANM”) focus mainly in simplifying the procedures for requesting research or mining, revising existing standards concerning mining companies’ obligations regarding the safety of mining dams (monitoring activities, compliance initiatives are described below,and
operability assessments, and dam emergency action plans) and standardization of the procedures regarding the Mine Closure Plan and decommissioning requests (ANM Resolution No. 68, 04/30/21).
In the State of Minas Gerais, several norms regarding dam safety have been adopted, among them, the State Policy for People Affected by Dams, the guidelines for the presentation of the Emergency Action Plan, the rules applicable to the accreditation of independent external auditors to carry out technical safety audits under the scope of the State Policy for Dam Safety, as well as the mainprocess for registration and classification of dams subject to the State Policy for Dam Safety.
In Canada, the mining industry is negotiating depollution permits applicable to AMMC and ArcelorMittal Long Products Canada facilities. In the mining sector, some objectives for dust, NOx and SO2 were also identified and a draft agreement prepared, but there has been no further progress.
The renewal requests of the depollution permits for AMMC's Mont Wright operations, Fire Lake and Port-Cartier pellet plant are still being analyzed by the environmental lawsauthorities that wish to apply the same standards to all mines. These permits establish the targets for water, air, soil and regulationswaste management, as well as the monitoring and reporting frequencies and requirements.
The above mentioned Quebec 2011 Clean Air Act reduced the limit for total PM from 120 to 75 grams/tonne produced for existing pelletizing plants, including ArcelorMittal Mines Canada. The electrostatic precipitator refurbishment plan included in the five-year capital expenditure plan will contribute to ensuring conformity with the new emission limit on a medium-term basis. This project is being undertaken over a 10-year timeline, and its expected cost will be approximately CAD15 million.
Moreover, renewed depollution permits that will apply to ArcelorMittal Long Products Canada’s Contrecoeur West and East facilities, issued respectively on December 21, 2018 and April 27, 2021, establish more stringent targets for water, air, soil and waste management, as well as the monitoring and reporting frequencies and requirements. Obtaining the new depollution permits will require increasing monitoring frequencies as well as conducting certain studies including water usage, air dispersion modelling, phase I environmental site assessment, former EAF dust stockpile site and former slag management area restoration.
In addition, Québec’s revised 2018 regulation relating to compensation for adverse effects on wetlands and bodies of water, will apply to projects conducted in its principal countriesPort-Cartier and also apply at ArcelorMittal Long Products Canada future projects.
An environmental performance agreement - signed between Environment and Climate Change Canada (“ECCC”), the Iron Ore Company of operation. Canada and AMMC - is in effect from January 5, 2018 to June 1, 2026. It aims to implement BLIERs developed for the iron ore pellet sector. More precisely, it specifies the membership, timelines and deliverables of the NOx Working Group and will ensure that the BLIERs limits for PM2.5 and SO2 are met, and that the approach to study NOx is implemented.
It is difficult to anticipate whetherfully assess the extent to which additional operating or capital expenditures will be required to comply with pending or recently-enacted amendments to environmental laws, directives and regulations or what effect they will have on the Company’s business, financial results or cash flow from operations.
In 2018, ArcelorMittaladdition, in 2021, the Company approved a number40 multi-year projects with identified environmental benefits and involving capital expenditure of $565 million and 34 multi-year projects with identified energy benefits and involving capital expenditures totalingexpenditure of $442 million. The latter includes 11 multi-year projects specifically targeted to $652 milliondecarbonization involving capital expenditure of $174 million. Actual capital expenditure on decarbonization initiatives for the year ended December 31, 2021, amounted to $0.1 billion and is expected to increase to $0.3 billion (net of government support) in order to facilitate compliance with these2022. See also further information on key environmental projects in "—Sustainable development" and energy laws and regulations."Capital expenditure projects".
Industrial emissions regulation: climate change
ArcelorMittal’s activities in the 28 member states of the EU are subject to the EU Emissions Trading Scheme (“ETS”), and it is likely that requirements relating to greenhouse gas (“GHG”) emissions will become more stringent and will continue to expand to other jurisdictions in the future. In the United States, the U.S. Environmental Protection Agency (“EPA”) currently requires reporting of GHG emissions by source and may impose permitting obligations on new sources or existing sources that seek to modify their operations that will result in an increase in certain GHG emissions.
In South Africa, a bill to tax carbon dioxide emissions is under discussion. In Mexico, Brazil and Kazakhstan new regulatory initiatives are being discussed by the different government authorities. In the United Kingdom, ArcelorMittal’s activities are subject to the Carbon Reduction Energy Efficiency Scheme (“CRC”).
In December 2015, 195 countries participating in the United Nations Framework Convention on Climate Change (“UNFCC”), at its COP21 held in Paris, adopted a new global agreement on the reduction of climate change (the “Paris Agreement”). The Paris Agreement sets a goal to limit the increase in global average temperature to well below 2 degrees celsiusCelsius and pursuingpursues efforts to limit the increase to 1.5 degrees celsius,Celsius, to be achieved by getting global GHG emissions to peak as soon as possible. The Paris Agreement consists of two elements: a legally binding commitment by each participating country to set an emissions reduction target, referred to as “nationally determined contributions” or “NDCs”, with a review of the NDCs that could lead to updates and enhancements every five years beginning in 2023 (Article 4) and a transparency commitment requiring participating countries to disclose in full their progress (Article 13). The majority of countries have issued their intended NDCs.
In June 2017,More recently, during COP26, the U.S. announcedsignatories reached a final agreement, the Glasgow Pact. This was the first climate conference pact in the history of UN climate talks to contain any mention of the need to end the world’s reliance on coal and fossil fuel subsidies. Countries have been asked to come to COP27 with strengthened plans to slash emissions. One of the
most important announcements made is that it would ceasethe governments have finally reached agreement on how to participate inprogress the development of tradable carbon credits, known as Article 6 of the Paris Agreement. PursuantGovernments agreed to Article 28,establish the earliest possible withdrawal date would bestandards for two types of carbon markets: for carbon units traded between governments that are over and underachieving their nationally determined contributions (NDCs), and for GHG reductions created and traded anywhere in November 2020.the world by the public or private sector. A UN appointed body will deliver recommendations on the functioning of these markets to COP27 next year.
Specifically, for the steel sector, heavy industry was a focus of initiatives at COP26. Steel was one of the five Glasgow breakthrough sectors, (with power, road transport, hydrogen and agriculture), which collectively cover more than 50% of global emissions. The U.S. has signaled that it would complyaim is to make clean technologies the most affordable, accessible and attractive choice for all in each of the most polluting sectors by 2030, particularly supporting the developing world to access the innovation and tools needed to transition to net zero. The goal is to reach net-zero emission steel as the preferred choice in global markets, with efficient use and net-zero emission steel production established and growing in every region by 2030.
Alongside the Glasgow Pact, Governments of the United Kingdom, India, Canada and the United Arab Emirates launched the Industrial Deep Decarbonization Initiative (“IDDI”) campaign. The IDDI aims to achieve net-zero in major steel and concrete public construction by 2050, with specific interim targets by 2030, by means of standards and evaluation guidelines on green procurement.
In July 2021, the European Climate Law was published, setting a new EU climate ambition target aiming at achieving at least a 55% reduction in greenhouse gases (“GHG”) emissions in 2030 versus 1990 (compared with the four-year exit process.current ambition of a 40% reduction) and reaching carbon neutrality by 2050.
On July 14, 2021, the European Commission adopted the “Fit for 55” Package with a view to adapting climate and energy legislation to the 2030 ambition set by the European Climate Law. The EU also committed internationally to its 55% reduction target. The “Fit for 55” amends several pieces of legislation that are already applicable to ArcelorMittal, is closely monitoring local, nationalsuch as the EU Emissions Trading Scheme (“EU-ETS”), the Renewable Energy Directive, the Energy Efficiency Directive, Energy Taxation Directive and international negotiations, regulatory and legislative developments and is endeavoring to reduce its own emissions where appropriate.
United Statesintroduces a proposal for establishing a Carbon Border Adjustment Mechanism (“CBAM”).
ArcelorMittal’s operating subsidiariesactivities in the United States27 member states of the EU are subject to numerous environmental laws and regulations including at the federal level, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (“RCRA”), 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. Pursuant to these laws, regulations and requirements, the EPA and the states are implementing updated emission standards for certain pollutants.
Any more stringent standards could have significant financial implications on operations. ArcelorMittal USA continues to carefully monitor all developments in this area and to proactively engage with regulators as appropriate to define its regulatory obligations.
In 2013, US EPA Region V rejected the State of Minnesota’s plan for reducing regional haze,EU-ETS, which was designedlaunched in 2005 pursuant to preserve visibility in pristine national park areas, and promulgated its own plan to require the taconite industry to install new low NOx technology at taconite furnaces in the region. This requires significant capital investment. In 2015, the taconite industry reached a settlement with the EPA to establish more flexible ranges for final limits and secured additional time to meet them. The EPA promulgated a final rule effectuating that settlement in April 2016. However, the new rule raised an additional concern regarding the process for setting final limits as well as an unrelated issueEuropean Directive 2003/87/EC, relating to SO2GHG emissions. Discussions with the EPA are ongoingThe EU-ETS is based on both issues.a cap and trade principle, setting a cap
The original litigation has been dismissed and efforts are underway to comply with the new regulation’s NOx requirements. It is estimated that this will cost approximately $6.7 million.
ArcelorMittal USA does not presently expect to incur significant capital expenditures relating to other environmental regulatory developments or matters in 2018.
European Union
Significant EU Directives and regulations that are applicable to ArcelorMittal’s production units in the EU, include the following:
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•77 | Directive 2010/75/EU of November 24, 2010 on Industrial Emissions (the “IED Directive”), which applies common rules for permitting and controlling industrial installations. To receive a permit, installations covered by the IED Directive must ensure that their Emissions Limit Values (“ELV”) do not exceed those associated with the Best Available Techniques (“BAT”), as adopted in the decision of the European Commission on February 28, 2012 establishing the BAT conclusions for iron and steel production under the IED (C(2012)903). Air, soil or water, energy emissions, waste generation, as well as noise, hazards and site closure, are all considered with few possibilities to obtain derogations related to the implementation of BAT and the associated emissions limits values. The implementation of the IED Directive materially impacts ArcelorMittal’s activities in the EU to an amount not yet determined since many issues that ultimately will determine this impact are not yet fixed due to authorities’ delays in implementing decisions and reconsideration of permits. Most of the Member States were expected to update permits and have ELVs achieved by operators in March 2016. Most permits were updated during 2017. However, negotiations and updates are still ongoing in some countries. On July 31, 2017, the European Commission adopted BAT conclusions for large combustion plants under the IED (C(2017)5225). The scope of these BAT reference documents ("BREF") covers the combustion of solid, liquid and gaseous fuels (including iron and steel process gases) in boilers, gas engines and gas turbines with a total rated thermal input of > 50MW (or in case of several units > 15 MW that are aggregated (sharing a common stack) so that the addition of all capacities reaches 50 MW). The main difficulty for the combustion of process gases is the achievement of NOx and SOManagement report2 limits when using mixtures of gases with a high share of coke oven gas. Following the adoption of these BAT conclusions, competent authorities have four years (until August 17, 2021) to review and update the permit conditions accordingly and to ensure that the new ones are compliant. It is important to note that, according to the IED it is only mandatory to update the permit conditions when new BAT conclusions related to the main activity of the installation are published. Nevertheless, competent authorities have relative freedom to launch the review even in cases where it will not be the main activity, hence several facilities may be impacted by this new BREF.
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Directive 2008/98/ECon GHG emissions from covered installations that is then reduced over time. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of November 19, 2008, which establishes the legislative frameworkallowances available ensures that they have a value. The EU is implementing its more stringent Phase 4 EU-ETS for the handling and management of waste2021 to 2030 period in a manner that may require ArcelorMittal to incur additional costs to acquire emissions allowances. Under the EU. On December 2, 2015,current rules, to achieve the Commission adopted an ambitious new Circular Economy Package to stimulate Europe's transition towards a circular economy which will boost global competitiveness. This was intended to contribute to "closing the loop" of product lifecycles with plans to extract the maximum value and use from all raw materials, products and waste, fostering energy savings and reducingEU’s overall greenhouse gas emissions and coverreduction target by 2030, the full lifecycle: from production and consumptionsectors covered by the EU-ETS must reduce their emissions by 43% compared to waste management2005 levels. In order to achieve the new EU 2030 ambition, the ETS proposal requires sectors under ETS to reduce their emissions by 61%. In particular, upcoming implementation rules for trading period 4.2 are expected to further reduce current benchmark and the market for secondary raw materials. Directive 2008/98/EC was amended by Directive 2018/851 effective May 30, 2018 . This new Directive is intended to prevent waste and, where prevention of waste is not possible, to significantly increase recycling. The intention is to phase out landfilling and promote the use of economic instruments, such as extended producer responsibility (this is a policy approach underresulting shortage in free allocation levels which producers are given a significant responsibility – financial and/or physical – for the treatment or disposal of post-consumer products) schemes. The Directive strengthens the concept of "waste hierarchy" requiring specific measures to prioritize prevention, re-use and recycling above landfilling and incineration.
Directive 2012/27/EU of October 25, 2012, which repeals prior Directives 2004/8/EC and 2006/32/EC, and brings forward legally binding measures to step up Member States’ efforts to use energy more efficiently at all stages of the energy chain – from the transformation of energy and its distribution to its final consumption. Measures include the legal obligation to establish energy efficiency obligations schemes or policy measures in all Member States. The final target is to achieve energy efficiency improvements of 20%. It is worth noting that most provisions of the texts do not apply to ETS industries and a lot of flexibility is given to the Member States to set up supportive schemes instead of obligatory ones. A political agreement was reached on June 14, 2018 for a revised Renewable Energy Directive. as part of the implementation of a resilient Energy Union and a forward-looking climate change policy. This, along with revised renewable energy targets for the EU for 2030 pursuant to Directive (EU) 2018/844 of the European Parliament and the amendment to Directive 2010/31/EU on the energy performance of buildings, will support Europe's commitment to complete clean energy transition and meet the goals set by the Paris Agreement.
“REACH” Regulation (EC) no. 1907/2006 for Registration, Evaluation, Authorization and Restriction of Chemicals, adopted on December 18, 2006, which controls the (chemical) substances used, manufactured in or imported into the
EU and “CLP” Regulation (EC) no. 1272/2008 of December 16, 2008 on the classification, labeling and packaging of substances and mixtures, which complements it.
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• | Directive 2003/87/EC of October 13, 2003 (which has been amended several times and especially by Directive 2009/29/EC) and related directives establishing the ETS in three phases for achieving Kyoto Protocol commitments relating to GHGs for Member States. The ETS works on the “cap and trade” principle. This means there is a “cap”, or limit, on the total amount of certain GHGs that can be emitted by the factories, power plants and other installations subject to the ETS. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value. At the end of each year, each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or sell them. Phase II of the ETS ended on December 31, 2012, and Phase III covers the period from 2013 to 2020. In Phase III, all CO2 allowances should be auctioned (as per Regulation (EC) no. 1031/2010 of November 12, 2010 on the timing, administration and other aspects of auctioning of emission allowances). The Commission is implementing Phase III of the ETS in a manner that could increase costs for the Group to obtain sufficient emission allowances for its European operations depending on steel production levels and the market price of emission allowances. 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”. In its decision of April 27, 2011, the Commission determined transitional EU-wide rules for the harmonized free allocation of emission allowances and the benchmark values for the steel industry. The values adopted result in fewer free allocations than those sought by the European steel industry and will lead to additional costs for steel companies in Europe at the point in time when companies have fully utilized their free allocations. Under Commission Decision 2013/448/EU of September 5, 2013, implementation of a so called “Cross Sectoral Correction Factor” will further negatively impact CO2 free allowances previously announced to the industry based on benchmark values. In 2014, the Commission investigated new possible schemes and mechanisms to regulate and adjust CO2 prices on the ETS market (CO2 backloading, or Market Stability Reserve). On October 6, 2015, the Commission published its decision concerning the establishment and operation of a Market Stability Reserve. The reserve is supposed to address the current surplus of allowances and improve the system's resilience to major shocks by adjusting the supply of allowances to be auctioned. In other words, it is meant to address the market imbalances. On October 23, 2014, the Commission agreed on a 2030 greenhouse gas reduction target of at least 40% compared to 1990. This is on top of the other main targets of the Commission’s 2030 policy framework calling for increasing the share of renewable energy to at least 27% and increasing energy efficiency by at least 27%.
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On November 9, 2017, the European Parliament and Council announced a provisional agreement to revise and make the ETS more stringent during the Phase IV period of 2021 to 2030. Among other changes, Phase IV provisions would further accelerate reduction in the current oversupply of allowances in the ETS market (with industry free allowance surpluses expiring) and establish further protections against the risks of carbon leakage. Directive 2018/410 dated March 14, 2018 amends the rules of ETS for the next period, 2021-2030. The Delegated regulation on post 2020 free allocation of emission allowances rules ("FAR") will regulate the free allocation rules for the next period. According to these rules, the benchmarks will be at least 3% lower than the current period regardless of industry performance. Depending on further implementation rules, the lack of significant free allocation in Phase IV could result in an increase of marginal production costs by approximately €50 per tonne (assuming a price of 25€/tCO2), which wouldwould put the European steel industry at a significant disadvantage versus global competition.
The following EU Directives are also significant:
Directive 2008/50/EC of May 21, 2008 on ambient air qualitycompetition (see notes 6.3 and cleaner air for Europe.
Directive 2004/107/EC of December 15, 2004 relating9.1 to limit values and target values for pollutants in ambient air, including thresholds on very fine particulates. Several annexes to Directives 2004/107/EC and 2008/50/EC were amended by Directive (EU) 2015/1480 of August 28, 2015.
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• | The Clean Air Policy Package, Directive (EU) 2016/2284 of December 14, 2016 on the reduction of national emissions of certain atmospheric pollutants. This Directive amends Directive 2003/35/EC and repeals Directive 2001/81/EC. This Directive, ensures that the national emission ceilings (NECs) set in the current Directive 2001/81/EC for 2010 onwards for SO2, NOx, NMVOC and NH3 shall apply until 2020 and establishes new national emission
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reduction commitments (“reduction commitments”) applicable from 2020 and 2030 for SO2, NOx, NMVOC, NH3 and fine particulate matter (particulate matter of size 2.5 microns) (“PM2.5")the consolidated financial statements).
The new Directive on the control of major accidents hazards involving dangerous substances, also known as SEVESO III 2012/18/UE (repeals Directive 96/82/EC of December 9, 1996), which has been applicable since June 1, 2015. Updates take into account changes in the EU classification of dangerous substances, strengthen provisions on public access to safety information and introduce stricter standards for inspections of installations.
Directive (EU) 2015/2193 of November 25, 2015 on the limits of emissions of certain pollutants into the air from medium combustion plants ("MCP").
Directive 2011/92/UE concerning the impact assessment of certain public and private projects on the environment. Directive 2009/31/EC of April 23, 2009 on the geological storage of carbon dioxide.
Directive 2009/28/EC of April 23, 2009 on the promotion of the use of energy from renewable sources. As part of its ‘Clean Energy for all Europeans’ package,Moreover, the European Commission proposed in 2016 an updateGreen Deal announced the revision of the Renewable Energy Directive forDirective. The Commission proposed to increase the period 2021 -current EU-level target of “at least 32%” of renewable energy sources in the overall energy mix to at least 40% by 2030, (RED II). A final compromise document was agreed amongwhich represents doubling the current renewables share of 19.7% in just a decade. The Proposal aims to deploy renewables across all sectors, and particularly in sectors where progress in integrating renewables had been slower – such as the industry.
In addition, revision of the existing Land Use, Land Use Change and Forestry (“LULUCF”) is part of the energy and climate legislative framework. The proposal aims to increase the carbon removals to 310 million of tonnes CO2e by 2030 and to achieve climate neutrality in the combined land use, forestry and agriculture sector by 2035 at EU Institutions on June 14, 2018.
Directive 2008/68/EC of September 24, 2008level. The LULUCF sector is connected to all ecosystems and economic activities that rely on the inland transport of dangerous goods, by rail, road,land and inland waterwaythe services it provides, therefore impacting ArcelorMittal’s sites.
Finally, the Sustainable Product Initiative which will revise the Directive 2009/125/EC (“Ecodesign Directive”) and Directive (EU) 2016/2309 of December 16, 2016 adapting for the fourth time the Annexespropose additional legislative measures as appropriate, aims to Directive 2008/68/EC.
Directive 2004/35/EC of April 21, 2004, and Directive 2008/99/EC of November 19, 2008, establishing liability (including criminal liability) for violations ofmake products placed on the EU environmental legislation.market more sustainable. The initiative will also address the presence of harmful chemicals in steel.
The new Directive 2013/59/EURATOMGHG emissions regulations are being implemented in an increasing number of December 5, 2013, establishing basic safety standards for protection from the exposure to ionizing radiation and repealing former EURATOM directives, effective from February 6, 2018.
ArcelorMittal anticipates that its capital expenditures with respect to environmental matters in the EU over the next several years will relate primarily to installations of additional air emission controls, to requirements imposed in the course of renewal of permits and authorizations, including those pursuant to the IED Directive, and to address GHG issues, including the reduction of emissions and purchase of allowances. In relation to ArcelorMittal Italia (formerly Ilva), environmental obligations of the previous owners have been transferred to ArcelorMittal through environmental permits. This will require significant capital investments, see note 8.4 to the consolidated financial statements for further information. Significant issues that need to be addressed include reduction of diffuse dust emissions (from storage yards) and channeled emissions (such as sinter primary de-dusting system and coke plant de-dusting systems, treatment of process waste waters and implementation of rain water collection, separation and treatment.
Other jurisdictions
Increasingly stringent environmental laws and regulations have also 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.ArcelorMittal operates.
Argentina
Law 25.675, which was enactedFor example, in 2002, requires facilities engaging in potentially hazardous activities to obtain Environmental Insurance. ArcelorMittal has obtained Environmental Bonding Insurance for Villa Constitucion, Tablada and San Nicolas plantsSouth Africa climate legislation is developing rapidly in order to meetregulate the requirementscarbon footprint of industry in the form of carbon pricing mechanisms and renewsemission thresholds.
The Carbon Tax Act to tax carbon dioxide emissions was adopted and came into effect in 2019. Moreover, a Climate Change Bill is currently awaiting parliamentary approval, and is expected to be promulgated by early 2022. This Climate Change Bill will set up a comprehensive and harmonized GHG legal framework, along with the plans annually.implementation of Carbon Budget allocations for companies from 2023 onwards (exceedances of such allocations will be taxed in terms of the Carbon Tax Act in combination with the Carbon Tax which is already collected).
Law 11.717Moreover, with the imminent review in 2022 of the emission standards prescribed in terms of the “National Environmental Management: Air Quality Act (Act 39 of 2004)”, industries can expect more stringent emission limits and Decree 101/03additional compliance monitoring and reporting obligations in the near future. Furthermore, greater emphasis is anticipated on diffuse dust emission management, with the primary objective of improving ambient air quality on a national level. Consequently, emission reduction strategies for Santa Fe province regulate environmental licensesArcelorMittal South Africa’s business units will receive greater consideration from the authorities and local NGO’s.
In Canada, carbon pricing regulations are becoming more stringent. Starting in January 1, 2022 ArcelorMittal Dofasco and Ontario industries will be regulated on carbon pricing under the Ontario Emissions Performance System (“OEPS”), transitioning out of the Federal out-put based pricing system (“OBPS”). It was approved by the Federal government in late 2020 and the environmental requalification plan. The Villa Constitucion plant’s license was officially obtained in June 2013. The Villa Constitucion Plant’s committed plan was monitored by environmental authorities and completed in January 2014. This license was renewed in 2017. The Tablada and San Nicolas Plant's licenses were obtained for Tablada in November 2013 and the San Nicolas license was obtained in July 2013 and an additional license in April 2014. The renewal process for the Villa Constitucion plant was tied to investments in water treatment for direct reduction process effluents andcost may be marginally lower compared to the resolution of certain environmental issues
relatingOBPS. However, the Federal government intends to ensure provincial GHG programs are rigorous enough to meet Federal carbon reduction targets (40 – 45% lower than 2005 by 2030). Details about the new Provincial system are under development since the Federal government imposed in 2021 new GHG reductions; results are expected to be announced early 2022. Possible risks include potential reduction in free allowances to the steel facility. The plansector and increased costs. In the OEPS, integrated steel GHG emission performance standards are set for: coke, iron, steel and general combustion. There are 100% allowances for fixed emissions and a declining cap for combustion emissions: starting at 100%, decreasing by 2% per year for high Emissions-Intensive and Trade-Exposed companies. Compliance is expected be ready in March 2019 after which the renewal process will be addressed with the regulatory authorities. Regarding the San Nicolas and Tablada sites, there are no issues preventing approval.
Decree 2151/14 requires that industrial non-dangerous residues undergo recycleachieved by reducing GHGs or recovery activities and avoid final disposal. The Company is already compliant but may be required to develop further projects in relation to new by-products.by purchasing compliance units (e.g., surplus credits & offsets).
In Quebec, the Buenos Aires province, Decree 429/13 has imposed taxes relating to water consumption. The impact of this on the Company’s operations is minimal.
Law 27.191 was approved relating to renewable energy generation2030 Plan for a Green Economy set a 37.5% greenhouse gases emission reduction target compared with 1990 levels, and consumption and applying fines for non-compliance. The new law and resolution 281/17, which established the framework that governs the Term Market for Renewable Energies ("MATER") and sets the rules for agreements between private companies, was fully applicable as of January 1, 2018. This is not expected to have a significant impact on the Company. With respect to Acindar, this new legislation does not have a significant impact on energy costs due to the current low contribution of renewable sources to Acindar’s current energy mix and the extended timeline to build and implement renewable energy projects. The law is expected to have a more significant impact from 2020, with a reduction in costs once Acindar is able to enter into direct supply agreements with generators. This may also, however, require renewable energy capital projects to be undertaken.
Decree 3395/92 for Air Quality Standards foreseeing more stringent air quality standards including incorporating PM2.5 to the regulated parameters for Buenos Aires province is still under review. The Company does not expect that any significant capital expenditures will be required to meet these new proposed standards.
In 2017, the Buenos Aires environmental authority OPDS commenced review of regulations relating to polychlorinated biphenyls (“PCBs”, which are highly toxic chemical compounds present in electricity transformer oil) to allow decontaminated equipment to reach 50 ppm instead of 2 ppm. This change would align with the regulations in the rest of the country. In May 2017, the Ministry of Energy dictated Resolution 1-E/2017, the purpose of which is to consider the special situation of manufacturing companies that are affectedcarbon neutrality by the process of electricity price disclosure and to promote a regime of benefits with discounts on the cost of energy in exchange for accrediting an improvement program aimed at energy efficiency. In 2016, Acindar agreed to the first version of the scheme and obtained a discount of $385,000. After fulfilling each of the stages of the project, Acindar was awarded as an electrointensive industry an estimated discount in the cost of energy of $500,000.
Other national laws are being developed, imposing further responsibility on manufacturers, including hazardous wastes disposal and remediation of contaminated sites, to standardize requirements between provinces and to align them with international requirements.
Argentina is considering the introduction of a Carbon Tax with effect from 2020. The amount of the tax will depend on the fuels’ potential CO2 emissions (current proposal being considered is $25/TnCO2-e) and a fixed-sum tax per unit of fuel in order to match the current tax pressure. At this time it appears that the draft legislation excludes fuels that are used as raw materials. However, if natural gas (used as a raw material in the direct reduction process) falls within the purview of the legislation, the impact could be about $25 million per year. The Company has requested the regulatory authorities to exclude it from the imposition of this tax as it utilizes mineral petroleum coke and is awaiting a response.
Bosnia and Herzegovina
Environmental legislation in Bosnia and Herzegovina is essentially based on the provisions of a set of federal laws and regulations that have been effective since January 2008. The following practices are particularly relevant for ArcelorMittal Zenica: adopting best available techniques and complying with limit values that achieve environmental quality standards in air and water, preventing and controlling major accidents involving hazardous substances, procedures and measures for dealing with accidents in water and coastal water land, fees on sulfur dioxide, nitrogen oxides and dust emissions the discharge of pollutants in water, waste recovery, disposal and export and limitations on noise pollution. In 2018, the federal government amended laws and regulations related to air emission limits, monitoring of air emission and waste management which are also relevant to ArcelorMittal Zenica operations.
In April 2017, the Federal Ministry of Environment and Tourism issued an integrated environmental permit for all plants in ArcelorMittal Zenica. A water permit was issued by the relevant federal agency in July 2017. Both permits are valid until 2022.
In addition to investments already achieved and ongoing investments, several investments are expected in the coming years to continue improving the environmental footprint of the plant and thus the release of lower emissions, in the context of poor air quality in Bosnia Herzegovina and NGO concerns regarding the situation.
For ArcelorMittal Prijedor, the Omarska mine has two separate licenses, one for the surface pit, which was renewed in 2015 and remains valid through 2020, and the other for the GMS plant (Medjedja tailing dam and maintenance) which was renewed in 2018 and remains valid until 2023. The process for obtaining an extension has been initiated. ArcelorMittal Prijedor is required to renew its environmental licenses every 5 years. ArcelorMittal Prijedor also obtained an environmental license for Limestone Quarry Drenovaca in 2016, which must be renewed in 2021.
Brazil
ArcelorMittal’s operating subsidiaries in Brazil are subject to federal, state and local environmental laws and resolutions issued by the Brazilian environmental authorities. The Federal Constitution established the protection of the environment as a principle, while both the government and society generally are responsible for the achievement of such purpose.
National Decree no. 7390/2010 regulates Articles 6, 11 and 12 of the National Policy on Climate Change (Federal Law No. 12187/2009). For the steel sector, a reduction target of 5% by 2020 with 2012 as the reference year has been established.
On April 4, 2012, the Brazilian Steel Institute and its associated companies launched the “Protocol for Sustainable Charcoal Production”. The Protocol’s objectives are to avoid charcoal production from illegal deforestation and to stimulate suppliers to produce charcoal from eucalyptus planted forests. In 2013, meetings were held to define actions to achieve the protocol’s objectives. In 2015, the criterion for Green Labeling in pig-iron production was established by the Brazilian Association of Technical Standards. Implementation of the new Protocol depends on the creation of new forms that were expected to be finalized, however, they are yet to be published.
Federal Resolution No. 436/2011 published by the Brazilian National Environmental Council ("CONAMA") established maximum limits for air pollutants emissions from stationary sources installed or having requested its installation license before January 2, 2007. More restrictive limits can be determined by the licensing environmental agency, according to the local conditions of the affected area. Beginning in 2014, more stringent limits became effective for emissions of particulate material, SO2, NOx from coke ovens, electric arc furnaces, rolling mills, sintering, charcoal blast furnaces and blast furnaces. ArcelorMittal Brasil already complies with these new emission standards. In Minas Gerais State the Normative Deliberation COPAM n° 227/2018 establishes procedures to reduce the atmospheric emissions of charcoal kilns from planted forest and to evaluate the air quality in its surroundings. ArcelorMittal's industrial units do not expect any issues with meeting the requirements of this Normative Deliberation.
São Paulo State published Decree No. 59263/2013, which established guidelines for contaminated site management. The main items are related to the publication of a State List of Contaminated Sites. The Decree requires the legally responsible person to provide bank guarantees or environmental insurance worth at least 125% of the costs estimated in such plan. The penalties for violating this Decree could consist of fines of up to $30 million or embargo, demolition and suspension of loans and tax benefits. Also in São Paulo State the Decree nº 63.262 regulates Law 7.663/91, which provides for the State Policy on Water Resources and the grant and exercise of water use rights in São Paulo. Authorization 14/18 granted ArcelorMittal Piracicaba the right to launch liquid effluents in the public sewage network, until January 31, 2019.
Due to the water crisis faced in the South East of Brazil, São Paulo, Minas Gerais and Espírito Santo, where most of ArcelorMittal Brasil's industrial sites are located, laws enacted in 2015 and 2016 that imposed restrictions on water permits for industrial use are still in effect. These restrictions are only applicable for the period when river flows are below pre-established levels. The restriction has not affected its operations since the site also has groundwater permits that provide the necessary flow for the operational activities and action has been taken to reduce water consumption, similar to actions taken at the Tubarão and Cariacica sites.
Regarding industrial effluents, regulatory Deliberation CERH n° 47/2014 established new procedures for granting submissions for the release of effluents in Minas Gerais State.
Following the 2005 World Health Organization (“WHO”) recommendations, there continues to be a trend to adopt new air quality standards at the national and state levels. National standards in force, established by Resolution CONAMA 003/1990, are considered outdated and a change of values for parameters such as PM10, NOx, and O3 are envisaged, together with the incorporation of the PM2.5 parameter. The states of São Paulo and Espírito Santo, through the State Decree 59113/2013 and
Decree No. 3463-R DE 12.16.2013, respectively, have reviewed the state air quality standards following the guideline values suggested by WHO, and have established emission control plans for gradual adaptation to the new standards. This trend may result in more stringent air emission limits on industrial activities in these states and other states from the review of national standards.
In Vitória, a municipal mechanism to control dust emissions and air quality was implemented in 2015, which, among other things, creates intermediate targets to be implemented from 2018, lowers emission values to new parameters, especially PM 2.5, and creates an emergency plan when air quality at Vitória falls to a critical level. The State is leading investigations on the “Black dust” saga which is followed by the press and social media due to potential health issues in the area. Emissions of several industries are scrutinized by the authorities. In November 2016, the Federal Public Prosecutor´s Office in Espírito Santo State requested to be party to the lawsuit in which ANAMA (National Association of Friends of the Environment) is claimant against ArcelorMittal in a matter involving visible emissions. The initial suit was suspended by the judge for one year while ArcelorMittal implemented an environmental agreement reached with authorities, which was appealed by ANAMA. There have been no orders or findings from the appeal judge in the matter yet and the suspension of the initial suit continues. The Normative Instruction n° 2/18 established the minimum criteria for the implementation of Plans and Projects of Environmental Education and Social Communication with respect to the workers and communities in the areas of influence of the companies to be licensed by the Espírito Santo State Environmental Agency.
Following the Samarco accident, the state of Minas has issued State Decree No. 46993/2016 and State Resolution SEMAD / FEAM 2372/16, both requiring extraordinary audits of tailings dams, generating increased costs for compliance and a number of surveillance visits from federal and state agencies (environment, geology and police departments).
Minas Gerais State Law 21972/2016 proposed significant changes both in the structure and the competences of the state Environmental Agency. State Normative Resolution COPAM nº 217/2017 establishes criteria for classification, according to size and polluting potential, as well as the locational criteria to be used to define the modalities of environmental licensing. Decree nº 47.474 / 2018 establishes rules for environmental licensing and classifies infractions according to the norms of protection to the environment and to water resources and establishes administrative procedures for the inspection and application of the penalties. Normative Resolution COPAM nº 223/2018 prohibits the storage, processing and final disposal of hazardous waste and waste generated outside the State. Normative Resolution COPAM nº 220/2018 established guidelines and procedures for the temporary halting of mining activity and mine closure.
National Decree no. 7390/2010 regulates Articles 6, 11 and 12 of the National Policy on Climate Change (Federal Law No. 12187/2009). Following the ratification of the Paris Agreement, the Intended Nationally Determined Contribution ("INDC") for Brazil, that proposes absolute emission reductions targets of 37% by 2025 and 43% by 2030 in comparison to historic emissions of 2005, was ratified by the Brazilian Congress. The implementation of the INDC targets is currently under discussion. There are no specific targets for the industrial sector, but it is expected that new regulations will be issued to reduce GHG emissions. Normative Instruction nº 19/18 establishes the procedures for the regularization and licensing by the Federal Environmental Agency of activities that use radioisotopes.
Canada
ArcelorMittal’s operating subsidiaries in Canada are subject to federal environmental laws regulating matters of national interest (for example, the Fisheries Act and the Canadian Environmental Act) and provincial legislation regulating matters of more local importance such as natural resource use, local air and water quality noise and hazardous waste management.
The province of Québec and the state of California in the U.S. are currently members of the Western Climate Initiative (“WCI”), a sub-national GHG emission cap and trade program. In 2016, the government of Ontario enacted the Climate Change Mitigation and Low-Carbon Economy Act and an associated regulation (O. Reg. 144/16) which established a GHG emission cap and trade program that began in 2017. In June 2018, Ontario’s new government canceled the existing GHG Regulation and is currently developing a new plan. Details about this new Provincial system and plans to legally challenge the Federal system have not been announced.
2050. Separate consultations by the government of QuébecQuebec are underway with large GHG emitters of GHG in each province with regard to the cap and trade program regulation for the second and subsequent compliance periods from 2021 to 2030. For Québec, consultations were completed for the 2021 to 2023 compliance
period and the financial impact of the regulation was reduced compared to what was presented at the end of 2016 for the period. For the period 2024 to 2030, negotiations will commenceare still in 2019progress in order to minimize the financial impact of regulatory changes.ArcelorMittal Dofasco could be subjectchanges on ArcelorMittal’s operating subsidiaries in Canada.
Regarding clean energy, a one-year test with liquefied natural gas (“LNG”) was started in the spring of 2018. At AMMC, a total of six burners on one production line were converted to
LNG with the Federal “Backstop” GHG regulation.In October 2016,objective of reducing the Federal governmentcost of Canada announced its intention to impose a minimum, national carbon price on provinces without a pricing system for reducing GHG emissions. In 2018,To improve the federal government finalizedenergy usage, multiple initiatives are implemented by AMMC at the Federal Carbon Pollution Pricing System ("FCPP System") that has two components:
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– | a charge on fossil fuels which will be administered by the Canada Revenue Agency, and |
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– | an output-based pricing system ("OBPS") for emission-intense industrial facilities which will be administered by Environment and Climate Change Canada ("ECCC"). |
The regulation pertainingAs part of Canada’s climate plan to this FCPP System is effective from January 1, 2019 butreduce emissions and to accelerate the details are not expected to be finalized beforeuse of clean technologies and fuels, the second quarter of 2019. The finalized regulation, which will not apply to the Québec province, would then be applied retroactively as of January 1, 2019.
The main features of the proposed system include a carbon levy on fossil fuel (which will be passed on to users) with a steep increase over the next 5 years and an exemption of the fuel levy for industrial users to be replaced by OBPS. A customization for each sector’s OBPS is underway as the program rules are developed over the coming months (including arguments regarding competitiveness and carbon leakage). The starting point of the standard is 90% of the average of the Ontario integrated steel sector. There is no acknowledgmentof fixed process emissions exemptions yet. The carbon pricing starts at CAD 20 per tonne in 2019 and is set to increase to CAD 50 per tonne by 2022.
It is too early in the consultation process to reasonably estimate the final impact for ArcelorMittal Dofasco.
On December 13, 2017 ECCC published a Clean Fuel Standard ("CFS"(“CFS”) regulatory framework. The federal government plans to publish regulations in 2019 but the effective date is still to be determined. As per this regulation, the government would allow for a one-year “warm-up” in 2020 to allow time for obligated parties to adapt before mandatory compliance begins in 2021. The development of this regulation is ongoing and no significant developments have been shared by the government so far.
The CFS will establishestablishes lifecycle carbon intensity requirements separately for liquid, gaseous and solid fuels that are used in transportation, industry and buildings. This performance-based approach is intended to incentivize innovation, development and use of a broad range of lower carbon fuels, alternative energy sources and technologies. It is still too earlyThe CFS only requires liquid fuel (e.g., gasoline, diesel, home heating oil) suppliers to reasonably estimatereduce the final program’s results consideringcarbon intensity (CI) of their fuels. Gaseous and solid fossil fuels have been eliminated from the ongoing consultation process.scope (ArcelorMittal Dofasco and associations heavily advocated against the inclusion of gaseous and solid fuels). Beginning in 2022, the cost increase of liquid fuels will be passed on to consumers.
ECCC has developed Base Level Industrial Emission Requirements (“BLIERs”) underThe Ministry of Environment's Ordinance No. 386, of 08/23/21, established the National Air Quality Management System and the national regulation addressing Criteria“National Pure Air Contaminants. ForProgram” (which aims to ensure air quality in urban areas).
In the State of São Paulo, the Decision of the Board of the State of São Paulo Environmental Company of the State of São Paulo (“CETESB”) instituted the Greenhouse Gases Emissions Inventory, by enterprises, defining the respective criteria for elaboration. Starting in 2022, it will require that certain types of enterprises (e.g, coking plants, metallic mineral sintering plants, pig iron or steel sector,production plants with a production capacity exceeding 22,000 t/year, ferrous metal foundries with a production capacity exceeding 7,500 t/year and other facilities with fossil fuel consumption that emit more than 20,000 t/year of CO2, HFC's, PFC's or SF6) should prepare and communicate
annually (between September 1 and October 31) to CETESB an Inventory of Greenhouse Gas Emissions containing information about carbon dioxide ("CO2"), methane ("CH4"), nitrous oxide ("N2O"), sulfur hexafluoride ("SF6"), hydrofluorocarbons ("HFC's"), and perfluorocarbons ("PFC's"). The report issued will always refer to the emissions of NOX, SO2, VOCsthe previous base year. Initially and fugitive particulatesuntil more precise criteria are covered.available, the methodology for calculating the estimated emissions can be the ABNT NBR ISO 14.064-1 standard. The SO2 BLIER requires ArcelorMittal Dofasco to install full coke oven gas desulphurization by December 31, 2025.standard provides for 3 scopes of emissions: direct emissions, indirect emissions arising from the source of electricity used, and indirect emissions arising from own or outsourced vehicle fleets. The NOx BLIERpresentation of sources of indirect emissions from own or outsourced vehicle fleets will be managed through oxygen controls atoptional.
Law enforcement in Brazil is expected to become more frequent and stricter in coming years, especially regarding mining activities. Additionally, in the hot mill reheat furnaces by May 1, 2020.
BLIERS also apply to ArcelorMittal Mining Canada’s operations. This will likely requirenext few years, investments may be necessary to reduce air emissions in the future.
A Performance Agreement ("PA") has been signed by ArcelorMittal Mining Canada with the Iron Ore Pellet Sector on January 5, 2018 which specifies the membership, timelines and deliverables of the NOx Working Group and will ensure that the BLIERs limits for PM2.5 and SO2 are met, and that the approach to study NOx is implemented.
In Ontario, Air Regulation 419 requires ArcelorMittal Dofasco to manage an inventory of air pollution sources and model the concentrations of pollutants at the property boundary. Site Specific Standard limits for Benzo(a)pyrene, Benzene, Particulate Matter, Manganese and Sulphur Dioxide will be reviewed with the government over the next 2 years. These will likely result in requirements for studies and then further reductions in the future.
Permits for water dischargesArgentina, climate goals are becoming more stringentambitious as well. In December 2020, the country presented its second Nationally Determined Contribution (“NDC2”), where it updated and it is possible that ArcelorMittal Dofasco mayintensified its commitment to reduce greenhouse gas emissions by 2030. Argentina ultimately aims to be requiredcarbon neutral by 2050. In addition, end of 2020 Decree 1030/2020 was adopted to treatimplement the 2019 Law 27520 on Minimum Budgets for ammonia from its Primary Water Treatment Plant dischargeAdaptation and Mitigation to the Hamilton Harbour. Negotiations are currently underway with the government’s approvals offices.
In Québec, the miningGlobal Climate Change. At local level, three provinces have already published their own local Climate Change Law: i) Ciudad Autónoma de Buenos Aires, ii) Rio Negro and metallurgical sectors are negotiating depollution permits that will apply to ArcelorMittal Mining and Infrastructure Canada and ArcelorMittal Long Products Canada works.iii) Santa Fe. In the mining sector, some objectiveslatter, ArcelorMittal Acindar has the main site (Direct Reduction, Steelplant, HotRolling Mill). The Law 14019/20 for dust, NOxSanta Fe province defines the public policy for responding to climate change and SO2 were also identifiedsets a period of one year to establish measures and actions regarding the reduction of greenhouse gases and adaptation to climate change (not regulated up to now). In its article 14, it mentions that the provincial government may establish a draft agreement prepared, but there has beenCarbon Emissions Trading System.
Moreover, ArcelorMittal is increasing its consumption of renewable energy through private power purchase agreements in two sites: i) Tablada site, which is the case since 2019 and ii) Villa Constitucion site, from 2024 onwards. In both cases, no further progress.additional financial impact should be incurred. ArcelorMittal Acindar’s annual demand should amount to 1.3 TWh per year.
The depollution permitIn Mexico, the Government launched a comprehensive climate policy within the framework of an ETS to meet its obligations under the Paris Agreement. On October 1, 2019, the Government published rules and foundations of an emissions trading system for those who generate more than 100,000 tons. of CO2/year. Starting from 2020, a pilot ETS is being implemented for 3 years for ArcelorMittal Mines Canada's Mont Wright operations was issuedMéxico Long and Flat
Segments and Services areas (“SERSIINSA”). As the program is still in March 2010a trial and modifiedanalysis period, if ArcelorMittal Mexico exceeds the granted emission credits, it will not be obliged to buy more rights of emission nor invest in July 2015. The next update is required in 2020. Its Port-Cartier pellet plant depollution permit was issued in April 2015 and is to be renewed in 2020. The Fire Lake depollution permit was received in June 2015 and will require to be renewed in 2020. These permits establish the targets for water, air, soil and waste management, as well as the monitoring and reporting frequencies and requirements. The permits require ArcelorMittal Mines and Infrastructure Canada to implement a storm water treatment system at the pellet plant to comply with applicable Total Suspended Solids (TSS) standards. A permanent treatment plant is being designed and will be constructed and put in operation in 2021. Air emissions monitoring is conducted at the pellet plant and mitigation projects are being evaluated for dust (ESP), dioxin and furans and SO2 abatement to attain compliance with applicable standards.
A water management multi-year project aimed to control the surface effluents on the waste rock piles and achieve compliance with the applicable federal regulation on the metal mines and diamond mines effluents (MMDMER) was started in 2017 and consists of the construction of collector ditches on the perimeter of the waste rock piles and the installation of temporary and permanent water treatment units in Mont-Wright and Fire-Lake.
Starting in 2014, ArcelorMittal Mines and Infrastructure Canada is taxed on sites with depollution permits for waste rock and tailings storage with a maximum annual cost per site of CAD1 million per year per site.
At the provincial level, a Decree has been issued on August 15, 2018 for the tailings expansion consisting of construction of a water containment basin (B+ basin) and the new tailings impoundments. The Decree imposes more restrictive environmental goals at the final mine effluent for total suspended solids, metals and nitrates.
Pursuant to the mining regulation and the restoration plans for the facilities in Mont Wright, Fire Lake and Port-Cartier ArcelorMittal Mines and Infrastructure Canada provided a financial guarantee of CAD80 million for restoration of the sites identified by Quebec Ministry of Natural Resources.
The depollution permit for ArcelorMittal Long Products Canada's Contrecoeur West facility was issued on December 21, 2018 and the process for issuance of the depollution permit for its Contrecoeur East facility is expected to be completed by the first quarter of 2019. Obtaining the new depollution permits will require increasing monitoring frequencies as well as conducting certain studies including water usage, air dispersion modeling, phase I environmental site assessment, former EAF dust stock pile site restoration and former slag management area assessment.
Québec adopted a Clean Air Regulation on June 30, 2011 that requires particulate matter ("PM") testing for steel mills, (annual testing of baghouses and testing of roof fans every three years), and installation of broken bag detectors in baghouses. A baghouse was replaced at ArcelorMittal Long Products Canada’s Contrecoeur West steel making facility in 2018. A combustion chamber and canopy hood volume increase at its Contrecoeur East facility is in progress with the expected completion date at the end of 2020. Currently under study is the replacement of bag houses at both of its Contrecoeur West and Contrecoeur East facilities. ArcelorMittal Long Products Canada estimates this will require a further investment of approximately CAD35 million to comply with this regulation.
In the mining sector, this regulation reduced the limit for total PM from 120 to 75 grams/tonne produced for existing pelletizing plants, including ArcelorMittal Mines and Infrastructure Canada. The limit for a new plant will be 50 grams/tonne produced. The electrostatic precipitator refurbishment plan included in the five-year capital expenditure plan will contribute to ensuring conformity with the new emission limit on a medium-term basis. This project is being undertaken over a 10 year timeline, and its expected cost will be approximately CAD15 million.
A one-year test with liquefied natural gas (“LNG”) was started in the spring of 2018. At ArcelorMittal Mines and Infrastructure Canada, a total of six burners on one production line were converted to LNG with the objective of reducing the cost of GHG. To improve the energy usage, multiple initiatives are implemented by ArcelorMittal Mines and Infrastructure Canada at the pellet plant, among which the 3-stage screening conveyor project is the most successful in increasing the energy efficiency. Projects on cleaner fuel usage, such as natural gas and bioenergy, are being studied at the pellet plant.
ArcelorMittal Mines and Infrastructure Canada is presently below the cap for CO2, but will pursue initiatives for CO2 reduction as the cap is decreasing every year and the trade value is increasing by about 7% on an annual basis.
On February 6, 2018, the Federal Government published Bill C-68, which aims to provide a framework for the proper management and control of fisheries and the conservation and protection of all fish and fish habit, including pollution prevention. The definition of fish habitat is also modified and broadened to include any waters frequented by fish in Canada. Discussions with authorities are ongoing through the Mining Association of Canada to address provisions related to water flow and to designated projects. Feedback indicate that regulators and government intends to amend Bill C-68.
The Québec Environmental Quality Act (“EQA”) has been subject to significant modifications, which, for the most part, entered in force on March 23, 2018. Under the new EQA, many mining and ore treatment activities which have serious anticipated environmental impacts as defined by the EQA, will be subject to the environmental impact assessment and review procedure provided for under the EQA. In such cases, the impact on ArcelorMittal Mines and Infrastructure Canada will be longer delays in obtaining regulatory authorizations, as an impact assessment and public consultations may be required for its projects and may take up to 2 years prior to the submission of the request for authorization.
Québec’s revised regulation relating to compensation for adverse effects on wetlands and bodies of water entered in force on September 20, 2018. This regulation determines the activities exempt from compensation, the calculation method of the amount of the financial contribution payable as compensation, as well as the cases in which a financial contribution may be replaced by work carried out. The regulation applies essentially to all the territory of Québec located south of the 49th parallel. As such, it does not apply to a mining project operated in Mont-Wright and no financial contribution or offset plans will be required for these projects. The regulationETS process will apply to projects conducted in Port-Cartier.
Kazakhstan
In April 2016, Kazakhstan introduced a number of amendments to the environmental code in the area of GHG emissions. Among other things, the amendments suspended provisions of the environmental code which (i) prohibit GHG emissions without obtaining a quota and (ii) regulated trading of emission quotas until January 1, 2018. Previously issued quotas and trading of quotas had been suspended until January 2018. Effective January 1, 2018, this part of Kazakh legislation came into force. The Administrative Code of Kazakhstan that came into forcestart formally on January 1, 2015 increased the penalty provisions for legal entities and officials for environmental violations. Fines were determined for exceeding the approved level of GHG emissions in the amount of five times the “monthly calculation index” for each unit of quota exceeding the permitted level.
Starting from January 1, 2017, one monthly calculation index is equal to 2,269 KZT ($6). The size of the monthly calculation index is approved by the state and re-considered annually. When deciding on the amount of the fine, the court or other authority considering the administrative offense will take into account the value of the index which was in effect at the time when the administrative proceeding was initiated. However, in line with the above amendments to the environmental code, the provisions of the administrative code imposing liabilities for exceeding GHG emission quotas were suspended until January 1, 2018 and came into effect thereafter.
The committee of environmental control and regulations of the Ministry of Energy has put forth a proposal to cancel the procedure of obtaining special permits that allow emissions and discharges to the environment (i.e., "ecological permits"). These ecological permits are separate from the permits governing GHG emissions. As of December 31, 2018, no ecological permits had been canceled.
Two new laws became effective in 2018: law 126-VI of the Republic of Kazakhstan dated December 27, 2017, which makes amendments and additions to certain legislative acts of the Republic of Kazakhstan on subsoil use and law 156-VI of the Republic of Kazakhstan dated May 25, 2018, which makes amendments to some legislative acts of the Republic of Kazakhstan on the improvement of business regulation.
Effective from January 1, 2019 the Environment code of the Republic of Kazakhstan banned the disposal of solid domestic waste without its prior recycling. Disposal of waste without recycling would be an administrative violation that could result in fines. Fines will be calculated based on the extent of environment damage caused.
Authorities have reduced liability in the Administrative Code of Kazakhstan for some ecology offenses such as for non-compliance with the requirements of the legislation on the mandatory obtaining of state ecological expertise from 500 monthly calculation index ("MCI") (US$3,300) to 350 MCI (USD$2,300). In addition, new rules allowing users of environmental resources to install an automated system for the monitoring of emissions at the sources of pollution have been introduced.
However, detailed procedures on how to comply with such requirements are not yet available. This is likely to reduce instances of penalties in the future.
Liberia
The Environmental Protection Agency Act (2002) (“EPA Act”) was the initial environmental law in Liberia. It established an Environmental Administrative Court and provided for a National Environment Action Plan, which builds on local and regional action plans. The EPA Act requires Environmental Impact Assessments (“EIAs”) to be carried out for all activities and projects likely to have an adverse impact on the environment, as well as mechanisms to achieve restoration of degraded environments. It also provides the means for permits, fees and fines.
Enacted at the same time, the Act Adopting the Environment Protection and Management Law of the Republic of Liberia (2002) (“EPML”) is the principal piece of legislation covering environmental protection and management in Liberia. The Liberian system incorporates a social impact assessment within the Environmental Impact Assessment.
In the absence to date of any announced environmental management regulations, ArcelorMittal has devised an Environmental and Social Standards Manual to cover its operations in Liberia. This was approved by the Liberian EPA for use as a guidance document for all site activities under the existing Liberia mining project and remains the only set of such guidelines in the country. ArcelorMittal updates this Manual periodically, according to experience and operational needs.
The Act Adopting the National Forestry Reform Law (2006), together with the National Forestry Law (2000) and the Act Creating the Forestry Development Authority (2000) that it amended, cover all aspects of commercial and community use of forests. Community management of forests was significantly enhanced by the enactment of the Community Rights Law with respect to Forest Lands (2009). Some territory gazette under this law is within ArcelorMittal’s concession, and access to these areas is leading to a series of test cases between this law and the Company’s Mineral Development Agreement. Some parts of the concession are also protected under the Act for the Establishment of a Protected Forest Areas Network (2003), and specifically by the subsidiary Act for the Establishment of the East Nimba Nature Reserve (2003).
With respect to land tenure, in rural areas there is a strong crossover between agriculture and forestry. A moratorium on Public Land Sales banned all transactions involving public land and also voided any new Tribal Land Certificates (“TLC”). The 2010 Land Policy Review was silent on the validity of existing TLCs as ownership documents, although they are the first step in the chain of transfer of land from customary to individual title. In 2014, the Lands Commission suspended deals involving TLC, pending a review of their relationship to formal title deeds. The Ministry of Lands, Mines and Energy (“MLME”) reported allowing TLCs to be used as valid land ownership documentation in respect of land that had to be leased for development. They also produced guidelines for the process for valuing land for developmental rental purposes only, and these have been deployed in all concessions. So far, there has been no codification of these guidelines into law, but they are a requirement of concessionaires managed by MLME, of which ArcelorMittal is one.
The draft Land Rights Act is still yet to be passed. However, in October 2016, Title 12 of the Executive Law of the Liberian Codes of Law Revised was amended to create the Liberia Land Authority whose role is to control and manage the access and use of public and government land and ensure the development of land use plans and zoning schemes. The Authority is also entitled to establish county land boards and land management structures to govern and manage the land of communities.
Although ArcelorMittal suspended its proposed Project Phase 2 expansion in 2014 following the onset of Ebola in West Africa and subsequent poor market conditions, the various environmental permits already awarded set a number of stringent conditions for ongoing operations and for future project developments. Among other things, they have necessarily committed ArcelorMittal to a significant environmental offset program and a comprehensive mine closure plan. While most of the costs of these initiatives will be incorporated in operational expenditure over the life of the mine, the implication is that the offsets may eventually amount to at least $70 million and overall mine closure may amount to more than $100 million.
Renewal of the environmental permit at the end of June 2017 included mining activities for Gangra which were part of the Phase 2 expansion project. This permit has increased requirements in terms of sediment control, water discharge as well as biodiversity conservation. Increased requirements as identified in the 2017 Phase 1 ESIA addendum calls for more stringent sediment controls and land take management, and expansion of the offset program due to the increase in the mine footprint.
Mexico
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, environmental impact study, environmental audit, transfer of contaminants, water management, waste management, sustainable forestry development, radioactivity control, wildlife management and environmental noise pollution control.
In addition, on June 6, 2012, Mexico issued a new2023. Moreover, General Federal Law for Climate Change and on June 7, 2013, a new Federal Law of Environmental Responsibility. These establish the “polluter pays” principle in which the person that caused the environmental breach is responsible for restoring the environment to its pre-pollution condition and for any other administrative, economic and potentially criminal liabilities.
In January 2014, ArcelorMittal Mexico’s raw water consumption costs increased 395% due to changes in the Water Federal Rights Law. In addition, for waste water discharges, any parameter above the maximum permissible limit now generates a fine according to a volume discharge and fine factor.
In September 2016, the environmental authority proposed launching a pilot scheme to establish a carbon market based on a cap and trade system, which in the future could obligemandates ArcelorMittal Mexico to comply with maximum CO2 emission limits to buy carbon credits and/or invest in projects to reduce emissions and obtain carbon credits. The proposal is still under review and has not yet been finalized.
As per the General Federal Law for Climate Change, since 2017, ArcelorMittal Mexico must verify and validate its yearly CO2CO2 emissions report with an external authorized company every 3 years.year.
On December 31, 2018,In Ukraine, the State Government launched a new tax law which includes ecological taxes, which requires each company to pay monthly dues by each tonclimate change policy is being dynamically developed. The Law "On Monitoring, Reporting and Verification of CO2 emissions, tons of solid waste storedGreenhouse Gas Emissions" ("MRV Law") came into force on January 1, 2021. It aims at introducing the EU’s MRV rules for the largest carbon emitters and each m3 of waste-water discharged. In light ofpaves the high impact to all industries of this new law, companies have requestedway for the Government to suspend the lawETS implementation, which is being considered bycompatible with EU ETS. Hence, in April 2022 the Government. The Company proposes to apply for a Writ of Amparo until this law is revised, amended or suspended.
South Africa
The National Environmental Management Act (“NEMA”) 107 of 1998 serves asfirst verified data on GHG emissions from the departure point for any projectlargest Ukrainian industrial companies will be published in South Africa and informs the Environmental Impact Assessment (“EIA”) process that needs to be followed in order to obtain the required authorization. An environmental authorization is issued pursuant to NEMA and other related environmental legislation, for example the National Environmental Management: Waste Act, 59 of 2008 (“NEM:WA”) as well as the National Environmental Management: Air Quality Act, 39 of 2004 (“NEM:AQA”) for any projects requiring an EIA process. Furthermore, the “duty of care” principle enshrined in NEMA specifies that any harm caused to the environment is a criminal offense under the terms of NEMA. A compliance notice/directive was issued on December 7, 2015 by the Department of Environmental Affairs regarding certain operations at the Newcastle Works. The compliance notice/directive required the Newcastle Works to cease its existing practices for waste disposal at a site that allegedly was operating unlawfully and to cease sales of slag to outside companies unless proof was submitted that such companies are in possession of a waste management license. Finally, the compliance notice/directive requires Newcastle Works to conduct a study of possible environmental related impacts with regard to certain identified areas of the site. ArcelorMittal South Africa conducted and submitted the study as required. The remaining instructions as part of the Compliance Notice / Directive were taken on review to the High Court. ArcelorMittal South Africa received a favorable outcome and the authorities are now appealing the decision by the High Court to the Supreme Court of Appeal. A further Compliance Notice was issued on August 30, 2018 by the Gauteng Department of Agriculture and Rural Development regarding certain operations at the Vanderbijlpark Works. In terms of the Compliance Notice, ArcelorMittal South Africa is required to cease operation of the gas combustion furnace used at the foundry until the required Air Emission Licence is obtained. This has not had any material effect on operations. The gas cleaning facilities at coke making also need to be operational within a specified time period of 2.5 years and a project is planned to this effect which will entail capital expenditures. ArcelorMittal South Africa is currently in complianceaccordance with the Compliance Notice.
The NEM:WA came into effectMRV Law. Moreover, Ukraine submitted its second Nationally Determined Contribution (“NDC2”) on July 1, 2009, and applies to all waste related activities and contaminated land and replaces older legislation in this regard. NEM:AQA, which took full effect on April 1, 2010, introduced strict air emission standards for new and existing plants. Existing plants or processes are granted31, 2021. The NDC2 involves a periodtarget of 5 years to achieve standards set for existing plants and 10 years to achieve standards set for new plants. ArcelorMittal South Africa’s coke making operations, in
particular, but other operations as well, are affected by the implementation65% reduction of this Act, and major capital expenditures are expected to be implemented over the next two years to meet the relatively strict 2020 standards.
South Africa has committed to reduce GHG emissions below business as usualthe 1990 level by 34%2030, in line with the above mentioned LULUCF Regulation. The NDC2 has increased the Ukraine’s ambition from the target announce in the first NDC – at least 40% reduction of GHG emissions below the 1990 level by 20202030. Apart of the 2030 target, the NDC2 contains the new pledge of climate neutrality by 2060, repeating the target announce earlier in the “National Economic Strategy until 2030”, approved by the Ukrainian Government in March 2021. Additionally, in October 2021 the Ukrainian Government approved the Environmental Security and 42% by 2025, and adoptClimate Adaptation Strategy until 2030. This Strategy has been developed to fulfil Ukraine’s international obligations under the Paris Agreement, providing the strategic outlook for the prospective adaptation measures as outlined in South Africa’s Intended NDC for purposesto the consequences of global climate change. The document also focuses on the Paris Agreement. A carbon tax is envisaged to be implemented during 2019 together with complementary measures to reduce GHG emissions and effect behavioral change. In the carbon tax bill published in December 2017, the National Treasury lists a number of allowances to mitigate the impact the tax would have on industries. Further regulations regarding allowances provided for in the bill have not been published. Current expectations are that AMSA could achieve an 80% tax-free threshold with the remainder of its emissions being taxed at ZAR120/tCO2. This would equate to a financial impactof up to ZAR300 million per year (depending on production levels) on South Africa’s operations.
A climate change bill was published in June 2018 and the objectives of the proposed Climate Change Act are to provide for an integrated response to climate change and ensureindustrial pollution reduction; the effective managementchemical safety system establishment; the rational use of inevitable climate change impacts by means of various regulatory requirements. Furthermore,natural resources etc. As stated above, the Climate Change Act seeks to make a fair contribution to the global effort to stabilize greenhouse gas concentrations in the atmosphere. The Climate Change Act makes provision for the development of a national environmentally sustainable development framework for achieving its objectives, which must be reviewed every five years. The proposed carbon tax will at some stage in the future also be integrated into this act as a mitigation measure.
Ukraine
Ukraine is gradually introducing EU environmental standards and emission standards, which will require significant capital expenditures in the near future.
On December 7, 2016, the Cabinet of Ministers of Ukraine approved the Concept of implementing the state policy in the sphere of climate change for the period until 2030. According to this Concept, an internal trading system of greenhouse gas emission quotasStrategy will be created and implemented in accordance with the provisionsapproved action plan, setting out the list of Directive 2003/87/EC.
The Ministry of Ecology and Natural Resources of Ukraine has approved the plan of actionsmeasures for the implementation of the concept by Order No. 878-р dated 06.12.2017. The plan includes:consecutive three years. ArcelorMittal is closely monitoring local, national and international negotiations, regulatory and legislative developments and is endeavoring to reduce its own emissions where appropriate.
formation, support and implementation of state policy in the field of climate changes and the gradation to a low-carbon state development;
proper regulations of activity relating to prevention of climate changes due to reduction of anthropogenic emissions and increasing the absorption of the greenhouse gases; and
adaptation to climate changes.
The above will apply to almost all sectors of the economy, including energy, industry, agro industrial complex, transport, water industry, forestry, housing and public utility sector, as well as public health and livelihoods, conservation and reproduction of natural ecosystems.
Pursuant to the plan, ministries and departments were required in 2018 to develop and submit for consideration to Ukraine’s Cabinet of Ministers laws for the implementation of monitoring, reporting and verification system for greenhouse gas emissions, greenhouse gas emission quotas trading, and approving strategies for the low carbon development of Ukraine until 2030.
On December 18, 2017, Ukraine's law on the assessment of environmental impacts came into force. This law establishes the legal and organizational basis for environmental impact assessment and permitting requirements, aimed at preventing damage to the environment, ensuring environmental safety, environmental protection, rational use and reproduction of natural resources in the process of making decisions on the implementation of economic activities that may have a significant impact on the environment, taking into account state, public and private interests.
Law of Ukraine No. 2354-VIII about strategic environmental assessment was published on April 11, 2018 and came into effect on October 12, 2018. This law regulates environmental impact assessment, in particular setting out industries/activities which require assessment, taking into account the possible consequences.
Drafts of new laws developed in accordance with European waste directives: 2008/98/ЕС, 1999/31/ЕС, 2006/21/ЕС are being considered. Draft laws of Ukraine relating to principles of monitoring, reporting and verification of greenhouse gas
emissions are being considered. Ukraine's Cabinet of Ministers has also communicated their support for the strategy for low carbon development of Ukraine by 2050.
Certain environmental permits of the Company will expire in April 2019 and the Company has initiated the process for renewal of these.
Venezuela
Industrias Unicon, C.A. (“Unicon”) is subject to various Venezuelan environmental regulations, the most important being the Organic Law for the Environment (2006) and the Criminal Law of the Environment (2012). Unicon is also subject to annual inspections by environmental entities of the federal and regional government, through whom environmental permits and adherence are reviewed. Strict compliance with environmental standards by Unicon has been verified by these governmental entities, with no observations. No inspections have taken place during 2018. Unicon is up to date with all environmental permits.
Health and safety laws and regulations
ArcelorMittal’s 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 EU and other jurisdictions continue to become more stringent, ArcelorMittal expects to expend substantial amounts to achieve or maintain compliance. See “Risk factors—Legal and regulatory risks—ArcelorMittal is subject to strict environmental,
health and safety laws and regulations that could give rise to a significant increase in costs and liabilities.” ArcelorMittal has established corporate health and safety guidelines requiring each of its business units and sites 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 on a continuing basis the severity and frequency of accidents.accidents; through its Health & Safety Council and Management Committee, the Company reinforces the penetration of the safety culture in the Company. The effective policy outlines the commitment ArcelorMittal has made to the health and safety of all employees and implements a commonreinforces the accountability of the local management and encourages the continuous improvement in health and safety model across the entire organizationperformance at unit level, which permits the Corporate Health & Safety Council and Safety departmentManagement Committee to define and track performance targets and monitor results from every business unit and site. Further, ArcelorMittal has implemented a database to recordsites. See "Business overview—Sustainable development—Management Theme #1: Health and share events and unsafe situations that have the potentialsafety" for a serious injury. These situations and events are called SO/PSIFs (for “serious occurrences/potential serious injuries and fatalities”), the actual consequences of a SO/PSIF might have been minor, but as soon as the potential for a severe injury or fatality was present, it is considered as a “SO/PSIF”. At present, the database enables access to statistics for the ArcelorMittal group as a whole, and more detailed information on injuries for business units and sites. Additional information is available at plant sites. The database 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 prevent their recurrence. Another database, focusing on good practices/internal benchmarking has been deployed since 2010 and, as with any database, continues to grow in terms of content and uses over time. To monitor compliance, an auditing system has been put in place to check compliance with internal standards.further information.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) each reporting operator of a coal or other mine is required to include certain mine safety information within its periodic reports filed with the SEC. Pursuant to Section 1503 of the Dodd-Frank Act, the Company presents information regarding certain mining safety and health matters for each of its U.S. mine locations in Item 16H of this annual report.
Foreign trade
ArcelorMittal has manufacturing operations in many countries and sells its products worldwide. In 2018,2021, certain countries and communities, such as Argentina, Brazil, Canada, Chile, the Eurasian Economic Union, the European Union, the Gulf Cooperation Council,EU, Egypt, India, Mexico, Philippines, South Africa, Taiwan, Thailand, Turkey, and the United States of America and Vietnam,U.S. continued or launched investigations into whether to impose/continue imposing trade remedies (usually anti-dumping or safeguard measures) against injury, or the threat thereof, caused by increasing steel imports originating from various steel producing countries.
Under both international agreements and the domestic trade laws of most 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 trade remedies are assessed, such laws have common features established in accordance with World Trade Organization (“WTO”) standards. Dumping involves exporting 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) plus a reasonable amount for profit. Subsidies from governments (including, among others, grants and loans at artificially low interest rates) are similarly actionable under certain circumstances. The trade remedies available are typically (i) an antidumpinganti-dumping duty order or suspension agreement where injurious dumping is found and (ii) a countervailing duty order or suspension agreement where injurious subsidization is found. Normally, the duty is equal to the amount of dumping or subsidization that is generally imposed on the imported product (other than in the European UnionEU where the lesser duty rule is applied). Accordingly, such orders and suspension agreements do not prevent the importation of a product, but rather require that either 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 country of origin, to protect domestic production against increased importsserious injury caused by unforeseen, sharp and sudden increase of that product. The remedies available for safeguard investigations are commonly safeguard duties or quotas on the imported products.imports.
All WTO members are required to review antidumpinganti-dumping 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 dumping or subsidization and the injury is likely to continue or recur, then the orders continue. In the case of safeguard measures enduring for greater than three years, all WTO members are required to review the imposed measures in the mid-term of the relevant measure. After a review, restrictionssafeguard measures may be extended if they continue to be required, but the total period for the application of relief providedsafeguard measures may not exceed eight years. These so-called "sunset" reviews affect various countries of interest, for example in May 2016 the United States initiated a sunset review of the duties imposed in December 2014 for hot rolled products from Russia. In September 2016, the US Department of Commerce, in light of this sunset review, decided to continue applying those duties stating that such products from Russia posed the same dumping risks as in 2014. A new sunset review on the existing anti-dumping duties on imports of organic coated steel products from China into the EU was commenced in 2018.
In 2017, the European Commission’s antidumping duties on hot-rolled coil products imported from China became permanent and are to remain in place for a period of five years. It also imposed final anti-subsidy duties against the same products from China. The European Commission also imposed final anti-dumping duties on hot-rolled coil products imported from Russia, Iran, Brazil and Ukraine and initiated an anti-dumping investigation against non-auto corrosion resistant steel coming from China with final duties implemented in December 2017. Additionally it implemented final measures on quarter plate products imported from China. In the United States, final anti-dumping duties and countervailing duties against corrosion-resistant, hot-rolled and cold-rolled steel imports from China, Brazil and certain other countries became definitive in 2017, and the US Department of Commerce applied final anti-dumping and countervailing duties against heavy steel plate imports from China, Brazil, South Africa and certain other countries. In 2018, a new antidumping investigation started against Chinese imports of sheet piles as well as another antidumping investigation on welded tubes, pipes and hollow profiles of square or rectangular cross-section, originating from North Macedonia, Russia and Turkey.
In a number of markets in which ArcelorMittal has manufacturing operations, it may be the beneficiary of trade actions intended to address trade distortions consistent with WTO regulations, such as the examples already mentioned in Europe and the United States.above. In other situations, certain operations of ArcelorMittal may be a respondent to antidumpinganti-dumping and countervailing duty cases and its exported products might be subject to antidumpinganti-dumping and countervailing duties or other trade restrictions, for example antidumpinganti-dumping duties imposed in 2017 by the Egyptian government against rebar imports from Ukraine, Turkey and China affecting exports from ArcelorMittal operations in Ukraine.
USA Section 232:
On April 20, 2017,March 23, 2018, after a section 232 national security investigation (Section 232) with respect to steel imports, was initiated in the United States. The Department of Commerce ("DOC") report was sent to the Trump Administration on January 11, 2018, after which the administration had 90 days to decide what action to take. On March 23, 2018, the US administration imposed tariffs of 25% on steel products from all but a select list of countries. However, until May 1, 2018,countries, with a temporary suspension applied for Canada, Mexico, Argentina, South Korea, Brazil and the EU.
OnEU until May 1, 2018, the US administration issued two proclamations authorizing modifications of the Section 232 tariffs on steel and aluminum.2018. Subsequently, Australia obtained a full exemption, and imports from Argentina, Brazil, and South Korea are subject to annual quotas. In addition, as of May 16, 2019, Turkish imports are subject to a 25% tariff after having been subject to 50% tariffs since August 2018. Tariffs on imports of steel products from Canada and Mexico were eliminated on May 17, 2019, which led to positive impacts in the Company’s NAFTA business units; imports from Canada and Mexico were monitored to identify if imported volumes surge meaningfully beyond historic levels. On August 28, 2020, President Trump closed the fourth quarter of 2020 Brazilian quota (no further imports allowed) on semi-finished steel although the Company received an expedited exclusion to import 40,000 metric tons of semi-finished steel in the fourth quarter; the 2021 quota will revert to the original aggregate 3.5 million tonnes volume. On October 31, 2021, the U.S. and EU announced that they had reached agreement to modify the section 232 measures on U.S. steel imports from the tariffs. US imports of South Korean steel, Brazilian steel, and Argentina steel and aluminum remained exempt fromEU. Effective January 1, 2022, the U.S. replaced the existing Section 232 tariffs but were insteadon EU steel with a Tariff-rate Quota (TRQ) consistent with pre-Section 232 trade volumes in return for the EU dropping the threat of retaliatory tariffs. The total annual import volume under the TRQ is set at 3.3 million tonnes allocated by product category and on an EU member state basis. Only steel “melted and poured” in the EU is eligible for duty-free treatment. Imports above the TRQ volumes will continue to be subject to annual quotas covering imports that have entered the US since January 1, 2018. Annual US imports of South Korean steel products are limited to 70% of the average of 2015-2017 volumes allocated on a product-specific basis. Brazil was granted annual quotas of 100% of the average of 2015-2017 shipments for slabs and 70% of the 3 year average period for finished products. For Argentina, the applicable quota was set to 135% of the 3 year average period, representing a significant cut from 2017 when Argentina shipped 211,00025% tariff. An additional 1.1 million tonnes (for tubeof products the 2018 quota amounted to 180,000 million tonnes). Countries subject to annual quotas are also subject to quarterly limitations. As of July 1, 2018, exports of a subject country of a particular steel or aluminum product cannot exceed “500,000 kg and 30%” of the annual product-specific quota in a given quarter, which could lead to a surge at the beginning of each quarter. In its May 1, 2018 proclamations, the US administration also extended negotiations with Canada, Mexico, and the EU for a final 30 days and, effective June 1, 2018, the US administration implemented 25% tariffs on importspreviously excluded from the EU, Canada and Mexico. The Section 232 action has had a positive impact on ArcelorMittal USA’s financial performance as a result of the improved pricing environment in the United States. However, ArcelorMittal’s Canadian and Mexican businesses have been negatively impactedtariffs will also be allowed to the extent thatcontinue duty-free.
The USA Section 232 duties apply to their shipments to the United States. Some NAFTA business unitstariffs have also been negatively impacted by retaliatory duties applied by Canada and Mexico.
The modifications of the Section 232 tariffs triggered concerns of trade deflection worldwide and several countries initiated domestic remediation measures. On March 26, 2018, the EU Commission opened ex-officio a safeguard investigation on 26 products (including 19 long, flat and stainless steel products and 7 tubes and other steel products). On July 18, 2018, the EU Commission published provisional measures which entered into force on July 19, 2018 with a maximum duration of 200 days (February 4, 2019). These provisional measures were based on global tariff quotas with a 100% quota based on average imports over the past 3 years on 23 product categories. Imports that exceeded the above quotas would face a 25% tariff but certain 'developing' countries are exemptedwere exempt when their import share iswas below 3%. The EU’s provisional safeguard measures were replaced by definitive safeguard measures approved by EU member states on January 16, 2019 whichand went into effect on February 4, 2019. These safeguards2, 2019, which cover the full steel product scope, setting country-based quotas for larger importers on all product categories, except for
hot rolled (global), and quarterly quota calculations for residual volumes of all products. The measures also include three phases of 5% quota relaxations in early February 2019, July 2019 and July 2020, which can be adapted to market conditions for each product individually. Countries subject to quotas have an incentive to frontload the consumption of their national quota in order to benefit from the residual quotas in the final quarter of the period, thus ensuring full quota consumptions. In July 2019, the EU commission completed a review investigation of these safeguard measures and proposed modifications, which were implemented on October 1, 2019. The main changes include:
•a reduction of quotas to 3% (from the 5% quotas applicable since July 1, 2019),
•inclusion of additional countries in the developing country quota list which had met the 3% import levels,
•a quarterly cap of 30% of the HRC global applicable to each country's total import cap for hot rolled coil, and
•a 30% cap applicable to the last quarter per period of a country's total cap on wire rod and rebar imports, as well as a new requirement that end users (product purchasers) validate any imports of category 4B products (hot dip galvanized products used in the auto industry).
In February 2020, the EU Commission started a second review of the EU Steel Safeguards to consider adjustments to the tariff-rate quota considering changes since the last review in 2019. On June 12, 2020, EU member states voted in favor of the Commission’s revised measures. These were implemented from July 1, 2020.The main changes include:
•Quarterly management of country specific quotas;
•Country-specific quotas for hot rolled flat products ("HRF");
•Access to residual quotas prohibited for organic coated, wire rod, gas pipes, and cold finished bars;
•Access to residual quotas more restricted for most long products; and
•30% cap per country accessing the residual quotas for hot dip galvanized 4B (automotive grade material) and HRF in the fourth quarter of 2020.
In February 2021, the EU Commission initiated a review into extending the safeguard measures to consider whether the situation justified prolonging the tariff-rate quota. On June 18, 2021, EU member states voted in favor of a three-year extension prolonging the measures until June 30, 2024. The key elements of the extension include:
•No changes to the quota modalities;
•3% liberalization from July 1, 2021;
•A review of the quota levels after one year; and
•A review of the measures in general after two years.
ArcelorMittal welcomed the impositionextension of the final safeguard measures in Europe, howeverEurope.
In December 2021, the Company considers thatEuropean Commission opened a new review into the relaxation clause weakensfunctioning of the efficiencysafeguard measures. The result of these measures.
In response to the measures adopted by the USUnited States and the EU, Turkey opened a safeguard investigation on May 2, 2018 with provisional measures effective as of October 17, 2018. Turkey’s safeguard investigation on iron and steel products, which was supposed to be concluded by January 26, 2019, was extended for six months, i.e., until July 26, 2019, with the provisional safeguard measures set to remainthat remained in effect until May 5, 2019. The investigation coverscovered hot-rolled, cold-rolled, coated, hot-dipped galvanized, bars and rods, angles, shapes and sections, wire rod, rails, tubes and hollow profiles and stainless steel and the provisional measures arewere in the form of a free tariff quota with 25% duties. ArcelorMittal has participated inSuch investigation was terminated on May 7, 2019 without permanent safeguard measures being imposed. In January 2021, Turkey opened an investigation into HRC coming from the defense process to try to reduceEU and South Korea. The investigation is ongoing and the effects to its European exports into Turkey. Asresult should be known by the third quarter of 2022. In Canada, as a result of the opening of a safeguard investigation on certain flat and long products, Canada decided to implement provisional measures that came into forcewere put in place on October 25, 2018 in the form of quotas and a 25% tariff on steel imports. Final safeguard measures were subsequently implemented in relation to plate and stainless wire, but not rebar, hot rolled, prepaint, wire rod and energy tubulars. The EurasiaEurasian economic union led by Russia also opened a safeguard investigation on August 7, 2018 covering some flat steel products only.only and on August 8, 2019, safeguard measures covering hot-rolled steel were put in place, imposing 20% tariffs above relevant quotas.
In February 2019, President Trump received the findings of another Section 232 investigation into whether imported vehicles pose a national security threat to the United States and will have 90 days to decide on any action such as tariffs. The investigation covers imports of vehicles including SUVs, vans and light trucks as well as auto parts. If any such tariffs are adopted, their impact on imports from Canada and Mexico into the United States would be attenuated by side letters that were executed by the United States, Canada and Mexico as part of the negotiations of the replacement of the NAFTA trade agreement. These side letters would exclude 2.6 million passenger vehicles annually from Canada and another 2.6 million from Mexico, as well as all light trucks and specific volumes of auto parts from such tariffs.
China poses unique trade policy questions as the EU, among other regions, debates whether to grant China market economy status (“MES”) under WTO rules. MES is a critical component in determining the magnitude of trade remedies that may be applied against a country engaging in unfair trade practices. Where a country has MES, this alters the comparative price selection and cost benchmarks used to calculate the margin of the alleged dumping. While China viewed the recognition of its MES as automatic and necessary from the point of expiry of certain of its WTO accession protocols on December 11, 2016, this status was not granted by certain regions and countries, notably the EU and the U.S. Accordingly, on December 12, 2016, China notified the WTO that it was requesting dispute consultations with both the United States and the European Union in respect of the special calculation methods used by both the United States and European Union in anti-dumping proceedings. In November, 2017, the United States submitted a statement to the WTO, as a third party brief in support of the European Union in a dispute with China, formally opposing granting China market economy status; the dispute is ongoing at the WTO. On December 19, 2017, the EU published its approved amendments of the Anti-Dumping Regulation (EU) 2016/1036 (New Anti-dumping Methodology-NADM), which stipulate that if the existence of “significant distortions” has been established by the complainant, the European Commission may use an alternative methodology for calculating dumping margins for imports from third countries. This new framework notably removes the former distinction between market and non-market economies (“NMEs”) for the calculation of dumping margins in the EU anti-dumping regulation. The alternative methodology can now be used by the EU for any WTO country.
Key currency regulations and exchange controls
As a holding company, ArcelorMittal is dependent on the industrial franchise fees from, 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 ordinary shares or conduct share buy-backs. Significant cash or cash equivalent balances may be held from time to time at subsidiaries where repatriation of funds may be affected by tax and foreign exchange policies, including in Argentina, Brazil, China, India, Kazakhstan, South Africa, Ukraine and Venezuela. Such policies are briefly summarized
below; however, none of these are currently significant in the context of ArcelorMittal’s overall liquidity.
Argentina
In December 2015, the newly electedThe Argentinian government announced initiatives to significantly relax foreign exchange controls and regulations. These measures, among other things, allowmarket is regulated by the Argentine Central Bank ("BCRA"). The BCRA allows the local currency to float, subjectfree-float against the USD, however, capital controls have reduced volatility in an effort to intervention byprovide stability to the central bank to avoid destabilizing movements.currency. The ArgentineArgentinian peso (“ARS”) is not fully convertible and is most commonly traded as a non-deliverable forward (i.e., cash settlement at maturity based on the relative movement of the designated currency rather than the physical settlement of the designated currency at maturity)("NDF"), both onshore and offshore. Despite the lifting of controls, rules on the repatriation of export receipts remain unchangedAn account in respect of the conversion of 100% of foreign exchange revenue into Argentine pesos. Access to the foreign exchange markets for the payment of dividends does not require authorization from the central bank, only the completion of certain legal and administrative procedures. local currency cannot be held offshore. As of July 1, 2018, Argentina has been considered as a highly inflationary country. hyperinflationary economy. Since the re-imposition of capital controls in September 2019, local restrictions on obtaining foreign currencies have tightened, requiring the BCRA's approval for all foreign currency transactions and all transfers to and from the local market for companies and for financial outflows, such as dividend payments. The BCRA has set a limit of 5 days for exporters to convert foreign currency, while institutions will need authorization of the bank to buy USD in the foreign exchange market, except in the case of foreign trade, according to a statement from the BCRA. In September 2020, the BCRA intensified Forex regulation once again, instituting a 30% tax on purchases made abroad and restricting withdrawals to USD 200 per month. In addition, a 0.06% fixed charge on all current bank accounts (debit and credit) has been installed. See also note 2.2.2 to the consolidated financial statements.
Brazil
The central bankCentral Bank of Brazil ("BCB") operates a managed floating foreign exchange regime, although intervention has become more regular in recent years. Nevertheless, the BCB does not intervene in the foreign exchange market to determine the exchange rate. The Brazilian real is fully deliverable onshore (i.e., physical settlement of the designated currency at maturity), but is non-deliverable offshore. With proper documentation, the repatriation of registered invested capital and remittance of profits do not require prior approval from the central bank of Brazil.BCB. Profits can be freely remitted as dividends or as interest on capital to foreign shareholders or portfolio investors.
China
China’s foreign exchange regime has recently undergone significant liberalization.liberalization in recent years. The People’s Bank of China (“PBOC”) maintains the Chinese renminbi in a managed float with reference to a basket of currencies. The CNY, which refers to the Chinese renminbi on the onshore market, is partially convertible and has a non-deliverable offshore market. All transactions involving foreign exchange are strictly controlled by the State Administration of Foreign Exchange. Since 2021, repatriating capital or profits out of China includes increased layers of inspection and security from the government. The PBOC has decided to increase the amount of foreign-currency
deposits that financial institutions need to hold as reserves, starting in June 2021, in order to curb sell-offs of foreign currencies after the renminbi's value climbed to a record high.The CNH, which is the Chinese renminbi traded offshore, became deliverable in Hong Kong in July 2010. The CNH can generally be transferred freely between offshore accounts and interaction with the onshore market is growing, although transfers of CNH from Hong Kong to onshore China are subject to regulations and approval by the PBOC.
India
The Reserve Bank of India ("RBI") maintains the Indian rupee (“INR”) in a managed floating regime. The INR is partially convertible and has a non-deliverable offshore market. Onshore deliverable forwards are also available out to 10 years. The most common tenor with the best liquidity in the forwards market is one year or less. The INR is convertible for exports and imports of goods and services as well as unilateral transfers, including repatriating profits from foreign-funded companies, as well as for daily recurring transactions in the ordinary course of business. However, the INR is restricted on the capital account (purchase and sale transactions of foreign assets and liabilities) and there are specific transactions that have to be authorized by the RBI or other relevant government departments for routine capital account transactions, e.g. foreign currency borrowings under the approval route or foreign direct investments by foreign portfolio investors.that are not permitted under the automatic route. Other permitted capital account transactions that are allowed, subject to compliance with local applicable regulations, include foreign direct investment, foreign currency loans and bonds, securities and equity investments overseas. Companies may remit dividends overseasIn April 2020, the RBI issued final guidelines on “Hedging of foreign exchange risk by Residents and Non-Residents”. The simplified guidelines are expected to foreign investors after they have been declared by the board of directors of private limited companies or annual general meetings of shareholders of public limited companies. Companies can remit royalty payments to foreign parents, subject to applicable rulesa positive material impact on product suite, procedures and regulations.requirements for hedging requests which will impact both local and global franchises.
Kazakhstan
In August 2015, the National Bank of Kazakhstan devalued the Kazakhstan tenge and introduced a free-floating exchange rate.rate with an inflation targeting regime. The National Oil Fund conducts open market operations to finance economic programs, hence the current exchange rate regime may be best described as a managed float. Liquidity in foreign exchange markets is limited and mainly non-deliverable forwards are traded on offshore markets. There are no restrictions on tenge convertibility, but domestic legal entities must state their reasons for buying foreign currency and may only trade with authorized banks.
South Africa
The South African Reserve Bank ("SARB") operates a managed floating foreign exchange regime.rate system. The South African rand (“ZAR”) is deliverable and largely convertible, and the reserve bankSARB is gradually relaxing exchange rate controls. Since January 1, 2014, companies may apply for approval to establish a holding company to hold their offshore investments. Subject to certain conditions, listed companies may place ZAR 23 billion per annumyear with such holding companies, which can be transferred offshore without exchange control approval, and unlisted companies may transfer ZAR 12 billion per year.year. All funds transferred into or out of South Africa must be declared to the SARB.
Ukraine
The National Bank of Ukraine ("NBU") is responsible for the country’s monetary policy. The exchange rate system is highly regulatedhas gone through significant liberalization during 2018-2019, notably with the set-up of a floating exchange rate regime, though currency control for foreign currency purchases still remains in place. Deliverable forwards and only deliverable forwardsforeign currency swaps are allowed on the onshore market.market, with an improvement in liquidity. The NBU has achieved an accumulation of foreign currencies in order to intervene to smooth exchange market volatility. Non-deliverable forwards are not allowed onshore, however the local market is still in a preparatory phase. On the offshore market, only non-deliverable forwardsUkrainian hryvnia ("UAH") Non-Deliverable Forwards are allowed, buttraded with good liquidity is very limited.from both sides, with tenors of up to 1 year. Since August 2016, foreign investors are entitled to repatriate profit,profits, income or other funds relating to investments without any restrictions, after the payment of applicable taxes. ExceptIn 2019, the NBU lifted all restrictions for payments of 2014 to 2016 dividends, which were allowed subject to certain restrictions, there is a ban on the remittance of funds to foreign investors through the payment of dividends on securities, traded on the stock exchange, a decreaseassets repatriated by corporates, decreases in share capital or the exit of foreign investorsexits from domesticlocal legal entities.
Venezuela
Venezuela’s foreign exchange regime has been characterized by governmental devaluation and sudden legislative change. Until the beginning of 2018, Venezuela featured two exchange systems for the bolivar, its official currency: DIPRO, which was fixed at a rate of 10 bolivars per U.S. dollar and was used primarily for priority food and medicine sectors, and DICOM, which was allowed to float freely and applied to most other sectors. The Venezuelan government temporarily suspended the sale of U.S. dollars through its DICOM auction system during the fourth quarter of 2017 and effective January 30, 2018, eliminated the DIPRO rate and reopened the auction of the DICOM rate on February 5, 2018.changes. DICOM is now the country’s only official exchange rate. On August 20, 2018, the bolivar soberano (VES)("VES") replaced the bolivar fuerte (VEF)("VEF") at a rate of 1 VES to 100,000 VEF. The only way to convert the VES is through the DICOM rate, which sets an exchange limit of EUR 340,000€340,000 per month for domestic legal entities. Since September 7, 2018, currency purchase and sale transactions can be freely converted by direct agreement between the parties, provided they do so through the exchange operators of the Central Bank, however, the Central Bank of Venezuela can intervene in these operations whenever it deems necessary to avoid distortions of the exchange value of the national currency. Local banks are allowed to provide accounts in USD and other convertible currencies as well as the transfer of funds between banks. Since this regime's effective date, the foreign exchange market has been characterized by limited existence of customers and transactions for insignificant amounts.
Transactions are allowed on a non-deliverable offshore market, but liquidity is very limited. On October 1, 2021, Venezuela Government launched its second monetary overhaul in three years by cutting six zeros from the bolivar currency in response to hyperinflation. Consequently the currency has been renamed from VES to VED.
Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act (ITRA)
ArcelorMittal’s business with customers in Iran
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act). Section 13(r) requires an issuer to disclose in its annual reports whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran. Disclosure is required even where the activities, transactions or dealings are conducted outside the United States by non-US persons in compliance with applicable law, and whether or not the activities are sanctionable under US law.
In 2018,2021, neither ArcelorMittal sold the following products to customersnor any of its affiliates engaged in Iran:
In 2018, ArcelorMittal sold commodity-grade long and flat steel products and tubes for the consumer and construction sector, and the automotive sector and alloy steel plates destined to industrial projects as detailed below:
ArcelorMittal’s subsidiary ArcelorMittal International FZE in Dubai (“AMID”) sold steel products to customers in Iran, generating $66.2 million in revenue in 2018, which amounts to 4% of AMID's total sales in 2018.
AMID sells to trading companies, most of which are based in Dubai and some of which are owned by Iranian nationals, that export and ship the products to stockists (i.e., wholesalers) and fabricators in Iran which, to the best of ArcelorMittal’s knowledge, on-sell them primarily to companies involved in the private-sector construction and consumer goods industries.
Following the changes in U.S. secondary sanctions on May 8, 2018, ("Re-imposition of US Sanctions"), AMID has only sold (through traders) finished commodity grade long and flat steel products in the form of hot rolled coils and cold rolled coils to Iranian companies involved in construction and consumer goods industries. To the best of ArcelorMittal’s knowledge AMID has not had any directactivities, transactions or indirect sales to customers in Iran since November, 2018.
AMID continues to monitor this market and the market risks involved, before making any decisiondealings relating to continuation of the above described business by AMID in 2019.
During January to May 2018, ArcelorMittal’s Europe segment sold coated flat products, alloy steel plates, sections, wire rod and seamless pipes both directly and indirectly for projects in Iran. These activities generated $9.8 million in revenue with a profit of $0.52 million; ArcelorMittal’s Europe segment, to the best of ArcelorMittal's knowledge, has not had any direct or indirect sales to customers in Iran since June 2018.
Additionally, during January to May, 2018 ArcelorMittal’s Europe segment sold flat coated and non-coated products destined to Iranian automotive customers generating $2.54 million in revenue with a profit of $0.38 million. According to press reports and other public information, these companies may have links to the Iranian Government. ArcelorMittal's Europe segment, to the best of ArcelorMittal's knowledge, has not had any direct or indirect sales to Iranian automotive customers since June 2018.
ArcelorMittal's Europe segment continues to monitor this market and the market risks involved before making any decision relating to continuation of the above described business by ArcelorMittal's Europe segment in 2019.
To the best of the Company’s knowledge, none of the above sales have gone to any sanctionable end-uses or end users. No U.S. affiliate or persons are involved in these sales, and the sales are not conducted in U.S. dollars.triggering disclosure under Section 13(r).
ArcelorMittal continues to monitor developments in this area, in particular the status of U.S. Sanctions, the Joint Comprehensive Plan of Action ("JCPOA") the Re-imposition of USand EU Sanctions, and the expansion of the EU Blocking Regulation (Council Regulation (EC) 2271/96) and will determine whether and to what extent they affect its business with Iranian customers as currently conducted and intended to be conducted.. ArcelorMittal carefully monitors political risk and sanctions exposure and has procedures and systems in place intended to manage those risks.
However, ArcelorMittal’s business is subject to an extensive, complex and evolving regulatory framework. Significant direct U.S. sanctions against Iran remain and significant U.S. secondary sanctions against Iran were re-imposed, and the risk is not mitigated by the EU Blocking Regulation. It is possible that ArcelorMittal may face conflicting obligations or risks under U.S. direct and secondary sanctions and the EU Blocking Regulation, or other conflicting instrumentsinstruments. Despite its governance, compliance policies and procedures and continuous efforts to comply with all applicable sanctions regimes, its systems and
procedures may not always prevent the occurrence of violations which may lead to regulatory penalties or cause reputational harm to operating subsidiaries, joint ventures or associates. See “Item 3.D—Key information—Risk“Risk factors.”
Iran-related activities of ArcelorMittal affiliates
Pursuant to Section 13(r) of the Securities Exchange Act of 1934, ArcelorMittal is required to disclose whether any of its affiliates have engaged in certain Iran-related activities and transactions.
HPCL-Mittal Energy Limited (“HMEL”), a joint venture in which the HSBC Trustee (C.I.) Limited, as trustee of trusts of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries, holds a 48.99% stake, owns and operates the Guru Gobind Singh Refinery, an oil refinery located in the Bathinda district of Punjab, India.
During the period of January to April 2018, in connection with its oil refining activities, HMEL purchased approximately 3.8 million barrels of crude oil on FOB basis from the National Iranian Oil Company (the "NIOC"). In addition HMEL also used shipping services from the National Iranian Tanker Company ("NITC") for the movement of crude oil from the Middle East including Iran to India.
HMEL did not purchase crude oil from NIOC or use shipping services from NITC after US secondary sanctions were re-imposed on Iran in August 2018.
During 2018, HMEL made total payments of $ 367.9 million including $125.80 million outstanding against cargos purchased in 2017 to NIOC. In 2018, HMEL paid $4.10 million for NITC’s shipping services. To the best of the Company’s knowledge none of the transactions were conducted in U.S. dollars. HMEL made no sales of refined products to Iran.
HMEL produces a variety of petroleum and petrochemical products, which individually require different types of crude oil in different quantities. HMEL generally co-mingles crude oil purchased from various sources, making it difficult to trace the raw materials used in manufacturing a given product or to link revenues directly to such inputs. HMEL cannot determine with certainty the amount of its revenue or profit in 2018 that were related to crude oil purchased from the NIOC.
PT Ispat Indo and its subsidiaries, a group of companies in which the HSBC Trustee (C.I.) Limited, as trustee of a trust of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries, holds a 100% stake, owns and operates various steel manufacturing facilities at different locations in Indonesia.
During the period from January to July 2018, in connection with its activities, PT Ispat Indo and its subsidiaries purchased approximately 64,000 MT of steel billets and Direct Reduced Iron combined through different traders based in Germany and Austria, having offices in Dubai, with shipment from Arfa Iron & Steel, Khouzestan Steel Company and South Kaveh Steel Co.(SKS) in Iran.
Any and all contracts entered into by PT Ispat Indo after the re-imposition of US sanctions on Iran were canceled and any advance payments made in connection therewith were held by suppliers as penalties or claims for cancellation of the contract.
During 2018, PT Ispat Indo and its subsidiaries made total payments of SGD 37.794 million for material received from Iran before August 2018.
To the best of Company’s knowledge none of the transactions were conducted in U.S Dollars.
Organizational structure
Corporate structure
ArcelorMittal is a holding company with no business operations of its own. All of ArcelorMittal’s significant operating subsidiaries are indirectly owned by ArcelorMittal through intermediate holding companies. The following chart represents the operational structure of the Company, including ArcelorMittal’s significant operating subsidiaries and not its legal or ownership structure.
Please refer to the "Presentation of Financial"Glossary - definitions, terminology and Certain Other Information" section of this Annual Report on Form 20-Fprincipal subsidiaries" for a listing of the Company’s principal subsidiaries, including country of incorporation. Please refer to note 2.2.1 of the consolidated financial statements for the ownership percentages of these subsidiaries. Unless otherwise stated, the subsidiaries as listed have share capital consisting solely of ordinary shares, which are held directly or indirectly by the Company and the proportion of ownership interests held equals to the voting rights held by the Company.
Investments accounted for under the equity method
ArcelorMittal has investments in entities accounted for under the equity method. Seemethod as detailed in note 2.4 to ArcelorMittal’s consolidated financial statements. The Company's key investments in joint ventures are AMNS India, Acciaierie d'Italia, Calvert and VAMA for which the Company holds 60%, 62%, 50% and 50%, respectively. See section “Property, plant and equipment—Investments in joint ventures” for further details.
Reportable segments
ArcelorMittal reports its business in the following five reportable segments corresponding to continuing activities: NAFTA, Brazil, Europe, ACIS and Mining.
As from April 1, 2021, ArcelorMittal implemented changes to its organizational structure whereby primary responsibility for captive mining operations whose output is mainly consumed by their respective steel segments has been transferred to such segments. The Mining segment retains primary responsibility for the operation of the seaborne oriented operations at AMMC and ArcelorMittal Liberia Ltd, and will continue to provide technical support to all mining operations within the Company. Only the seaborne-oriented operations of AMMC and ArcelorMittal Liberia Ltd are reported within the Mining segment. The results of all other mines are henceforth accounted for within the steel segment that they primarily supply.
NAFTA produces flat, long and tubular products. Flat products include slabs, hot-rolledhot rolled coil, cold-rolledcold rolled coil, coated steel products and plate and are sold primarily to customers in the following sectors: automotive, energy, construction packaging and appliances and via distributors and processors. Flat product facilities are located at seventwo integrated and mini-mill sites located in threetwo countries. Long products include wire rod, sections, rebar, billets, blooms and wire drawing. Long production facilities are located at threetwo integrated and mini-mill sites located in threetwo countries. In 2018,2021, shipments from NAFTA totaled 22.09.6 million tonnes. The raw material supply of the NAFTA operations includes sourcing from iron ore captive mines in Mexico to supply the steel facilities.
Brazil produces flat, long and tubular products. Flat products include slabs, hot-rolledhot rolled coil, cold-rolledcold rolled coil and coated steel.
Long products comprise sections, wire rod, bar and rebars, billets blooms and wire drawing. In 2018,2021, shipments from Brazil totaled 11.511.7 million tonnes. The raw material supply of the Brazil operations includes sourcing from iron ore captive mines in Brazil.
Europe produces flat, long and tubular products. Flat products include hot-rolledhot rolled coil, cold-rolledcold rolled coil, coated products, tinplate, plate and slab. These products are sold primarily to customers in the automotive, general industry and packaging sectors. Flat product facilities are located at 1411 integrated and mini-mill sites located in sixfive countries. Long products include sections, wire rod, rebar, billets, blooms and wire drawing. Long product facilities are located at 1410 integrated and mini-mill sites in eightseven countries. In addition, Europe includes downstream solutions, which provides primarily distribution of long and flat products as well as value-added and customized steel solutions through further processing to meet specific customer requirements. In 2018,2021, shipments from Europe totaled 41.033.2 million tonnes. The raw material supply of Europe operations includes sourcing from iron ore captive mines in Bosnia & Herzegovina.
ACIS produces a combination of flat, long and tubular products. It has five flat and long production facilities in three countries. In 2018,2021, shipments from ACIS totaled 11.710.4 million tonnes, with shipments having been made worldwide.on a worldwide basis. The raw material supply of the ACIS operations includes sourcing from iron ore captive mines in Kazakhstan and Ukraine and coal captive mines in Kazakhstan.
Mining provides the Company’sCompany's steel operations with high quality and low-cost iron ore and coal reserves and also sells limited amounts of mineral products to third parties. The Company’sMining segment iron ore mines are located in North America and South America, Europe, Africa and CIS.Africa. In 2018,2021, iron ore and coal production from own minesin the Mining segment totaled approximately 58.526.2 million tonnestonnes.
Properties and 5.9 million tonnes, respectively.capital expenditures
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 itsArcelorMittal's operating subsidiaries are substantially owned by ArcelorMittal through intermediate holding companies, and are grouped into the five reportable segments described above in “Item 4.C—Information on the Company—Organizational structure”.above. Unless otherwise stated, ArcelorMittal owns all of the assets described in this section. Regarding ArcelorMittal's iron ore and coal mines, see also " Properties and capital expenditures—Reserves and resources (iron ore and coal)" below, where information is provided in accordance with Regulation S-K 1300.
For further information on environmental issues that may affect ArcelorMittal’s utilization of its assets, see “Item 4.B—Information on the Company—Business“Business overview—Government regulations—Environmental laws and regulations”, "Business overview—Sustainable development" and note 8.39.1 to ArcelorMittal’s consolidated financial statements.
Steel production facilities of ArcelorMittal
The following table provides an overview by type of steel facility of the principal production units of ArcelorMittal’s operations. While all of the Group’s facilities are shown in the tables, only the facilities of significant subsidiaries are described textually for each segment. The facilities included in the tables are listed from upstream to downstream in the steel-making process.
| | | | | | | | | | | | | | | | | | | | |
Facility 3 | | Number of Facilities 3 | | Capacity (in million tonnes per year)1, 3 | | Production in 2021 (in million tonnes)2, 3 |
| Coke Oven Battery | | 49 | | 25.8 | | 19.3 |
| Sinter Plant | | 22 | | 76.9 | | 53.8 |
| Blast Furnace | | 35 | | 64.6 | | 49.5 |
| Basic Oxygen Furnace (including Tandem Furnace) | | 44 | | 66.9 | | 52.5 |
| DRI Plant | | 12 | | 8.6 | | 6.3 |
| Electric Arc Furnace | | 30 | | 24.9 | | 16.5 |
| Continuous Caster—Slabs | | 28 | | 59.6 | | 43.7 |
| Hot Rolling Mill | | 14 | | 53.8 | | 37.5 |
| Pickling Line | | 21 | | 24.0 | | 12.7 |
| Tandem Mill | | 25 | | 27.7 | | 19.1 |
| Annealing Line (continuous / batch) | | 30 | | 12.9 | | 6.7 |
| Skin Pass Mill | | 19 | | 11.8 | | 5.3 |
| Plate Mill | | 5 | | 1.7 | | 0.9 |
| Continuous Caster—Bloom / Billet | | 32 | | 31.5 | | 22.3 |
| Breakdown Mill (Blooming / Slabbing Mill) | | 1 | | 6.0 | | 1.8 |
| Billet Rolling Mill | | 3 | | 2.6 | | 0.9 |
| Section Mill | | 22 | | 12.2 | | 6.6 |
| Bar Mill | | 19 | | 7.8 | | 6.3 |
| Wire Rod Mill | | 16 | | 10.5 | | 7.4 |
| Hot Dip Galvanizing Line | | 39 | | 15.6 | | 13.0 |
| Electro Galvanizing Line | | 10 | | 1.8 | | 0.8 |
| Tinplate Mill | | 12 | | 2.4 | | 1.4 |
| Color Coating Line | | 17 | | 2.8 | | 1.9 |
| Seamless Pipes | | 4 | | 0.5 | | 0.1 |
| Welded Pipes | | 100 | | 4.1 | | 0.9 |
| | | | | | |
1.Reflects design capacity and does not take into account other constraints in the production process (such as, upstream and downstream bottlenecks and product mix changes). As a result, in some cases, design capacity may be different from the current achievable capacity.
2.Production facility details include the production numbers for each step in the steel-making process. Output from one step in the process is used as input in the next step in the process. Therefore, the sum of the production numbers does not equal the quantity of sellable finished steel products.
3.On April 14, 2021, ArcelorMittal derecognized assets and liabilities of ArcelorMittal Italia (subsequently renamed Acciaierie d'Italia) and accounted for its interest in the joint venture under the equity method - see note 2.3.1 to the consolidated financial statements and “Introduction—Key transactions and events in 2021". The derecognition of assets included one integrated plant, two downstream and three tubular facilities. The number of lines and their respective capacities, as well as their production up to April 14, 2021 are not included in the table above.
|
| | | | | | |
| Facility | | Number of Facilities | | Capacity (in million tonnes per year)1 | | Production in 2018 (in million tonnes)2 |
| Coke Oven Battery | | 75 | | 35.1 | | 25.5 |
| Sinter Plant | | 32 | | 102.8 | | 66.8 |
| Blast Furnace | | 58 | | 102.3 | | 70.6 |
| Basic Oxygen Furnace (including Tandem Furnace) | | 75 | | 106.3 | | 75.5 |
| DRI Plant | | 13 | | 9.4 | | 7.4 |
| Electric Arc Furnace | | 32 | | 27.4 | | 18.8 |
| Continuous Caster—Slabs | | 50 | | 96.0 | | 65.5 |
| Hot Rolling Mill | | 23 | | 82.7 | | 54.6 |
| Pickling Line | | 35 | | 37.3 | | 17.9 |
| Tandem Mill | | 39 | | 45.7 | | 27.7 |
| Annealing Line (continuous / batch) | | 50 | | 22.6 | | 10.8 |
| Skin Pass Mill | | 35 | | 20.9 | | 8.8 |
| Plate Mill | | 12 | | 8.1 | | 3.0 |
| Continuous Caster—Bloom / Billet | | 34 | | 32.1 | | 23.2 |
| Breakdown Mill (Blooming / Slabbing Mill) | | 3 | | 10.7 | | 3.8 |
| Billet Rolling Mill | | 3 | | 2.6 | | 1.8 |
| Section Mill | | 25 | | 13.6 | | 8.3 |
| Bar Mill | | 21 | | 8.7 | | 6.2 |
| Wire Rod Mill | | 18 | | 11.8 | | 8.1 |
| Hot Dip Galvanizing Line | | 63 | | 23.8 | | 17.4 |
| Electro Galvanizing Line | | 13 | | 2.4 | | 1.0 |
| Tinplate Mill | | 17 | | 3.6 | | 2.0 |
| Tin Free Steel (TFS) | | 2 | | 0.4 | | 0.1 |
| Color Coating Line | | 19 | | 2.8 | | 2.0 |
| Seamless Pipes | | 7 | | 0.9 | | 0.4 |
| Welded Pipes | | 79 | | 4.9 | | 1.1 |
| | | | | |
189 | Reflects design capacity and does not take into account other constraints in the production process (such as, upstream and downstream bottlenecks and product mix changes). As a result, in some cases, design capacity may be different from the current achievable capacity.Management report |
| | | | | | | | | | | |
| Crude steel production by process and segment in 2021 (in million tonnes) |
| | | |
| Segment | Basic oxygen furnace | Electric arc furnace | Total |
| NAFTA | 3.1 | 5.4 | 8.5 |
| Brazil | 8.2 | 4.2 | 12.4 |
Europe1 | 30.4 | 6.4 | 36.8 |
| ACIS | 11.2 | 0.2 | 11.4 |
| Total | 52.9 | 16.2 | 69.1 |
| | | |
| | | |
1.Including ArcelorMittal Italia for the period from January 1, 2021 till April 14, 2021.
| | | | | | | | |
| Blast furnace and electric arc furnace facilities | | |
| Segment | Blast furnaces | Electric arc furnaces |
| NAFTA | 3 | 8 |
| Brazil | 6 | 8 |
Europe 1 | 16 | 13 |
| ACIS | 10 | 1 |
| Total | 35 | 30 |
1.Excluding the assets of ArcelorMittal Italia (subsequently renamed Acciaierie d'Italia), in particular four blast furnaces in Taranto.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2NAFTA | Production facility details include the production numbers for each step in the steel-making process. Output from one step in the process is used as input in the next step in the process. Therefore, the sum of the production numbers does not equal the quantity of sellable finished steel products. |
| | | | Crude Steel | | |
| | | | | | | | |
NAFTAUnit | | Country | | Locations | | Crude Steel | | |
| | | | | | | | |
Unit | | Country | | Locations | | Production in 20182021 (in million tonnes per year)1 | Type of plant | Products |
ArcelorMittal USA | | USA | | Warren, OH | | n/a | Coke-Making | Coke |
ArcelorMittal USA | | USA | | Monessen, PA | | n/a | Coke-Making | Coke |
ArcelorMittal USA 23
| | USA | | East Chicago, IN | | 4.7 | Integrated | Flat |
ArcelorMittal USA | | USA | | Burns Harbor, IN | | 4.4 | Integrated | Flat |
ArcelorMittal USA | | USA | | Cleveland, OH | | 3.1 | Integrated | Flat |
ArcelorMittal USA | | USA | | Riverdale, IL | | 0.7 | Integrated | Flat |
ArcelorMittal USA | | USA | | Coatesville, PA | | 0.4 | Mini-mill | Flat |
ArcelorMittal USA | | USA | | Columbus, OH | | n/a | Downstream | Flat |
I/N Tek | | USA | | New Carlisle, IN | | n/a | Downstream | Flat |
ArcelorMittal USA 4
| | USA | | Conshohocken, PA | | n/a | Downstream | Flat |
ArcelorMittal USA | | USA | | Weirton, WV | | n/a | Downstream | Flat |
ArcelorMittal USA | | USA | | Gary, IN | | n/a | Downstream | Flat |
Double G | | USA | | Jackson, MS | | n/a | Downstream | Flat |
| | | | | | | | |
ArcelorMittal Dofasco5 2 | | Canada | | Hamilton | | 3.52.8 | Integrated, Mini-mill | Flat |
ArcelorMittal Mexico3, 4 | | Mexico | | Lázaro Cárdenas, Celaya | | 3.43.7 | Mini-mill, Integrated, and Downstream | Flat, Long/ Bar, Wire Rod |
| ArcelorMittal Long Products Canada | | Canada | | Contrecoeur East, West | | 2.12.0 | Mini-mill | Long/ Wire Rod, Bars, Slabs |
ArcelorMittal USA
| | USA | | Steelton, PA | | 0.2 | Mini-mill | Long/ Rail |
ArcelorMittal Tubular Products | | Canada | | Brampton | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | Canada | | London | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | Canada | | Woodstock | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | Canada | | Hamilton | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | USA | | Shelby | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | USA | | Marion | | n/a | Downstream | Pipes and Tubes |
ArcelorMittal Tubular Products | | Mexico | | Monterrey | | n/a | Downstream | Pipes and Tubes |
| |
1ArcelorMittal Tubular Products | | Note: Canada | | Brampton | | n/a = not applicable (no crude steel production). | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | Canada | | London | | n/a | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | Canada | | Woodstock | | n/a | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | Canada | | Hamilton | | n/a | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | USA | | Shelby | | n/a | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | USA | | Marion | | n/a | Downstream | Pipes and Tubes |
| ArcelorMittal Tubular Products | | Mexico | | Monterrey | | n/a | Downstream | Pipes and Tubes |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2Captive mining operations | Indiana Harbor.
|
| | | | | | | | |
3Unit | | Country | | Locations | | ArcelorMittal USA idled its #2 basic oxygen furnace and its #2 slab caster at Indiana Harbor (East Chicago) in June 2017.Interest (%) | | Type of Mine | | Product |
| | | | | | | | | | |
4 | ArcelorMittal USA idled its plate rolling unit at the Conshohocken, PA facility in August 2018. |
| | | | | | | | |
5ArcelorMittal Mexico (excluding Peña Colorada) | | Mexico | | Sonora, Sinaloa and Michoacán | | 100.0 | | Iron Ore Mine (open pit) | | Concentrate, lump and fines |
ArcelorMittal Dofasco idled the HDG lines #1 in 2017.Mexico Peña Colorada | | Mexico | | Minatitlán | | 50.0 | | Iron Ore Mine (open pit) | | Concentrate and pellets |
| | | | | | | | | | |
1.n/a = not applicable (no crude steel production).
2.ArcelorMittal Dofasco idled its BF #3 in April 2020 and permanently idled it in 2021. ArcelorMittal Dofasco also temporarily stopped its temper mill #2 in 2019 and permanently idled it in 2021.
3.ArcelorMittal Mexico successfully performed hot commissioning of its new hot strip mill in December 2021 with ramp-up to full capacity expected during 2022.
4.ArcelorMittal Mexico permanently idled its coke plant in 2021.
ArcelorMittal Dofasco
ArcelorMittal Dofasco (“Dofasco”) is a leading North American steel solution provider and Canada’s largest manufacturer of flat rolled steels. Dofasco’s steel-making plant in Hamilton, Ontario is adjacent to water, rail and highway transportation. The plant uses both integrated and EAF-based steelmaking processes. Its products include hot-rolled, cold-rolled,hot rolled, cold rolled, galvanized and tinplate. Dofasco supplies these products to the automotive, construction, packaging, manufacturing, pipe and tube and steel distribution markets.
On July 30, 2021, ArcelorMittal USA
announced with the Canadian Government its intention for a CAD$1.8 billion investment in decarbonization technologies at ArcelorMittal USA mainly produces flat productsDofasco’s plant in Hamilton. The intended investments will reduce annual CO2 emissions at their steelmaking facilities located at Indiana Harbor, Burns Harbor, Cleveland, Riverdale and Coatesville.
Indiana HarborArcelorMittal’s Hamilton, Ontario operations by approximately 3 million tonnes, which represents approximately 60% of emissions. At the heart of the plan is a fully integrated steelmaker, strategically located2.5 million tonnes capacity DRI facility and an EAF facility capable of producing 2.4 million tonnes of high-quality steel through its existing secondary metallurgy and secondary casting facilities. Modification of the existing EAF facility and continuous casters will also be undertaken to align productivity, quality and energy capabilities between all assets in the new footprint. The investment was contingent on support from the southern shoregovernments of Lake MichiganCanada and Ontario. The Canadian Government announced on July 30, 2021 that it would invest CAD$400 million in East Chicago, Indianathe project and benefitson February 15, 2022, the Government of Ontario announced that it would invest CAD$500 million in the project. This secures project funding and firms up the investment. The project is scheduled to be complete by 2028, although the Company is looking for opportunities to accelerate the project timelines. Besides a considerable reduction of CO2 emissions, the new manufacturing processes contribute deliver other positive environmental impacts including the elimination of emissions and flaring from Great Lakes shippingcoke making and ironmaking operations. See also “Introduction—Key transactions and events in 2021".
Two key investment projects are under implementation in Dofasco: the hot strip mill modernization project (to install two new state of the art coilers and runout tables to replace three end of life coilers, as well as highway and railroad transportation access. The Indiana Harbor facilities produce hot-rolled sheet, cold-rolled sheet and hot dip galvanized sheet for use in automotive, appliance, service center, tubular,to upgrade the strip converters and contractor applications.
Burns Harbor is strategically located on Lake Michigan in northwestern Indiana approximately 50 miles southeast of Chicago, Illinois. The area allows for 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.
The Cleveland facility is located on the Cuyahoga River in Cleveland, Ohio with access to the Port of Cleveland and Great Lakes shipping, as well as highway and railroad transportation routes. The Cleveland plant serves the automotive, service centers, converters and tubular applications markets.
The Riverdale facility is located near the Indiana border in Riverdale, Illinois, with access to Lake Michigan, and highway and railroad networks. It 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.
The Coatesville facility is located in Pennsylvania and produces plate products for use in rail transportation, pipes & tubes and distribution segments.
ArcelorMittal USA has standalone finishing facilities in Weirton, West Virginia making tin products and in Columbus, Ohio making coated products. It has coke plants at Burns Harbor and Warren that supply coke to its production facilities. ArcelorMittal USA’s idled its plate rolling unit at the Conshohocken, Pennsylvania, PA facility in August 2018.
ArcelorMittal USA, through various subsidiaries, owns interests in joint operations, including (i) ArcelorMittal Tek Inc. (60% interest), a cold-rolling mill near New Carlisle, Indiana; (ii) Double G Coatings (50% interest), a coating line producing galvanized and Galvalume steel near Jackson, Mississippi, and (iii) Hibbing Taconite Company,cooling system) which is described under “—Mining” below.estimated to be completed in the first half of 2022 and the #5 CGL conversion to AluSi® project (addition of up to 160 thousand tonnes per year Aluminum Silicon (AluSi®) coating capability to #5 Hot-Dip Galvanizing Line for the production of Usibor® steels) which is estimated to be completed in 2022 with the first coil planned for the second half of 2022.
ArcelorMittal Mexico
ArcelorMittal Mexico produces both flat and long steel products and operates an integrated route and EAF route using DRI. It
produces higher quality slabs for use in specialized steel applications in the automotive, line pipe manufacturing, shipbuilding and appliance industries. It is also one of the largest single rebar and wire rod production facilities in Mexico and mainly uses the integrated route for steelmaking. The facility is located in Lazaro Cardenas in the Michoacán state by the Pacific coast and is highly accessible by ocean, rail, and other means. It also operates a rebar mill at Celaya with billets sourced from the Lazaro facility.
The new hot strip mill project which had commenced in the fourth quarter of 2017 produced its first coils in December 2021 with ramp-up to full capacity expected during 2022.
ArcelorMittal Mexico Mining Assets
ArcelorMittal Mexico operates three iron ore mines in Mexico, the San José and Las Truchas mines, and, through a joint operation with Ternium S.A., the Peña Colorada mine. In 2019, the El Volcan mine was closed and ArcelorMittal continues to operate certain parts of the El Volcan facilities with material coming from the San José mine. For further details on Mexico mines production and other information, see "Properties and capital expenditures—Reserves and Resources (iron ore and coal)".
Peña Colorada
Consorcio Minero Benito Juarez Peña Colorada, S.A. de C.V. (Peña Colorada), operates an open pit mine in the province of Minatitlán in the northwestern part of the State of Colima, Mexico. ArcelorMittal owns 50% of Peña Colorada and Ternium S.A. owns the other 50% of the company.
Peña Colorada operates an open pit mine as well as a concentrating facility and a two-line pelletizing facility. The beneficiation plant is located at the mine, whereas the pelletizing plant is located in Manzanillo. The magnetite concentrate produced at the mine is shipped from Manzanillo to ArcelorMittal Mexico, as well as to Ternium’s steel plants, by ship and by rail.
El Volcan & San José
ArcelorMittal operates the San José and El Volcan mines in the state of Sonora, Mexico. The El Volcan mine stopped production in April 2019 due to depletion of reserves, and mining is continued from San José mine located approximately 40 kilometers from Culiacán City, in the south of the Sinaloa State.
The El Volcan facilities that are continuing to be used with materials from the San José mine include the concentration plant and port installations. Concentrate produced is transported by rail to the Pacific port of Guaymas and then shipped to the steel plant in Lázaro Cárdenas.
Las Truchas
ArcelorMittal operates the Las Truchas mine located approximately 27 kilometers southeast of the town of Lázaro
Cárdenas in the State of Michoacán, Mexico. The concentrated ore is pumped from the mine site through a slurry pipeline to the steel plant facility in Lázaro Cárdenas.
In 2021, ArcelorMittal launched a project to increase pellet feed production at Las Truchas mine to 2.3 million tonnes per annum with DRI concentrate grade capability. Production is expected to start in the second half of 2023.
ArcelorMittal Long Products Canada
ArcelorMittal Long Products Canada is the largest mini-mill in Canada and has the flexibility to use either DRI or scrap,
depending on their respective economics. It produces wire rods, wire products and bars, primarily sold in Canada and the
United States and principally serves the automotive, appliance, transportation, machinery and construction industries. It also produces slabs that are used within ArcelorMittal.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BRAZIL | | | | | | Crude Steel | | | | |
| | | | | | | | | | |
BRAZILUnit | | Country | | Locations | | Crude Steel | | | | |
| | | | | | | | | | |
Unit | | Country | | Locations | | Production in 20182021 (in million tonnes per year)1 | | Type of plant | | Products |
| Sol | | Brazil | | Vitoria | | n/a | | Coke-Making | | Coke |
ArcelorMittal Tubarão2 | | Brazil | | Vitoria | | 7.0 | | Integrated | | Flat |
| ArcelorMittal Vega | | Brazil | | São Francisco do Sul | | n/a | | Downstream | | Flat |
| ArcelorMittal Brasil | | Brazil | | João Monlevade | | 1.11.2 | | Integrated | | Long/ Wire Rod |
AcindarArcelorMittal Brasil | | ArgentinaBrazil | | Villa ConstitucionJuiz de Fora, Piracicaba | | 1.42.0 | | Mini-mill | | Long/ Bar, Wire Rod Bar |
ArcelorMittal Brasil 23 | | Brazil | | Juiz de Fora, Piracicaba | | 2.0 | | Mini-mill | | Long/ Bar, Wire Rod |
ArcelorMittal Costa Rica | | Costa Rica | | Costa Rica | | n/a | | Downstream | | Long/ Wire Rod |
Industrias Unicon | | Venezuela | | Barquisimeto, Matanzas, La Victoria | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Sul Fluminense 3
| | Brazil | | Barra Mansa,
Resende | | 0.70.9 | | Mini-mill | | Long/Rebar, Wire rod, Bars, Sections, Wires |
Acindar 4 | | Argentina | | Villa Constitucion | | 1.3 | | Mini-mill | | Long/ Wire Rod, Bar |
| ArcelorMittal Costa Rica | | Costa Rica | | Costa Rica | | n/a | | Downstream | | Long/ Wire Rod |
| Industrias Unicon | | Venezuela | | Barquisimeto, Matanzas, La Victoria | | n/a | | Downstream | | Pipes and Tubes |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1Captive mining operations | Note: n/a = not applicable (no crude steel production)
|
| | | | | | | | |
2Unit | The Cariacica site was divested in May 2018 |
| Country | | Locations | | ArcelorMittal Interest (%) | | Type of Mine | | Product |
3ArcelorMittal Brasil Andrade Mine | | Brazil | | State of Minas Gerais | | 100.0 | | Iron Ore Mine (open pit) | | Fines |
ArcelorMittal acquired Votorantim Siderurgia (subsequently renamed ArcelorMittal Sul Fluminense) in April 2018.Mineração Serra Azul | | Brazil | | State of Minas Gerais | | 100.0 | | Iron Ore Mine (open pit) | | Lump and fines |
1.n/a = not applicable (no crude steel production).
2.ArcelorMittal Tubarão completed the reline of its BF #2 in December 2019. The blast furnace remained idled due to market conditions until its restart in July 2020.
3.ArcelorMittal Brasil temporarily idled its electric arc furnaces #1 & #2, billet caster and long rolling mill #2 at Barra Mansa in February 2019 in response to market conditions. Following Brazilian market recovery, it was decided to restart one of the two EAFs and the billet caster at Barra Mansa in the fourth quarter of 2021.
4.Acindar definitively discontinued operation of both hot dip galvanizing lines in the fourth quarter of 2021.
ArcelorMittal Brasil
ArcelorMittal Brasil produces both flat and long steel products. Flat products are manufactured at ArcelorMittal Tubarão and ArcelorMittal Vega. Its products include slabs, hot-rolledhot rolled coil, cold-rolledcold rolled coil and galvanized steel, and serve customers in automotive, appliances, construction and distribution segments. The Tubarão complex uses the integrated steelmaking route to produce slabs and furtherrolling hot rolled to hot-rolled coils and is strategically located with access to the Praia Mole Marine Terminal as well as road and railway systems. The Vega facility has cold-rolling cold rolling
and coating facilities and easy access to the port of São Francisco do Sul.
ArcelorMittal Brasil’s long products include wire rod and wire, sections, merchant bars, special bars and rebars, for use in civil
construction, industrial manufacturing, agricultural and distribution sectors. It produces transformed products including, among others, welded mesh, trusses, annealed wire and nails. It alsoowns upstream and downstream steel facilities in Monlevade, Juiz de Fora, Piracicaba, Barra Mansa and Resende and operates an extensive distribution network across the country selling to retail customers. It also owns interests in two subsidiaries, Belgo Bekaert Arames Ltda. (BBA)("BBA"), which manufactures wire products for agricultural and industrial end-users, and Belgo-Mineira Bekaert Artefatos de Arame Ltda., which produces steel cords used in the tire industry. On April 1, 2018 ArcelorMittal Brasil completed the acquisition of Votorantim Siderurgia, Votorantim's long steel business in Brazil comprisingIt also owns forests, and the upstream and downstream steel facilities of Barra Mansa and Resende which produce wire rod, bars, sections, wires, welded mesh and trusses. The transaction was approved by the Brazilian antitrust authority CADE subject to the disposal of ArcelorMittal Brasil's production sites of Cariacica and Itaúna, which was completed in May 2018 (see "Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018" for a description of the transaction). ArcelorMittal Bioflorestas produces charcoal from eucalyptus forestry operations that is used to fuel its furnaces in Juiz de Fora and to exchange for pig iron with local producers.
The Monlevade upstream expansion project consisting of sinter plant, blast furnace and meltshop and aiming at increase in liquid steel capacity by 1 million tonnes per annum has recommenced in late 2021. The project is expected to be completed in the second half of 2024.
Acindar
Acindar is the largest long steel producer in Argentina. It producesmanufactures and distributes products to meet the needs of the construction, industrial, agricultural and constructionagricultural sectors. It produces rebars, square, round, drawn and flat bars, meshes, nails, preassembled and welded cages, square and round bars, flat bars,structural sections, piles, wire
rod drawn bars and barbed wire. It has an in-house distribution network that can also service end-users.serves end-users across Argentina.
ArcelorMittal Brasil - Andrade Mine ArcelorMittal Brasil operates Andrade mine located approximately 80 kilometers east of Belo Horizonte in the Minas Gerais State of Brazil. In addition to the open pit mine, ArcelorMittal operates a crushing and screening facility. Fine material produced at the mine is transported to Monlevade plant through a private railway line.
ArcelorMittal Brasil - Serra Azul Mine
ArcelorMittal Brasil operates Serra Azul mine located approximately 50 kilometers southwest of the town of Belo Horizonte in the Minas Gerais State of Brazil. ArcelorMittal operates an open pit mine and a concentrating facility at the site. Iron ore product is shipped mainly to the ArcelorMittal Brasil integrated plants and to the local Brazilian market.
In 2021, ArcelorMittal launched an investment at Serra Azul mine to construct facilities to produce 4.5 million tonnes per annum of DRI quality pellet feed by exploiting compact itabirite iron ore. Production is expected to start in the second half of 2023.
For further details on Brazil mines production and other information, see "Properties and capital expenditures—Reserves and Resources (iron ore and coal)".
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EUROPE | | | | | | Crude Steel | | | | |
| | | | | | | | | | |
EUROPEUnit | | Country | | Locations | | Crude Steel | | | | |
| | | | | | | | | | |
Unit | | Country | | Locations | | Production in 20182021 (in million tonnes per year) 1 | | Type of plant | | Products |
| ArcelorMittal Bremen | | Germany | | Bremen, Bottrop | | 3.43.3 | | Integrated | | Flat, Coke |
| ArcelorMittal Eisenhüttenstadt | | Germany | | Eisenhüttenstadt | | 2.11.9 | | Integrated | | Flat |
| ArcelorMittal Belgium | | Belgium | | Ghent, Geel, Genk, Liège | | 4.5 | | Integrated and Downstream | | Flat |
ArcelorMittal BelgiumFrance 24 | | BelgiumFrance | | Gent, Geel, Genk, Huy, Liège | | 5.4 | | Integrated and Downstream | | Flat |
ArcelorMittal Atlantique et Lorraine | | France | | Dunkirk,
Mardyck,
Montataire,
Desvres,
Florange, Mouzon,
Basse- Indre | | 6.85.9 | | Integrated and Downstream | | Flat |
| ArcelorMittal Méditerranée | | France | | Fos-sur-Mer,
Saint-Chély | | 3.73.4 | | Integrated and Downstream | | Flat |
ArcelorMittal Galati 4
| | Romania | | Galati | | 2.1 | | Integrated | | Flat |
| ArcelorMittal España | | Spain | | Avilés, Gijón, Extebarri,Etxebarri, Lesaka, Sagunto | | 4.84.4 | | Integrated and Downstream | | Flat, Long, Rails, Wire Rod |
ArcelorMittal Italy | | Italy | | Taranto, Genova, Novi Ligure | | 0.7 | | Integrated and Downstream | | Flat, Pipes and Tubes |
ArcelorMittal Poland | | Poland | | Krakow, Swietochlowice, Dabrowa Gornicza,
Chorzow,
Sosnowiec,
Zdzieszowice | | 5.3 | | Integrated and Downstream | | Flat, Long, Coke/ Sections, Wire Rod, Sheet Piles, Rails |
ArcelorMittal Sestao | | Spain | | Bilbao | | 0.3 | | Mini-mill | | Flat |
ArcelorMittal Piombino 4
| | Italy | | Avellino,
Piombino | | n/a | | Downstream | | Flat |
ArcelorMittal Dudelange 4
| | Luxembourg | | Dudelange | | n/a | | Downstream | | Flat |
ArcelorMittal Skopje 4
| | North Macedonia | | Skopje | | n/a | | Downstream | | Flat |
ArcelorMittal Tallinn | | Estonia | | Tallinn | | n/a | | Downstream | | Flat |
Industeel | | France, Belgium | | Charleroi, Le Creusot, Chateauneuf,
Saint-Chamond,
Seraing, Dunkirk | | 0.5 | | Mini-mill and Downstream | | Flat |
ArcelorMittal Ostrava 4
| | Czech Republic | | Ostrava | | 2.1 | | Integrated | | Flat, Long |
ArcelorMittal Belval & Differdange | | Luxembourg | | Esch-Belval, Differdange, Rodange | | 2.2 | | Mini-mill | | Long /Sheet Piles, Rails, Sections & Special Sections |
|
| | | | | | | | | | |
EUROPE (continued)ArcelorMittal Avellino & Canossa 2 | | Italy | | Avellino | | Crude Steeln/a | | Downstream | | Flat |
ArcelorMittal Poland 3 | | Poland | | Kraków, Swietochlowice, Dabrowa Gornicza,
Chorzow,
Sosnowiec,
Zdzieszowice | | 4.0 | | Integrated and Downstream | | Flat, Long, Coke/ Sections, Wire Rod, Sheet Piles, Rails |
UnitArcelorMittal Sestao | | CountrySpain | | LocationsBilbao | | 0.6 | | Mini-mill | | Flat |
| Industeel | | France, Belgium | | Charleroi, Le Creusot, Chateauneuf,
Saint-Chamond,
Seraing, Dunkirk | | 0.4 | | Mini-mill and Downstream | | Flat |
| ArcelorMittal Belval & Differdange | | Luxembourg | | Esch-Belval, Differdange, Rodange | | 2.1 | | Mini-mill | | Long/Sheet Piles, Rails, Sections & Special Sections |
| ArcelorMittal Olaberria-Bergara | | Spain | | Olaberría, Bergara | | 1.1 | | Mini-mill | | Long/ Sections |
| ArcelorMittal Gandrange | | France | | Gandrange | | n/a | | Downstream | | Long/ Wire Rod, Bars |
| ArcelorMittal Warszawa | | Poland | | Warsaw | | 0.6 | | Mini-mill | | Long/ Bars |
| ArcelorMittal Hamburg | | Germany | | Hamburg | | 0.9 | | Mini-mill | | Long/ Wire Rods |
| ArcelorMittal Duisburg | | Germany | | Ruhrort, Hochfeld | | 1.0 | | Integrated | | Long/ Billets, Wire Rod |
| ArcelorMittal Hunedoara | | Romania | | Hunedoara | | 0.2 | | Mini-mill | | Long/ Sections |
| Sonasid | | Morocco | | Nador, Jorf Lasfar | | 0.6 | | Mini-mill | | Long/ Wire Rod, Bars, Rebars in Coil |
| ArcelorMittal Zenica | | Bosnia and Herzegovina | | Zenica | | 0.8 | | Mini-mill / Integrated | | Long/ Wire Rod, Bars |
ArcelorMittal Tubular Products Roman SA 5 | | Romania | | Roman | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Iasi SA | | Romania | | Iasi | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Tubular Products Karvina a.s. 6 | | Czech Republic | | Karvina | | n/a | | Downstream | | Pipes and Tubes |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EUROPE (continued) | | | | | | Crude Steel | | | | |
| | | | | | | | | | |
| Unit | | Country | | Locations | | Production in 20182021 (in million tonnes per year) 1 | | Type of plant | | Products |
ArcelorMittal Olaberria-Bergara | | Spain | | Olaberría, Bergara | | 1.0 | | Mini-mill | | Long/ Sections |
ArcelorMittal Gandrange | | France | | Gandrange | | n/a | | Downstream | | Long/ Wire Rod, Bars |
ArcelorMittal Warszawa | | Poland | | Warszawa | | 0.6 | | Mini-mill | | Long/ Bars |
ArcelorMittal Hamburg | | Germany | | Hamburg | | 0.9 | | Mini-mill | | Long/ Wire Rods |
ArcelorMittal Duisburg | | Germany | | Ruhrort, Hochfeld | | 1.1 | | Integrated | | Long/ Billets, Wire Rod |
ArcelorMittal Hunedoara | | Romania | | Hunedoara | | 0.3 | | Mini-mill | | Long/ Sections |
Sonasid | | Morocco | | Nador, Jorf Lasfar | | 0.6 | | Mini-mill | | Long/ Wire Rod, Bars, Rebars in Coil |
ArcelorMittal Zenica | | Bosnia and Herzegovina | | Zenica | | 0.7 | | Mini-mill / Integrated | | Long/ Wire Rod, Bars |
ArcelorMittal Tubular Products Galati SRL 4
| | Romania | | Galati | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Tubular Products Roman SA | | Romania | | Roman | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Tubular Products Iasi SA | | Romania | | Iasi | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Tubular Products Ostrava a.s. 4
| | Czech Republic | | Ostrava | | n/a | | Downstream | | Pipes and Tubes |
ArcelorMittal Tubular Products Karvina a.s. | | Czech Republic | | Karvina | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Kraków | | Poland | | KrakowKraków | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Hautmont | | France | | Hautmont | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Vitry | | France | | Vitry | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Chevillon | | France | | Chevillon | | n/a | | Downstream | | Pipes and Tubes |
| ArcelorMittal Tubular Products Lexy | | France | | Lexy, Rettel,Vincey, Fresnoy-le-Grand | | n/a | | Downstream | | Pipes and Tubes |
Condesa Fabril 7 | | Spain | | Legutiano | | n/a | | Downstream | | Pipes and Tubes |
Zalain Transformados 7 | | Spain | | Zalain-Lesaka | | n/a | | Downstream | | Pipes and Tubes |
Perfiles de Precision 7 | | Spain | | Berrioplano | | n/a | | Downstream | | Pipes and Tubes |
SRW Schwarzwälder Röhrenwerk 7 | | Germany | | Altensteig-Walddorf | | n/a | | Downstream | | Pipes and Tubes |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1Captive mining operations | n/a = Not applicable (no crude steel production)
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2Unit | Entities (certain downstream facilities in Liège in the case of ArcelorMittal Belgium) classified as held for sale as of December 31, 2018. See also note 2.3.2 to the consolidated financial statements. |
| Country | | Locations | | ArcelorMittal Interest (%) | | Type of Mine | | Product |
3ArcelorMittal Prijedor | ArcelorMittal acquired Ilva (subsequently renamed ArcelorMittal Italia) on November 1, 2018. As a result, production figures relate only to November | Bosnia and December 2018.Herzegovina | | Prijedor | | 51.0 | | Iron Ore Mine (open pit) | | Concentrate and lump |
| |
4 | Assets held for sale as of December 31, 2018 |
1.n/a = Not applicable (no crude steel production).
2.On April 14, 2021, ArcelorMittal derecognized assets and liabilities of ArcelorMittal Italia (subsequently renamed Acciaierie d'Italia) and accounted for its interest in the joint venture under the equity method - see note 2.3.1 to the consolidated financial statements and “Introduction—Key transactions and events in 2021". The derecognition of assets included one integrated plant, two downstream and three tubular facilities. Their production is not included in the table above.
3.The blast furnace, basic oxygen furnaces and slab caster at Kraków were temporarily idled in the fourth quarter of 2019 due to market conditions. On October 8, 2020, ArcelorMittal Poland announced its intention to permanently close its primary steelmaking operations at its unit in Kraków (except the coke battery which remains in operation), and the shutdown process in the blast furnace and the steel shop was completed in November 2020.
4.The coke oven battery in Florange was permanently closed in the second quarter of 2020. The new HDG 2 line (Galsa2) in Florange ramped up production in early 2020.
5.ArcelorMittal Tubular Products Roman decommissioned its seamless pipe mill #2 in 2020.
6.ArcelorMIttal Tubular Products Karvina decommissioned its welded pipe mill #9 in 2020 and launched a new pipe mill #12 in the fourth quarter of 2021.
7.In November 2021, ArcelorMittal concluded the acquisition of Grupo Condesa which consists of 4 production plants in Spain and Germany including 29 cold profiling and welded pipe mills.
ArcelorMittal France
ArcelorMittal Atlantique & Lorraine
ArcelorMittal Atlantique & LorraineFrance has locations in Dunkirk, Mardyck, Montataire, Desvres, Florange, Mouzon and Basse-Indre. ArcelorMittal Atlantique & LorraineFrance produces and markets a large range of products, including slabs, hot-rolled,hot rolled, pickled, galvanized, color-coatedcolor coated and tin-plated coils. ArcelorMittal Atlantique & Lorraine’sFrance’s products are sold principally in the regional market in France and Western Europe, particularly in the automotive and packaging market.market, as well as the consumer goods industry. The Dunkirk site has primary facilities and produces slabs as well as hot rolled coils for other ArcelorMittal Atlantique & Lorraine sites as well as supplies hot rolled coils to the sites of Desvres, Mardyck and Liège.France sites. The Mardyck site has finishing facilities and supplies the hot dip coating lines of Desvres, Mardyck and Montataire.
The Florange site supplies through its hot strip mill and 2 cold rolling mills: the finishing cold facilities and2 hot dip lines of Florange (GALSA 1 & 2), the continuous annealing of Florange, the hot dip coating lines of Mouzon, and ArcelorMittal Dudelange, as well as the tinplate cold facilities for certain packaging facilities.of Florange and Basse-Indre. Mouzon is specialized in finishing hot dip coating operations.
The Florange site has primary (hot strip mill) and finishing facilities that are located mainly along the Fensch River in Lorraine. The liquid phase of Florange has been idled since October 2011. Florange is being supplied with slabs from2011 and the Dunkirk site.Company began the definitive closure and dismantling of this facility in 2018. The finishing plant of
Florange has idled one continuous annealing line sincein September 2013, a tinplate mill sincein January 2012 and an organic coating line whichin June 2011. The Florange coke oven battery was idled on a long-term basis since June 2011.
In 2012, ArcelorMittal and the French government reached an agreement following which the liquid phase was idled without any dismantling for six years. Following the expiration of the idling period at the end of 2018, the Company began its definitive closure and dismantling. Also in 2012, the Company also expressed its commitment to the French government that it would invest €180 millionpermanently closed in the Florange site over the next five years, maintain the packaging activity in Florange for at least five years, reorganize the activity of the Florange site only by voluntary social measures for workers and launch an R&D program to continue to develop the blast furnace top gas recycling technology. The social measures terminated at the end of 2015 after the retirement of the relevant employees. In 2018, the €180 million investment commitment was completed. Following the expiration of the agreement between ArcelorMittal and the French government, the Company will proceed with the definitive closure of the facility and recorded a provision of $113 million for the dismantling of the facility in the fourthsecond quarter of 2018.2020.
The site of Basse-Indre is specialized in packaging activities. Its pickling line and cold-rollingcold rolling mill are both idled since April 2014.
The sites of ArcelorMittal Atlantique & LorraineFrance produce and deliver a range of flat steel high-value finished products to customers, including cold-rolled,cold rolled, hot dip galvanized, electro-galvanized, aluminized and organic-coatedorganic coated material, tinplate, draw wall ironed tin plate (DWI)tinplate ("DWI") and tin free steel. Certain of its products are designed for the automotive market, such as Ultragal®, Extragal®, galfan, Usibor® (hot dip), while others are designed for the appliances market, such as Solfer® (cold-rolled)(cold rolled) for enameling applications.
On May 7, 2018,March 17, 2021, Air Liquide and ArcelorMittal signed a memorandum of understanding with the European Commission approved the acquisitionobjective of Ilva. As partimplementing solutions to produce low-carbon steel in Dunkirk. The companies will join forces to develop innovative solutions involving low-carbon hydrogen and CO2 capture technologies, using both Smart Carbon and Innovative DRI routes. The objective of the European Commission's approval,project is to reduce yearly CO2 emissions from ArcelorMittal’s steel-making facilities in Dunkirk by 2.85 Mt by 2030. The Company thereby confirmed its intention to implement an innovative production unit on its Dunkirk site, combining two steel production technologies – DRI: direct reduced iron unit, and submerged arc furnace.
On February 4, 2022, ArcelorMittal agreed to divest certainannounced plans for the acceleration of its European assets, includingdecarbonization plan with a €1.7 billion investment in its Fos-sur-Mer and Dunkirk sites in France (while maintaining equivalent production capacities), supported by the French Government. This investment will enable a transformation of steelmaking in France and a total reduction of close to 40% or 7.8 million tonnes per annum in ArcelorMittal’s CO2 emissions in France by 2030. Specifically, in Dunkirk, ArcelorMittal Dudelange (see "Item 4.A—Information on the Company—Historywill build a 2.5 million tonnes DRI unit to transform iron ore using hydrogen instead of coal. This DRI will be coupled with an innovative technology electric furnace and developmentcomplemented by an additional EAF. The new industrial facilities will be operational starting in 2027 and will gradually replace 2 out of the Company—3 of ArcelorMittal’s blast furnaces in Dunkirk by 2030, see also “Introduction—Key transactions and events in 2018") for a description of the transaction)2021". Accordingly, ArcelorMittal Dudelange is classified as held for sale at December 31, 2018. The completion of the disposal of these facilities is subject to the European Commission's approval and the conclusion of information consultations with local and European Works Councils.
ArcelorMittal Belgium
ArcelorMittal GentGhent
ArcelorMittal GentGhent is a fully integrated coastal steelworkssteel plant which is located along the Gent-TerneuzenGhent-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. ArcelorMittal GentGhent produces flat steel products with high added value. A
significant part of the production is coated, either by hot dip galvanizing, electro galvanizing or organic coating. ArcelorMittal GentGhent also includes one organic coating line located in Geel and one electro galvanizing line located in Genk. ArcelorMittal Gent’sGhent’s products are mainly used in the automotive industry and in household appliances, tubes, containers, radiators and construction. In 2018, ArcelorMittal GentGhent invested €65 million in a new furnace at Sidgal 3 line to produce Fortiform ® grades for automotives. The blow-in of blast furnace B in Ghent occurred on March 1, 2021, after the completion of the reline which commenced late August 2020.
ArcelorMittal is in process of constructing two industrial scale plants at its site in Ghent in the frame of the Carbalyst and Torero projects which are leveraging breakthrough smart carbon technologies to enable use of circular carbon. Both projects are in progress with commissioning expected before the end of 2022.
On September 28, 2021, ArcelorMittal announced that it had signed a letter of intent with the Governments of Belgium and Flanders, supporting a €1.1 billion project to build a 2.5 million-tonne DRI plant and EAF facility at its site in Ghent, see “Introduction—Key transactions and events in 2021" for further information.
ArcelorMittal Liège
The primary facilities of ArcelorMittal Liège upstream are located in two main plants along the Meuse River. The finishing facilities of ArcelorMittal Liège are located southwest of Liège.
After a series of discussions earlier in 2013 regarding the potential reorganization of ArcelorMittal Liège ArcelorMittalproduces a wide range of innovative products to meet the demanding needs of companies in the automotive industry and industrial domestic appliances. The operating assets in Liège agreed in December 2013 toinclude the terms of a social plan with unions following a five-year industrial plan agreementcontinuous annealing line 1, hot dip galvanizing line 7 (combiline) and in February 2014 signed a five-year global agreement withline 8 (Eurogal), the Walloon Government and local unions confirming the lines to be operated in the coming yearselectrogalvanzing line 5, and the commitments made by ArcelorMittal in terms of investments, R&Dtwo organic coating lines 2 and local economic support. ArcelorMittal Liège confirmed and had fully completed its commitment to a €138 million investment program as of December 31, 2017. In addition, ArcelorMittal Liège definitively closed a coke plant in early June 2014, which was no longer viable due to excess supply in Europe.
On February 3, 2017, ArcelorMittal Liège inaugurated7 (combiline hot dip galvanizing line 7). It also includes the JVD (Jet Vapor Deposition) line a new €63 million asset that is part of the €138 million investment program.inaugurated on February 3, 2017. This world-class innovative line coats moving strips of steel in a vacuum chamber by vaporizing zinc onto the steel at high speed to produce coated steels for automotive and other industrial applications.
Following its transformation, ArcelorMittal Liège produces a wide range of innovative products to meet the demanding needs of companies in the automotive, industrial, domestic appliances. Remaining operating assets in Liège are the continuous annealing line 1, hot dip galvanizing line 7 (combiline) and line 8 (Eurogal), the electrogalvanzing line 5, the JVD line and the two organic coating lines 2 and 7 (combiline hot dip galvanizing line 7).
On May 7, 2018, the European Commission approved the acquisition of Ilva. As part of the European Commission's approval, ArcelorMittal agreed to divest certain of its European assets, including the hot dipped galvanizing lines 4 and 5 in Flémalle, hot-rolled pickling, cold rolling and tin packaging lines in Tilleur of ArcelorMittal Liège in Belgium (see "Item 4.A. —Information on the Company—History and development of the Company—Key transactions and events in 2018") for a description of the transaction). Accordingly, these facilities are classified as held for sale at December 31, 2018. The completion of the disposal of these facilities is subject to the European Commission's approval and the conclusion of information consultations with local and European Works Councils.
ArcelorMittal Bremen
ArcelorMittal Bremen is situated on the bank of the Weser River north of Bremen, Germany. ArcelorMittal Bremen produces and sells a wide range of products including slab, hot-rolled,hot rolled, pickled, cold-rolled
cold rolled and hot dip galvanized rolls to the automotive and primary transformation sectors.
On March 29, 2021, ArcelorMittal announced plans to build a large-scale industrial plant for approximately 2 million tonnes DRI, as well as a new EAF at the site of Bremen. It also disclosed plans for an innovative DRI pilot plant and an EAF in Eisenhüttenstadt, following the announcement of the planned expansion of Germany’s hydrogen infrastructure. Using green hydrogen, up to 3.5 million tonnes of steel could be produced by the Bremen and Eisenhüttenstadt sites by 2030, with significantly lower CO2 emissions, see also “Introduction—Key transactions and events in 2021".
ArcelorMittal Méditerranée
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 Marseille on the Mediterranean Sea.
ArcelorMittal Méditerranée’s 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 for the construction, home appliance, packaging, pipe and tube, engine and office material industries. About 69% of its products are shipped from a private wharf, in part through a shuttle system and 24% of its products are shipped by rail, with the remaining amount transported by truck.
The Saint-Chély plant produces electrical steel (with up to 3.2% silicon content), mainly for electrical motors. About 60%
On February 4, 2022, ArcelorMittal announced plans for the acceleration of its products are shipped from a private wharf,decarbonization plan in part through a shuttle system. 30%France. Specifically, in Fos-sur-Mer, ArcelorMittal will build an EAF. This new unit will complement the ladle furnace announced last March and supported by France’s recovery plan, ‘France Relance’. The new industrial facility will be operational starting in 2027 and will gradually replace 1 out of its products are shipped2 of ArcelorMittal’s blast furnaces in Fos-sur-Mer by rail, with the remaining amount transported by truck.
ArcelorMittal España
ArcelorMittal España’s Avilés and Gijón facilities, which are by far the largest of its facilities, are connected by ArcelorMittal España’s own railway system. These two facilities operate as a single integrated steel plant. The product range of ArcelorMittal España includes rail, wire rod, heavy plates and hot-rolledhot rolled coil, as well as more highly processed products such as hot dip and electro galvanized sheet, tinplate and organic-coatedorganic coated sheet. The facilities are also connected by rail to the region’s two main ports, Avilés and Gijón. Raw materials are received at the port of Gijón, where they are unloaded at ArcelorMittal España’s owndedicated dry-bulk terminal,
which is linked to steel-making facilities by conveyor belt. A variety of products are shipped through the Avilés port facilities to other units of the Group and to ArcelorMittal España’s 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 directly to the ArcelorMittal Sagunto plant, which it supplies with hot-rolledhot rolled coils for subsequent processing into cold-rolled,cold rolled, galvanized and electro galvanized sheet.
ArcelorMittal España production is primarily sold to the railway, automotive and construction industries.
ArcelorMittal España’s Gijón coke plant is idled.was idled in 2013. On September 23, 2015, ArcelorMittal announced thean investment of over €100 million in the refurbishment of the coke oven batteries in Gijón. The main part of the approved investment focuses on the re-constructionreconstruction of two 45-oven batteries at ArcelorMittal Asturias’ coke plant in Gijón, installation of a state-of-the-art emission collection and scrubbing system, and implementation of efficient by-product management systems. The refurbishment work started in 20162016. The refurbished coke oven battery number 1 in Gijón started its heating in the last quarter of 2019. The first coke from coke oven battery #1 was produced at the beginning of 2020. The start of the coke oven battery #2 was delayed due to the COVID-19 crisis and the first coke was produced on February 13, 2021. In October 2019, the coke oven batteries are expectedof Aviles were decommissioned with the aim to reach full capacity in 2020.
ArcelorMittal Italiabe demolished and their coke output was then supplied by the refurbished Gijón coke batteries located near the two blast furnaces.
On November 1, 2018,February 17, 2021, the Company announced that ArcelorMittal España had completed its coke-oven gas injection project for Blast Furnace B in its Gijón plant, a strategic step to reduce CO2 emissions and operational costs, thanks to lower coke consumption.
On July 13, 2021, ArcelorMittal signed a memorandum of understanding with the acquisition of Ilva S.p.A. (subsequently renamedSpanish Government for a €1 billion investment in decarbonization technologies at ArcelorMittal Italia)Asturias’ plant in Gijón (Spain), which includes 2.3 million tonnes new direct reduced iron ("DRI") and certain of its subsidiaries.hybrid electrical arc furnace ("EAF") installations. The DRI installation in Gijón will also enable ArcelorMittal Italia is the leading steel producer in Italy, Europe’s second largest steel consuming economy, and a new industrial hub within ArcelorMittal Europe Flat Products. ArcelorMittal Italia produces high-quality and sustainable steelSestao to be used inthe world’s first full-scale zero carbon-emissions steel plant. By 2025, the Sestao plant – which manufactures a range of vitalflat steel products for the automotive and construction sectors, and general industry sectors across the domestic steel market such as construction, energy, automotive, home appliances, packaging and transport and for international export. ArcelorMittal Italia has operations across various structurally linked operating sites including Europe’s biggest single-site integrated steel facility in Taranto and rolling mills in Genoa and Novi Ligure. Genoa– is also an important hub in terms of intermodal logistics. ArcelorMittal Italia will leverage on new synergies between its service centers in Genoa and Canossaexpected to serve the largest European tinplate market.The agreement includes industrial capital expenditure commitments of approximately €1.3 billion ($1.4 billion) over a seven-year period focused on blast furnaces including €0.2 billion revamping of blast furnace #5 intending to bring steel production to 8produce 1.6 million tonnes by 2024 (current crude steel production is limited to 6 million tonnes until environmental capex plan is completed), steel shops and finishing lines and environmental capital expenditure commitments of approximately €0.8 billion ($0.9 billion) including €0.3 billion for stock pile coverage, €0.2 billion for reduction of emissions at coke ovens and €0.2 billion in waste water treatment. The agreementzero carbon-emissions steel. See also includes environmental remediation obligations of approximately €0.5 billion ($0.6 billion), the latter of which will be funded with funds seized by the Italian Government from the former shareholder.
In Taranto, a new research and development center is being built; its objective is to develop strategic and high value-added products and to make provisions for new and ad hoc technical solutions designed to improve the environmental impact of the steel production processes. See "Item 4.A—Information on the Company—History and development of the Company—“Introduction—Key transactions and events in 2018" and note 2.2.4 to ArcelorMittal’s consolidated financial statements for further details.2021".
ArcelorMittal Poland
ArcelorMittal Poland is the largest steel producer in Poland. ArcelorMittal Poland’s Zdzieszowice coke plant produces and supplies coke to ArcelorMittal subsidiaries and third parties.
ArcelorMittal Poland produces coke and a wide range of steel products, including both long and flat products such as slabs, billets, blooms, sections, sheet piles, rails up to 120 meters long, railway accessories, mining supports sections, hot-rolledhot rolled coils, sheets and strips, cold-rolledcold rolled coils, sheets and strips, hot dip galvanized coils and sheets, wire-rodswire rods and organic 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 Poland’s principal customers are in the construction, engineering, transport, mining and automotive industries.
ArcelorMittal Eisenhüttenstadt
ArcelorMittal Eisenhüttenstadt is situated on the Oder river near the German-Polish border, 110 kilometers southeast of Berlin. ArcelorMittal Eisenhüttenstadt is a fully integrated and highly-automated flat steel producing plant. The facility is run with one medium-sized blast furnace.
ArcelorMittal Eisenhüttenstadt produces and sells a wide range of flat steel products, including hot-rolled, cold-rolled,hot rolled, cold rolled, electrical and hot dip galvanized and organic-coatedorganic coated coils to automotive, distribution, metal processing, construction and appliances industry customers in Germany, Central and Eastern Europe.
On March 29, 2021, ArcelorMittal Ostravaannounced plans for an innovative DRI pilot plant and ArcelorMittal Galati
ArcelorMittal Ostrava produces long and flat products and sells most of its products to end-users primarilyan EAF in Eisenhüttenstadt, following the engineering and construction industries, as well as to small-lot resellers.
ArcelorMittal Ostrava’s product range includes slabs, billets, blooms, sections, rebars, wire rod, mining supports sections, hot-rolled coils, sheets and strips. Its products are mainly sold in the domestic Czech market and other EU member states.
ArcelorMittal Galati produces plates, hot-rolled coils, cold-rolled coils and galvanized products, which are sold mainly in the Romanian, Turkish, Balkan and European markets.
On May 7, 2018, the European Commission approved the acquisition of Ilva. As partannouncement of the Commission's approval, ArcelorMittal agreed to divest certainplanned expansion of its European assets, including ArcelorMittal Galati and ArcelorMittal Ostrava (see "Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018" for a description of the transaction). Accordingly, ArcelorMittal Galati and ArcelorMittal Ostrava are classified as held for sale at December 31, 2018. The completion of the disposal of these facilities is subject to the European Commission’s approval and the conclusion of information consultations with local and European Works Councils.
ArcelorMittal Belval & Differdange
ArcelorMittal Belval & Differdange produces a wide range of sections and sheets piles which are sold to the local European
construction market as well as for export. With its Rodange facilities, it also produces a wide range of rails, special sections and heavy angles.
On January 28, 2021, ArcelorMittal announced a collaboration with Vow ASA (company listed on Oslo Stock Exchange and specialized in world leading solutions to convert biomass and waste into valuable resources) to build the first dedicated industrial scale biogas plant for the steel industry at Rodange, with the aim to start production in 2023. The plant will convert sustainable biomass into biogas to replace the use of natural gas at the plant’s rolling mill reheating furnace, so reducing CO2 emissions from the production of steel.
On October 21, 2021, a floating solar farm installed on a former cooling pond belonging to ArcelorMittal Differdange was commissioned. It consists of 25,000m2 of solar panels, with a surface area of 5.7 hectares. Eventually, the electricity produced will amount to 3 GWh/year and will be able to power nearly 800 local homes, which represents the annual electricity usage of 3,200 people. The electricity produced on the floating solar farm will be fed into the local grid and contribute to Luxembourg’s energy self-sufficiency.
ArcelorMittal Hamburg
ArcelorMittal Hamburg produces billet and high quality wire rod and its production is mainly sold in the European market, primarily to automotive and engineering customers.
The site of Hamburg already operates Europe’s only DRI-EAF plant. A project is underway to construct a demonstrator plant in order to test the ability of hydrogen to reduce iron ore into DRI on an industrial scale, and to test carbon-free DRI in the EAF steelmaking process. The objective is to reach industrial commercial maturity of the technology by 2025, initially producing 100,000 tonnes of sponge iron a year.
On September 7, 2021, the German Federal Government has expressed its intention to provide €55 million of funding support towards construction of the plant, which is half of the €110 million total capital expenditure required.
ArcelorMittal Olaberria-Bergara
The Olaberría-Bergara facilities produce billets and sections. The Olaberría facility’sfacility's production is sold to the local construction market as well as for export, while the Bergara facility’s production is sold primarily to the local European construction market.
ArcelorMittal Duisburg
ArcelorMittal Duisburg produces blooms, billets, bars and high quality wire rod and its production is mainly sold in the European market primarily to automotive, railway and engineering customers.
ArcelorMittal Downstream Solutions (AMDS)
The Europe segment also includes ArcelorMittal Downstream Solutions (“AMDS”), which primarily covers the downstream activities of ArcelorMittal in Europe. It provides distribution of long and flat products as well as value-added and customized steel solutions through further processing to meet specific customer requirements. In addition, specific solutions are dispatched through other business lines, primarily ArcelorMittal Construction, ArcelorMittal Projects, ArcelorMittal Tubular Products, ArcelorMittal Wire Solutions and ArcelorMittal International.
AMDS also includes Industeel, with facilities in Belgium and in France. Industeel Belgium and Industeel Creusot are designed to produce special steel plates, ranging from 5 to 180 millimeters in thickness, including stainless steel products, while
Industeel Loire is dedicated to extra heavy gauge products of alloyed carbon steel. Euroform operates hot forming facilities, mainly to transform extra heavy gauge products received from Industeel Loire. The R&D center in Le Creusot, France is fully dedicated to special plate products development.
During 2018,
ArcelorMittal Prijedor
ArcelorMittal Prijedor is an iron ore open pit mining operation located in response toBosnia and Herzegovina, near the continued challenging economic contexttown of Prijedor. The mine is a joint venture formed in 2004, in which ArcelorMittal owns 51% and overcapacity in Western49% are owned by the local Iron Ore Mine Ljubija. The ore is excavated at the Omarska mine and Eastern Europe, AMDS reduced its industrial footprint in Germany (Herford, Goslar & Berlin sites) and in France.
Also, early 2018, ArcelorMittal Tubular Lexy finalized the acquisition of Lorraine Tubes' assets. This company operatesprocessed in the constructionprocessing plant. The mine supplies its final product, iron ore lumps and mechanical sectors, with also a new developmentconcentrate, to ArcelorMittal's steel plant, ArcelorMittal Zenica, located approximately 250 kilometers from Prijedor in central Bosnia.
For further details on HAV tubes for automotive. In addition, ArcelorMittal Projects Martillac completed the acquisition of Exosun's assets. The company is specialized in solar energy (trackers, photovoltaic energy). This acquisition enables the Company to complement its presence on the solar market (solar steel frames manufacturing units in Europe, ChinaPrijedor mine production and Egypt) with ambitions on the growing photovoltaic marketother information, see "Properties and trackers as an emerging solution.capital expenditures—Reserves and Resources (iron ore and coal)".
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| ACIS | | | | | | Crude Steel | | | | |
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ACISUnit | | Country | | Locations | | Crude Steel | | | | |
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Unit | | Country | | Locations | | Production in 20182021 (in million tonnes per year)1 | | Type of plant | | Products |
| ArcelorMittal Temirtau JSC | | Kazakhstan | | TermitauTemirtau | | 3.33.4 | | Integrated | | Flat, Long, Pipes and Tubes |
ArcelorMittal Kryvyi Rih2 | | Ukraine | | Kryvyi Rih | | 4.84.9 | | Integrated | | Long |
ArcelorMittal South Africa3 | | South Africa | | Vanderbijlpark, Saldanha, Newcastle, Vereeniging, Pretoria | | 5.03.1 | | Integrated Mini-mill Downstream | | Flat, Long, Pipes and Tubes |
| JSC ArcelorMittal Tubular Products Aktau | | Kazakhstan | | Aktau | | n/a | | Downstream | | Pipes and Tubes |
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1Captive mining operations | Note: n/a = not applicable (no crude steel production). | | | | | | | | | |
| Unit | | Country | | Locations | | ArcelorMittal Interest (%) | | Type of Mine | | Product |
| ArcelorMittal Kryvyi Rih | | Ukraine | | Kryvyi Rih | | 95.1 | | Iron Ore Mine (open pit and underground) | | Concentrate, lump and sinter feed |
| ArcelorMittal Temirtau | | Kazakhstan | | Lisakovsk, Kentobe, Atasu, Atansore | | 100.0 | | Iron Ore Mine (open pit and underground) | | Concentrate, lump and fines |
| ArcelorMittal Temirtau | | Kazakhstan | | Karaganda | | 100.0 | | Coal Mine (underground) | | Coking coal and thermal coal |
1.n/a = not applicable (no crude steel production).
2.ArcelorMittal Kryvyi Rih commissioned its new billet caster #3 in June 2019 and new billet caster #2 in the first quarter of 2020. The blast furnace #5, open hearth shop, blooming shop #1 and wire rod mill #250-3 were definitively closed in 2020. In June 2021, ArcelorMittal Kryvyi Rih restarted its BF #8 which had been temporarily idled in October 2019 for planned maintenance and in response to market conditions.
3.ArcelorMittal South Africa temporarily idled some of its downstream production lines at Vanderbijlpark (batch annealing lines, continuous annealing line, temper mills and the tinning line) in the course of 2019; the lines were definitively closed in 2020. ArcelorMittal South Africa permanently closed its Saldanha operations in the second quarter of 2020. Furthermore, in 2020 ArcelorMittal South Africa permanently closed the bar mill (16 inch) at Vereeniging, as well as the coke oven battery #5 within the Coke and Chemicals division.
ArcelorMittal South Africa
ArcelorMittal South Africa is the largest steel producer in Africa and its common shares are listed on the JSE Limited in South Africa under the symbol “ACL”. ArcelorMittal South Africa has threefour main steel production facilities of which Vanderbijlpark, Newcastle and NewcastleVereeniging (melt shop restarted in January 2019) are located inland, while Saldanha (permanently closed in the second quarter of 2020) is close to a deep water port which is supported by adeep-water port. A metallurgical by-products division (Coke and Chemicals) was reorganized (after closure of coke oven battery #5 in Pretoria in the fourth quarter of 2020) and is now split in two operations: coke-making and by-products at the steel production facilities (Vanderbijlpark and Newcastle). ArcelorMittal South Africa has a diversified range of products and includes hot-rolledhot rolled plates and sheet in coil form, cold-rolledcold rolled sheet, coated sheet, wire-rodwire rod and sections, as well as forgings. Approximately 80%During 2021, 87.8% of its products arewere sold in the South African domestic market, while Africa is its largest export market. It also sells into Asia and hassells minor tonnages into Europe and the Americas.
In November 2018,Due to temporary shipments backlogs encountered in 2021, ArcelorMittal South Africa acquireddecided that the electric arc furnace at Vereeniging, which had been scheduled to be placed under care and maintenance in the third quarter of 2020 along with Saldanha operations, would continue to operate for the foreseeable future in support of long steel supply.
The Thabazimbi Iron Ore Mine (Pty) Ltd, located at Thabazimbi, in the Limpopo Province of South Africa, was taken over by ArcelorMittal South Africa in 2018. Thabazimbi Iron Ore Mine currently processes existing stockpiles of iron ore from a run of mine which is currently in rehabilitation whilenature (unbeneficiated) and old plant discard dumps with recoverable iron, with the future ofaim to supply product to the asset is being investigated.
ArcelorMittal Temirtau
ArcelorMittal Temirtau’s product range of flat and long steel products includes pig iron, continuous caster slabs, continuous caster billets, hot- and cold-rolled coils and sheets, black plates, covers, tin plates, hot dipped galvanized products, color coated products, welded pipes and rebars. ArcelorMittal Temirtau also has iron ore mines and coal mines (see “—Mining” below for further information).
ArcelorMittal Temirtau sells steel products to a range of industries, including the tube- and pipe-making sectors, as well as manufacturers of consumer goods and appliances. The markets for its products include Kazakhstan, CIS and Russia, Middle East and China.Vanderbijlpark Steel Works.
ArcelorMittal Kryvyi Rih
ArcelorMittal Kryvyi Rih’s product range includes billets, rebars and wire rods, light sections (angles) and merchant bars (rounds, squares and strips). ArcelorMittal Kryvyi Rih also has iron ore mines (see “—Mining” below for further information). Its products are sold to a range of industries such as hardware, construction, rerollingre-rolling and fabrication. The markets for its products include Ukraine, CIS and Russia, North West and East Africa, Middle East and Gulf countries, Europe, Latin America and Latin America.South East Asia.
In addition, ArcelorMittal Kryvyi Rih includes an export sales network which supplies a complete range of steel products not only from Kryvyi Rih but also from other plants of the Group to customers outside of their respective home markets.
Mining
ArcelorMittal’s mining segment has productionArcelorMittal Kryvyi Rih is investing in new pellet plant facilities in North and South America, Europe, Africa and CIS. The following table provides an overview by type of facility of ArcelorMittal’s principal mining operations.
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Unit | | Country | | Locations | | ArcelorMittal Interest (%) | | Type of Mine | | Product |
Iron Ore | | | | | | | | | | |
ArcelorMittal Mines and Infrastructure Canada | | Canada | | Mt Wright and Port Cartier, Qc | | 85.0 | | Iron Ore Mine (open pit), railway and port | | Concentrate and pellets |
Minorca Mines | | USA | | Virginia, MN | | 100.0 | | Iron Ore Mine (open pit) | | Pellets |
Hibbing Taconite Mines | | USA | | Hibbing, MN | | 62.3 | | Iron Ore Mine (open pit) | | Pellets |
ArcelorMittal Mexico | | Mexico | | Sonora, Lazaro Cardenas | | 100.0 | | Iron Ore Mine (open pit) | | Concentrate, lump and fines |
ArcelorMittal Mexico Peña Colorada | | Mexico | | Minatitlán | | 50.0 | | Iron Ore Mine (open pit) | | Concentrate and pellets |
ArcelorMittal Brasil Andrade Mine | | Brazil | | State of Minas Gerais | | 100.0 | | Iron Ore Mine (open pit) | | Fines |
ArcelorMittal Mineração Serra Azul | | Brazil | | State of Minas Gerais | | 100.0 | | Iron Ore Mine (open pit) | | Lump and fines |
ArcelorMittal Prijedor | | Bosnia and Herzegovina | | Prijedor | | 51.0 | | Iron Ore Mine (open pit) | | Concentrate and lump |
ArcelorMittal Kryvyi Rih | | Ukraine | | Kryvyi Rih | | 95.1 | | Iron Ore Mine (open pit and underground) | | Concentrate, lump and sinter feed |
ArcelorMittal Temirtau | | Kazakhstan | | Lisakovsk, Kentobe, Atasu, Atansore | | 100.0 | | Iron Ore Mine (open pit and underground) | | Concentrate, lump and fines |
ArcelorMittal Liberia | | Liberia | | Yekepa | | 85.0 | | Iron Ore Mine (open pit) | | Fines |
Coal | | | | | | | | | | |
ArcelorMittal Princeton | | USA | | McDowell, WV, Tazewell, VA | | 100.0 | | Coal Mine (surface and underground) | | Coking and PCI coal |
ArcelorMittal Temirtau | | Kazakhstan | | Karaganda | | 100.0 | | Coal Mine (underground) | | Coking coal and thermal coal |
Iron Ore
ArcelorMittal Mines and Infrastructure Canada
ArcelorMittal Mines and Infrastructure Canada is a major Canadian producer of iron ore concentrate and several types of pellets. It holds mineral rights over 32,279.5 hectares of land in the province of Québec, Canada. ArcelorMittal Mines and Infrastructure Canada operates the Mont-Wright Mine and concentrator near 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 and Infrastructure Canada. The Mont-Wright mine and the town of Fermont are connected by Highway 389 to Baie Comeau on the North Shore of the Gulf of St. Lawrence, a distance of 570 kilometers. ArcelorMittal Mines and Infrastructure Canada owns mineral rights to iron ore deposits in Fire Lake and Mont Reed. Fire Lake, which is located approximately 53 kilometers south of Mont-Wright, dispatched approximately 15.9produce 5 million tonnes of crude ore by rail to the Mont-Wright concentrator in 2018. The Mont Reed deposit is currently not mined. In addition, ArcelorMittal Mines and Infrastructure Canada holds surface rights over the land on which the Mont-Wright and Port Cartier installations are located, with the exception of a small area which remains the property of the Quebec Government but in no way compromises the mineral rights. The property began operating in 1976.
The expiration dates of the mining leases range from 2020 to 2033. These leases are renewable for three periods of ten years, provided the lessee has performed mining operations for at least two years in the previous ten years of the lease.
The Mont-Wright and Fire Lake mines are part of the highly-folded and metamorphosed southwestern branch of the Labrador Trough. The most important rock type in the area is the specular hematite iron formation forming wide, massive deposits that often form the crest of high ridges extending for many kilometers in the Quebec-Labrador area.
The Mont-Wright operation consists of open pit mines and a concentrator. The ore is crushed in two gyratory crushers and the concentrator operates with seven lines of three stage spiral classifiers and horizontal filters. The mining complex and infrastructure has a production capacity of approximately 26 million tonnes of concentrate per year. The Port-Cartier pellet plant produces acid and flux pellets that operate six ball mills, ten balling discs and two induration furnaces. The pelletizing plant has a capacity of 10 million tonnesannum of pellets, per year. The minereplacing two existing sinter plants and ensuring environmental compliance. First pellet is estimated to be produced 9.5 million tonnes of pellets and 15 million tonnes of concentrate in 2018.
Electric power for Mont-Wright and the town of Fermont is supplied by Hydro-Quebec via a 157 kilometer line. In the event of an emergency, the Hart Jaune Power plant, also connected to the Hydro-Quebec grid, can supply sufficient power to maintain the operations of the essential processing facilities.
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 managed by Cleveland Cliffs Inc.
ArcelorMittal Minorca holds the mineral rights on more than 2,800 acres necessary to mine the stated reserves. Minorca's owned/leased lands increased to approximately 13,920 acres with the purchase of 160 acres of land in Meadowlands, MN for construction of wetlands as required by the State of Minnesota. The operations are located approximately three kilometers north of the town of Virginia in the northeast of Minnesota, which are accessible by road and rail. The Minorca Mine controls through leases all the mineral and surface rights needed to mine and process its estimated 2018 iron ore reserves. The expiration dates of the mining leases range from 2035 to 2056. ArcelorMittal Minorca operates a concentrating and pelletizing facility, along with two open pit iron ore mines - Laurentian, and East Pits - located 12 kilometers from the processing facilities. The processing operations consist of a crushing facility, a three-line concentration facility and a single-line straight grate pelletizing plant. The Minorca pelletizing facility produced 2.8 million metric tonnes of taconite pellets in 2018. Pellets are transported by rail to ports on Lake Superior. Lake vessels are used to transport the pellets to Indiana Harbor. The Minorca taconite plant was constructed and operated by Inland Steel from 1977 until 1998 when it was purchased by then ISPAT International, a predecessor company of ArcelorMittal.
The Hibbing Taconite Company holds mineral rights over 7,520 acres through 34 contiguous mineral leases, which are located mainly within the City of Hibbing with a processing facility five kilometers from north of the town center in the northeast of Minnesota and is accessible by road and rail. The Hibbing operations are jointly owned by subsidiaries of ArcelorMittal USA (62.3%), Cleveland-Cliffs Inc. (23.0%) and U.S. Steel (14.7%), with Cliffs Mining Services Company as the managing agent of the mine and processing facilities. The Hibbing Taconite Company, through leases, controls the mineral and surface rights needed to mine and process its estimated iron ore reserves. The expiration dates of the mining leases range from 2022 to 2056. These leases can be renewed through negotiations with the mineral owners, though no obligations to renew exist for the mineral owners. The operations consist of open pit mining, crushing, concentrating and pelletizing. The finished pellets are then transported by rail to the port of Allouez at Superior, Wisconsin, a distance of 130 kilometers, and then over the Great Lakes by lake vessels to ArcelorMittal’s integrated steelmaking plants, principally Burns Harbor. The Hibbing Taconite Company began operating in the third quarter of 1976. The mine produced 7.8 million metric tonnes of taconite pellets in 2018 (of which approximately 4.8 million metric tonnes are ArcelorMittal’s share).
Both the Minorca and Hibbing mines are located in the Mesabi iron range where iron ore has been extracted for over 100 years. The ore bodies are within the Biwabik Iron Formation, a series of shallow dipping Precambrian sedimentary rocks known as taconite with a total thickness in excess of 200 meters and running for approximately 200 kilometers. Although the first deposits mined in the Mesabi iron range consisted of oxidized hematite ores, production was shortened in the mid-1950 to low grade magnetic taconite ores. The processing of this ore involves a series of grinding and magnetic separation stages to remove the magnetite from the silica. Natural gas and electric power constitutes the main sources of energy for both Minorca and Hibbing. The electric power is provided by the Minnesota Power company.
ArcelorMittal Mexico Mining Assets
ArcelorMittal Mexico operates three iron ore mines in Mexico, the El Volcan and Las Truchas mines, and, through a joint operation with Ternium S.A., the Peña Colorada mine.
Peña Colorada
Consorcio Minero Benito Juarez Peña Colorada, S.A. de C.V. (Peña Colorada) holds mineral rights over 99,188 acres located at about 60 kilometers by highway to the northeast of the port city of Manzanillo, in the province of Minatitlán in the northwestern part of the State of Colima, Mexico. ArcelorMittal owns 50% of Peña Colorada Ltd., and Ternium S.A. owns the other 50% of the company.
Peña Colorada operates an open pit mine as well as a concentrating facility and a two-line pelletizing facility. The beneficiation plant is located at the mine, whereas the pelletizing plant is located in Manzanillo. Major processing facilities include a primary crusher, a dry cobbing plant, two autogenous mill, three horizontal and two vertical ball mills and several stages of magnetic separation. The concentrate is sent as a pulp through a pipeline from the mineral processing plant. Peña Colorada has operated since 1974. The Peña Colorada mine receives electrical power from the Comisión Federal de Electricidad (CFE), which is a state-owned company that serves customers across the entire country.
Government concessions are granted by the Mexican federal government for a period of 50 years and are renewable. The expiration dates of the current mining concessions range from 2021 to 2062.
The Peña Colorada pelletizing facility produced 3.6 million tonnes of pellets and 0.4 million tonnes of concentrate in 2018. Both magnetite concentrate and iron ore pellets are shipped from Manzanillo to ArcelorMittal Mexico, as well as to Ternium’s steel plants, by ship and by rail.
Peña Colorada is a complex polyphase iron ore deposit. The iron mineralization at Peña Colorada consists of banded to massive concentrations of magnetite within breccia zones and results from several magmatic, metamorphic and hydrothermal mineralization stages with associated skarns, dykes and late faults sectioning the entire deposit.
El Volcan
ArcelorMittal holds mineral rights over 1,053 hectares to support its El Volcan operations located approximately 68 kilometers northwest of the city of Obregon and 250 kilometers from the Guaymas port facility in the state of Sonora, Mexico. The El Volcan operations controlled all of the mineral rights and surface rights needed to mine and process iron ore during 2018. ArcelorMittal operates a concentrating facility along with an open pit mine and a pre-concentration facility at the mine site. The mine site is accessible by a 90-kilometer road from the city of Obregon, where the concentrator is located.
Government concessions are granted by the Mexican federal government for a period of 50 years and are renewable. The expiration dates of the current mining concessions range from 2055 to 2061.
The pre-concentration 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, a conveyor, transfer towers and two ship loading systems. The mine exploitation and crushing operations and all transport activities are performed by contractors. The concentrate and port operations are operated with ArcelorMittal’s own resources. The concentrate is transported by rail to the Pacific port of Guaymas and then shipped to the steel plant in Lázaro Cárdenas. The mining operation uses two Caterpillar 3516B electric generators in continuous operation, with one generator operating 24 hours per day at an average consumption of 540 kilowatt hours while the second generator is on standby. The concentration facility uses electric power from the national grid.
The El Volcan mine concession was bought from the Sonora provincial government in 2004, followed by exploration of the property in 2005. The development of the mine started in 2007. Mining operations were halted during the 2008-2009 global economic crisis and on several occasions due to structural problems in the crushing facilities. Operations resumed without interruption from 2010 until October 2015. In the fourth quarter of 2015, the El Volcan operations were temporarily suspended due to weak market conditions. The El Volcan operations resumed in the first quarter of 2017 as a result of revised mine plan in light of improved price conditions. The total concentrate production in 2018 was 1.6 million tonnes. The iron mineralization2023.
includes magnetite rich skarn associated to the intrusion and extrusion of magmas rich in iron and formed in a volcanic environment. The mine is expected to stop production in early 2019 due to the depletion of the reserves.
Las Truchas
ArcelorMittal now holds mineral rights over 54,892 hectares in Mexico. The Las Truchas mine is located approximately 27 kilometres southeast of the town of Lázaro Cárdenas in the State of Michoacán, Mexico. The Las Truchas operations are accessible by public highway and control all the mineral rights needed to mine and process its estimated 2018 iron ore reserves. Part of the surface rights needed to mine and process the 2018 iron ore reserves expired and are currently being re-negotiated.
Government concessions are granted by the Mexican federal government for a period of 50 years and are renewable. The expiration dates of the current mining concessions range from 2044 to 2059.
The Las Truchas mine is an integrated iron ore operation. It began operating in 1976 as a government enterprise (Sicartsa), and its mining activities consist of an open pit mine exploitation, crushing, dry cobbing preconcentrate and concentration plant. The aggregate 2018 production of concentrate and lumps totaled 1.1 million tonnes. The concentrator includes one primary crusher, two secondary crushers and three tertiary crushers, two ball mill and two bar mill and two wet magnetic separation circuits. The electrical energy supplier for the Las Truchas mine is a state-owned company, Comisión Federal de Electricidad (CFE). The concentrated ore is pumped from the mine site through a 26-kilometer slurry pipeline to the steel plant facility in Lázaro Cárdenas.
The Las Truchas deposits consist of massive concentrations of magnetite of irregular morphology. The main Las Truchas deposits occur along about seven kilometers long and about two kilometers wide. The Las Truchas mineral deposits have been classified as hydrothermal deposits, which may have originated from injections of late stage-plutonic-activity through older sedimentary rocks. The mineralization of the Las Truchas iron deposits occurs in disseminated and irregular massive concentrations of magnetite within metamorphic rocks and skarns. The mineralization also occurs as fillings of faults, breccia zones, and fractures.
ArcelorMittal Brasil - Andrade Mine
ArcelorMittal Brasil holds mineral rights of over 2,871 hectares located in the Iron Quadrangle (Quadrilatero Ferrifero), a widely-explored and mined region located approximately 80 kilometers east of Belo Horizonte in the Minas Gerais State of Brazil. ArcelorMittal’s operations control all of the mineral rights and surface rights needed to mine and process its estimated 2018 iron ore reserves, dominated by directly shippable hematite ore. In addition to the open pit mine, ArcelorMittal operates a crushing and screening facility. Production is transported to Monlevade plant through a private railway line. Power is mostly generated from hydroelectric power plants and supplied by CEMIG, an open capital company controlled by the Government of the State of Minas Gerais.
Companhia Siderurgica Belgo-Mineira (“CSBM”) initiated mining operations at the property in 1944 in order to facilitate the supply of ore to its steel plant in Joao Monlevade. The mine was managed by CSBM until the end of 2004. In January 2005, Vale signed a leasing agreement with CSBM for management and operation. In December 2005, CSBM changed its name to Arcelor Brasil S.A. which was then merged in August 2007 into Belgo Siderurgia S.A. The latter then changed its name to ArcelorMittal Brasil S.A. In November 2009, Vale returned the Andrade mine to ArcelorMittal Brasil S.A. In 2018, the Andrade mine produced 1.5 million tonnes of sinter feed. An increase of the crushing and screening facility production capacity to 3.5 million tonnes per year of sinter feed was completed in 2012. In 2013, a cross road was built in order to improve shipments to the local Brazilian market. In 2018 Andrade started implementing a concentration plant that will enable concentrating Itabirite and mixing it with the hematite. This will improve the quality of the sinter feed to Monlevade Plant, have a positive impact on costs and increase its life span by 16 years. This project is expected to start production in early 2020.
ArcelorMittal Brasil - Serra Azul Mine
ArcelorMittal Brasil holds mineral rights over the central and east claims of the Serra Azul deposit over 375 hectares, located approximately 50 kilometers southwest of the town of Belo Horizonte in the Minas Gerais State of Brazil and accessible by public highway. ArcelorMittal’s operations control all of the mineral rights and surface rights needed to mine and process its estimated 2018 iron ore reserves. ArcelorMittal operates an open pit mine and a concentrating facility. The mine site is accessible by 80 kilometers of public highway from Belo Horizonte.
In addition to the open pit mine, processing operations consist of a crushing facility and a three-line concentration facility including screening, magnetic separation, spirals separators and jigging. Production is transported either by truck for local clients of lump, or by truck to two railway terminals located 35 and 50 kilometers, respectively, from the mine site for selling to local clients of sinter feed or for export through third-party port facilities located in the Rio de Janeiro State. Production is shipped mainly to local Brazilian market including the ArcelorMittal Brasil integrated plants. The Compania Energética de Minas Gerais (CEMIG) supplies power through a 13,800 volt line from Mateus Leme, located 20 kilometers from the mine. The electricity is locally transformed into 380 volts by six transformers spread around the operation. Minas Itatiaucu (MIL) initiated mining operations at the property in 1946. In 2007, London Mining Brazil Mineracao Ltda (London Mining) purchased the mineral rights from MIL. Following the acquisition of the property from London Mining, ArcelorMittal has operated the mine since 2008. In the same year, London Mining Brazil Mineração Ltda was merged into London Mining Participaçoes Ltda, which changed its corporate name to ArcelorMittal Mineração Serra Azul. In April 2016, ArcelorMittal Mineração Serra Azul was merged into ArcelorMittal Brasil. In 2018, ArcelorMittal Brasil - Serra Azul Mine produced 1.3 million tonnes of lumps and concentrate.
In February 2019, the Company decided to implement the evacuation plan related to its dormant Serra Azul tailing dam in Brazil, evacuating the 119 person community situated downstream to the dam as a precautionary measure based on an updated stability report following recent incidents in the Brazilian mining sector in order to undertake further testing and implement any necessary mitigation measures.
Both the Andrade and Serra Azul mines are located in the Iron Quadrangle (Quadrilatero Ferrifero), a widely-explored and mined region. The mineralization occurs as Itabirites, banded hematite-silica rocks, with varying weathering degrees. While the Serra Azul ore reserve estimates are constituted of rich friable Itabirites requiring some beneficiation, the Andrade ore reserve estimates are dominated by directly shippable hematite ore. As from 2020 Andrade will enable concentrating Itabirite and hematite fines as described above.
ArcelorMittal Prijedor
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. ArcelorMittal Prijedor holds mineral rights over approximately 2,000 hectares, the current concession was signed in 2018 for a period of 6 years. The production process includes crushing, with hydro-cyclones and magnetic separation at the concentration plant. The plant is close to the mine site, and materials are transported through a conveyor. Power is supplied from the national grid through a local power distribution company. In 2018, ArcelorMittal Prijedor produced 1.4 million tonnes of aggregated lumps and fines. The mine supplies iron ore to ArcelorMittal’s steel-making operations located approximately 243 kilometers south of Prijedor in northern Bosnia (Zenica). The operation is in close proximity to long-established public roads. Additionally, ArcelorMittal Prijedor has a limestone quarry for which the output is used for the roads in the mine.
In 1916, Austrian mining companies established the first industrial production of iron ore in the Prijedor area. The mines were nationalized in the 1950s, and were then owned by Iron Mines Ljubija Company until Mittal Steel acquired 51% of the company in 2004.
The Omarska deposit is composed of two ore bodies: Jezero and Buvac. The Jezero open pit began operating in 1983 and, following an interruption in production during the Bosnian civil war in the 1990s, production resumed in 2004.
However, since 2011, ore has only been produced at the Buvac pit, since the Jezero reserves were exhausted. The Buvac pit was opened in 2008 and is located within a carboniferous clastic and carbonates sediments containing iron mineralization in the form of beds concordant with host rocks or in the form of massive irregular blocks. The genesis of this deposit is attributed to hydrothermal replacement and syn-sedimentary processes. The Buvac ore body is mainly composed of limonite-goethite mineralization, which was formed during weathering oxidization of the primary siderite bodies.
ArcelorMittal Kryvyi Rih
ArcelorMittal Kryvyi Rih (“AMKR”) holds mineral rights to support its operationsalso has iron ore captive mines located roughly within the borders of the city of Kryvyi Rih, 150 kilometers southwest of Dnipro, Ukraine over 1,301 hectares. AMKR’s operations control all of the mineral rights and surface rights needed to mine and process its estimated iron ore reserves. AMKRUkraine. ArcelorMittal Kryvyi Rih operates a concentrating facility, along with two open pit sites and one underground iron ore mine. The iron ore deposits are located within the southern part of the Krivorozhsky iron-ore basin. Access to the mines is via public roads, which are connected by a paved highway to Dnipro. The area is well served by rail. Power is supplied by the Ukraine energy market and is generated from a mix of nuclear, hydro, renewables and coal-fired power stations. AMKR has two iron ore mines: an open pit mine feeding a concentration plant that produced 9.3 million tonnes of concentrate in 2018, known as the Kryvyi Rih open cast, and an underground mine with production of 0.9 million tonnes of lump and sinter feed in 2018, known as the Kryvyi Rih underground mine. Operations began at the Kryvyi Rih open cast in 1959 and at the Kryvyi Rih underground mine in 1933. ArcelorMittal acquired the operations in 2005.
The expiration of the agreements on the subsoil use conditions and the subsoil use permits range from 2021 for underground mine to 2038 for open pits, while the expiration of the land lease agreements ranges from 2060 to 2061.
The iron ore extracted from the Kryvyi Rih open castmining operations is first processed at the mine site through primary crushing. After initial processing, the product is loaded on a rail-loading facilityto concentrate, sinter feed and transportedlumps and supplied primarily to the concentrator. The concentrator production process includes crushing, classification, magnetic separation and filtering. The iron ore extracted from the Kryvyi Rih’s underground mine by a modified sub-level caving method is crushed on surface and transported by rail to the steel plant. The main consumer of the sinter and concentrate products is the ArcelorMittal Kryvyi Rih steel plant, with some concentrate being shipped to other ArcelorMittal affiliatesentities in Eastern Europe, as well as to third parties. For further details on Ukraine mines production, other information and recent updates, see "Properties and capital expenditures—Reserves and Resources (iron ore and coal)" and "Key transactions and events in 2021 — Recent developments".
ArcelorMittal Temirtau
ArcelorMittal Temirtau’s product range of flat and long steel products includes pig iron, continuous caster slabs, continuous caster billets, hot and cold rolled coils and sheets, black plates, covers, tin plates, hot dipped galvanized products, color coated products, welded pipes and rebars.
ArcelorMittal Temirtau sells steel products to a range of industries, including the tube- and pipe-making sectors, as well as manufacturers of consumer goods and appliances. The iron mineralization is hosted by early Proterozoic rocks containing seven altered ferruginous quartzite strata with shale layers. The major iron ore bearing units in the open pit mines have carbonate-silicate-magnetite composition. In addition, oxidized quartzite is mined simultaneously with primary ore but cannot be processed at presentmarkets for its products include Kazakhstan, CIS, Russia and is stored separately for future possible processing. Only the magnetite mineralization is included in the 2018 open pit iron ore reserve estimates. The underground mine is hosted by a ferruginous quartzite with martite and jaspilite.
Lisakovsk, Kentobe, Atasu, Atansore (Temirtau Iron Ore)South-East Asia.
ArcelorMittal Temirtau has four captive iron ore mining operations in Kazakhstan. The mines areKazakhstan, named Lisakovsk, Kentobe, Atasu and Atansore. Dispatch of ore from theseConcentrate, lumps and fines produced at the mines are transported to the ArcelorMittal steel plant is by railway. ArcelorMittal Termitau’s operations control all of the mineral rights and surface rights needed to mine and process its estimated 2018 iron ore reserves.
Lisakovsk is an open pit operation located in northwest Kazakhstan about 1,100 kilometers from Temirtau, with production of 0.7 million tonnes of concentrate in 2018.Temirtau. The mine was initially commissionedacquired by ArcelorMittal in 19692000 and was acquired in 2000. The existing subsoil agreement expires in 2020. The production process comprises crushing, screening, grinding, wet jigging and wet magnetic separation. Thetreats oolite iron mineralization at Lisakovsk occurs as oolite containing mainly hygogoethite and goethite. Theore to produce concentrate which is supplied to ArcelorMittal Temirtau steel plant, the phosphorous content in the iron mineralization at Lisakovsk limits its utilization in the steel-making process. At Lisakovsk, natural gas is supplied by KazTransGazAimak JSC and transmitted through the local grid. Electric power for the other facilities is supplied by Promsnab Astana LLP.
Kentobe is an open pit operation, initially started in 1983 and acquired by ArcelorMittal in 2002, located about 300 kilometers southeast of Temirtau, with production of 0.6 million tonnes of concentrate in 2018. Clearance for extension of the existing subsoil agreement until the end of 2026 was given by Kazakhstan Ministry of innovation and development and the addendum was signed on November 23, 2017. Ore processing is performed by crushing and dry magnetic separation, producing coarse concentrate. The Kentobe mine is located in the Balkhash metallogenic province hosting numerous volcanic, sedimentary and hydrothermal deposits. The mineralization at Kentobe includes two types of iron ore: oxidized and primary magnetite. Theis magnetite, mineralization constitutes allwhich is after mining treated in processing plant located at the 2018 estimated ore reserves. Electric power is suppliedsite before sending it to the Kentobe operations by Karaganda Energosbyt LLP.customer.
Atasu is an underground mine operation located about 400 kilometers south/southwest from Temirtau with production of 0.8 million tonnes of lump and fines in 2018. The mine began operating in 1956 with open pit exploitation of near surface reserves. Surface operations ended in 1980. Underground operations commenced in 1976.Temirtau. The mining lease was obtained by ArcelorMittal in 2003. The existing subsoil agreement expires at the end of 2026. Processing comprises of crushing and wet jigging. The Atasu mine is hosted by the West Karazhal deposit, which is a primary hematite ore with associated manganese mineralization. Studies have indicated thatore. In addition to the deposit could haveunderground mine, Atasu operates a sedimentary-volcanogenic origin caused by underwater hydrothermal activity. The mine receives electric power from the ABB Energo LLP.processing plant.
Atansore is an open pit operation located about 500 kilometers northeast of Temirtau, with production of 0.5 million tonnes of concentrate in 2018. The mining lease was obtainedacquired by ArcelorMittal in 2004. The existing subsoil agreement expires
primary ore mined at the end of 2029. The Atansor depositsite is located within skarn zones relatedmagnetite, which is treated at the dry processing facility at the site, prior to a volcanic intrusion that can be traced for more than 1.5 kilometers. The mineralization includes both martitic oxidized ore and primary magnetite ore. Ore processing is performedits transportation by crushing and dry magnetic separation. Atrail to the Atansore operations, electric power is provided from the Kokshetauenergo center LLP.customer.
ArcelorMittal Liberia
ArcelorMittal Liberia Holdings Limited (“AMLH”), through its agent (and subsidiary) ArcelorMittal Liberia Limited (“AML”), has been mining ‘direct shipping ore, or DSO’ from the Mt. Tokadeh and Mt. Gangra deposits in northern Nimba, Liberia since June 2011. AML signed a Mineral Development Agreement (“MDA”) in 2005 with the Government of Liberia (“GOL”) that is valid for 25 years and renewable for an additional 25-year period. The MDA covers 51,651.5 hectares, and is located approximately 300 kilometers northeast of Monrovia, Liberia . Three deposits within the MDA are grouped under the name “Western Range Project”, which includes the Mt. Tokadeh, Mt. Gangra and Mt Yuelliton deposits. In addition, to the rights to explore and mine iron ore, the GOL has granted the right to develop, use, operate and maintain the Buchanan to Yekepa railroad and the Buchanan port. A phased approach has been taken to establish the final project configuration. Currently only high grade ore reserves of oxidized iron ore (DSO) are mined. This ore only requires crushing and screening to make it suitable for export. The materials-handling operation consists of stockyards at both the mine and port areas, linked by a 250-kilometer single track railway running from Tokadeh to the port of Buchanan. Production in 2018 was at 4.6 million tonnes, focused on the Atlantic markets. The power for the current Liberia DSO operations is obtained from on-site diesel based power generation. The Company expects to switch to the grid supply in 2019.
Planning and construction of the project were commenced in 1960 by a group of Swedish companies, which ultimately became the Liberian American-Swedish Minerals Company (“LAMCO”), and production commenced on the Nimba deposit in 1963. Production reached a peak of 12 million metric tonnes in 1974 but subsequently declined due to market conditions. Production started at Mt. Tokadeh in 1985 to extend the life of the Nimba ore bodies to 1992 when operations ceased due to the Liberian civil war. In 2005, Mittal Steel won a bid to resume operations and signed the MDA with the GOL. Rehabilitation work on the railway started in 2008 and, in June 2011, ArcelorMittal started mining operations at Tokadeh, followed by a first shipment of iron ore in September 2011.
The Nimba Itabirites is a 250 to 450 meter thick recrystallized iron formation. Although the iron deposits at Mt. Tokadeh, Mt. Gangra and Mt Yuelliton fit the general definition of Itabirite as laminated metamorphosed oxide-facies iron formation, they are of lower iron grade than the ore previously mined at Mount Nimba. Tropical weathering has caused the decomposition of the rock forming minerals resulting in enrichment in the iron content that is sufficient to support a DSO operation.
Coal
ArcelorMittal Princeton
The ArcelorMittal Princeton (“AMP”) properties are located in McDowell County, West Virginia and Tazewell County, Virginia, approximately 30 miles west of the city of Princeton, West Virginia, where AMP’s corporate office is located. The properties consist of two operating areas: the Low Vol operations and the Mid Vol operations, which are situated south of U.S. Route 52. 138kV high-voltage power lines deliver power to the company's new 138/13kV substation where transformers reduce voltage for specific equipment requirements.
The Low Vol operations are located in McDowell County, West Virginia, near the communities of Northfork, Keystone, Eckman, Gary, and Welch. The Eckman Plant and Dan’s Branch Loadout are also located there, as well as the following underground mines: XMV Mine Nos. 35, 39, and 43. XMV Mine No. 32 was sold in 2017, and No. 42 was mined out and closed in 2018. The Red Hawk surface mine and Berwind Loadout finished primary reclamation in 2018.
The Mid Vol operations are in southeastern McDowell County, West Virginia and northwestern Tazewell County, Virginia. The nearest communities are Horsepen and Abbs Valley, Virginia as well as Anawalt, West Virginia.
The property has a long history of coal mining, mostly by predecessors in title to AMP. Significant underground mining of some of the deeper coal seams on the properties have occurred, notably the Pocahontas no. 3 and no. 4 seams. In addition, a substantial amount of the thicker coal outcrops have been previously contour mined, providing access for highwall mining and on-bench storage of excess spoil from future surface mining. AMP was created in 2008 when the Mid-Vol Coal Group and the Concept Mining Group were integrated. The properties are located in the Pocahontas Coalfields of the Central Appalachian Coal Basin. The Carboniferous age coal deposits are situated in the Pottsville Group, New River and Pocahontas Formations. The rock strata, including the coal deposits, are sedimentary rocks formed by alluvial, fluvial, and deltaic sediments deposited in a shallow, subsiding basin. The most common rock types are various types of sandstone and shale. Thecoal deposits are typically in relatively thin coal beds, one to five feet thick.
There are three active leases across the AMP operations which cover approximately 50% of the annual production. One of these expires in 2025 and the other two expire in 2027.
The combined production of the mines in 2018 was 2.1 million tonnes of washed and direct shippable coal.
ArcelorMittal Temirtau (Karaganda Coal Mines)
ArcelorMittal Temirtau has eight captive underground coal mines located in Karaganda in Kazakhstan, named Kostenko, Kuzembaeva, Saranskaya, Abayskaya, Kazakhstanskaya, Lenina, Shakhtinskaya and Tentekskaya and operates two coal preparation plants (CPP “Vostochnaya” and Temirtau Washery-2). In 1996, the mines entered into the structure of Ispat-Karmet JSC, Coal Division (now ArcelorMittal Temirtau JSC, Coal Division). The coal mines of ArcelorMittal Temirtau are located in the Karaganda Coal Basin. The basin is more than 3,000 square kilometers and was formed by strata of Upper Devonian and Carbonic ages, Mesozoic and Cainozoic formations. Due to structural peculiarities, the coal basin is divided into three geology-based mining areas: Karagandinskiy, Sherubay-Nurinskiy and Tentekskiy.
The mines are located in an area with well-developed infrastructure around the regional center of Karaganda city. Within a distance of 10 to 60 kilometers are the following satellite towns: Shakhtinsk, Saran and Abay, as well as Shakhan and Aktas. All mines are connected to the main railway, and coal is transported by railway to the coal wash plants and power stations.
The Kostenko mine merged with the neighboring Stakhanovskaya mine in 1998. The field of Kostenko mine falls within the Oktyabrskiy district of Karaganda city.
The Kuzembaeva mine was established in 1998. The eastern part of the mine falls within the center of Karaganda City.
The Saranskaya mine began operations in 1955. It merged with the Sokurskaya mine in mid-1997 and the Aktasskaya mine in 1998. Karaganda City is located approximately 12 kilometers to the northeast.
The Abayskaya mine began operations in 1961. In 1996, it was merged with the Kalinina mine. Karaganda City is located approximately 30 kilometers to the northeast.
The Kazakhstanskaya mine began operations in 1969. Karaganda City is located approximately 40 kilometers to the northeast. The railway station at MPS-Karabas is located approximately 30 kilometers to the southeast.
The Lenina mine was put in operation in 1964 and was subsequently merged with Naklonnaya no. 1/2 mine in 1968. Karaganda City, located 50 kilometers to the northeast. The railway station MPS-Karabas is located 38 kilometers to the southeast.
The Shakhtinskaya mine began operations in 1973. Karaganda City is located approximately 35 kilometers to the northeast.
The Tentekskaya mine began operations in 1979. Karaganda City is located approximately 40 kilometers to the northeast. The railway station MPS-Karabas is located approximately 39 kilometers to the southeast.
The Kostenko, Kuzembaeva, Saranskaya, Abayskaya, Kazakhstanskaya, Lenina, Shakhtinskaya and Tentekskaya mines, together with the Vostochnaya wash plant, receive energy from the high-voltage transmission lines of Karaganda.
The subsoil use contract and license (all coal mines in Temirtau) will be valid until January 21, 2022. Total area under mineral rights is 28,816 hectares.
The mines produce primarily cokingmetallurgical coal used in steel-making at ArcelorMittal Temirtau as well as thermal coal for ArcelorMittal Temirtau’s power plants. For beneficiation of coking coal, two washeries are operated.Temirtau. Surplus coal concentrate is
supplied to ArcelorMittal Kryvyi Rih in Ukraine, and to external customers in Russia and China. China.For further details on Kazakhstan mines production and other information, see "Properties and capital expenditures—Reserves and Resources (iron ore and coal)".
Mining
ArcelorMittal’s Mining segment has iron ore production facilities in Canada and Liberia. The following table provides an overview by type of facility of ArcelorMittal’s principal mining operations. For detailed information regarding ArcelorMittal's Mining segment and captive mines, see " Properties and capital expenditures—Reserves and Resources (iron ore and coal)".
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| Unit | | Country | | Locations | | ArcelorMittal Interest (%) | | Type of Mine | | Product |
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| AMMC | | Canada | | Mt Wright, Fire Lake and Port Cartier, Qc | | 85.0 | | Iron Ore Mine (open pit), pellet plant, railway and port | | Concentrate and pellets |
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| AML | | Liberia | | Yekepa | | 85.0 | | Iron Ore Mine (open pit) | | Fines |
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| Investments in joint ventures | | | | | | | | | | |
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| Unit | | Country | | Locations | | Capacity in 2021 (in million tonnes per year) | | Type of plant | | Products |
| AMNS India | | India | | Hazira, Gujarat | | 8.8 1 | | Integrated | | Flat |
| Acciaierie d'Italia | | Italy | | Taranto, Genova, Novi
Ligure, Socova, Raconiggi,
Salerno | | 7.8 1, 2 | | Integrated and
Downstream | | Flat, Pipes and Tubes |
| AMNS Calvert | | United States | | Calvert | | 5.3 3 | | Steel processing | | Steel finishing |
| VAMA | | China | | Loudi, Hunan | | 1.5 4 | | Steel processing | | Automotive steel finishing |
1.Crude steel capacity.
2.Reflects design capacity, whereas achievable capacity is limited to 6 million tonnes until completion of the environmental plan.
3.Flat-rolled carbon steel products production capacity.
4.Cold rolled coils, aluminized coils, hot dip galvanized coils production capacity.
AMNS India
On December 11, 2019, following the unconditional approval received by the Indian Supreme Court of ArcelorMittal's Resolution Plan for Essar Steel India Limited ("ESIL" subsequently renamed AMNS India) on November 15, 2019, ArcelorMittal and NSC, Japan’s largest steel producer and the third largest steel producer in the world, created a joint venture to own and operate AMNS India with ArcelorMittal holding a 60% interest and NSC holding 40% in accordance with the second amended joint venture formation agreement signed on December 8, 2019.
AMNS India is an integrated flat steel producer, and the largest steel company in western India. AMNS India’s main steel manufacturing facility is located at Hazira, Gujarat in western India. It also has:
–two iron ore beneficiation plants close to the mines in Kirandul and Dabuna, with slurry pipelines that then transport the beneficiated iron ore slurry to the pellet plants in the Kirandul-Vizag and Dabuna-Paradeep systems;
–a downstream facility in Pune (including a pickling line, a cold rolling mill, a galvanizing mill, a color coating mill and a batch annealing plant); and
–six service centers in the industrial clusters of Hazira, Indore, Bahadurgarh, Chennai, Kolkata and Pune. It has a complete range of flat rolled steel products, including value added products, and significant iron ore pellet capacity with two main pellet plant systems in Kirandul-Vizag and Dabuna-Paradeep, which have the potential for expansion. Its facilities are located close to ports with deep draft for movement of raw materials and finished goods.
In 2018,terms of iron ore pellet capacity, the Karaganda Coal Mines produced 3.8Kirandul-Vizag system has 8 million tonnes of metallurgical coalannual pellet capacity; and approximately 3.3the Dabuna-Paradeep system has 12 million tonnes of annual pellet capacity, following completion of expansion early September 2021. This expansion brings pellet capacity above AMNS India’s own requirements and provide the opportunity to improve operating income by fully utilizing such pellet capacity. AMNS India has also made acquisitions of certain ancillary assets including the Thakurani iron ore block in Keonjhar district of Odisha (operation reached full capacity at the end of the first quarter of 2021) acquired in February 2020, Odisha Slurry Pipeline Infrastructure Limited in July 2020 which secured an important infrastructure asset for raw material supply to the Paradeep pellet plant and Hazira steel plant and a captive power plant at Paradeep in Orissa in January 2021. In September 2021, AMNS India also commenced mining operations at its Ghoraburhani-Sagasahi iron ore block in Odisha. AMNS India also intends to debottleneck the existing operations (steel shop and rolling parts) to increase production to 8.8 million tonnes of rolled products. Over the next 5 years, the production capacity at the Hazira facility is planned to increase further from 8.8 million tonnes to 14.4 million tonnes of rolled products following the construction of coke oven, sinter plant, blast furnace, basic oxygen furnace and hot strip mill. Finally, AMNS India is evaluating downstream auto product expansion at the Hazira site to improve its product portfolio and serve the growing automotive demand in India.
On March 4, 2021, AMNS India and the Odisha government signed a memorandum of understanding for setting up a 12 million tonne integrated steel plant and a jetty in Kendrapara district of Odisha with an investment of INR 50,000 Crore, subject to several pre-conditions, including making provisions for land and iron ore mines. A pre-feasibility study report was consumedsubmitted to the state government in the third quarter of 2021, and AMNS India is currently engaged in further studies and clearances.
In the context of the creation of the joint venture, the Company has also transferred certain payments it had been required to make in 2018 and 2019 to the financial creditors of Uttam Galva
in order that the Resolution Plan would be eligible for consideration by ESIL's Committee of Creditors. On June 2, 2021, Uttam Galva's Committee of Creditors approved the resolution plan submitted by AMNS India. The resolution plan has been submitted for approval to the National Company Law Tribunal ("NCLT").
The joint venture partners continue to assess various options to secure the availability of additional ancillary assets, such as port facilities.
The Resolution Plan for ESIL includes a capital expenditure plan of approximately $2.6 billion to be implemented in two stages over six years. The first stage is completed and involved investments to increase the production of finished steel goods sustainably to 6.5 million tonnes per annum. It included completion of ongoing capital expenditure projects with respect to a coke oven, second sinter plant, third line CSP caster, Paradeep pellet plant and Dabuna beneficiation plant. The first stage also includes investment in maintenance to restore current assets, the implementation of an environmental management plan and the implementation of ArcelorMittal’s best practices on raw material sourcing, plant operations, sales and product mix (in particular through greater sophistication of the quality and markets of the steel produced with a focus on developing sales to the automotive industry), people management and health & safety. The second stage will involve investments to increase the production of finished steel goods from 6.5 million tonnes per annum to 8.5 million tonnes per annum by the Temirtauend of 2024, including asset reconfiguration and the addition of a coke oven, blast furnace and basic oven furnace.
In terms of mining assets, AMNS India operates the Thakurani mine and the Ghoraburhani-Sagasahi mine at exploration stage in the Keonjhar district of Odisha and in the Sudargarh district of Odisha, respectively, in India. AMNS India started mining at the Thakurani mine in 2020 and concentrated material is transported by pipeline to the Paradeep pellet plant, located on the coast at Bay of Bengal. AMNS India announced the commencement of operations at the Ghoraburhani-Sagasahi iron ore mine. The captive mine is set to produce more than 2 million tonnes of high-quality iron ore in 2022 and gradually ramp up production to a rated capacity of 7.2 million tonnes per annum. The iron ore will be supplied to the beneficiation plant in Dabuna from where the feed will reach the pellet plant at Paradeep and contribute significantly to meeting AMNS India’s long-term raw material requirements. For further details on Indian mines production and other information, see "Properties and capital expenditures—Reserves and Resources (iron ore and coal)".
Acciaierie d'Italia
Acciaierie d'Italia, a joint venture between the Company and Invitalia-Agenzia nazionale per l'attrazione degli investimenti e lo svliuppo d'impresa SpA ("Invitalia"), an Italian state-owned company, is the leading steel operations.producer in Italy, Europe’s second largest steel consuming economy. Acciaierie d'Italia produces high-quality and sustainable steel to be used in a range of vital industry sectors across the domestic steel market such as construction, energy, automotive, home appliances, packaging and transport and for international export. Acciaierie d'Italia has operations across various structurally linked operating sites including Europe’s biggest single-site integrated steel facility in Taranto and rolling mills in Genoa and Novi Ligure. Genoa is also an important hub in terms of intermodal logistics.
On April 14, 2021, pursuant to the investment agreement of December 10, 2020 forming a public-private partnership between Invitalia and AM InvestCo Italy SpA ("AM InvestCo", thereupon renamed Acciaierie d'Italia Holding), ArcelorMittal's subsidiary party to the lease and purchase agreement for the Ilva business, Invitalia invested €400 million ($476 million) of new equity into AM InvestCo, providing Invitalia with a 38% shareholding, equal (50%) voting and governance rights and therefore joint control. Accordingly, as of April 14, 2021, the Company derecognized assets and liabilities of Acciaierie d'Italia Holding and its subsidiaries from its consolidated statement of financial position and accounted for its 62% interest in the joint venture under the equity method. The investment agreement stipulates a second equity injection by Invitalia, of up to €680 million, to fund the completion of the purchase of Ilva’s business by Acciaierie d'Italia Holding, subject to certain conditions precedent to be met by May 2022. At this point, Invitalia’s shareholding in Acciaierie d'Italia would increase to 60%. ArcelorMittal may need to invest up to €70 million to the extent necessary to retain a 40% shareholding and joint control over the company. For more details, see “Introduction—Key transactions and events in 2021" and "Introduction—Risk factors".
The industrial plan agreed between ArcelorMittal and Invitalia in connection with the December 2020 investment agreement involves investment in lower-carbon steelmaking technologies, including the construction of a 2.5 million tonne electric arc furnace, which is expected to open in mid-2024, and the relining of BF #5, which is expected to start production in 2024. This industrial plan targets reaching 8 million tonnes of production in 2025 (crude steel production is limited to 6 million tonnes until the environmental plan is completed). It integrates a series of public support measures including ongoing government funded employment support and includes, for the period between 2021 and 2025, environmental capital expenditures of €117 million and industrial capital expenditures of €957 million as well as
capital expenditures of €226 million for the revamp of blast furnace #5 and €260 million for the construction of the EAF.
Calvert
AMNS Calvert ("Calvert"), a joint venture between the Company and NSC, is a steel processing plant in Calvert, Alabama, United States. It's 2,500 acre property layout allows for optimal product flow and room to expand. It has a HSM with 5.3 million tonnes capacity, pickling and cold rolling facilities with 3.6 million tonnes capacity and finishing facilities with a total capacity of 2.1 million tonnes. Calvert had a 6-year agreement to purchase 2 million tonnes of slabs annually from ThyssenKrupp Steel USA ("TK CSA"), subsequently acquired by Ternium S.A. in December 2017, an integrated steel mill complex located in Rio de Janeiro, Brazil, using a market-based price formula. The slab purchase agreement with Ternium S.A was.finished with last purchases concluded in May 2021.The remaining slabs for Calvert's operations are sourced from ArcelorMittal plants in Brazil and Mexico and from ArcelorMittal USA, which following the divestment to Cleveland-Cliffs, entered on December 9, 2020 into a new five year agreement with Calvert (with an automatic three year extension unless either party provides notice of intent to terminate) for 1.5 million tons annually for the initial term and 0.55 million tons annually under the extension and which, in each case, can be reduced with a six month notice. ArcelorMittal is principally responsible for marketing the product on behalf of the joint venture. Calvert serves the automotive, construction, pipe and tube, service center and appliance/ HVAC industries.
Calvert plans to invest $775 million for an on-site steelmaking facility through a 1.5 million tonnes capacity EAF (produce slabs for the existing operations, replacing part of the purchased slabs). Construction commenced in March 2021 after obtaining all environmental permits, and the facility is expected to start in the first half of 2023. Equipment manufacturer selection is concluded, site preparation, underground electrical works and piling activities are underway. The plan includes an option to add further capacity of 1.5 million tonnes at lower capital expenditure intensity. VAMA
Valin ArcelorMittal Automotive Steel (“VAMA”) is a joint venture between ArcelorMittal and Hunan ValinSteel Co., Ltd which produces steel (1.5 million tonne capacity) for high-end applications in the automotive industry. VAMA supplies international automakers and first-tier suppliers as well as Chinese car manufacturers and their supplier networks. It is well positioned to take advantage of the growing electric vehicle market and plans to complete its project to increase capacity to 2 million tonnes by the end of 2022 with self-funded expansion capital expenditures expected to be $165 million.
Capital expenditure projectsexpenditures
The Company’s capital expenditures were $3.3$3.0 billion, $2.8$2.4 billion and $2.4$3.6 billion for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
The following tables summarize the Company’s principal investmentgrowth and optimization projects involving significant capital expenditureexpenditures completed in 20182021 and those that are currently ongoing. In 2019,2022, capital expenditures are expected to be approximately $4.3$4.5 billion. ArcelorMittal expects to fund these capital expenditures primarily through internal sources. See “Operating and financial review—Liquidity and capital resources—Sources and uses of cash—Net cash used in investing activities” and note 3.1 to the consolidated financial statements for further information, including capital expenditures by segment.
Completed projects in most recent quarters
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| Completed projects | | |
| Segment | | Site / Unit | | Project | | Capacity / particulars | | Key date / Forecast completion | | Note # |
| NAFTA | | Mexico | | New Hot Strip Mill | | Production capacity of 2.5 million tonnes per year | | 2021 | | a |
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| Ongoing Projects* | | |
| Segment | | Site / Unit | | Project | | Capacity / particulars | | Key date / Forecast completion | | Note # |
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RegionNAFTA
| | SiteArcelorMittal Dofasco (Canada)
| | ProjectHot strip mill modernization
| | Capacity / particularsReplace existing three end of life coilers with two state of the art coilers and new runout tables | | Actual completionH1 2022 | | Note #b |
EuropeNAFTA | | ArcelorMittal Differdange (Luxembourg)Dofasco (Canada) | | Modernization#5 CGL conversion to AluSi® | | Addition of finishingup to 160 thousand tonnes per year Aluminum Silicon (AluSi®) coating capability to #5 Hot-Dip Galvanizing Line for the production of "Grey rolling mill"Usibor® steels | | Revamp finishingH2 2022 | | c |
| Brazil | | ArcelorMittal Vega Do Sul | | Expansion project | | Increase hot dipped / cold rolled coil capacity and construction of a new 700 thousand tonne continuous annealing line ("CAL") and continuous galvanizing line ("CGL") combiline | | Q4 2023 | | d |
| Mining | | Liberia | | Phase 2 premium product expansion project | | Increase production capacity to achieve full15 million tonnes per year | | Q4 2023 | | e |
| NAFTA | | Las Truchas mine (Mexico) | | Revamping and capacity increase to 2.3 million tonnes per year | | Revamping project with 1 million tonnes per year pellet feed capacity increase (to 2.3 million tonnes per year) with DRI concentrate grade capability | | H2 2023 | | f |
| Brazil | | Serra Azul mine | | 4.5 million tonnes per year direct reduction pellet feed plant | | Facilities to produce 4.5 million tonnes per yearDRI quality pellet feed by exploiting compact itabirite iron ore | | H2 2023 | | g |
| Brazil | | Monlevade | | Sinter plant, blast furnace and melt shop | | Increase in liquid steel capacity by 1 million tonnes per year; sinter capacity of grey mill at 850 thousand tonnes/2.3 million tonnes per year | | Q2 2018H2 2024 | |
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EuropeACIS | | Gent & Liège (Europe Flat automotive UHSS Program)ArcelorMittal Kryvyi Rih (Ukraine) | | Gent: Upgrade HSMNew pellet plant | | Facilities to produce 5.0 million tonnes per year pellets, replacing two existing sinter plants ensuring environmental compliance and new furnace Liège: Annealing line transformationimproving productivity | | Increase approximately 400 thousand tonnes in Ultra High Strength Steel capabilitiesQ4 2023 | | Q2 2018 | |
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NAFTA
Brazil | | Indiana Harbor (US)Barra Mansa | | Indiana Harbor “footprint optimization project”New section mill | | RestorationIncrease capacity of 80” HSMHAV bars and upgrades at Indiana Harbor finishingsections by 0.4 million tonnes per year | | 4Q 2018
Q1 2024 | |
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Ongoing Projects* | |
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| Region | | Site | | Project | | Capacity / particulars | | Forecast completion | | Note # |
ACIS
| | ArcelorMittal Kryvyi Rih (Ukraine)
| | New LF&CC 2&3
| | Facilities upgrade to switch from ingot to continuous caster route. Additional billets of 290 thousand tonnes over ingot route through yield increase | | 2019
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| Europe | | Sosnowiec (Poland) | | Modernization of Wire Rod Mill | | Upgrade rolling technology improving the mix of HAV products and increase volume by 90 thousand tonnes | | 2019 | |
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| NAFTA | | Mexico | | New Hot Strip Mill | | Production capacity of 2.5 million tonnes per year | | 2020 | | 1 |
NAFTA
| | ArcelorMittal Dofasco (Canada)
| | Hot Strip Mill Modernization
| | Replace existing three end of life coilers with two states of the art coilers and new runout tables. | | 2020 | | 2 |
| NAFTA | | Burns Harbor (US) | | New walking beam Furnaces | | Two new walking beam reheat furnaces bringing benefits on productivity, quality and operational cost | | 2021 | |
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| Brazil | | ArcelorMittal Vega Do Sul | | Expansion project | | Increase hot dipped / cold rolled coil capacity and construction of a new 700 thousand tonnes continuous annealing line (CAL) and continuous galvanizing line (CGL) combiline | | 2021 | | 3 |
| Brazil | | Juiz de Fora | | Melt shop expansion | | Increase in melt shop capacity by 0.2 million tonnes/year | | On hold | | 4 |
| Brazil | | Monlevade | | Sinter plant, blast furnace and melt shop | | Increase in liquid steel capacity by 1.2 million tonnes/year; | | On hold | | 4 |
| Sinter feed capacity of 2.3 million tonnes/year | | | |
| Mining | | Liberia | | Phase 2 expansion project | | Increase production capacity to 15 million tonnes/year | | Under review | | 5 |
* Ongoing projects refer to projects for which construction has begun (excluding various projects that are under development), even if such projects have been placed on hold pending improved operating conditions.
a.On September 28, 2017, ArcelorMittal announced a major $1 billion investment program at its Mexican operations, which is focused on building ArcelorMittal Mexico’s downstream capabilities, sustaining the competitiveness of its mining operations and modernizing its existing asset base. The program is designed to enable ArcelorMittal Mexico to meet the anticipated increased demand requirements from domestic customers, realize in full ArcelorMittal Mexico’s production capacity of 5.3 million tonnes and significantly enhance the proportion of higher added-value products in its product mix. The main investment will be the construction of a new hot strip mill ("HSM"). Upon completion, the project will enable ArcelorMittal Mexico to produce approximately 2.5 million tonnes of flat rolled steel, approximately 1.5 million tonnes of long steel and the remainder made up of semi-finished slabs. Coils from the new hot strip mill will be supplied to domestic, non-auto and general industry customers. The hot strip mill project commenced at the end of the fourth quarter of 2017 and the first coils were produced at the end of 2021 with ramp up expected to full capacity
during 2022. The hot skin pass mill ("HSPM") is expected to be completed in the second half of 2022. In addition to the HSM project, a push-pull pickling line ("PPPL") is to be constructed to capture additional domestic volume through hot rolled pickled and oiled products. The PPPL has a capacity of up to 0.75 million tonnes per year and the first pickled and oiled coils are expected to be produced by the second half of 2024.
2 b.Investment in ArcelorMittal Dofasco (Canada) to modernize the hot strip mill. The project is to install two new state of the art coilers and runout tables to replace three end of life coilers. The strip cooling system will be upgraded and include innovative power cooling technology to improve product capability. The project is estimated to be completed in the first half of 2022.
c.Investment to replace #5 Hot-Dip Galvanizing Line Galvanneal coating capability with 160 thousand tonnes per year Aluminum Silicon (AluSi®) capability for the production of ArcelorMittal’s patented Usibor® Press Hardenable Steel for automotive structural and safety components. With this investment, ArcelorMittal Dofasco will become the only Canadian producer of AluSi® coated Usibor® and it complements additional strategic North America developments, including a new EAF and caster at Calvert in the US and a new hot strip mill in Mexico, and will allow to capitalize on increasing Auto Aluminized PHS demand in North America. The project is expected to be completed in 2020.2022, with the first coil planned for the second half of 2022.
3 d.In August 2018,February 2021, ArcelorMittal announced the resumption of the Vega Do Sul expansion to provide an additional 700 thousand tonnes of cold-rolledcold rolled annealed and galvanized capacity to serve the growing domestic market. The three-year, $0.3approximately $0.35 billion investment program to increase rolling capacity with construction of a new continuous annealing line and CGL combiline (and the option to add an approximately 100 thousand tonnes organic coating line to serve construction and appliance segments), and will upon completion will strengthen ArcelorMittal’s position in the fast growing automotive and industry markets through Advanced High Strength SteelAHSS products. The investmentsinvestment will look to facilitate a wide range of products and applications whilst further optimizing current ArcelorMittal Vega facilities to maximize site capacity and its competitiveness, considering comprehensive digital and automation technology.
4 During the second quarter Equipment delivery is progressing in accordance with plan. Civil works and erection of 2013, ArcelorMittal restarted its Monlevade expansion projects, which was initially expectedacid regeneration plant and repair and inspection line is well advanced. The project is estimated to be completed in two phases, with the first phase focused mainly on downstream facilities consisting of a new wire rod mill with additional capacity of 1.05 million tonnes of coils per year and estimated investment of $280 million. The investment also included a rebar revamping in Juiz de Fora to increase rebar production from 50,000 to 400,000 tonnes per year replacing equivalent wire rod production capacity that would be transferred to Monlevade. The Monlevade wire rod expansion project was completed in the fourth quarter of 2015 and the Juiz de For a rebar revamping was concluded in the last quarter of 2014, each in line with its respective budget. The Company does not expect to increase shipments from Monlevade until domestic demand improves. The Juiz de Fora meltshop expansion project to increase meltshop capacity by 200,000 tonnes is currently on hold. A decision regarding the execution of the second phase of the projects (for upstream facilities) will be taken at a later date.2023.
5 e.ArcelorMittal Liberia has been operating a 5 million tonnes DSO since 2011 (Phase 1). In 2013, the Company had previously announcedstarted construction of a Phase 2 project that envisaged the construction of 15 million tonnes per year of concentrate sinter fines capacity and associated infrastructure. The Phase 2infrastructure; this project was initially delayedthen suspended due to the declarationonset of force majeure by contractors in August 2014 due to the Ebola virus outbreak in West Africa and then reassessed following rapid iron ore price declines over the ensuing period.subsequent force-majeure declaration by the onsite contracting companies. On September 10, 2021, ArcelorMittal Liberia is now undertaking the engineering phase of a feasibility study to identify the optimal concentration solution for utilizing the resources at Tokadeh. The feasibility study is expected to be completed by mid 2019.
In December 2006,signed with the Government of the Republic of Liberia and ArcelorMittal announced the finalization of a firstan amendment to agreements relatingits MDA which is currently under legislative ratification process. Final detailed engineering is in progress, whilst site preparation and tenders for key construction contracts and remaining equipment are underway. Under this project, first concentrate product is expected in late 2023, ramping up to an iron ore mining15 million tonnes per year thereafter. The capital expenditures required to conclude the project, estimated at approximately $0.8 billion, is under review given impacts of inflation and infrastructure developmentenlarged scope. Under the agreement, the Company has further expansion opportunities up to 30 million tonnes per year. Other users may be allowed to invest for additional rail capacity.
f.ArcelorMittal Mexico is investing approximately $150 million to increase pellet feed production by 1 million tonnes per year to 2.3 million tonnes per year and improve concentrate grade in Las Truchas. This project entered into in 2005. A further amendmentwill enable concentrate production to the 2006 Mineral Development Agreement was negotiatedblast furnace route (2,0 million tonnes per year) and ratifiedDRI route (0.3 million tonnes per year) for a total of 2.3 million tonnes per year. Primary target is to supply ArcelorMittal Mexico steel operations with high quality feed. Procurement of long lead time items (mills and pumps) and early works have started. Detailed engineering is ongoing. Road works are in September 2013. The project consists of reopening mines in Nimba County, rehabilitating 260 kilometers of abandoned railway, developing the Buchanan port for shipping traffic and includes a number of important social initiatives, including providing training and health facilities for employees.
progress. Production of direct shipping ore ("DSO") commencedstart-up is estimated in the second half of 2011 which increased2023.
g.Approximately $350 million investment at Serra Azul (Brazil) to a capacity of fiveconstruct facilities to produce 4.5 million tonnes in 2013per year of DRI quality pellet feed to primarily supply ArcelorMittal Mexico steel operations. The project will allow to mine the compact itabirite iron ore. Environmental and produced 4.3 million tonnesoperations licenses have been cleared. Detailed engineering is ongoing, hiring of drilling companies and procurement of main equipment is initiated. Project start up is estimated in 2015. Following a period of exploration cessation caused by the onset of Ebola, ArcelorMittal Liberia recommence drilling for DSO resource extensions in late 2015. Drilling for orebody extensions commenced and in 2016 the operation at Tokadeh was right sized to 2 to 3 million tonnes to focus on its natural Atlantic markets. ArcelorMittal Liberia moved ore extraction from its depleting DSO (direct shipping ore) deposit at Tokadeh to the nearby, lower impurity (DSO Gangra) deposit. In the second half of 2017,2023.
h.The Monlevade upstream expansion project consisting of the sinter plant, blast furnace and meltshop has recommenced in late 2021, following the anticipated improvement in Brazil domestic market. Basic engineering is being finalized and hiring of civil works and piling companies has started. The project is estimated to be completed in the second half of 2024 with a capital expenditure requirement of approximately $0.5 billion.
i.Investment in ArcelorMittal started DSO operations from the Gangra deposit, which hasKryvyi Rih to build a lower strip ratio and higher grade DSO. Production in 2018 was 4.6new 5.0 million tonnes belowper year pellet plant which, together with the full annual rate capacityongoing modernization of 5Sinter Plant 2, will ensure that all sinter operations in Kryvyi Rih are compliant with dust emissions environmental regulations and will enable cost reduction, quality and productivity improvement. In addition, the project will enable a CO2 footprint improvement by 750 thousand tonnes CO2 per year. First pellet is expected to be produced in the fourth quarter of 2023 with a capital expenditure requirement of approximately $0.3 billion.
j.New approximately $0.25 billion investment in sections mill at Barra Mansa (Brazil) with 400 thousand tonnes per year production capacity. The aim of the project is to deliver higher added value products ("HAV") (merchant bar and special bars) to increase domestic market share in HAV products and to enhance profitability. The project is expected to commence in 2022 and be completed by the first quarter of 2024.
In addition, in 2021, the Company approved 40 multi-year projects with identified environmental benefits and involving capital expenditures of $565 million tonnes.and 34 multi-year projects with identified energy benefits and involving capital expenditure of $442 million. The latter includes 11 multi-year projects specifically targeted to decarbonization involving capital expenditures of $174 million. Capital expenditures related to decarbonization initiatives amounted to $0.1 billion for the year ended December 31, 2021 and are expected to increase to $0.3
billion (net of government support) in 2022 with the expected completion of the Carbalyst and Torero projects in Ghent. See also further information on key environmental projects in "Business overview—Sustainable development".
ArcelorMittal's joint ventures have also announced significant capital expenditure projects. See "Property, plant and equipment—Investments in joint ventures".
Updates on previously announced investment projects
In addition to the significant investment projects presented in the above table, the Company had previously announced several large investment projects. The status of certain of such projects as of the date of this annual report on Form 20-F is described below. While the Company continues to study certain of its key previously announced investment projects summarized below, no assurance can be given that they will proceed.
India greenfield projects. The Company explored investment opportunities in India and in June 2010, entered into a memorandum of understanding with authorities in the state of Karnataka in South India that envisaged the construction of a six million tonnetonnes steel plant with a captive 750 megawatt power plant, representing a potential aggregate investment of $6.5 billion. The Company has completed all the necessary formalities for acquiring the land by signing and executing a lease cum sale agreement for 2643.25 acres of land on December 26, 2018 and the project is currently under review.
Baffinland (Canada(Canada)). In March 2011, ArcelorMittal acquired 70% of Baffinland Iron Mines Corp. (“Baffinland”),the Mary River mine project, with Nunavut Iron Ore Inc. (“Nunavut Iron Ore”NIO”), an affiliate of The Energy and Minerals Group (“EMG”), owning the remaining 30%. This project consists of an open pit high-grade iron ore mine located in the Mary River area of Baffin Island, Nunavut (Canada). In February 2013, ArcelorMittal and Nunavut Iron OreNIO entered into a joint arrangement and equalized their shareholdings at 50/50. ArcelorMittal retained operator and marketing rights and, in consideration for its increased shareholding, Nunavut Iron Ore assumed certain project funding obligations. During 2016, 2017 and 2018, following part of the capital increases being subscribed only by Nunavut Iron Ore, ArcelorMittal’s shareholding decreased to 44.54%, 31.07% and 28.76%, respectively. The project began commercial production in 2016 (for further details, see “Item 4.D—Information on2016. Subsequently, following equity funding commitments and conversion of preferred shares into equity, both exercised by NIO only, ArcelorMittal’s share over time decreased to 25.70% as of December 31, 2019 and 25.23% as of December 31, 2020 and 2021. In September 2020, the Company—Property, plant and equipment”corporate structure was reorganized whereby NIO became the parent company of Baffinland Iron Mines Corporation ("Baffinland")., while ArcelorMittal together with EMG became shareholders of NIO with ArcelorMittal’s share in NIO. Following this reorganization, ArcelorMittal retained its participation in the project, holding a 25.23% share in NIO.
Baffinland has also has approved Phase 3 of the project which involvesinvolving the construction of a railway, to replace the existing truck-haul operation for transport of iron ore from Mary River to Milne Inlet, as well as expansion of mining, crushing and screening operations and port shiploading capacity. The objective of Phase 3ship loading capacity (the "Rail Expansion"), which is to increase production capacity to 12 million tonnes per year. Baffinland has budgeted approximately $936.8critical for Baffinland's future. Approximately $1,385 million of capital expenditures were budgeted for Phase 3, which willthis project, to be funded with operating cash flows, additional equity and new debt. Nunavut Iron Ore has committed to provide up to $450 million ofBy mid-2020, NIO completed its exclusive equity funding for Phase 3.commitment of $575 million towards the Rail Expansion. Subject to certain conditions, ArcelorMittal hadhas an option to provide up to $85 million of equity funding, for Phase 3 which will expireexpires on March 31, 2019. ArcelorMittal had an option2023 (as agreed as part of the reorganization described above).
On January 31, 2022, Baffinland filed its closing statement to convert preference sharesthe Nunavut Impact Review Board (“NIRB”) in support of the Company’s proposed Rail Expansion. NIRB's recommendation to the Canadian Federal Government is expected in May 2022 and final regulatory decisions on the Rail Expansion are expected to be announced up to 90 days after NIRB recommendation. As of the date of this report, Baffinland also continues evaluating the impact of COVID-19 on delayed regulatory approvals costs and overall inflationary pressures faced by October 31, 2017 but this was not exercised, resulting in a subsequent dilution of ArcelorMittal’s shareholding. If Nunavut or other parties fund further phases, it would result in further dilution of ArcelorMittal’s shareholding. Sincethe mining industry impacting labor, supply chain rates and lead times.
Between August 2016 and June 2018, ArcelorMittal and Nunavut Iron OreEMG shared operator rights for Baffinland’s operations. Since July 2018 the project has been operated by EMG. ArcelorMittal’s marketing rights expired at the end of 2019. In 2020, ArcelorMittal provided transitional marketing services to Baffinland.
Reserves and Resources (iron ore and coal)
ArcelorMittal has iron ore and coal production facilities in Canada, Mexico, South America, Europe, Africa, CIS and in India through its joint venture AMNS India. The Company has two categories of mining operations, namely captive mines, and seaborne oriented operations. Captive mines, whose production is mainly consumed by their respective steel segments, form part of such segments. The seaborne iron ore mining operations at AMMC and AML correspond to the Mining segment.
ArcelorMittal considers its iron ore and coal mining operations in aggregate to be material to its business.
The following table provides an overview of ArcelorMittal’s principal mining operations. The production of Run of Mine ("ROM") iron ore and coal is that which is attributable to ArcelorMittal, based on ArcelorMittal's shared operator rights terminated on June 30, 2018, butownership interest in the mining operations. All production figures are stated as wet tonnages.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operations/Projects | | Segment | | % of Ownership Interest | | Type of Ownership Interest | | In Operation
Since | |
| Iron Ore |
| Mexico (Excluding Peña Colorada) | | NAFTA | | 100.0 | | subsidiary | | 1976 | |
| Peña Colorada - Mexico | | NAFTA | | 50.0 | | joint operation | | 1974 | |
| Brazil | | Brazil | | 100.0 | | subsidiary | | 1944 | |
| Bosnia | | Europe | | 51.0 | | subsidiary | | 2008 | |
| AMKR Open Pit | | ACIS | | 95.1 | | subsidiary | | 1959 | |
| AMKR Underground | | ACIS | | 95.1 | | subsidiary | | 1933 | |
| Kazakhstan Open Pit | | ACIS | | 100.0 | | subsidiary | | 1976 | |
| Kazakhstan Underground | | ACIS | | 100.0 | | subsidiary | | 1956 | |
| AML | | Mining | | 85.0 | | subsidiary | | 2011 | |
| AMMC | | Mining | | 85.0 | | subsidiary | | 1976 | |
| India | | Not Consolidated | | 60.0 | | joint venture | | 1961 | |
| Baffinland | | Not Consolidated | | 25.2 | | associate | | 2014 | |
2019 aggregate ROM iron ore production, millions of tonnes1 | | 131.1 |
2020 aggregate ROM iron ore production, millions of tonnes1 | | 132.7 |
| 2021 aggregate ROM iron ore production, millions of tonnes | | 115.1 |
| Coal |
| Karaganda - Kazakhstan | | ACIS | | 100.0 | | indirect, subsidiary | | 1956 | |
2019 aggregate ROM coal production, millions of tonnes2 | | 13.2 |
2020 aggregate ROM coal production, millions of tonnes2 | | 12.3 |
| 2021 aggregate ROM coal production, millions of tonnes | | 8.3 |
1.Total ROM Iron ore production in 2019 and 2020 included Hibbing and Minorca mining operations, which were sold in 2020.
2.Total ROM Coal production in 2019 and 2020 included Princeton mining operations, which were sold in 2020.
Summary of ArcelorMittal’s Mining Operations
ArcelorMittal's iron ore mining operations include the captive mines of the NAFTA, Brazil, Europe and ACIS segments and AMMC and AML in the Mining segment. ArcelorMittal has either 100%, equal or majority interest in these mining operations. In addition, the Company willowns a 60% interest in the AMNS India joint venture and has a 25.23% non-controlling interest in Baffinland.
ArcelorMittal's coal mining operations include the captive coal mines in Kazakhstan forming part of the ACIS segment. ArcelorMittal has a 100% interest in these mining operations.
Iron ore operations
NAFTA
ArcelorMittal Mexico Mining Assets
ArcelorMittal Mexico operates three iron ore mines in Mexico, the San José and Las Truchas mines, and, through a joint
operation with Ternium S.A., the Peña Colorada mine. In 2019, the El Volcan mine was closed and ArcelorMittal continues to operate certain parts of the El Volcan facilities to process material coming from the San José mine.
LOCATION MAP - NAFTA | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | |
| Peña Colorada - Mexico | | 50.0 | | | | | | | | | |
| At 100% | | | | 11.8 | 4.1 | | 11.4 | 3.8 | | 7.8 | 4.0 |
| At ownership interest (50%) | | | | 5.9 | 2.05 | | 5.7 | 1.9 | | 3.9 | 2.0 |
| Mexico (Excluding Peña Colorada) | | 100.0 | | | | | | | | | |
| Las Truchas | | | | 4.4 | 1.5 | | 4.6 | 1.6 | | 4.7 | 1.4 |
| San Jose/El Volcan | | | | 3.0 | 1.3 | | 2.8 | 1.2 | | 2.4 | 0.8 |
| | | | | | | | | | | |
| NAFTA, (100% basis) | | | | 19.2 | 6.9 | | 18.8 | 6.6 | | 15.0 | 6.1 |
| NAFTA, (ArcelorMittal ownership basis) | | | | 13.3 | 4.8 | | 13.1 | 4.7 | | 11.1 | 4.2 |
Peña Colorada
Consorcio Minero Benito Juarez Peña Colorada, S.A. de C.V. ("Peña Colorada") is the operator of a production stage surface iron ore mine, located 60 kilometers to the north-east of the port city of Manzanillo, in the province of Minatitlán in the north-western part of the State of Colima, Mexico. ArcelorMittal holds 50% of Peña Colorada through a joint operation with Ternium S.A. ("Ternium"), who owns the other 50% interest.
Peña Colorada holds mineral rights over 39,977 hectares (98,782 acres) across 20 concessions. Government concessions are granted by the Mexican federal government for a period of 50 years and are renewable. The expiration dates of the current mining concessions range from 2042 to 2062.
Peña Colorada is a complex polyphase iron ore deposit. The iron mineralization at Peña Colorada consists of banded to massive concentrations of magnetite within breccia zones and results from several magmatic, metamorphic and hydrothermal mineralization stages with associated skarns, dykes and late faults sectioning the entire deposit.
Peña Colorada operates an open pit mine as well as a concentrating facility and a two-line pelletizing facility. The ore is mined by truck and shovel/loader method. The beneficiation plant is located at the mine, with the pelletizing plant located in Manzanillo. Major processing facilities include a primary crusher, a dry cobbing plant, two autogenous mills, three horizontal and two vertical ball mills and several stages of magnetic separation. The concentrate is sent as a pulp through a pipeline from the mineral processing plant to the pelletizing facilities. The magnetite concentrate and pellets are transported from Manzanillo to ArcelorMittal Mexico, as well as to Ternium’s steel plants, by ship and by rail.
Las Truchas
The Las Truchas is a production stage mine located approximately 27 kilometers north-west of the town of Lázaro Cárdenas in the State of Michoacán, Mexico. ArcelorMittal holds an indirect 100% interest.
ArcelorMittal Mexico holds mineral rights over 53,812 hectares, of which 4,261 support the Las Truchas operations in Mexico. Government concessions are granted by the Mexican federal government for a period of 50 years and are renewable. The expiration dates of the current mining concessions range from 2044 to 2059.
The Las Truchas deposits consist of massive concentrations of magnetite of irregular morphology. The main Las Truchas deposits occur along a geological trend that is about seven kilometers long and about two kilometers wide. The Las Truchas mineral deposits have been classified as hydrothermal deposits, which may have originated from late-stage plutonic activity injecting through older sedimentary rocks. The mineralization of the Las Truchas iron deposits occurs in disseminated and irregular massive concentrations of magnetite within metamorphic rocks and skarns. The mineralization also occurs as fillings of faults, breccia zones, and fractures.
Mining activities consist of open pit mining, crushing, dry cobbing to generate pre-concentrate, and a concentration plant.
The concentrator includes one primary crusher, two secondary crushers and three tertiary crushers, two ball mills and two bar mills and two wet magnetic separation circuits. The concentrated ore is pumped from the mine site through a 26 kilometer slurry pipeline to the steel plant facility in Lázaro Cárdenas.
San José
The San José Mine is a production stage iron ore mine located approximately 40 kilometers South-East of the town of Culiacán, the capital of the State of Sinaloa, México. Mining at San José began in 1946 and was handled by multiple owners until 2019, when ArcelorMittal secured a lease agreement and commenced mining and pre-concentration operations. ArcelorMittal’s interest in the San José mine is 100%.
ArcelorMittal Mexico holds mineral concessions for 39 hectares supporting the San José mining and pre-concentration operations. Additionally, ArcelorMittal Mexico holds mineral rights over 1,053 hectares which previously supported its now closed El Volcan operations, located approximately 68 kilometers northwest of the city of Obregon. The El Volcan processing facilities, including the concentration plant and port installations, continue to retain marketingbe operated processing ores from the San José mine.
ArcelorMittal Mexico has a lease agreement secured from Ejido Las Flechas for both the land and the San José facilities, which is in place for a period of ten years and is valid until 2028. Previous mine operators have secured surface rights to the project from the Ejido in the past and it is reasonable to assume that ArcelorMittal Mexico can continue to secure surface rights beyond 2028.
San José is a metasomatic deposit, produced by hydrothermal replacement, with epidote-garnet skarns located in the contact zone between a Cretaceous limestone unit and a granodioritic intrusive. The mineralization is primarily composed of magnetite, with minor hematite. Accessory sulfide minerals including pyrite and chalcopyrite are also present.
Ore is mined from the open pit using conventional mining methods and processed into a pre-concentrate by a crushing and screening circuit with dry magnetic separation. The pre-concentration facilities at the mine include one primary crusher, one secondary crusher, a dry cobbling high-intensity magnetic pulley and one tertiary crusher. The pre-concentrate is then shipped 30 kilometers by road to a rail head located in Quila, where it is railed 450 kilometers to the El Volcan concentrator. The concentration plant at El Volcan includes two ball mills, 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, a conveyor, transfer towers
and two ship loading systems. At El Volcan the pre-concentrate is milled and concentrated via wet magnetic separation to produce the final concentrate. The final concentrate is transported 150 kilometers by rail to the Port of Guyamas where it is loaded onto ships and sent 1,400 kilometers to the Port of Lazaro Cardenas.
BRAZIL
ArcelorMittal Brazil operates the Andrade mine and Serra Azul Mineração mines.
LOCATION MAP - BRAZIL Mining Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | |
| Andrade | | 100 | | 2.1 | 1.8 | | 1.9 | 1.6 | | 1.5 | 1.5 |
| Serra Azul | | 100 | | 2.6 | 1.6 | | 2.6 | 1.6 | | 1.7 | 0.9 |
| Brazil | | | | 4.7 | 3.4 | | 4.5 | 3.2 | | 3.2 | 2.4 |
| | | | | | | | | | | |
| | | | | | | | | | | |
Andrade Mine
The Andrade Mine is a production stage open pit iron ore mine, located at 5 kilometers from the town of João Monlevade and 80 kilometers east of Belo Horizonte in the Brazilian state of Minas Gerais. The Andrade mine is 100% owned and operated by the Long products division of ArcelorMittal Brazil, with all production supplying the Monlevade steel plant.
ArcelorMittal’s operations control all of the mineral rights and surface rights needed to mine and process its estimated iron ore reserves, dominated by directly shippable hematite ore. ArcelorMittal Brasil holds mineral rights of over 2,421 hectares and land lease over 3,347 hectares to support its current operation. Mining legislation in Brazil does not predetermine the duration of mineral rights and as such these rights are considered valid to the point of mine exhaustion.
The Andrade deposit is located in the north-eastern portion of the Iron Quadrangle. The base stratigraphic section consists of quartzites and sericite-quartzites of the Moeda formation, followed by schists of the Batatal formation, both forming the Caraça group. The iron rich mineral bodies are part of the overlying Cauê formation, which represents the base of the Itabira Group. The Caraça and Itabira groups compose the base of the Paleoproterozoic Minas Supergroup. The Cauê formation rocks are covered by dolomites and marbles, and sometimes weathered phylites and schists, belonging to the Gandarela formation.
In addition to the open pit mine, the Andrade mine operates a crushing and screening facility, as well as a concentration plant used to improve the quality of the sinter feed to the Monlevade plant. This concentration plant commenced production in early 2020 and concentrates the itabirite ores, enabling mixing with the higher-grade hematite ores. The concentrated iron ore product is transported to the Monlevade steel plant through a private railway line.
Serra Azul Mine
ArcelorMittal Mineração Serra Azul mine is a production stage open pit iron ore mine located approximately 50 kilometers southwest of Belo Horizonte in the Minas Gerais State of Brazil. The mine is 100% owned and operated by ArcelorMittal Brasil.
ArcelorMittal Brasil controls all of the mineral and surface rights needed to mine and process its iron ore reserves. ArcelorMittal Brasil holds mineral rights over the Central and East claims of the Serra Azul deposit of over 375 hectares and surface rights over 281 hectares. Mining legislation in Brazil does not predetermine the duration of mineral rights and as such these rights are considered valid to the point of mine exhaustion.
The Serra Azul mine is located in the North-Eastern portion of the Iron Quadrangle, in the iron rich Cauê Formation of the Itabira Group. The mineralization occurs as friable, semi compact and compact Itabirites and banded hematite-silica rocks, with varying degrees of weathering and oxidation. Currently, Serra Azul mines and processes the friable itabirite with the Serra Azul expansion project (see "—Capital expenditures") contemplating the mining and processing of semi-compact and compact ores.
In addition to the open pit mine, the Serra Azul mine operates a processing plant consisting of a crushing facility and a three-line concentration facility, including screening, magnetic separation, spirals separators and jigging. Iron ore product is transported by truck to two railway terminals located 35 and 50 kilometers from the mine site for distribution to local purchasers of sinter feed or for export through third-party port facilities located in the Rio de Janeiro State.
In 2021 an updated resource model was generated, incorporating the results of a 1,508m drilling program completed in late 2020. The drilling program targeted further definition of the friable itabirite (IF) ore bodies and the updated model has been used to reassess the mine life for the current IF phase of the Serra Azul Mine. This has resulted in a revised life of mine for the IF phase, with mining operations extended until December 31, 2019.2024.
Investment projects relatingFollowing the integration of the Serra Azul Mine into the ArcelorMittal Brazil steel segment in 2020, an expansion project for the Serra Azul Mine has been approved. The project considers producing 4.5 million tonnes per annum of DRI quality pellet feed by processing compact itabirite (IC) and semi-compact itabirite (ISC) material. The IC and ISC processing plant operations are scheduled to Ilvastart in the second half of 2023 (see also "—Capital expenditures) and ESILestimated reserves
for IC and ISC have been included in the Serra Azul life of mine, which has been extended until 2056.
In February 2019, the Company decided to implement the evacuation plan related to its dormant Serra Azul tailing dam. The community situated downstream to the dam was evacuated as a precautionary measure based on an updated stability report following incidents in the Brazilian mining sector. This was done to enable further testing and implementation of any additional mitigating measures. As a result, the Company has executed an agreement with the Federal and State Public Prosecutors Offices and affected families to provide temporary
assistance to the families and set technical measures required to re-establish factor of safety standards. Such agreement was extended in February 2020 and negotiations regarding compensation continued in 2021, during which a Complementary Agreement Term was signed with new guidelines for compensation parameters for the impacts caused by preventive evacuation.
EUROPE
ArcelorMittal Prijedor (Omarska mine) is the only captive mining operation within the Europe segment.
LOCATION MAP - EUROPE Mining Operation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | |
| ArcelorMittal Prijedor | | 51.0 | | | | | | | | | |
| At 100% basis | | | | 1.8 | 1.6 | | 1.8 | 1.4 | | 1.9 | 1.5 |
| At ownership interest (51%) | | | | 0.9 | 0.8 | | 0.9 | 0.7 | | 1.0 | 0.8 |
| | | | | | | | | | | |
ArcelorMittal Prijedor
The Omarska mine is a production stage surface iron ore mine in Bosnia and Herzegovina, operated by ArcelorMittal Prijedor. The mine is located 25 kilometers south east of the town of Prijedor, where the ArcelorMittal Prijedor headquarters are described in"Item 4.A—Informationbased. The subsidiary company was founded in 2004 as a partnership between ArcelorMittal (at the time LNM Holdings) with a 51% controlling interest and local mining company Iron Ore Mine Ljubija owning the remaining 49% stake. ArcelorMittal Prijedor is a captive mine of the Europe segment and supplies all of its iron ore production to the ArcelorMittal Zenica steel plant.
The mine’s current concession was signed in 2018 for a period of 6 years. The property comprises 1,946 hectares of land and mineral rights. ArcelorMittal Prijedor is the registered holder of the mining rights on all cadastral plots in the Omarska mine exploitation field. Land tenure and mineral rights issued to ArcelorMittal Prijedor are indefinite and considered to be of sufficient duration to enable all reported mineral reserves on the Company—Historyproperties to be mined in accordance with current life of mine production schedules.
The Buvac deposit at Omarska mine is located within Carboniferous clastic (shale and sandstones) and carbonate (limestone, dolomite, and ankerite) sequences, with massive siderite-limonite mineralization forming an integral part of the
formation. Iron ore from the Buvac deposit is predominantly limonite-goethite with associated quartz, carbonates, and silicates of the illite type. The limonite-goethite mineralization was formed during the oxidization of the upper parts of the primary siderite bodies.
The ore body is asymmetrical, lens-shape and elongated in a northeast - southwest direction, dipping at about 8° toward the north-east from the surface to a depth of 210 meters. The deposit is approximately 1.5 kilometer long and 1.0 kilometer wide.
The ore is excavated from the Buvac deposit by traditional truck and shovel open pit mining methods. After a primary stage of crushing within the pit, the ore is transported to a processing plant via a conveyor. The processing plant on site performs crushing, screening, gravity separation, magnetic separation and filtration.
ACIS
Iron ore mining operations forming part of the ACIS segment include ArcelorMittal Kryvyi Rih open pit and underground mines in Ukraine, ArcelorMittal Temirtau Orken open pit and underground iron ore mines in Kazakhstan and Thabazimbi mine in South Africa.
LOCATION MAPS - ACIS Mining Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| ArcelorMittal Kryvyi Rih Open Pit | | 95.1 | | | | | | | | | |
| At 100% basis | | | | 25.7 | 11.0 | | 24.9 | 10.7 | | 23.6 | 9.8 |
| At the ownership interest | | | | 24.4 | 10.5 | | 23.7 | 10.1 | | 22.4 | 9.4 |
| ArcelorMittal Kryvyi Rih Underground | | 95.1 | | | | | | | | | |
| At 100% basis | | | | 0.7 | 0.7 | | 0.6 | 0.6 | | 0.9 | 0.9 |
| At the ownership interest | | | | 0.7 | 0.7 | | 0.6 | 0.6 | | 0.9 | 0.9 |
| ArcelorMittal Temirtau Open Pit (Lisakovsk, Kentobe and Atansore) | | 100.0 | | | | | | | | | |
| At 100% basis | | | | 3.6 | 1.8 | | 3.3 | 2.0 | | 3.2 | 1.9 |
| ArcelorMittal Temirtau Underground (Atasu) | | 100.0 | | | | | | | | | |
| At 100% basis | | | | 1.8 | 1.5 | | 1.8 | 1.3 | | 1.7 | 0.9 |
| ACIS at 100% basis | | | | 31.7 | 14.9 | | 16.3 | 14.6 | | 15.6 | 13.5 |
| ACIS at the ownership interest | | | | 30.5 | 14.4 | | 15.8 | 14.0 | | 15.1 | 12.9 |
ArcelorMittal Kryvyi Rih
ArcelorMittal Kryvyi Rih ("AMKR") is a production stage iron ore mining complex located predominantly within the borders of the city of Kryvyi Rih, 150 kilometers southwest of Dnipro, Ukraine. The mine is 95.1% owned by ArcelorMittal and is integrated into the ArcelorMittal Kryvyi Rih steel business as a captive mine. ArcelorMittal acquired the operations in 2005.
AMKR operates two open pits over the Novokryvorizke (Mine 2 on the map) and Valyavkinske (Mine 3 on the map) deposits,
and an underground mine at the high-grade iron ore deposit of Kirova. Operations began at the Kryvyi Rih open pit mines in 1959 and at the Kryvyi Rih underground mine in 1933.
AMKR's operations control all of the mineral rights and surface rights needed to mine and process its estimated iron ore reserves, holding mineral rights over 775 hectares and surface rights over 4,827 hectares to support its surface operations, and 57.9 hectares of mineral and 160 hectares of surface rights for the underground mine operation. The subsoil use permits for the surface pits have been renewed in 2021 for a further 20 years.
For the underground mine, mineral rights are due to expire in 2038, with the land lease agreements being valid until 2060 and 2061.
The iron ore deposits are located within the southern part of the Krivorozhsky iron-ore basin. The iron mineralization at Novokryvorizke and Valyavkinske deposits is hosted by early Proterozoic rocks containing multiple altered ferruginous quartzite strata with shale layers. The major iron ore bearing units in the open pit mines have a carbonate-silicate-magnetite composition. In addition, oxidized, iron-rich quartzite is mined simultaneously with primary ore and is stored separately for possible future processing. Only the magnetite mineralization is included in the 2021 open pit iron ore reserve estimates. The high-grade iron ore of the Kirova deposit is hosted by a ferruginous quartzite with martite and jaspilite.
Along with the two open pit sites and underground mine, AMKR operates a concentrating facility and a crushing facility to produce its final product. The iron ore extracted from the open pits is crushed at the mine site through primary crushing, loaded on a rail-loading facility and transported to the concentrator. The concentration facility includes crushing, grinding, classification, magnetic separation and filtering. The iron ore is extracted from the underground mine by a modified sub-level caving method and is crushed and screened at surface into lump and sinter ore, before being transported by rail to the steel plant. The ArcelorMittal Kryvyi Rih steel plant is the main consumer of the mine’s products. For a recent update on AMKR operations, see "Key transactions and events in 2021 — Recent developments”.
ArcelorMittal Temirtau Iron Ore Mining Assets
ArcelorMittal Temirtau has four iron ore mining operations in Kazakhstan, three open pit mines, Lisakovsk, Kentobe and Atansore, and one underground mine, Atasu. The mines are 100% owned by ArcelorMittal and integrated into and operated by ArcelorMittal Temirtau steel business as captive mines. Final iron ore products are transported to the ArcelorMittal Temirtau steel plant by railway.
ArcelorMittal Temirtau’s operations control or convey the legal right to extend all of the mineral rights and surface rights needed to mine and process its estimated iron ore reserves. Land leases are granted by the government of the Republic of Kazakhstan.
Lisakovsk
Lisakovsk (or Lisakovsky) is a production stage open pit mine located in northwest Kazakhstan, about 110 kilometers from the town of Kostanay and 1,100 kilometers from Temirtau. The mine was commissioned in 1969 and was acquired by ArcelorMittal in 2000.
The mine leases cover 2,706 hectares to support its operations, and mining rights are held for 893 hectares, covering the area which supports the mine’s planned life of mine production. The existing mining license was extended through a new subsoil use agreement granted in 2020 for 25 years and is due to expire in 2044.
The Lisakovsk deposit is located within the western side of the Turgai trough, in the Eltaisko-Kurzhunkul ore region. It was formed by sedimentation processes and the filling of the Lisakovskaya river valley. It is a shallow sheet-like deposit, elongated along strike for 100 kilometers with a width that varies from several hundred meters to 6 kilometers. The iron mineralization at Lisakovsk occurs as an oolite deposit containing mainly hydro-goethite and goethite. The deposit has relatively high phosphorous content which can limit its utilization in the steel-making process.
Ore is excavated at the mine by traditional truck and shovel methods before being transported by rail to the processing facility located at the site. Processing comprises crushing, screening, grinding, wet jigging, wet magnetic separation and filtration.
Kentobe
Kentobe is a production stage open pit mine located in the Karkaraly District of Karaganda Region, about 300 kilometers South-East of Temirtau. The mine was commissioned in 1983 and acquired by ArcelorMittal in 2002.
The mine currently holds surface rights covering 455 hectares in support of its total operations, including 280 hectares of land owned by the mine and approximately 175 hectares of land leased until 2026 and 2027. The mining rights are granted across the 209 hectares covering the area of the planned life of mine production. In 2017 the Kentobe mine signed an addendum with the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan for an extension of the existing subsoil agreement, which is now valid until the end of 2026.
The Kentobe deposit is an integral part of Kentobe-Togai ore field, located in the contact zone of the Topar and Kaldyrma complexes’ granitoids, in the north-eastern part of the Kent massif. The deposit is located within the eastern part of the Kentobe-Togai structure, associated with skarns and metasomatites, with intensive occurrences of dyke formations of different ages and ruptured faults. The mineralization at Kentobe is primarily magnetite, with a small component of oxidized ore within the upper horizons. The magnetite mineralization constitutes all the remaining estimated ore reserves of Kentobe mine.
Magnetite ore is excavated at the mine by conventional truck and shovel methods after drilling and blasting. Ore processing on the site includes crushing, screening, and dry magnetic separation to produce a coarse iron ore concentrate.
Atansore
Atansore is a production stage open pit mine located in the Enbekshelderskiy district of the Akmola region of Kazakhstan, 450 kilometers from the city of Temirtau and 60 kilometers to the south-east of the district center of Stepnyak. Mining of the deposit commenced in 1996 and it was subsequently acquired by ArcelorMittal in 2004.
The mine leases cover 562.4 hectares to support its total operations, with current mining rights for 108.1 hectares, covering the entire area of the mine’s planned life of mine production. The existing subsoil agreement is valid until the end of 2029.
The Atansore deposit is located within skarn zones related to a volcanic intrusion that can be traced for more than 1.5 kilometers. The mineralization includes both oxidized martitic ore and magnetite ore. Magnetite ore is of primary interest and only a small portion of excavated martite ore is included in the mine's mineral reserves.
Ore is excavated at the mine by traditional truck and shovel methods. Ore is then processed by crushing and dry magnetic separation.
Atasu
Atasu is a production stage underground mine located in the Zhanaarkinskiy District territory, 5 kilometers from the town of Karazhal and about 400 kilometers south/southwest of Temirtau. The mine began operating in 1956 with open pit exploitation of near surface reserves. Surface operations ended in 1980. Underground operations commenced in 1976. The mine was acquired by ArcelorMittal in 2003.
The mine leases cover 457.9 hectares and 327 hectares ofmineral rights to support its total operations, including the entire area of the mine’s planned life of mine production. The current mining lease was obtained in 2003 and the existing subsoil agreement is due to expire at the end of 2026.
The Atasu operations mine the West Karazhal deposit, which is a primary hematite ore with associated manganese mineralization. Studies have indicated that the deposit could have a sedimentary-volcanogenic origin caused by underwater hydrothermal activity.
Ore is currently mined from the +44m Level by the sub-level caving method, using portable drilling and blasting equipment, scraper winches during loading and underground electric locomotives for transportation. Excavated iron ore is treated at
the processing plant by crushing, classification and wet jigging to produce lumps and fines iron ore products.
A project is currently underway to complete a detailed study for the development of the Company—-10m level, which is anticipated to replace the current ore source once it is fully depleted.
South Africa
The Thabazimbi mine in the Limpopo Province of South Africa is an exploration stage captive mine of ArcelorMittal South Africa (AMSA) steel. AMSA took full ownership of the Thabazimbi operations from Kumba Iron Ore in November 2018.
Open pit operations at Thabazimbi ceased in 2016, and the mine is currently only engaged in the rehandling of iron ore from stockpiles of ROM material from historical production.
The Thabazimbi mine holds surface rights over 10,952.8 hectares and mineral rights over 8,662.3 hectares, valid until 2039.
In 2021, mining consultancy VBKOM was contracted to complete a pre-feasibility study and estimate the remaining in-situ mineral resources for Vanderbijl deposit, which are reported in this report. Further studies to define mineral reserves and life of mine are planned to commence in 2022.
The Vanderbijl iron ore deposit at Thabazimbi, for which the resources are estimated, is located on the northern margin of the Transvaal sub-basin. The Transvaal Supergroup was deposited in an open marine sedimentary basin developed on the Kaapvaal Craton within fluvial, deltaic to marine depositional environments. The iron ore deposits are developed at or close to the transitional contact zone of the combined footwall dolomites and upper transitional shale beds (including the overlying ≈15 m thick chert-rich shale layer) of the Malmani Subgroup and the overlying BIFs of the Penge Formation.
Iron ore mining operations forming part of the Mining segment include AMMC in Canada and AML in Liberia.
LOCATION MAP - AMMC
LOCATION MAP- AML
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | | | |
| AMMC | | | | 85.0 | | | | | | | | | |
| At 100% basis | | | | | | 65.6 | 22.0 | | 67.0 | 23.2 | | 66.4 | 23.8 |
| At ownership interest (85%) | | | | | | 55.8 | 18.7 | | 56.9 | 19.7 | | 56.4 | 20.2 |
| AML | | | | 85.0 | | | | | | | | | |
| At 100% basis | | | | | | 4.6 | 4.2 | | 5.3 | 5.1 | | 4.2 | 4.4 |
| At ownership interest (85%) | | | | | | 3.9 | 3.6 | | 4.5 | 4.4 | | 3.6 | 3.8 |
| Mining segment at 100% basis | | | | | | 70.2 | 26.2 | | 72.3 | 28.3 | | 70.6 | 28.2 |
| Mining segment at the ownership interest | | | | | | 59.7 | 22.3 | | 61.4 | 24.1 | | 60.0 | 24.0 |
| | | | | | | | | | | | | |
AMMC
AMMC is structured in two partnerships ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure Canada G.P., which are both held at 85% by ArcelorMittal with a 15% non-controlling interest held by 9404-5515 Québec Inc., a
consortium constituted, among others, of POSCO, a South Korean Steel Company and China Steel Corporation.
AMMC is a production stage property, including two deposits at Mont-Wright and Fire Lake, and another deposit at Mont-Reed.
The mines at Mont-Wright and Fire Lake are owned and operated by AMMC and are both open-pit producing mines, consolidated in one production schedule and Life of Mine supporting the AMMC property's disclosed mineral reserves. The deposit at Mont-Reed is currently in an exploration stage.
The Mont-Wright and Fire Lake deposits are located in Québec, Canada. Mont-Wright is located near Fermont, and Fire Lake is located 85 kilometers south-east of Fermont. The Mont-Reed deposit is located approximately 130 kilometers southwest of Mont-Wright. Along with the Mont-Wright and Fire Lake mines, AMMC operates an ore processing plant located on-site at Mont-Wright, as well as a pelletizing plant located at the Port-Cartier port.
Headquarters of the mines are based in Montreal. Fermont, the town site built to support the mining operations, is located 16 kilometers east of the Mont-Wright mining complex and is connected by Highway 389 to Baie-Comeau, which is 570 kilometers away. The Mont-Wright and Fire Lake mines are located approximately 400 kilometers north of the city of Port-Cartier and approximately 1,000 kilometers north-east of Montreal.
AMMC mining property comprises 33,071 hectares of mineral rights across six mining leases, five patented parcels and five-hundred and ninety-one map designated claims. Patented parcels have no expiration dates or lease fees whereas active leases are valid for a period of ten years. All current leases expire between 2025 and 2033 and can be renewed as needed, with reports on material moved disclosed to the government on a yearly basis.
The Mont-Wright, Fire Lake and Mont-Reed deposits are all Lake Superior–type banded iron formations, the metamorphic equivalent to other iron formations within the Labrador Trough iron district. While Mont-Wright and Fire Lake are hematite-rich deposits, Mont-Reed has a greater ratio of magnetite.
Mont-Wright and Fire Lake are surface pit producing mines, with the mining operations carried out in conventional large-scale open pits employing industry standard technology and equipment to mine ore with grades averaging approximately 29% Fe.
All mined ore from Mont-Wright and Fire Lake is processed at the Mont-Wright processing plant, with material from Fire Lake brought in by train. Feed ore material is fed through the crusher and concentrated in the processing plant in Mont-Wright using a gravity separation method. Concentrate is shipped to Port-Cartier, Québec, Canada, via private railroad, to the pelletizing facilities and port operations. The main products sold are concentrate and a variety of pellets.
AML
AML is a production stage property and has been mining ‘direct shipping ore ("DSO") from the Mt. Tokadeh and Mt. Gangra deposits in northern Nimba, Liberia, since 2011. ArcelorMittal’s ownership at AML is 85%, with the remaining 15% owned by the Liberian Government. The construction of the mine commenced in 1960 by a group of Swedish companies, which ultimately became the Liberian American-Swedish Minerals Company (“LAMCO”), and production commenced on the Nimba deposit in 1963. After LAMCO ceased production in 1992, AML signed a MDA in 2005 with the Liberian Government. In 2021, AML signed an amendment to the MDA with the Liberian Government, which is currently under the legislative ratification process.
Under MDA, AML is currently developing three deposits located approximately 300 kilometers northeast of Monrovia, Liberia. Three deposits within the MDA are grouped under the name “Western Range Project”, which includes the Mt. Tokadeh, Mt. Gangra and Mt Yuelliton deposits. The concession area granted to AML by the Liberian Government as per the MDA, with rights to explore or mine iron ore covers approximately 51,342 hectares. Within the concession area, AML has a Class A mining license for the Mt. Tokadeh, Mt. Gangra and Mt Yuelliton deposits. In addition to the rights to explore and mine iron ore, the Liberian Government has granted the right to develop, use, operate and maintain the Buchanan to Yekepa railroad and the Buchanan port, along with an area at Buchanan for township and industrial facilities for material handling and workshops.
The Nimba Itabirites is a 250 to 450-meter-thick recrystallized iron formation. Although the iron deposits at Mt. Tokadeh, Mt. Gangra and Mt Yuelliton fit the general definition of Itabirite as laminated metamorphosed oxide-facies iron formation, they are of lower iron grade than the ore previously mined at Mount Nimba. Tropical weather effects have caused the decomposition of the rock forming minerals resulting in enrichment in the iron content that is sufficient to support a DSO operation and accordingly, currently, only high grade ore reserves of oxidized iron ore are mined. This ore only requires crushing and screening to make it suitable for export. The materials-handling operation consists of stockyards at both the mine and port areas, linked by a 250-kilometer single track railway running from Mt. Tokadeh to the port of Buchanan The facilities at the port consist of tail pulley platforms, conveyor system, quayside including bays for iron ore storage, fuel quayside jetty, equipment workshop and the final product storage. The final product is supplied to ArcelorMittal's steel plants in Europe, with the balance of any product being shipped to the external European market
In 2013, AML had started construction of a Phase 2 project that envisaged the construction of 15 million tonnes per annum of concentrate sinter fines capacity and associated infrastructure;
this project was then suspended due to the onset of Ebola in West Africa and the subsequent force majeure declaration by the onsite contracting companies. AML has now completed the revised feasibility study, which was updated in 2019-20 to apply best available technology and replace wet with dry stack tailings treatment. On September 10, 2021, the Liberian Government and ArcelorMittal signed an amendment to the MDA, which is currently under the legislative ratification process. The Phase 2 expansion includes the construction of a 15 million tonnes per annum concentrator plant project to treat oxidized and transitional ores to significantly ramp up production of premium iron ore. The concentrator phase, to be constructed in modules, will transition AML to a premium product category (high grade concentrate) asset while achieving a low FOB and CIF-China cost position (with the economies of scale projected to more than offset the cost of concentration). The expansion project - which encompasses processing, rail and port facilities - will be one of the largest mining projects in West Africa. The capital required to finalize the project is expected to be approximately $0.8 billion (currently under review given impacts of inflation and enlarged scope), as it is effectively a brownfield expansion given that 85% of the procurement has already been done (with the equipment on site) and 60% of the civil construction is complete. The expansion project includes the construction of a new concentration plant and the substantial expansion of mining operations, with the first concentrate expected in late 2023, ultimately ramping up to 15 million tonnes per annum. Under the agreement the Company has further expansion opportunities up to 30 million tonnes per annum. The revised feasibility study also contemplates a future change to the processing infrastructure to enable the production of high quality concentrate from the magnetite dominant fresh ores (Phase 3). Other users may be allowed to invest for additional rail capacity. See also “Introduction—Key transactions and events in 2018"2021".
JOINT VENTURES AND ASSOCIATES
Reserves (ironOn December 11, 2019, ArcelorMittal acquired a 60% interest in the joint venture AMNS India, with the remaining 40% being held by NSC.
LOCATION MAP - INDIA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | |
| | | | | | | | | | |
| AMNS India | | 60.0 | | | | | | | | |
| At 100% basis | | | | 7.4 | 6.8 | | 1.8 | 1.6 | | |
| At ownership interest (60%) | | | | 4.5 | 4.1 | | 1.1 | 1.0 | | |
| | | | | | | | | | |
Thakurani mine
AMNS India's Thakurani iron ore mine is a production stage open pit mine in the Odisha state of India. AMNS India holds surface and mineral rights over 228 hectares to support its Thakurani operations, located 320 kilometers to the north of the Odisha capital Bhubaneswar and 4 kilometers east of the town of Barbil.
The operation and mining rights to the Thakurani operations were obtained by AMNS India in February 2020 through the Indian Government Mining Block auction scheme. The Thakurani open pit mine has been operated since 1961 and has both mature mining pits and undeveloped resource areas. AMNS India commenced mining operations in mid-2020, following the demobilization of the previous claim holder, Kaypee Enterprises.
AMNS India has a permit in place for 5.5 million tonnes per annum of ore production, designated for internal consumption only. The ramp-up to a capacity of 5 million tonnes per annum was completed in 2021. The mining lease deed was executed on June 27, 2020 for a period of 50 years to June 26, 2070. Until June 27, 2021 all production from the mine had to be consumed by specified AMNS India end use plants, after which up to 25% of production may be sold to a third party. A submission approved by the Indian Bureau of Mines in late 2020 increases the permitted production rate to 7.99 million tonnes per year from 2023.
The Thakurani operations lie in the south eastern part of the Singhbhum-Keonjhar-Bonai iron ore belt, a narrow NNE-SSW directional trending folded syncline that runs through northern Odisha, India and southern Jharkhand, India. The Precambrian horseshoe shaped belt is a well-known iron ore province hosting many iron ore deposits. The enriched sequence is a traditional Banded Iron Formation that has been subject to significant weathering that has enriched the iron ore deposits. Ore is generally of the friable hematite type however more competent hematite ores and friable goethite ores are also present.
The current mining operation at Thakurani is being carried out by conventional mining methods using excavators and trucks for
ore transportation to a mobile crushing facility. Ore from the Thakurani operation is crushed and screened on site before being transported by road to the Dabuna beneficiation plant located approximately 40 kilometers to the south. Beneficiated material is then transported by slurry pipeline to the pelletizing plant at Paradip, located on the coast at Bay of Bengal.
Ghoraburhani – Sagasahi mine
The Ghoraburhani – Sagasahi mine is an exploration stage open pit iron ore mine, located in the Sundargarh district of Odisha state of India. The operation and mining rights to the Ghoraburhani – Sagasahi operations were obtained through the AMNS India takeover of Essar Steel (“ESIL”) in December 2019. The mining lease deed was executed on March 26, 2021, for a period of 50 years and permits production of up to 7.16 million tonnes per annum of ore primarily for captive usage. AMNS India holds surface and mineral rights over 139 hectares at the Sagasahi mine.
The Ghoraburhani – Sagasahi operations lie in the south- western part of the Singhbhum-Keonjhar-Bonai iron ore belt. The enriched sequence is a traditional Banded Iron Formation that has been subject to significant weathering & deformation that has enriched the iron ore deposits. Ore is generally of lateritic iron ore/ hard laminated ore on the top followed by soft laminated ore and coal)friable hematite with intercalations of friable shaly ore and limonitic ore are also present.
Ore mining commenced at the Ghoraburhani – Sagasahi mine in late 2021 by conventional mining methods, using excavators and trucks for ore transportation to a mobile screening & crushing facility. There are currently no processing facilities at the site. Mineral resources and mineral reserves have not been reported in 2021 due to ongoing exploration that is planned to be completed in 2022 prior to a full resource model update. Following this, a revised life of mine plan will be generated, forming the basis for mineral resources and mineral reserves expected to be reportable in the 2022 reporting cycle.
Introduction
Baffinland
ArcelorMittal has botha non-controlling interest at the associate Baffinland iron ore and metallurgical coal reserves. mine.
LOCATION MAP - BAFFINLAND
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 1 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | |
| Baffinland | | 25.23 | | | | | | | | | |
| At 100% basis | | | | 6.3 | 5.5 | | 7.8 | 6.0 | | 6.0 | 5.6 |
| At ownership interest (25.23%) | | | | 1.6 | 1.4 | | 2.0 | 1.5 | | 1.5 | 1.4 |
| | | | | | | | | | | |
1.ArcelorMittal ownership interest for 2019 production was 25.70%
The Company’sMary River mine is a production stage open pit high-grade iron ore mine. The mine is operated by Baffinland Iron Mines Corporation, a privately owned Canadian mining company.
The Mary River property is located within the Arctic Circle on north Baffin Island, in the Qikiqtani Region of Nunavut, Canada, approximately 1,000 kilometers (620 miles) northwest of Iqaluit,
the capital of Nunavut. It comprises five high grade deposits and six prospects, which represent high grade examples of Algoma-type iron formation consisting of magnetite, hematite and specular hematite mineralization. The project began commercial production on Deposit No. 1 in 2014.
In March 2011, ArcelorMittal acquired 70% of the Mary River mine project, with Nunavut Iron Ore Inc. (“NIO”), an affiliate of The Energy and Minerals Group (“EMG”), owning the remaining 30%. In February 2013, ArcelorMittal and NIO entered into a joint arrangement and equalized their shareholdings at 50/50. Subsequently, following equity funding commitments and conversion of preferred shares into equity, both exercised by NIO only, ArcelorMittal’s share over time decreased to 25.70% as of December 31, 2019 and 25.23% as of December 31, 2020. In September 2020, the corporate structure was reorganized whereby NIO became the sole parent company of Baffinland, while ArcelorMittal together with EMG became shareholders of NIO. Following this reorganization, ArcelorMittal retained its participation in the project and as of December 31, 2021, holds a 25.23% interest in NIO.
Baffinland’s total mineral tenures (including leases, mineral claims and exploration rights) cover an area of approximately 408,205 hectares (1008,695 acres). Of this, approximately 14% is subject to mining leases (being leased claims under the Nunavut Mining Regulations), 74% is covered by mineral claims (being recorded claims under the Nunavut Mining Regulations) and the rest by exploration rights.
Baffinland has two main operating locations – the mine site at Mary River and Milne Port, located approximately 86 kilometersnorth-west of the mine site.The Mary River mine is self-sustaining and is equipped with an airstrip and aerodrome. It is a conventional open pit truck and shovel operation. Ore is delivered to crushers before the crushed product is transported via the 100 kilometer Tote road to Milne Port. Milne Port has
been fully developed to accommodate a 5 million-tonne ore stockpile, an ore dock, maintenance facility, and associated infrastructure for the operation of the port facilities. Baffinland can only ship during the open water season (typically July to October), but may conduct haulage of ore to the port throughout the year.
In 2021, Baffinland operated within an approved Early Revenue Phase, which permitted up to 6.0 million tonnes per annum to be hauled to and shipped from Milne Port. The current permitting limit on trucking and shipping is 4.2 million tonnes per annum. However, as per previous years, Baffinland expects to obtain continued approval for an increase to 6 million tonnes per annum for 2022.
Baffinland has also approved the project involving the construction of a railway, to replace the existing truck-haul operation for transport of iron ore from Mary River to Milne Inlet, as well as expansion of mining, crushing and screening operations and port ship loading capacity (the "Rail Expansion"), which is critical for Baffinland's future. Approximately $1,385 million of capital expenditures were budgeted for this project, to be funded with operating cash flows, additional equity and new debt.
Coal Operations
ArcelorMittal Temirtau has eight underground coal mines located in and around Karaganda in Kazakhstan: Kostenko, Kuzembaeva, Saranskaya, Abayskaya, Kazakhstanskaya, Lenina, Shakhtinskaya and Tentekskaya.
LOCATION MAP - ArcelorMittal Temirtau Coal
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Ownership Interest | | 2021 | | 2020 | | 2019 |
| | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes | | ROM Millions of Tonnes | Product Millions of Tonnes |
| | | | | | | | | | | |
| Karaganda - Kazakhstan | | 100.0 | | 8.3 | 3.3 | | 9.5 | 3.6 | | 9.6 | 3.5 |
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ArcelorMittal Temirtau (Karaganda– Kazakhstan– Kazakhstan Coal Mines)
All eight coal mines are production stage underground mines and are captive to the Temirtau steel operations, since entering the structure of Ispat-Karmet JSC, Coal Division (now ArcelorMittal Temirtau JSC, Coal Division) in 1996. All of the mines are operated by ArcelorMittal Temirtau JSC, Coal Division.
The mines are located 5 to 30 kilometers to the west from the city of Karaganda, in an area with well-developed infrastructure around the capital of the Karaganda region of the Republic of Kazakhstan.
The subsoil use contract and license for all coal mines in Karaganda is under a renewal process with the Government of Kazakhstan and expected to be completed in the second quarter of 2022 and the license will be issued with a validity period of 20 years. The total area under mineral rights is 28,638 hectares after a small portion of land was returned to the State.
Land tenures of the Karaganda coal mines cover 13,349 hectares.
The coal mines of ArcelorMittal Temirtau are located in the United States, Canada, Mexico, Brazil, Liberia, Bosnia, UkraineKaraganda Coal Basin. The basin is more than 3,000 square kilometers and Kazakhstan. The Company’s metallurgicalwas formed by strata of Upper Devonian and Carbonic ages, Mesozoic and Cainozoic formations. Due to structural peculiarities, the coal basin is divided into three geology-based mining areas: ArcelorMittal Temirtau's coal mining operations are performed in the three distinct mining areas: Karagandinskiy (Kostenko, Kuzembayeva, and Saranskaya mines), Sherubay-Nurinskiy (Abayskaya and Shakhtinskaya mines) and Tentekskiy (Kazakhstanskaya, Lenina, and Tentekskaya mines).
The Kostenko mine occupies the central part of the industrial district of the Karagandinskiy area. In the west and north-west it borders with the closed Gorbacheva and Severnaya mines.
The Saranskaya and Kuzembayeva mines operate in the Saran district of the Karagandinskiy area.
The Abayskaya and Shakhtinskaya mines operate in the territory of the Sherubay-Nurinskiy area located in in the United Statessouthern part of the north-east limb of the Sherubay-Nurinskiy syncline (Brachy syncline).
The Lenina, Kazakhstanskaya, and Kazakhstan.Tentekskaya mines operate in the territory of Tentekskiy area. Tentekskaya is in the north-west part of the Sherubay-Nurinskiy syncline.
In all mines, coal mining is carried out by longwall and development production faces. The produced coal is transported via belt infrastructure and skip shafts to the surface. From there, ROM coal is dispatched via a rail network to coal preparation plants (Vostochnaya and Temirtau) for processing.
For beneficiation of the coal, two washeries are operated. All mines are connected to the main railway, and coal is transported by railway to the coal wash plants. Surplus coal concentrate, when available, is supplied to ArcelorMittal Kryvyi Rih in Ukraine, and to external customers in Russia and China. Additionally, low quality coking coal is provided to a power plant which supplies power and heated water to Temirtau city and the ArcelorMittal Temirtau steel plant.
Estimates of Iron Ore and Coal Mineral Reserves and Mineral Resources
In October 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to its current disclosure rules to modernize the mineral property disclosure requirements for mining registrants. The amendments include the adoption of Regulation S-K, Subpart 1300 (“S-K 1300”), which now governs disclosure for mining registrants. S-K 1300 replaces the historical property disclosure requirements for mining registrants that were included in the SEC Industry Guide 7. The 2021 estimates of mineral reserve and mineral resource have been prepared in accordance with S-K 1300 and also with the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Best Practice Guidelines and Standards.
For the meanings of certain technical terms used in this annual report, see “Glossary.”
The estimates of provenmineral resources and probable oremineral reserves at the Company’s mines and projects and the estimates of the mine life included in this annual report have been prepared by ArcelorMittal experienced engineers and geologists,qualified persons, in accordance with the exceptionguidelines for mining property disclosure requirements provided in S-K 1300. Qualified persons are either third parties or employees of a third party that is not affiliated with ArcelorMittal, or are employees of ArcelorMittal, with no direct or indirect economic interest in ArcelorMittal or its shares. No qualified persons have been
employed on a contingent basis. For additional information about the qualified persons identified below, please see the exhibits to this annual report.
Only measured and indicated mineral resources, where the level of geological certainty associated was sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit, were converted to proven or probable mineral reserves for each of the mineral properties under the summary disclosure.
The 2021 mineral resource and mineral reserve estimates at the AMMC mining property have respectively been prepared by qualified persons who are employees of ArcelorMittal.
The 2021 mineral resource and reserve estimates for the Las Truchas mineand San José mines (consolidated as Mexico, excluding Peña Colorada in the tables below) where the 2017 and 2018 reserve estimates were prepared by qualified persons of Gustavson Associates. AllAssociates, a subsidiary of WSP. Peña Colorada contracted SLR Consulting (Canada) Ltd. to provide the 2021 mineral resource and reserve estimates for the Peña Colorada mine.
The 2021 mineral resource and reserve estimates for the Andrade and Serra Azul mines (consolidated as Brazil in the tables below) were prepared by qualified persons of the Grupo GE21, with the support of the ArcelorMittal Brazil local team.
The mineral resource and reserve estimates for the ArcelorMittal Kryvyi Rih open pit and underground operations as of December 31, 2017 and 20182021 were prepared by KAI Ltd. Measured Group Pty Ltd was contracted in compliance with2021 to prepare the requirements of SEC Industry Guide 7.
In Eastern Europe (Bosnia)mineral resource and reserve estimates for the CIS, ArcelorMittal has conducted in-house and independent reconciliations ofTemirtau iron ore reserve estimate classifications based on SEC Industry Guide 7 and standards used by the State Committee on Reserves, knownsurface mines (consolidated as the GKZ, or its national equivalent,Kazakhstan Open Pit in the former Soviet Union countries. tables below) and underground mine (Kazakhstan Underground in the tables below).
The GKZ, or its national equivalent, constitutes2021 mineral resource and reserve estimates for the legal frameworkThakurani Iron Ore Mine (India in the tables below) 2021 were prepared by a qualified person of BMRC Geomining Solutions LLP. Additionally, an estimate of mineral resources and reserves of the exploration stage Ghoraburhani – Sagasahi mine is planned to be done in 2022, following the ongoing additional exploration works at the site. It is anticipated that Ghoraburhani – Sagasahi mineral reserves and mineral resources will be reported from 2022 onwards.
AML's 2021 mineral resources and mineral reserves were estimated by qualified persons who are employees of ArcelorMittal. In 2021, a qualified person of VBKOM (Pty) Ltd prepared a pre-feasibility study and estimated the mineral resources for the Vanderbijl pit at Thabazimbi (South Africa in tables below). Estimates of mineral reserves are not reported in 2021 for ArcelorMittal South Africa iron ore reserve reportingoperation
Thabazimbi. Mineral resources and mineral reserves as of December 31, 2021 for ArcelorMittal Prijedor (Bosnia in former Soviet Union countries where the tables below) were prepared by an independent qualified person. The mineral resources and reserves for the Mary River Mine (Baffinland in the tables below) as of December 31, 2021 were estimated by SLR International Corporation.
ArcelorMittal operates mines.
OnTemirtau's mineral resources for the basiseight coal mines (Kazakhstan-Karaganda in tables below) as of these reconciliations, ArcelorMittal’s oreDecember 31, 2021 were estimated by qualified persons of Golder, a member of WSP, and Dargo Associates Ltd. Mineral reserves for coal mines Kuzembaeva, Saranskaya, Kazakhstanskaya, Lenina, Shakhtinskaya and Tentekskaya.as of December 31, 2021 were estimated by qualified persons of Golder and Dargo Associates Ltd, and mineral reserves for Kostenko and Abayskaya have been estimated by applyinga qualified person who is an employee of ArcelorMittal. In 2021 coal mineral reserves increased based on a new life of mine planning, technicalplan developed for 20 years, based on new modeling and economic assessments defined as categories A, Bmetallurgical quality testwork, resulting also in a significant net increase of the mineral resources of coal at ArcelorMittal Temirtau coal mines.
The point of reference of reporting all of ArcelorMittal's mineral resources and C1 accordingreserves in the tables below is the point of delivery of the ROM material to the GKZ standards. In general, provided Guide 7’sprocessing plant and all material is reported on a wet basis.The effective date for reporting of all mineral resources and reserves is December 31, 2021.
For each of the mining operations under the summary disclosure, economic criteria are met (whichviability of the declared mineral reserves has been determined by the qualified persons using a discounted cash flow analysis, demonstrating that extraction of the mineral reserve is economically viable under reasonable investment and market assumptions. The estimated mine life reported in this table corresponds to the case here), A+Bduration of the production schedule of each operation based on the 2021 year-end iron ore reserve estimates only. The production varies for each operation during the mine life and as a result the mine life is equivalentnot the total reserve tonnage divided by the 2021 production. Mine life of each operation is derived from the life of mine plans and corresponds to “proven” and C1 is equivalent to “probable”.
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• | Reserves are the part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination.
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• | Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, working or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
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• | Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
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the duration of the mine production scheduled from mineral reserve estimates only. The demonstration of economic viability is established through the application of a life of mine plan for each operation or project providing a positive net present value on a cash-forward looking basis.basis, considering the entire value chain. Economic viability is demonstrated using forecasts of operating and capital costs based on historical performance, with forward adjustments based on planned process improvements, changes in production volumes and in fixed and variable proportions of costs, and forecasted fluctuations in costs of raw material, supplies, energy and wages. OreMineral reserve estimates are updated annually in order to reflect new geological information
and current mine plan and business strategies. The Company’s reserve estimates are of in-place material after adjustments for mining depletion and mining losses and recoveries, with no adjustments made for metal losses due to processing. For a description of risks relating to reserves and reserve estimates, see “Item 3.D—Key information—“Introduction—Risk factors—Risks related to ArcelorMittal—ArcelorMittal’s reserve estimates may materially differ from mineral quantities that it may be able to actually recover; ArcelorMittal’s estimates of mine life may prove inaccurate; and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine”.
Detailed independent verifications of the methods and procedures used are conducted on a regular basis by external consultants and sites are reviewed on a rotating basis. The 2016 year end reserve estimates for the Kazakhstan coal operations were independently audited by SRK Consulting (UK) Limited who recommended the changes that have been implemented. SRK Consulting (UK) Limited also completed the 2017 year end independent audits of the reserve estimates for ArcelorMittal Princeton coal operations in the United States and for ArcelorMittal Kryvyi Rih iron ore operations in Ukraine and recommended certain changes that are reflected in the 2017 year end reserve estimates. In 2018, iron ore reserve estimates for ArcelorMittal Mines and Infrastructure Canada were independently audited and validated by SRK Consulting (Canada) Inc., and no material changes to the 2018 iron ore reserve estimates were recommended. Improvement points were proposed and will be addressed during 2019 with the support of SRK Consulting (Canada) Inc. This will be reflected in the 2019 year-end reserve estimates.Furthermore, in 2018, after completing a new geological interpretation and model of the Andrade mine (Brazil), SRK Consultores do Brasil Ltda reviewed and validated all the mine planning components supporting the iron ore reserve estimates of Andrade mine.
ArcelorMittal owns less than 100% of certain mining operations; reserve estimates have not been adjusted to reflect ownership interests and therefore reflect 100% of reserves of each mine. Please see the table below for ArcelorMittal’s ownership interest in each mine. All of the reserves presented are estimates at December 31, 2018 (unless otherwise stated)Mining Activities".
Mine life is derived from the life of mine plans and corresponds to the duration of the mine production scheduled from ore reserve estimates only.
The Company’s mineral leases are of sufficient duration (or convey a legal right to renew for sufficient duration) to enable all ore reserves on the leased properties to be mined in accordance with current production schedules. The Company’s ore reserves may include areas where some additional approvals remain outstanding but where, based on the technical investigations the Company carries out as part of its mine planning process and its knowledge and experience of the approvals process, the Company expects that such approvals will be obtained as part of the normal course of business and within the timeframe required by the current life of mine schedule.
The reported iron ore and coal reserves contained in this annual report do not exceed the quantities that the Company estimates could be extracted economically if future prices were at similar levels to the average contracted price for the three years ended December 31, 2018. The average iron ore spot reference price for the last three years (2016-2018) was $66.47 per tonne (delivered to China, Qingdao 62% Fe US $ per tonne, Metal Bulletin) duly adjusted for quality, Fe content, logistics
and other considerations. For the same period, the average coal spot reference price was $178.67 per tonne (Premium HCC FOB Aus, Metal Bulletin).2021. The Company establishes optimum design and future operating cut-off grade based on its forecast of commodity prices, adjusted for local market conditions, freight, inland logistics costs, and final product value in use premiums/penalties, and operating and sustaining capital costs. The cut-off grade varies from operation to operation and during the life of each operation in order to optimize cash flow, return on investments and the sustainability of the mining operations. Such sustainability in turn depends on expected future operating and capital costs. The reserve baseEstimates of reserves and resources can vary from year to year due to the revision of mine plans in response to market and operational conditions, in particular market price. See “Item 3.D—Key information—“Introduction—Risk factors—Risks related to ArcelorMittal—ArcelorMittal’s Mining Activities—ArcelorMittal’s reserve and resource estimates may materially differ from mineral quantities that it may be able to actually recover; ArcelorMittal’s estimates of mine life may prove inaccurate; and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine”.mine.”
To ensure that mineral resource estimates for all mines satisfy the requirements for reasonable prospects for economic extraction ("RPEE") requirement, reasonable technical and economic factors were considered by qualified persons in the process of derivation of the ultimate mineral resource pit shells or underground constraining wireframes and other spatial controls used to constrain the mineralization. Factors used are current, considered to be reasonably developed, and are based on generally accepted industry practice and experience.
Tonnage and grade estimates are reported as ‘Run of Mine’. Tonnage is reported on a wet metric basis. Metallurgical recoveries are accounted for in the concentrate tonnes calculation based on historical processing data and are variable as a function of head grade.
Iron oreArcelorMittal owns less than 100% of certain mining operations; mineral reserve and mineral resource estimates
The table below details ArcelorMittal’s have been adjusted to reflect ownership interests and therefore reflect the portion of total estimated iron oremineral reserves and resources of each mine attributable to ArcelorMittal as ofper the Company’s ownership interest in each mine at December 31, 2018. 2021.
The classification of the iron ore and coal reserve estimates as proven or probable reflects the variability in the mineralization at the selected cut-off grade, the mining selectivity and the production rate and ability of the operation to blend the different ore types that may occur within each deposit. At ArcelorMittal mining operations, proven
The following table summarizes ArcelorMittal’s mineral reserves as of the end of the fiscal year ended December 31, 2021 in the aggregate, and by commodity and country and for each property containing 10% of more of ArcelorMittal’s combined mineral reserves. Mineral reserve quantities are rounded to million tonnes.Unless indicated otherwise below, for the purpose of determining iron ore reserve estimates are typicallymineral reserves, ArcelorMittal has used long term iron ore reference price of $60 per tonne for 62% Fe fines, based on drill hole spacing ranging from 25m x 25m to 100m x 100m,supply / demand fundamentals and probable iron ore reserve estimates are based on drill hole spacing ranging from 50m x 50m to 300m x 300m.industry cost curve adjusted upwards or downwards for mine specific factors and further adjusted for grade, logistics, and other adjustments.
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| | | As of December 31, 2018 | | As of December 31, 2017 |
| | | Proven Ore Reserves | | Probable Ore Reserves | | Total Ore Reserves | | Total Ore Reserves |
| | | Millions of Tonnes | | % Fe | | Millions of Tonnes | | % Fe | | Millions of Tonnes | | % Fe | | Millions of Tonnes | | % Fe |
Canada (1) | | 1,917 |
| | 30.2 | | 197 |
| | 29.2 | | 2,114 |
| | 30.1 | | 1,990 |
| | 28.0 |
| Minorca - USA | | 97 |
| | 23.5 | | 4 |
| | 22.7 | | 101 |
| | 23.5 | | 110 |
| | 23.7 |
| Hibbing - USA | | 134 |
| | 19.6 | | 25 |
| | 19.6 | | 159 |
| | 19.6 | | 182 |
| | 19.6 |
| Mexico (Excluding Peña Colorada) | | 10 |
| | 38.0 | | 114 |
| | 31.9 | | 124 |
| | 32.4 | | 129 |
| | 32.7 |
| Peña Colorada - Mexico | | 107 |
| | 21.8 | | 104 |
| | 21.2 | | 211 |
| | 21.5 | | 233 |
| | 21.2 |
| Brazil | | 50 |
| | 56.0 | | 45 |
| | 49.6 | | 95 |
| | 53.0 | | 72 |
| | 61.1 |
| Liberia | | 5 |
| | 52.0 | | 479 |
| | 47.9 | | 484 |
| | 48.0 | | 489 |
| | 48.0 |
| Bosnia | | 3 |
| | 45.4 | | 11 |
| | 46.3 | | 14 |
| | 46.1 | | 17 |
| | 46.2 |
| Ukraine Open Pit | | 51 |
| | 33.5 | | 78 |
| | 33.5 | | 129 |
| | 33.5 | | 151 |
| | 33.7 |
| Ukraine Underground | | 9 |
| | 54.4 | | 19 |
| | 54.4 | | 28 |
| | 54.4 | | 29 |
| | 54.4 |
| Kazakhstan Open Pit | | 5 |
| | 48.8 | | 255 |
| | 39.2 | | 260 |
| | 39.4 | | 265 |
| | 39.2 |
| Kazakhstan Underground | | — |
| | — | | 23 |
| | 45.2 | | 23 |
| | 45.4 | | 24 |
| | 45.2 |
| Total | | | | | | | | | | 3,742 |
| | 33.1 | | 3,691 |
| | 32.0 |
1. Given the decrease in ArcelorMittal’s ownership in Baffinland and the termination of its operator rights, Baffinland is no longer included in this table.
Supplemental information on iron ore operations
The table below provides supplemental information on the producing mines.
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| Operations/Projects | | % Ownership | | In Operation Since | | 2018 Run of Mine Production
(Million Tonnes)* | | 2018 Saleable Production
(Million Tonnes)1* | | Estimated Mine Life (Years)2 |
| Canada | | 85 | | 1976 | | 70.7 | | 24.5 | | 30 |
| Minorca - USA | | 100 | | 1977 | | 8.6 | | 2.8 | | 12 |
| Hibbing - USA | | 62 | | 1976 | | 29.2 | | 7.8 | | 6 |
| Mexico (Excluding Peña Colorada) | | 100 | | 1976 | | 7.0 | | 2.7 | | 18 |
| Peña Colorada - Mexico | | 50 | | 1974 | | 13.3 | | 4.0 | | 14 |
| Brazil | | 100 | | 1944 | | 4.0 | | 2.8 | | 44 |
| Liberia | | 85 | | 2011 | | 4.6 | | 4.6 | | 24 |
| Bosnia | | 51 | | 2008 | | 1.9 | | 1.4 | | 7 |
| Ukraine Open Pit | | 95 | | 1959 | | 22.3 | | 9.3 | | 5 |
| Ukraine Underground | | 95 | | 1933 | | 0.9 | | 0.9 | | 19 |
| Kazakhstan Open Pit | | 100 | | 1976 | | 3.0 | | 1.8 | | >50 |
| Kazakhstan Underground | | 100 | | 1956 | | 1.7 | | 0.8 | | 11 |
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1127 | Saleable production is constituted of a mix of direct shipping ore, concentrate, pellet feed and pellet products which have an iron content of approximately 65% to 66%. Exceptions in 2018 included the shipping of ore produced in Bosnia, Ukraine Underground and the Kazakh mines which have an iron content ranging between approximately 50% to 60% and are solely for internal use at ArcelorMittal’s regional steel plants. The direct shipping ore produced from Liberia had an average iron content of approximately 62% in 2018 while the sinter fines produced for external customers in Brazil from the Serra Azul operations averaged approximately 64% and the lumps averaged 56%.Management report
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| Iron Ore | | % of Ownership Interest15 | | Proven
Mineral Reserves | | Probable
Mineral Reserves | | Total
Mineral Reserves |
| | Millions of Tonnes | % Fe 1 | | Millions of Tonnes | % Fe 1 | | Millions of Tonnes | % Fe 1 |
| Canada | | | | 1,806 | 30.8 | | 209 | 32.6 | | 2,015 | 31.0 |
AMMC2 | | 85.0 | | 1,736 | 29.4 | | 188 | 29.0 | | 1,924 | 29.3 |
Baffinland3 | | 25.2 | | 70 | 65.2 | | 21 | 65.1 | | 91 | 65.1 |
| Mexico | | | | 64 | 24.9 | | 174 | 26.6 | | 238 | 26.2 |
Mexico (Excluding Peña Colorada)4 | | 100.0 | | 12 | 36.3 | | 101 | 30.5 | | 113 | 31.1 |
Peña Colorada - Mexico5 | | 50.0 | | 52 | 22.3 | | 73 | 21.2 | | 125 | 21.7 |
Brazil6 | | 100.0 | | 54 | 53.7 | | 351 | 35.1 | | 405 | 37.7 |
Bosnia7 | | 51.0 | | 2 | 49.0 | | 2 | 46.0 | | 4 | 47.6 |
| Ukraine | | | | 81 | 35.0 | | 466 | 34.2 | | 547 | 34.4 |
Ukraine Open Pit8 | | 95.1 | | 76 | 33.7 | | 453 | 33.7 | | 529 | 33.7 |
Ukraine Underground9 | | 95.1 | | 5 | 54.4 | | 13 | 54.6 | | 18 | 54.6 |
| Kazakhstan | | | | — | — | | 112 | 40.9 | | 112 | 40.9 |
Kazakhstan Open Pit10 | | 100.0 | | — | — | | 110 | 41.0 | | 110 | 41.0 |
Kazakhstan Underground11 | | 100.0 | | — | — | | 2 | 37.3 | | 2 | 37.3 |
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Liberia12 | | 85.0 | | 7 | 52.9 | | 568 | 43.3 | | 575 | 43.4 |
India13 | | 60.0 | | — | — | | 46 | 61.1 | | 46 | 61.1 |
| Total Iron Ore | | | | 2,014 | 31.5 | | 1,928 | 37.3 | | 3,942 | 34.3 |
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| | % of Ownership Interest | | Proven
Mineral Reserves | | Probable
Mineral Reserves | | Total
Mineral Reserves |
| Coal | | | Millions of Tonnes | % Ash | | Millions of Tonnes | % Ash | | Millions of Tonnes | % Ash |
Kazakhstan - Karaganda14 | | | | | | | | | | | |
| Saranskaya | | 100.0 | | 29 | 33.9 | | 9 | 29.6 | | 38 | 32.9 |
| Kuzembaeva | | 100.0 | | 14 | 36.2 | | 5 | 34.7 | | 19 | 35.8 |
| Kazakhstanskaya | | 100.0 | | 32 | 39.7 | | 4 | 42.5 | | 36 | 40.0 |
| Lenina | | 100.0 | | 17 | 35.2 | | 4 | 34.5 | | 21 | 35.1 |
| Shakhtinskaya | | 100.0 | | 18 | 47.8 | | 6 | 42.1 | | 24 | 46.4 |
| Tentekskaya | | 100.0 | | 19 | 37.3 | | 1 | 33.2 | | 20 | 37.1 |
| Kostenko | | 100.0 | | 1 | 39.0 | | 37 | 38.0 | | 38 | 38.0 |
| Abayskaya | | 100.0 | | 2 | 43.5 | | 12 | 38.7 | | 14 | 39.4 |
| Total Coal | | | | 132 | 38.3 | | 78 | 37.2 | | 210 | 37.9 |
1.Unless stated otherwise, % Fe represents total Fe content for all sites except Peña Colorada where it represents magnetic Fe content only.
2.Mineral reserves for AMMC are estimated at a cut-off grade of 15% and a mass recovery of 34.9%, for a life of mine of 31 years.
3.Mineral reserves for Baffinland are estimated at a cut-off grade of 55% and a mass recovery of 100%, for a life of mine of 22 years.
4.Mineral reserves for Las Truchas are estimated at a cut-off grade of 10% Fe magnetic, and reserves for San José are reported at a cut-off grade of 27% Fe. The Fe recovery of Fe magnetic is 90% is considered in Las Truchas, and at San José Fe recovery considered is 75%. Life of mine of Las Truchas is 15 years and San José has a life of mine of 3 years.
5.Mineral reserves for Peña Colorada are estimated at the cut-off grade of 15% Fe magnetic. Fe recovery at the mineral reserve average head grade is 78.2%, for the life of mine of 17 years.
6.Mineral reserves for Serra Azul are estimated at 40% Fe cut-off grade and a mass recovery of 52.8% for friable material, and 29% Fe cut-off grade and a mass recovery varying from 33% to 45% for compact material, for a life of mine of 35 years. Mineral reserves for Andrade are reported at a cut-off grade of 20% Fe and 81.3% mass recovery at average, for a life of mine of 41 years.
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2Management report | The estimated mine life reported in this table corresponds to the duration of the production schedule of each operation based on the 2018 year-end iron ore reserve estimates only. The production varies for each operation during the mine life and as a result the mine life is not the total reserve tonnage divided by the 2018 production. ArcelorMittal believes that the life of these operations will be maintained as exploration and engineering studies confirm the economic potential of the additional mineralization already known to exist in the vicinity of these iron ore reserve estimates.
128 |
* Represents 100%7.Mineral reserve for ArcelorMittal Prijedor is estimated based on a price of production.$24 per tonne of product calculated based on assumptions of a non-marketable material supplied to its integrated steel plant, at 32% Fe cut-off grade and mass recovery of 75%, for the life of mine of 4 years.
Changes in iron ore8.Mineral reserve estimates: 2018 versus 2017for Ukraine Open Pit is estimated at an average Fe recovery of 65.3%. Cut-off grade applied at Novokryvorizke deposit is 12% Fe, and at Valyavkinske deposit 16% Fe. Life of mine considered for the two pits combined is 24 years.
The Company’s iron ore9.Mineral reserve estimates hadfor Ukraine Underground mine is estimated based on a net increaseprice of 51 million metric tonnes$39.3 per tonne of Runproduct calculated based on assumptions of Minea non-marketable material supplied to its integrated steel plant,at cut-off grade of 48% Fe and a 1% increase in iron ore content between December 31, 2017mass recovery of 100%, for a life of mine of 23 years.
10.Mineral reserves for Kazakhstan Open Pit mines are estimated using a price averaging $20 per tonne of products calculated based on assumptions of a non-marketable material supplied to its integrated steel plant. Atansore mineral reserves are reported at a 20% Fe cut-off grade and 2018. This increase ina mass recovery of 53.9%, for a life of mine of 6 years. Mineral reserves includes an additionfor Kentobe are reported at a 20% Fe cut-off grade and a mass recovery of 218 million metric tonnes, mainly attributed86.7%, for a life of mine of 16 years, and mineral reserves for Lisakovsk are reported at a 30% Fe cut-off grade and a mass recovery of 48.3%, for a life of mine of 48 years.
11.Mineral reserve for Kazakhstan Underground mine Atasu is estimated based on a price of $32 per tonne of products calculated based on assumptions of a non-marketable material supplied to new interpretationsits integrated steel plants, a 35% Fe cut-off grade and a mass recovery of 40.4%, for a one-year life of mine.
12.Mt. Tokadeh, Mt. Gangra and Mt. Yuelliton mineral reserves are estimated at a cut-off grade of 40% Fe and a mass recovery of 58.9% for the ore bodiesoxide and transitional material, and a 30% Fe cut-off grade and a mass recovery of 44.8% for the fresh material, for a life of mine of 30 years.
13.Mineral reserves for Thakurani are estimated at 55% Fe cut-off grade and a mass recovery of 98%, for the life of mine of 11 years.
14.Mineral reserves of coal for all Kazakhstan-Karaganda mines are estimated based on a price of $128 per tonne of clean coal, and a minimum coal yield of 25.2% for the life of mine of 20 years. The ash cut-off grade applied at the CanadaKazakhstanskaya, Lenina, Shakhtinskaya and Brazil operations. However, this was offset by 167 million tonnesTentekskaya mines is 57% Ash with yield of mining depletion during 2018.
Metallurgical Coal Reserve Estimates48.42% at average and the cut-off grade applied at the Saranskaya, Kuzembaeva, Kostenko and Abayskaya mines is 46% Ash and yield of 36.7% at average. The minimum seam thickness cut-off used for all mines is 0.70 m.
The table below details ArcelorMittal’s estimated metallurgical coal15.As per S-K 1300, reported mineral reserves as of December 31, 2018. The classification of coal reserve estimates as proven or probable reflects the variability in the coal seams thickness and quality, the mining selectivity and the planned production rate for2021 reflect ArcelorMittal's ownership interest at each deposit. Proven coal reserve estimates are based on drill hole spacing ranging from 50m x 50m to 500m x 500m, and probable coal reserve estimates are based on drill hole spacing ranging from 100m x100m to 1,000m x 1,000m. |
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| | | As of December 31, 2018 | | As of December 31, 2017 |
| | | Proven Coal Reserves | | Probable Coal Reserves | | Total Coal Reserves | | Total Coal Reserves |
| ROM Millions of Tonnes | | Wet Recoverable Million Tonnes | | ROM Millions of Tonnes | | Wet Recoverable Million Tonnes | | ROM Millions of Tonnes | | Wet Recoverable Million Tonnes | | Ash
(%) | | Sulfur (%) | | Volatile (%) | | Millions of Tonnes | | Wet Recoverable Million Tonnes |
| Princeton - USA | | 71 | | 45 | | 23 | | 11 | | 94 | | 56 | | 5 | | 0.7 | | 17 | | 88 | | 56 |
| Karaganda - Kazakhstan | | 11 | | 5 | | 99 | | 49 | | 110 | | 54 | | 35 | | 0.6 | | 29 | | 136 | | 57 |
| Total | | | | | | | | | | 204 | | 110 | | 20 | | 0.7 | | 23 | | 224 | | 114 |
The Ash (%), Sulfur (%) and Volatile (%) for Princeton - USA shown in the table above are the in-situ coal qualities, whereas the Ash (%), Sulfur (%) and Volatile (%) for Karaganda - Kazakhstan are Run of Mine coal qualities.
A new reserve estimation for the Kazakhstan coal operations was completed in 2018, basedindividual business unit. Note that 2020 mineral reserves were reported on a preliminary 10 year mine plan, remodeled from first principle, as recommended in the 2016 SRK Consulting (UK) Limited independent audit report.100% basis.
The table below provides supplemental information on the producing mines.
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| Operations/Projects | | % Ownership | | In Operation Since | | 2018 Run of Mine Production
(Million Tonnes) | | 2018 Wet Recoverable production
(Million Tonnes) | | Estimated Mine Life (Years)1 |
| Princeton - USA | | 100 | | 1995 | | 3.4 | | 2.1 | | 35 |
| Karaganda - Kazakhstan | | 100 | | 1934 | | 10.0 | | 3.8 | | 10 |
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1 | The estimated mine life reported in this table corresponds to the duration of the production schedule of each operation based on the 2018 year-end metallurgical coal reserve estimates only. The production varies for each operation during the mine life and as a result the mine life is not the total reserve tonnage divided by the 2018 production. ArcelorMittal believes that the life of these operations will be significantly expanded as exploration and engineering studies confirm the economic potential of the additional mineralization already known to exist in the vicinity of these estimated coal reserves.
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Changes in Metallurgical Coal Reserve Estimates: 2018 versus 2017
The Company’s metallurgical coal reserve estimates had a net decrease of 20 million tonnes of Run of Mine coal and a decrease of 4 million tonnes of recoverable coal between December 31, 2017 and 2018. This decrease includes the annual mining depletion of 13 million tonnes Run of Mine and 16 million tonnes Run of Mine, at the Kazakhstan coal operations, primarily due to the new reserve estimation. However, this was offset by an increase of 9 million tonnes of Run of Mine coal at Princeton, primarily due to a reinterpretation of modifying factors. The additional recoverable coal at Princeton was due to infill drilling and improved modeling. The reporting of recoverable coal reserves from Kazakhstan excludes the recoverable coal which in theory could be used for metallurgical applications but which in practice is sold and usedfollowing table summarizes ArcelorMittal’s mineral resources as thermal coal by ArcelorMittal at its steel plant facilities.
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ITEM 4A. | UNRESOLVED STAFF COMMENTS |
There are no unresolved comments received from the staff of the Securities and Exchange Commission regarding ArcelorMittal’s periodic reports underend of the United States Securities Exchange Act of 1934, as amended.
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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Overview
ArcelorMittal is the world’s largest and most global steel producer and a significant producer of iron ore and coal, with production of 92.5 million tonnes of crude steel and, from own mines, 58.5 million tonnes of iron ore and 5.9 million tonnes of coal in 2018, as compared to production of 93.1 million tonnes of crude steel and, from own mines, 57.4 million tonnes of iron ore and 6.3 million tonnes of coal in 2017. ArcelorMittal had sales of $76.0 billion and steel shipments of 83.9 million tonnes for thefiscal year ended December 31, 2018 as compared2021 in the aggregate, and by commodity and country and for each property containing 10% or more of ArcelorMittal’s combined measured and indicated mineral resources. Mineral resource quantities are rounded to salesmillion tonnes. The reported mineral resources reflect ArcelorMittal's ownership interest at each individual business unit and are reported, exclusive of $68.7 billion
mineral reserves, on a wet basis. Mineral resource quantities are rounded to million tonnes. Unless indicated otherwise below, iron ore mineral resources are estimated based on the same long-term iron ore price forecast used for reserves, adjusted based on the applicable revenue factor and adjusted upwards or downwards for mine specific factors and further adjusted for grade, logistics and other adjustments.
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| Iron Ore | | % of Ownership Interest16 | | Measured Mineral Resources | | Indicated
Mineral Resources | | Measured & Indicated Mineral Resources | | Inferred
Mineral Resources |
| | Millions of Tonnes | % Fe 1 | | Millions of Tonnes | % Fe1 | | Millions of Tonnes | % Fe1 | | Millions of Tonnes | % Fe1 |
| Canada | | | | 1,563 | 28.3 | | | 1,684 | | 30.0 | | | 3,247 | | 29.2 | | | 1,704 | | 32.0 | |
AMMC2 | | 85.0 | | 1,563 | 28.3 | | | 1,668 | | 29.7 | | | 3,231 | | 29.0 | | | 1,551 | | 28.8 | |
Baffinland3 | | 25.2 | | — | — | | | 16 | | 65.4 | | | 16 | | 65.4 | | | 153 | | 65.2 | |
| Mexico | | | | 35 | 28.8 | | | 86 | | 31.6 | | | 121 | | 30.8 | | | 31 | | 35.4 | |
Mexico (Excluding Peña Colorada)4 | | 100.0 | | 15 | 34.4 | | | 64 | | 34.6 | | | 79 | | 34.6 | | | 31 | | 35.4 | |
Peña Colorada - Mexico5 | | 50.0 | | 20 | 24.6 | | | 22 | | 22.7 | | | 42 | | 23.6 | | | — | | — | |
Brazil6 | | 100.0 | | 173 | 48.3 | | | 112 | | 44.9 | | | 285 | | 47.0 | | | 102 | | 37.1 | |
Bosnia7 | | 51.0 | | — | 31.2 | | | — | | — | | | — | | 31.2 | | | — | | 40.5 | |
| Ukraine | | | | 76 | 33.5 | | | 419 | | 34.2 | | | 495 | | 34.1 | | | 42 | | 52.8 | |
Ukraine Open Pit8 | | 95.1 | | 73 | 32.5 | | | 401 | | 33.3 | | | 474 | | 33.2 | | | 6 | | 36.7 | |
Ukraine Underground9 | | 95.1 | | 3 | 56.0 | | | 18 | | 55.6 | | | 21 | | 55.6 | | | 36 | | 55.5 | |
| Kazakhstan | | | | 676 | 35.7 | | | 57 | | 44.9 | | | 733 | | 36.5 | | | 11 | | 48.0 | |
Kazakhstan Open Pit10 | | 100.0 | | 666 | 35.5 | | | 38 | | 41.4 | | | 704 | | 35.8 | | | 2 | | 37.1 | |
| Lisakovsk | | | | 655 | 35.3 | | | 19 | | 33.6 | | | 674 | | 35.3 | | | — | | 32.3 | |
Kazakhstan Underground11 | | 100.0 | | 10 | 52.3 | | | 19 | | 52.0 | | | 29 | | 52.1 | | | 9 | | 50.4 | |
South Africa12 | | 100.0 | | — | — | | | 38 | | 54.4 | | | 38 | | 54.4 | | | 43 | | 48.0 | |
Liberia13 | | 85.0 | | — | — | | | 1,036 | | 37.9 | | | 1,036 | | 37.9 | | | 952 | | 39.5 | |
India14 | | 60.0 | | — | — | | | 44 | | 57.7 | | | 44 | | 57.7 | | | — | | — | |
| Total Iron Ore | | | | 2,523 | 31.8 | | | 3,476 | | 34.3 | | | 5,999 | | 33.2 | | | 2,885 | | 35.3 | |
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| | % of Ownership Interest | | Measured Mineral Resources | | Indicated
Mineral Resources | | Measured & Indicated Mineral Resources | | Inferred
Mineral Resources |
| Coal | | | Millions of Tonnes | % Ash | | Millions of Tonnes | % Ash | | Millions of Tonnes | % Ash | | Millions of Tonnes | % Ash |
Kazakhstan - Karaganda15 | | | | | | | | | | | | | | |
| Saranskaya | | 100.0 | | | 376 | | 26.5 | | | 137 | | 26.9 | | | 513 | | 26.6 | | | 44 | | 28.9 | |
| Kuzembaeva | | 100.0 | | | 316 | | 27.0 | | | 196 | | 29.0 | | | 512 | | 27.8 | | | 83 | | 31.0 | |
| Kazakhstanskaya | | 100.0 | | | 211 | | 22.7 | | | 97 | | 23.8 | | | 308 | | 23.0 | | | 29 | | 25.4 | |
| Lenina | | 100.0 | | | 155 | | 22.3 | | | 56 | | 23.8 | | | 211 | | 22.7 | | | 22 | | 25.2 | |
| Shakhtinskaya | | 100.0 | | | 15 | | 21.0 | | | 36 | | 19.5 | | | 51 | | 19.9 | | | 34 | | 19.1 | |
| Tentekskaya | | 100.0 | | | 188 | | 20.3 | | | 74 | | 21.8 | | | 262 | | 20.7 | | | 16 | | 24.4 | |
| Kostenko | | 100.0 | | | 379 | | 26.8 | | | 285 | | 26.8 | | | 664 | | 27 | | | 75 | | 26.1 | |
| Abayskaya | | 100.0 | | | 120 | | 26.0 | | | 101 | | 25.9 | | | 221 | | 26 | | | 1 | | 26.3 | |
| Total Coal | | | | 1,760 | | 25.1 | | | 982 | | 26.0 | | | 2,742 | | 25.4 | | | 304 | | 26.8 | |
1.Unless stated otherwise, % Fe represents total Fe content for all sites except Peña Colorada where it represents magnetic Fe content only.
2.Mineral resources for AMMC are estimated at a cut-off grade applied for all deposits is 15% Fe with a mass recovery of 34.9%
3.Mineral resources for Baffinland are estimated at the cut-off grade of 55% and a mass recovery of 100%.
4.Mineral resources for Last Truchas are reported at a cutoff grade of 10% Fe magnetic and Fe recovery of 90%, and mineral resources for San José are reported at a cutoff grade of 27% Fe and Fe recovery of 75%.
5.Mineral resources for Peña Colorada are estimated at the cut-off grade of 10% Fe magnetic. Fe recovery at the mineral resource average head grade is 78.7%.
6.Mineral resources for Serra Azul are estimated at 40% Fe cut-off grade and a mass recovery of 52.8% for friable material, and 29% Fe cut-off grade and a mass recovery varying from 33% to 45% for compact material. Mineral resources for Andrade are reported at a cutoff grade of 20% Fe and variable a mass recovery of 70.6% at average.
7.Mineral resources for ArcelorMittal Prijedor are estimated based on a price of $24 per tonne of concentrate, calculated based on assumptions of a non-marketable material supplied to its integrated steel shipmentsplant, at 30% Fe cut-off grade and mass recovery of 85.2 million tonnes75%.
8.Mineral resources for Ukraine Open Pit are estimated at a cut-off grade applied at Novokryvorizke deposit is 12% Fe, and at Valyavkinske deposit 16% Fe.
9.Mineral resources for Ukraine Underground mine are estimated based on a price of $39.3 per tonne of product and a revenue factor of 1.5, at a cut-off grade of 48% Fe and a mass recovery of 100%.
10.Mineral resources for Kazakhstan Open Pit mines are estimated based on a price averaging $20 per tonne of products with a 1.5 revenue factor applied, calculated based on assumptions of a non-marketable material supplied to its integrated steel plant. Atansore mineral resources are reported at a 20% Fe cut-off grade and a mass recovery of 53.9%, Kentobe are reported at a 20% Fe cut-off grade and a mass recovery of 86.7%, and Lisakovsk are reported at a 30% Fe cut-off grade and a mass recovery of 48.3%.
11.Mineral resources for Atasu are estimated based on a price of $24.7 per tonne of concentrate with a 1.5 revenue factor applied calculated based on assumptions of a non-marketable material supplied to its integrated steel plant, at 40% Fe cut-off grade and a mass recovery of 60%.
12.Mineral resources for Thabazimbi are estimated at a 40% Fe cut-off grade and metallurgical recovery of 60%.
13.Mt. Tokadeh, Mt. Gangra and Mt. Yuelliton mineral resource are estimated at a cut-off grade of 40% Fe and mass recovery of 58.9% for the year ended December 31, 2017. ArcelorMittal isoxide and transitional material and 30% Fe cut-off grade and mass recovery of 44.8% for the largest steel producer in Northfresh material.
14.Mineral resources for Thakurani are estimated at a 45% Fe cut-off grade and South America, Europea mass recovery of 98%.
15.Mineral resources of coal for the Kazakhstanskaya, Lenina, Shakhtinskaya, Tentekskaya, Saranskaya, Kuzembaeva, Kostenko and Africa,Abayskaya mines are estimated by applying an ash cut-off grade of 40% Ash, a significant steel producer incoal seam dip of less than 30°, and a minimum coal seam thickness of 0.70 m. limited to coal that after the CISapplication of modifying factors, could meet the mineral reserves maximum raw ash and hasyield, with a smaller but growing presence in Asia. coking coal sale price of US$ 128.00 per tonne, equating to a minimum coal yield of 25.2%.
16.As per S-K 1300, reported mineral resources as of December 31, 2018, ArcelorMittal had approximately 209,000 employees.2021 reflect ArcelorMittal's ownership interest at each individual business unit. Note that 2020 mineral resources were reported outside the United States on a 100% basis.
Cautionary note concerning mineral reserve and mineral resource estimates: With regards to ArcelorMittal’s reported resources, investors are cautioned not to assume that any or all of ArcelorMittal’s mineral deposits that constitute either ‘measured mineral resources’, ‘indicated mineral resources’ or ‘inferred mineral resources’ (estimated in accordance with S-K 1300, which is consistent with the CIM (2014) definitions) will ever be converted into mineral reserves. There is a reasonable level of uncertainty as to the existence of ‘inferred mineral resources’ and their economic and legal feasibility, and it should not be assumed that any or all of an ‘inferred mineral resource’ will ever be upgraded to a higher category.
Internal Controls
ArcelorMittal producesmining and exploration properties employ robust quality control and quality assurance processes and procedures to ensure the validity of data utilized in the estimation of mineral resources and mineral reserves.
ArcelorMittal has developed an Orebody Knowledge and Management Framework, comprising a broad rangecomprehensive set of high-quality finishedinternal guidelines and semi-finished steel products. Specifically, ArcelorMittal produces flat products, including sheetmanagement standards that govern the resource and plate, and long products, including bars, rods and structural shapes. It also produces pipes and tubes for various applications. ArcelorMittal sells its products primarily in local markets and to a diverse range of customers in approximately 160 countries, including the automotive, appliance, engineering, construction and machinery industries. ArcelorMittal’s mining operations produce iron ore and coal for consumptionactivities conducted at its steel-making facilitiesproperties. The framework and alsoits associated documents describe the systems and processes to be developed and implemented at ArcelorMittal properties to effectively manage activities and data for sale commercially outsidethe estimation and mining of its mineral resources and reserves. This framework and its associated documents are compiled and managed by a centralized corporate team of
experienced and qualified technical experts and is reviewed and updated on a regular basis.
Databases are compiled and managed by experienced personnel engaged directly by the operating entities and business units, following documented procedures. Sample data derived from activities such as, but not limited to, exploration drilling and field sampling, is subject to thorough sample security and integrity protocols, field and laboratory quality assurance and quality control processes, and data validation procedures.
Field quality control processes and procedures will vary based on the specific nature of the Group.drilling or sampling program, but will nominally include the use of duplicate samples, blank control samples and certified reference materials. Samples processed and analyzed at internal and external laboratories are subject to additional laboratory quality control processes including, but not limited to, duplicate samples and certified reference materials. Data verification workflows are employed for each program to ensure the quality and integrity of all data incorporated into the databases.
Historical data is subject to rigorous verification processes prior to inclusion in resource estimation databases. These procedures can include, but are not limited to, external database validation by independent parties, internal database audits, and spatial and statistical analyses. Where historical data cannot be verified to the satisfaction of the relevant qualified person, it is excluded from the databases used in the estimation processes.
Where applicable, all mineral resource and mineral reserve estimates are reconciled against mine production data and operational results. Geological interpretations and estimation parameters are updated, and modifying factors, cost and price assumptions validated and adjusted.
There are inherent risks associated with all mineral resource and mineral reserve estimations see "Introduction—Risk Factors—Risks associated with ArcelorMittal's Mining Activities".
Operating and financial review
Key factors affecting results of operations
Overview
The steel industry, and the iron ore and coal mining industries, which provide its principal raw materials, have historically been highly cyclical. They are significantly affected by general economic conditions, consumption trends as well as by worldwide production capacity and fluctuations in international steel trade and tariffs. In particular, thisThis is due to the cyclical nature of the automotive, construction, machinery and equipment and transportation industries that are the principal consumers of steel. A telling example of the industry cyclicality was the sharp downturn in 2008/2009 after several strong years, which was a result of the global economic crisis. Similarly, the current COVID-19 pandemic caused a sudden and sharp decline in economic activity and steel consumption globally and particularly in the Company's core developed markets.
Weakness in North American and European markets hasThe COVID-19 pandemic had a significant impact on ArcelorMittal’s results with these markets together accounting for over 60% of ArcelorMittal's deliveries in 2018. Historically, in 2012, the onset of the eurozone crisis caused underlying European steel demand to weaken and, coupled with significant destocking, apparent steel demand fell by over 10%. Since then, deliveries have increased in each of the past six years, rising almost 3% per annum, returning to the average demand levels seen during the period between 2000 to 2005. However, deliveries remain approximately 18% below the 2007 peak. Imports into2020. In the European Union (“EU”) have also risen more strongly than demand, more than doubling since 2012 to, the impact of widespread national lockdowns during March, April and into May had a significant negative effect on output across the major steel consuming industries. Manufacturing declined sharply, with almost all automotive plants closed during the early part of the lockdown with production down over 31 million tonnes in 2018, meaning domestic European deliveries have lost market share, impacting60% year-on-year during the ability of ArcelorMittal to serve one of its largest markets. Underlyingsecond quarter. Industrial activity recovered sharply from April lows, and steel demand also recovered strongly through the second half of 2020, with consumption estimated to have declined by just over 10% year-on-year in North America increased strongly post-crisis, but apparent2020. While demand has been impacted by inventory movements, with highdid not fall as low as seen in 2009 as inventory levels resultingwere much leaner than prior to the global financial crisis, demand declined to levels not seen since the Eurozone debt crisis in stockists purchasing over six million fewer tonnes2012, with a significant impact on profitability in 2015, as compared to 2014, as they sought to reduce inventory levels as steel prices declined. This caused a 10% decline in apparent steel demand in 2015, which negatively impacted2020 from the Company’s deliveries and profitability. Apparentlargest market (Europe). Underlying steel demand in the United States was similarly impacted by the fall-out from the COVID-19 pandemic, with manufacturing output down over 15% year-on-year in the second quarter of 2020, especially light vehicle (-61% year-on-year) and machinery output (-19%). While construction was less affected, remaining close to 2019 levels, energy markets remained subdued and overall steel consumption is estimated to have declined furtherby 18% in 2016 as inventories continued to decrease2020, negatively impacting the Company’s deliveries and profitability.
The sharp global recession in 2020 significantly reduced global demand for Oil and Country Tubular Goods (“OCTG”)steel but the impact on demand was still very weak. The situation has since improved,not prolonged, with apparentoutput in developed markets rebounding strongly during the second half of 2020. Indeed, output of key steel demand growing over 6% year-on-year in 2017, due mainly to growth in pipes and tubes, demand for which was up around 85% year-on-year compared to only 2% growth in flat and a slight decline in longs. Apparent steel demand grew again in 2018 by an estimated 2% and 3% for flat and long products respectively, while demand for pipes and tubes declined slightly. Steel prices also recovered significantlyconsuming sectors in the United StatesU.S. was almost back to pre-pandemic levels by December 2020. As expected, the impact of restrictions on physical interaction, implemented in 2018,various regions at times through 2021, due to high rates of COVID-19 infections,
predominantly impacted services. However, the impositionrebound in manufacturing in developed markets was held back by a lack of 25% Section 232 tariffsavailable parts due to global supply chain issues. While the Company believes that these issues will be resolved in 2022, and that the United States, coupled with improving capacity utilization. With the United Statesneed to rebuild inventories of finished goods will support real demand, there remains a risk that supply chain issues will take longer than expected to be enjoying the longest economic expansion on record by the middleease or will recur. This is especially true if China increases its use of 2019,localized lockdowns, negatively impacting exports of needed parts and given the frailtyglobal supply chains. The scarcity of the current global economic outlook, any new economic downturn, especially one havingsemi-conductors had a major negativesignificant impact on developed markets, could significantly impact ArcelorMittal’s deliveriesauto production in 2021, and profitability. See “Item 3.D—Key information—Risk factors—Risks relatedwhile availability has begun to improve, the global economysituation highlights the tightness of supply chains globally. While it appears that the combination of high vaccination and booster rates and lower severity of Omicron variant means it is unlikely that countries will again implement significant restrictions, there is still a risk of renewed restrictions or lockdowns, if more transmissible variants spread globally.
Historically, the mining and steel industry.”
Demanddemand dynamics in China have also substantially affected the global steel business. Historically, after growingbusiness, mainly due to the significant changes in net steel exports. Despite the pandemic impacting China significantly in February and March 2020, increased government use of special local and sovereign bonds to fund increased investment, mainly in infrastructure projects, supported a robust recovery in steel consumption. Manufacturing output also rebounded strongly, since 2000,helped by robust demand globally for Chinese steel demand started to decline in 2015 because of weaker real estate sector constructionproducts and machinery production. This decline in domestic demand ledwas back to a surge in Chinese steel exports, which more than doubled between 2012 and 2015, increasing by over 56 million tonnes to 112 million tonnes in 2015. This increase in Chinese exports was greater than thetrend growth in world ex-China steel demand over the same period, and had the effect of curtailing domestic production in countries outside of China. A rebound in domestic demand and the beginning of a capacity reduction plan in China inearly into the second half of 2016 led to a decline2020. While Chinese steel demand surprised on the upside in exports, by 14%2020, growing around 9% year-on-year, policy support was quickly removed and steel demand weakened sharply in 2021, declining year-on-year in the second half of 2016the year. The Company had expected Chinese steel demand to decline in the medium-term, as infrastructure spending has been front-loaded and by 3% for the year as whole. While most exports were directedreal estate demand was expected to Asia, and exports to the U.S. were reducedweaken structurally due to lower levels of rural-urban migration. If this did not coincide with the renewed capacity closures, this would have been expected to have a negative impact of anti-dumping trade cases, a declining but still significant proportion were being directed toward ArcelorMittal’s core European markets in 2016. In particular, Chinese exports in 2015 were being sold at prices below cost (China Iron and Steel Association (CISA) reported CISA mills losing an accumulated RMB 65 billion ($10 billion) in 2015), negatively impactingon steel prices and therefore margins in many regions.spreads.
As real estate accounts for approximately 25% of the Chinese producers continuedGDP (including indirect linkages to accumulate losses until April 2016 when domesticsectors such as steel, cement, glass, and export prices rose sharply as domestic demand surprised producers onmetal products production), the upside, increasing capacity utilization. Sinceweakness of the second half of 2016, not only has demand continued to grow but significant capacity has been closed, consisting of over 150 million tonnes of legal blast furnace capacity and an estimated 120 million tonnes of illegal induction furnaces. Thisreal estate sector has led the government to a significantly higher capacity utilization rate, despite a 40 million tonnes reductionimplement measures to soften the decline in exports over the past few years, translating into a much improved domestic spread of steel prices over raw material costs,real estate and therefore higher export prices. Startingstabilize GDP growth in October 2017, this situation combined with environmental policies which led to temporary capacity restrictions over the winter period, and caused even higher utilization rates in China and an even higher spread of steel prices over raw materials. Although prices have since fallen back as these temporary capacity restrictions were less strictly enforced in October 2018, utilization rates remain high and2021. However, the risk of a renewed flood ofmore serious decline remains, as seen in the U.S. (2006 to 2009) and Spain (2007 to 2010) where residential investment declined by around 50% peak to trough. Such a decline would have a significant negative impact on the Chinese economy and steel consumption, and likely lead to rising steel exports has been reduced; it currently appears likely to occur again only if Chinese capacity were to increase and/or if Chinese demand were to weaken significantly.from China. See “Item 3.D—Key information—Risk factors—“Risk Factors—Risks related to the global economy and the mining and steel industry—Excess capacity and oversupply in the steel industry
and in the iron ore mining industry have in the past and may continue in the future to weigh on the profitability of steel producers, including ArcelorMittal.”ArcelorMittal”.
Unlike many commodities, steel is not completely fungible due to wide differences in its shape, chemical composition, quality, specifications and application, all of which affect sales prices. Accordingly, there is still limited exchange trading and uniform pricing of steel, whereas there is increasingan increase in trading of steel raw materials, particularly iron ore. Commodity spot prices can vary, which causes salesales prices from exports to fluctuate as a function of the worldwide balance of supply and demand at the time sales are made.
ArcelorMittal’s sales are made based on shorter-term purchase orders as well as some longer-term contracts to certain industrial customers, particularly in the automotive industry. Steel price surcharges are often implemented on steel sold pursuant to long-term contracts to recover increases in input costs. However, longer-term contracts with low steel prices will not reflect increases in spot steel prices that occur after contract negotiation. Spot market steel, iron ore and coal prices and short-term contracts are more driven by market conditions.
One of the principal factors affecting the Company’s operating profitability is the relationship between raw material prices and steel selling prices. Profitability depends in part on the extent to which steel selling prices exceed raw material prices, and specifically the extent to which changes in raw material prices are passed through to customers in steel selling prices. Complicating factors include the extent of the time lag between (a) the raw material price change and the steel selling price change and (b) the date of the raw material purchase and of the actual sale of the steel product in which the raw material was used (average cost basis). In recent periods, steel selling prices have tended to react quickly tonot always been correlated with changes in raw material prices, although steel selling prices may also be impacted quickly due in part to the tendency of distributors to increase purchases of steel products early in a rising cycle of raw material prices and to hold back from purchasing as raw material prices decline. With respect to (b), as average cost basis is used to determine the cost of the raw materials incorporated, inventories must first be worked through before a decrease in raw material prices translates into decreased operating costs. In some of ArcelorMittal’s segments, in particular Europe and NAFTA, there are several months between raw material purchases and sales of steel products incorporating those materials. Although this lag has been reduced recentlyin recent years by changes to the timing of pricing adjustments in iron ore contracts, it cannot be eliminated and exposes these segments’ margins to changes in steel selling prices in the interim (known as a “price-cost squeeze”). This lag can result in inventory write-downs, as occurred in 2015 and 2019 due to sharp declines in steel prices. In addition,
decreases in steel prices may outstrip decreases in raw material costs in absolute terms, as has occurred numerous times over the past few years, for example inthroughout 2019 as well as the second quarter of 2013 and fourth quarters of 2015, 2016 and 2018. In early 2020, steel spreads improved from the weak levels during the second half of 2019 but the negative impact of the pandemic on steel demand in the second quarter of 2020 led to lower spreads as steel prices declined, while raw material costs, especially iron ore, remained broadly stable underpinned by the strong rebound in Chinese demand. In the fourth quarter of 2020 and through the first half of 2021, global steel prices surged toward historical highs in many markets, due in part to increased demand and a slower increase in supply, resulting in increased steel spreads and higher profitability. During the second half of 2021, despite strong underlying demand, a lack of inputs (e.g. semiconductors) caused real steel demand to stagnate while steel supply continued to increase. This led steel prices to decline, faster than any decline in raw material costs leading to spread compression, and will lead to a lower profitability once these lower priced steel orders are delivered. However, this will be partially offset by an increase in the average price of annual automotive contracts in 2022 over 2021.
The Company’s operating profitability has been particularly sensitive to fluctuations in raw material prices, which have become more volatile since the iron ore industry moved away from annual benchmark pricing to quarterly pricing in 2010. Volatility on steel margins aside, the results of the Company’s mining segment (which sells externally as well as internally) are also directly impacted by iron ore prices, which decreased significantlyprices. The disaster at Vale’s Brumadinho dam at the end of January 2019, coupled with strong steel production in 2015, endingChina during the year at $40first half of 2019, pushed the price up to highs above $120 per tonne ("/t") and averaging only $56/t. Iron ore prices rebounded from $40/t during December 2015in July 2019. Vale brought back 35 million tonnes of supply by the end of 2019, allowing the price to decline to an average of $52/$92/t in December 2019 as supply better matched levels of demand. Despite the first half of 2016, increasingsignificant hit to Chinese downstream steel consumption in February and March 2020, iron ore prices fell only mildly to an average of $64/$87/t in February 2020 and remained relatively stable through March and April 2020. However, the strong recovery of Chinese steel consumption, and the beginnings of a rebound in demand in developed markets, coupled with some supply issues saw prices rebound to over $100/t by June 2020. As world ex-China demand and production rebounded during the second half of the year for a yearly2020, alongside continued strong steel production in China, iron ore prices continued to climb, rising to an average of $58/$134/t in the fourth quarter of 2020 and ending 2020 at over $160/t. The upward trendRobust recovery of steel demand and production continued intoin the first quarter of 20172021 with iron ore prices rising further to an average of $86/t, and then fluctuated between $60-75/t during most$167/t. In the second quarter of 2021, the following two years, leading to an annual average of $71/t in 2017 and $69/t in 2018. Despite recentseaborne iron ore price weakness,jumped to over $200/t as rising steel production in China coincided with tight supply, significantly increasing the
profitability of ArcelorMittal’s mining operations. Since mid-2021, iron ore prices have fallen back to an average of $111/t in January 2019 averaged $76/the fourth quarter of 2021 and falling to below $90/t at the top of the trading range for the last two years due to the strength ofduring November 2021 as Chinese crude steel production. Ifproduction declined. A significant further decrease in iron ore prices, were to decline from these levels due (among other things) to weaker global, and especiallywhich may occur, for example, if Chinese demand thisweakens sharply, would negatively impact ArcelorMittal’s revenues and profitability. See “Item 3.D—Key information—“Introduction—Risk factors—Risks related to the global economy and the mining and steel industry—Protracted low steel and iron ore prices would likely have an adverse effect on ArcelorMittal’s results of operations.”
Economic environment[1]
GlobalThe COVID-19 pandemic caused a collapse in global activity, with the global economy contracting by 3.5% in 2020, the largest decline since the global financial crisis (“GFC”) in 2008/09. While the initial impact of the pandemic on the global economy during the first half of 2020 was much sharper than during GFC, the immediate recovery throughout the third quarter was a lot faster, before moderating in the fourth quarter as momentum was dampened by a resurgence of infections. Globally, while both services and manufacturing sectors were initially impacted by various social restrictions implemented in order to curb the spread of the virus, manufacturing recovered much more strongly throughout 2020. Following the decline in GDP growth peaked at 3%during the crisis in both 2017 and 2018, and is now beginning2020, the global economy largely recovered through 2021, with GDP back to moderate asapproximately 2% above 2019 pre-pandemic levels by year-end. However, the recovery in tradelost momentum during the second half of 2021 and manufacturing activity loses steam. Despite ongoing negotiations, trade tensions among majorbecame increasingly imbalanced. Parts of the global economy, particularly advanced economies, remain elevated. These tensions, combined with concerns about softeningrebounded more quickly due to vaccine availability, supported by strong fiscal stimulus which led to significant excess savings and strong demand for manufactured goods throughout the year. Meanwhile, other parts of the global growth prospects, have weighed on investor sentiment and contributed to declines in global equity prices. Borrowing costs for emerging market andeconomy are at risk of being left behind, particularly many developing economies, ("EMDEs")where vaccination rates are low, and firms and employees in contact-intensive service sectors, where demand has yet to recover fully. In addition, global supply chains were unable to meet strong consumer demand due to persistent supply bottlenecks, rising input costs and the continued disruption effects of new COVID-19 variants. As a result, stronger and longer-lasting inflation pressures have emerged in all economies, at an unusually early stage of the growth cycle, and labor shortages are appearing, even though employment and hours worked are still yet to recover fully.
In the U.S., GDP in 2021 recovered to 2% above pre-pandemic levels with 5.6% growth year-on-year, driven mainly by strong consumer spending. Fiscal stimulus in 2020 – estimated at more than 30% of GDP had resulted in significant accumulated excess savings, of more than 10% of GDP, the highest among developed markets. As a result of the release in pent-up
consumer demand post-reopening, retail sales increased to around 15% above pre-pandemic levels throughout the 2021, with spending on goods remaining elevated, while services recovered to pre-pandemic levels. Despite strong goods consumption and orders around 10% above pre-pandemic levels, manufacturing output (at only 2% above pre-pandemic levels) was constrained by global supply bottlenecks, which were particularly acute in part as major advanced-economy central banks continuethe automotive sector, where global shortage of semi-conductors led to withdraw policy accommodations in varying degrees. A strengthening U.S. dollar, heightened financialvehicle assembly remaining 15% below 2019 pre-pandemic levels. As a result of constrained supply that was unable to meet strong demand, inflationary pressure has built, with the inflation rate increasing to 7% at the end of the year. While the labor market volatility, andrecovery continues to progress, there are signs of persistent inflationary pressures due to rising risk premiums have intensified capital outflow and currencywage pressures in some large EMDEs,sectors, notably in the leisure and hospitality sector, as well as in the transport and warehousing sectors. As a result, the tight labor market combined with some vulnerable countries experiencing substantial financial stress. Energy pricesoverheating demand, to push up wages, thereby sustaining inflationary pressure even after supply-bottlenecks have fluctuated markedly, mainlybegun to subside.
EU27 (Europe excluding UK) GDP grew an estimated 5% year-on-year, returning to pre-pandemic levels by the end of third quarter of 2021. The economic recovery in Europe was, however, weaker than in the U.S. Due to smaller fiscal stimulus (approximately 15% of GDP), growth was similarly driven by strong consumer spending, pushing retail sales to a level approximately 5% above the pre-pandemic level. While economic activity rebounded sharply in the first half of 2021, growth slowed during the second half of the year due to a series of supply factors,chain bottlenecks, particularly in the automotive sector, in addition to further tightening of restrictions towards year-end due to renewed intensification of COVID-19 cases (Delta variant wave, followed by emergence of the more infectious Omicron variant). Manufacturing output, which had recovered to pre-pandemic levels in 2020, then stagnated at those levels as gradual growth in other sectors offset very weak automotive assembly, which slumped to more than 30% below pre-pandemic levels in the second half of the year, due to semiconductor shortages. Similar to the U.S., firms’ inability to increase their production in line with sharp falls experiencedthe rapid growth in demand for manufactured goods led to an imbalance between supply and demand, putting upward pressure on prices. While inflation increased to more than 5% in the EU27, as the strength of consumer demand is not as strong as in the U.S., the risk of high inflation appears to be lower in the EU. More importantly, the labor market in the EU is not as tight as in the U.S., therefore, the risk of persistent inflation driven by a wage-price spiral is structurally lower.
In China, throughout the year, preventive measures remained in place to keep the spread of the virus under control and sporadic outbreaks have been suppressed by stringent, localized
lockdowns, mass testing and isolation measures. In 2021, GDP grew by 8.1% year-on-year, with growth slowing to under 5% year-on-year in the second half of the year after double digit growth in the first half, compared to the pandemic impacted output early in 2020. While industrial output growth slowed through the year, due to the stringent implementation of environmental targets and power cuts, the services sector recovery continued to gain momentum. Export growth remained strong as overseas economies continued to rebound, although it was mildly impacted by COVID-19-related port closures. Investment growth is slowing as some of its key components such as real estate and infrastructure investment have weakened. Regulations to rein in real estate investment (the so-called three red lines related to financial leverage at developers, with caps on bank lending), tightened liquidity conditions for property companies alongside declining sales, contributed to some large developers defaulting on their debt (e.g. Evergrande). The recovery of consumption has been more gradual, but recent strong growth in online sales indicates that consumption is gradually rebounding. Downside risks to growth are increasing and likely to continue in 2022, due to the emergence of Omicron variant that is more contagious and more difficult to trace, leading to more restrictions and causing significant disruption to supply chains. Given the rapid spread of new variants and the high share of asymptomatic carriers, restrictions under zero-tolerance policy are increasingly challenged as an effective way to deal with the ongoing COVID-19 pandemic and if more localised lockdowns are required, then Chinese economic growth will slow further in 2022.
In 2021, Brazil's GDP is estimated to have grown 4.6% year-on-year but is likely to slow sharply in 2022. After GDP returned to its pre-pandemic peak in February 2021, earlier than most emerging markets, helped by lax mobility restrictions and ample fiscal support, GDP has since broadly stagnated throughout 2021. This is due to continued recovery in services being offset by weaker industrial output exacerbated by global supply bottlenecks. Inflation has accelerated through the second half of 2021, negatively impacting the recovery of wholesale trade, retail sales and services. Lower consumer purchasing power and higher interest rates have dented the upturn in consumer and business confidence, slowing the recovery of domestic demand. Meanwhile, lack of reforms and increasing risk of unsustainable public debt – currently at more than 80% of GDP – will continue to impact medium-term growth.
In Russia, while the economy made a strong recovery in the first half of 2021, growth slowed slightly during the second half of the year, due to pandemic infections and tighter restrictions. GDP growth for 2021 is estimated at approximately 4% year-on-year, with fourth quarter GDP similar to pre-pandemic levels. Resilient manufacturing output (approximately 5% above pre-pandemic
levels) and mining (back to pre-pandemic levels) offset subdued services sectors activity, which was impacted by rising infection and restrictions. While retail sales growth also slowed from its peak in May 2021, labor market conditions have remained strong, with the unemployment rate falling to a record-low of 4.3% and wage growth close to 10% year-on-year.
In Turkey, growth has been strong with GDP increasing approximately 10% year-on-year in 2021, with particularly strong growth during the first half of the year. However, towards the end of 2018.the year, risk of a crisis has intensified due to very high inflation (36% year-on-year in December) and an erosion of the central bank's monetary policy credibility. This has led to large depreciation in the lira, which has increased Turkey’s economic vulnerability, due to higher external debt. In addition, the decision to compensate holders of lira for exchange rate losses, while mitigating the risk of further lira depreciation, risks pushing exchange rate risks on to public finances, which until now had been a point of strength for the economy, relative to other emerging markets.
U.S.After reaching its peak levels at the beginning of 2021, approximately 6% above pre-pandemic levels, global manufacturing output stagnated during the first half of 2021 and started to decline during the third quarter of 2021 before recovering toward year-end as supply bottlenecks began to improve. This stagnation was partly due to declining manufacturing output in China, as the boost from infrastructure in 2020 waned and power cuts impacted heavy industry and restrictions to curb real estate developer’s over-borrowing impacted the construction sector. Meanwhile, world ex-China manufacturing output had recovered to pre-pandemic levels at the beginning of the year. However, a series of global supply chain bottlenecks, constrained further growth in 2018industrial production, particularly the lack of semiconductors which significantly negatively impacted automotive output. As a result, world ex-China manufacturing output stagnated throughout the year, causing inventory of finished goods to fall to historic lows, as demand outstripped supply. The global supply chain issue has impacted both the U.S. and EU, with output in the EU stagnated at pre-pandemic levels, while in the U.S. output stayed at approximately 2% above early 2020 levels.
Following a slight decline in 2020 – the first decline since 2015, global apparent steel consumption (“ASC”) is estimated to have picked upincreased by approximately 4% in 2021, as the global economy rebounded post-pandemic. The growth was driven by a rebound in real steel demand growth as steel consuming sectors attempted to 2.9%, from 2.2%increase the output to meet strong consumer demand, coupled by a strong inventory rebuild at end users. In China, after being one of the few countries to see steel demand growth in 2017, mostly reflecting2020, at 9% year-on-year, ASC is estimated to have declined by around 2% in 2021, due to a combination of waning infrastructure demand, more stringent policy to curb property
developers’ credit and environmental policy to cap output of heavy industry. In contrast, vaccine progress and removals of restrictions post-pandemic saw ASC increase strongly in the rest of the world ex-China, estimated more than 11% year-on-year growth. Relatively stronger than-expected domestic demand. Activity was bolstered by pro-cyclical fiscal stimulus than in the rest of developed world, meant U.S. real steel demand increased strongly, and still-accommodative monetary policy. The labor market remainscoupled with inventory restocking, resulted in an increase in ASC of around 21% year-on-year. While flat steel demand grew 19%, negatively impacted by weakness in the automotive industry, long products and pipe and tubes both grew around 25% year-on-year. In EU27, while real demand has weakened in the second half of 2021 due to supply bottlenecks after growing strongly during the first half of 2021, overall ASC was supported by rising inventory, as high domestic steel prices have led to rising imports. ASC is estimated to have increased by approximately 15% year-on-year in 2021.
Most developing markets also saw ASC increase in 2021, particularly India (17% year-on-year) and to lesser extent, the Association of Southeast Asian Nations (ASEAN, 8% year-on-year) and Russia (3% year-on-year). Meanwhile, ASC increased significantly in both Brazil (23% year-on-year) and Turkey (13% year-on-year). However, this is unlikely to be sustainable as the strong steel demand in Brazil was prompted by a fiscal stimulus leading to rising risks from unsustainable public debt. While in Turkey, it was caused by a strong credit cycle, that has caused overheating of demand and sharp lira depreciation.
Source: GDP and industrial production data and estimates sourced from Oxford Economics January 25, 2022. ASC data for U.S. from American Iron and Steel Institute (AISI) to November 2021, estimates for December 2021. ASC data for Brazil from Brazilian Steel Institute to November 2021, estimates for December 2021. ASC data for EU27 from Eurofer to October 2021, estimates for November and December 2021. All estimates are internal ArcelorMittal estimates.
Steel production
World steel production grew 3% in 2019, an increase of approximately 55 million tonnes to 1.87 billion tonnes, primarily driven by a 7.9% year-on-year increase in Chinese production, whereas world ex-China production fell 2% year-on-year. In 2020, world steel production stagnated as a result of demand disruption caused by the global COVID-19 pandemic, led to a decline of 65 million tonnes (mt) in world ex-China production (-7.6% year-on-year) to 800mt, the lowest production since 2010, offset by a robust 6.5% year-on-year increase in Chinese production. In 2021, as vaccinations allowed the global economy to recover from the pandemic, world steel production increased by 3.8% year-on-year. In China, steel production declined by 3% year-on-year to 1.03 billion from 1.06 billion tonnes, due to tighter restrictions on the real estate sector and an environmental policy to cap output of heavy industry. However, this was more than offset by a sharp rebound in world ex-China production, that increased by more than 100 mt in 2021 (+13% increase year-on-year), to a historical high, that was 4% above 2019 pre-pandemic levels. Developed markets
saw a particularly strong increase (+14% year-on-year) with the unemployment rate near a 50-year low, which bolstered consumption. Labor productivity is showing signs of picking up. Nominal wage gains have been outpacing inflation, resultingproduction back to pre-pandemic levels, and particularly strong growth in modest real wage growth. Long-term inflation expectations have edged up but remain stable. During 2018, the U.S. administration raised tariffs on about $300 billion worth of imports, mostly from China.(+18%), EU27 (+16%) and Japan (+16%). As a result, otherChina’s share of global steel production decreased to 54% in 2021 (2020: 58%, 2019: 54%) while others’ share broadly rose back to their pre-pandemic levels, including East Asia (10% from 9% in 2020 and 10% in 2019), EU28 (EU including UK) (8.5% from 7.5% in 2020 and 8.5% in 2019), NAFTA (6% from 5% in 2020 and 6% in 2019), India (6.5% from 5% in 2020 and 6% in 2019), while the CIS saw its share remain broadly stable over the past three years at around 5.5%.
In world ex-China, a robust recovery in underlying steel demand, supported by restocking last year, led to a strong growth in steel production, with production of 901 million tonnes, significantly above production in 2020 (800 million tonnes) and back above the 866 million tonnes produced in 2019. EU27 production rebounded to 153 million tonnes, with significant year-on-year growth during the first half of the year relative to weak production during the first half of 2020 caused by widespread lockdowns. In 2021, production was back above its 2019 level (150 million tonnes) but still below average production levels seen in the prior decade (2010-19 approximately 158 million tonnes per annum). In North America, production increased by 17% year-on-year to 117 million tonnes – almost back to 2019 production levels (119 million tonnes), with production in Mexico (18 million tonnes) back to pre-pandemic levels, while production in the U.S. (86 million tonnes) and Canada (13 million tonnes) was slightly below the pre-pandemic levels. Production in developed Asia grew 11% year-on-year to 190 million tonnes (Japan: 96 million tonnes – South Korea: 71 million tonnes – Taiwan: 23 million tonnes), similarly almost back to 2019 production levels (193 million tonnes). Steel production in South America rose strongly in 2021 up 18% year-on-year to 46 million tonnes, significantly above 2019 levels (42 million tonnes). This was largely driven by Brazil, where steel production stood at 36 million tonnes in 2021 (2019 levels: 33 million tonnes) due to significant fiscal stimulus in 2020, which boosted the economy and steel consumption above pre-pandemic trends. In CIS, steel production increased 5% year-on-year to 106 million tonnes in 2021, i.e., above 2019 levels after production was broadly stable in 2020 despite the pandemic. Finally, some regions saw production increase in both 2020 and 2021, for example Turkey, where steel production rose by 13% year-on-year in 2021 after a 6% increase in 2020. However, while production in 2021 at 40 million tonnes was well above pre-pandemic levels (2019: 34 million tonnes), production had fallen in 2019 due to the Lira crisis. Elsewhere production has continued to rise year over year in ASEAN, with production at 52 million tonnes in 2021, over 20% above 2019 levels.
Source: Steel production data are compiled using World Steel data for 61 countries for which monthly data is available (which together account for 97% of World production). Production data is available for all months of 2021.
Trade and import competition
Europe
There has been a trend of imports growing more strongly than domestic demand in the EU since 2012. Apparent steel consumption ("ASC") increased approximately 13% between 2012 and 2019, while finished steel imports increased by approximately 70%, taking market share from domestic producers. Over this period total finished imports have retaliatedrisen from almost 14 million tonnes in 2012 to over 23 million tonnes in 2019, causing import penetration to rise to 17% in 2019 from 11% in 2012. In 2020, widespread lockdowns across Europe in order to curb the spread of COVID-19 infections led to total steel demand falling by around 11% year-on-year in 2020, with tariffs on about $150 billion worthimports falling similarly by 11%, to approximately 24 million tonnes, leading to a broadly stable import penetration of U.S. exports. 16%.
In all, new tariffs2021, a global synchronized rebound in economic activities following the significant lockdowns related to the COVID-19 pandemic led to a strong recovery in steel demand in Europe. In 2021, ASC was estimated to have been imposed on about 12%increased by approximately 15% year-on-year to a level which was approximately 2% above pre-COVID-19 (2019 levels). In addition to strong demand, elevated steel prices attracted increased imports into the EU, with total imports estimated to have increased by around 40% year-on-year. As a result, import penetration increased to approximately 19% in 2021 from 16% in 2020. Import penetration for both flat and long products increased, with flat products to approximately 24% (2020: 20%) and long products 13% (2020: 11%).
Traditionally, imports into EU27 have come from Commonwealth of U.S. goodsIndependent States (“CIS”), China, Turkey, developed Asia and the UK, with these regions accounting for approximately 76% of imports in 2020, similar to the average over the prior five years. While imports declined in 2020 due to the COVID-19 pandemic, 2021 has seen a strong rebound to 2019 levels from most regions except the UK and may expand further, resultingChina. Imports from the UK declined by approximately 15% year-on-year in higher2021, with import share down to 6% from its average of approximately 9% in the prior five years. The share of Chinese origin imports continued to decline in 2021 to only 5%, down from its peak of 24% in 2015, as imports remained at a similar level to 2020 and approximately 30% below 2019 levels. Meanwhile in some regions such as CIS, developed Asia and India, imports have increased to above 2019 levels but import shares are still marginally down to 25% in the CIS (2020 share: 26%). Strong European steel prices also attracted more imports from Turkish producers, which supported by a weaker Lira, increased imports by approximately 30% year-on-year, however, Turkish imports share decreased slightly to 17%. In developed Asia, despite imports increasing by 30% year-on-year to above pre COVID-19 pandemic levels, stronger imports from elsewhere mean the import share maintained at its 5-year average of 14% in 2021.
Overall, traditional importers' (CIS, China, developed Asia, Turkey and elevated policy uncertainty. the UK) import share fell to only 68% in 2021 from 76% in 2020. This was due to a significant increase in imports from elsewhere in Asia, with imports from India more than doubling, increasing their import share from 8% in 2020 to 11% in 2021. Similarly, imports increased sharply from ASEAN, rising from under half a million tonnes in 2020 to approximately 1.8 million tonnes in 2021, pushing their import share to 5% from 2% in the previous year.
See “Item 4.B—Information on the Company—Business“Business overview—Government regulations—Foreign trade” and “Item 3.D—Key information—Risk“Risk factors—Risks related to the global economy and the mining and steel industry—Unfair trade practices, in ArcelorMittal’s home marketsimport tariffs and/or barriers to free trade could negatively affect steel prices and reduce ArcelorMittal’s profitability, while trade sanctions and barriers may have an adverse effect on ArcelorMittal’sresults of operations in various markets.”
EU GDP growth slowed notablySource: Eurostat imports to October 2021, estimate for November and December 2021. ASC data from 2.6%Eurofer to October 2021, internal company estimates for November and December 2021. All historical data now refers to EU27 after UK left the EU.
United States
Finished steel imports peaked in 20172014 at almost 30 million tonnes with an import share of 28%, before declining to 2%approximately 18 million tonnes in 2018. Exports have softened, reflecting2019 (or an import penetration of 19%), mainly due to the earlier appreciationimplementation of Section 232 in 2018, adding a 25% tariff on most of the euroimports from outside USMCA (United States-Mexico-Canada Agreement). In 2020, the decline in real steel demand due to the COVID-19 pandemic pushed finished steels imports to fall by 25% year-on-year to approximately 14 million tonnes, with import penetration declining to 17%.
Similar to Europe, a combination of a strong post-pandemic steel demand recovery and slowing external demand. Inflation remains low despite declineselevated steel prices meant imports in unemployment.2021 increased strongly by almost 50% year-on-year, to around 21 million tonnes – higher than the pre-pandemic levels of 18 million tonnes in 2019. Meanwhile, ASC also increased strongly by approximately 21% year-on-year and recovered to 2019 (pre COVID-19) levels of approximately 97 million tonnes. As a result of imports growing much more strongly than steel demand, import penetration increased to approximately 21% in 2021 from 17% in 2020 (pre-pandemic 2019 share was approximately 19%). The European Central Bank has stopped adding to its balance sheet, although it is expected to maintain its negative interest rate policy until at least mid-2019. Financial system lendingincrease in import penetration was more in flat products as imports grew over 60% year-on-year, than long products where imports grew by around 35% and profitability have continued to increase, though some EU banks may be exposed to financial stress in some EMDEs. Across the euro area, fiscal policy is expected to be mildly expansionary. Increased German expenditures are expected to lead to smaller surpluses, while deficits in Franceimport share remained broadly stable.
Traditionally, only around one-third of U.S. finished steel imports came from within USMCA, however since 2019 imports from Canada and Italy are likely to rise amid public pressures for additional spending and tax relief. Italy’s borrowing costsMexico have increased their share, mainly at the expense of Europe. After remaining stable in 2020 (compared to 2019) while imports from all other major regions declined, imports of finished steels from USMCA increased by
approximately 50% year-on-year in 2021, maintaining a historically high import share of 45%. Imports increased strongly from both Canada (approximately 48% year-on-year) and remain volatile, reflecting uncertainties aboutMexico (53% year-on-year), with Canada accounting for 33% of U.S. imports while Mexico was accounted for 12% share, both close to 2020 levels. By contrast imports from Europe (EU27, Norway, Switzerland, and UK) have lost their share, declining to only 13% in 2021 as compared to 15% in 2020 and 19% in 2019 (pre COVD-19). Developed Asia import share has remained broadly stable at 20% in 2021, down only slightly from 21% in 2020 and 22% in 2019.
While there was a significant increase in imports from Africa, ASEAN, CIS, and India, with all regions seeing exports into the outlook ofUS more than double, this only partly offset the country’s debt load.decline seen in 2020. Indeed, these regions combined import share doubled to 10% in 2021, from 5% in 2020 but remained lower than the 12% import share they accounted for in 2019.
China
GrowthChinese finished steel exports increased to 71.6 million tonnes in China2021, up 35% year-on-year from 53.1 million tonnes in 2020, which had been the lowest annual total since 2011. While this is estimated to have slowed from 6.9% in 2017usually a cause for concern, it was mainly due to a still robust 6.6% in 2018, supported by resilient consumption, although the trend in the fourth quartershortage of 2018 was down further. A rebound in private fixed investment helped offset a decline in public infrastructure and other state spending. However, industrial production and export growth have decelerated, reflecting easingsteel on global manufacturing activity. Import growth continued to outpace export growth, contributing to a shrinking current account surplus. Net capital outflows have resumed, and international reserves have been edging down. Stock prices and the Renminbi have experienced continued downward pressures, and sovereign bond spreads have risen amid ongoing trade tensions and concerns about the growth outlook. New regulations on commercial bank exposures to shadow financing, together with stricter provisions for off-budget borrowing by local governments, have slowed credit growth to the non-financial sector. However, in mid- and late 2018, the Chinese authorities reiterated their intention to pursue looser macroeconomic policies to counter the potential economic impact of trade disputes with the United States. Prices of newly constructed residential buildings have rebounded, including in Tier 1 cities, following several years of correction. Consumer price inflation has generally moved up since mid-2018, partly reflecting currency depreciation and higher energy and food prices in most of last year, but it remains below target.
[1]GDP and industrial production data and estimates sourced from Oxford Economics January 10, 2019.
Growth in Brazil was lackluster in 2018 at 1.2%, reflecting the country's emergence from a severe recession, a truckers’ strike mid-year and continued policy uncertainty. In Russia, growth was resilient at 1.6% in 2018, supported by private consumption and exports; however, momentum has slowed, reflecting policy uncertainty, recent oil price declines, and renewed pressures on currency and asset prices. In Turkey, growth slowed down to 2.9% (from 7.4% in 2017) due in part to substantial deterioration in foreign investor confidence. Growth in Argentina plummeted to 2.1% in 2018 (from 2.9% in 2017) following acute financial market stress that resulted in sharp currency depreciation and monetary policy tightening, which have led to Argentina being designated a hyper-inflationary economy. In South Africa, activity contracted inmarkets during the first half of 2018 and, despite a recovery in the second half, growth remained subdued at 0.7% in 2018 (from 1.3% in 2017), reflecting challenges in mining production, low business confidence, and policy uncertainty.
Global apparent steel consumption (“ASC”) grew further in 2018 after a robust growth in 2017, compared to growth of just over 1% in 2016. Growth in 2018 reflected increases in demand in most markets with the notable exceptions of Mexico, South Africa, South Korea, Turkey and Venezuela. Overall, 2018 global ASC is estimated to have grown over 2.8% as2021. Indeed, Chinese demand was stronger than anticipated, growing approximately 3.5%, supported by the strength of machinery output and a better than expected real estate market. Elsewhere, world-ex-China ASC grew around 2.1% year-on-year, supported by strong growth in Indian sub-continent (7.5%), Latin America (4%), ASEAN (4%), Africa (3.5%) and EU28 (3%). Further regions grew more slowly including CIS (2%) and NAFTA (1%) where growth in the U.S. of almost 2% was offset by declining demand in Mexico. Demand growth in world ex-China was impacted by a sharp decline in Turkish steel demand (a 10% decrease) due to the crisis that hit the economyexports were lower during the second half of 2018 and a slight decline in developed Asia (a 0.5% decrease).
Steel production[2]
After reaching a peak of over 1.67 billion tonnes in 2014, world crude steel production declined by 3% in 2015 to 1.62 billion tonnes as output fell in every major steel producing market, except India. In 2016 global output grew marginally as Chinese output increased by under 4 million tonnes and World ex-China growth, which had fallen by 3.6% year-on-year in 2015, rising by 0.4% in 2016 due to higher output from developing countries such as India (+7.2%), Ukraine (+5.4%) and Turkey (+5.2%), although this was partially offset by lower output from South America (-8.4%), EU28 (-2.5%) and developed Asia (-0.6%).
However, over the past two years global steel production grew strongly rising 6.3% in 2017 to 1.73 billion tonnes in line with a strengthening global economy. In 2018, despite concerns about trade protectionism, global production grew a further 4.6% to a new peak of 1.81 billion tonnes. In 2018, China accounted for 52% of global steel production, East Asia 11%, EU28 9%, NAFTA 7%, India 6%, CIS 5% and the rest of the world 9%.
Chinese steel production data over the past few years has been subject to increased uncertainty due to under-reporting and the closure of illegal induction furnaces (IF) around mid-2017. Since IF production was mostly unrecorded in the official figures, as this production is moved to mills whose production is recorded officially, official production estimates are likely stronger than the actual production output as estimated by ArcelorMittal. Although the Company believes that the 2018 official steel production in China of 928 million tonnes is broadly accurate, ArcelorMittal believes that the growth rates recorded by the World Steel Association of 7.8% in 2017 and, to a lesser extent the 6.6% growth recorded in 2018, are higher than what occurred over this period.
[2]Annual Global production data is for all 95 countries for which production data is published by the World Steel Association
World ex-China steel production has risen strongly since 2016 rising 4.8% in 2017 to 859 million tonnes and a further 2.5% in 2018 to 880 million tonnes. In 2017, production was supported by double-digit growth of over 10% year-on-year in Brazil, Egypt, Turkey and Vietnam. By major regions, 2017 production grew by 1.6% year-on-year in East Asia, 3.9% in EU28, 4.6% in North America, 6.3% in India, decreased by 1.2% in CIS and increased by 13.1% in the rest of the world. In contrast, production in 2018 increased by 1.0% in East Asia, decreased 0.3% in EU28, and increased 4.1% in North America, 4.9% in India, 0.3% in CIS and 5.7% in the rest of the world. Production in East Asia has returned to historic highs as intense competition from excess capacity in China has eased, supported by steady growth in global steel demand. Production growth in EU28 has been curtailed by increased import penetration despite continued demand growth and weakness in German steel production. Stronger production growth in North America has been driven by US fiscal stimulus and supported by increasing trade protectionism, initially focused on steel imports like the Section 232 tariffs. Continued growth in Indian steel production reflects continued industrialization supporting strong domestic steel consumption growth. Weakness in CIS steel production is due to persistent weakness in Ukrainian steel production (the 2018 production of 21 million tonnes is a third below the 2011 peak of 35 million tonnes), despite historically high Russian production of nearly 72 million tonnes in 2018. After rising 13.1% to a record 37.5 million tonnes in 2017, Turkish steel production fell slightly by 0.6% in 2018 due to a balance of payment crisis caused by excessive economic policy stimulus in 2017 and triggered by diplomatic tensions with the United States.
Steel prices
Flat products
Steel prices for flat products in Europe improved during the first quarter of 2016 compared to December 2015 levels. In Northern Europe, the price for hot rolled coil ("HRC") improved in the first quarter of 2016, with a similar trend in Southern Europe. The second quarter of 2016 saw a sharp increase in international steel prices, led by China, driving an average increase of approximately €84/t quarter-on-quarter in the North and €97/t in the South. The average HRC prices for the first half of 2016 were at €371/t in Northern Europe and €351/t in Southern Europe2021, compared to the first half of 2015,the year. In addition, most Chinese exports are delivered to regions which are not core to the Company’s business, with only 8% of Chinese exports destined for EU27 or North America due to the protection of trade measures. In contrast, ASEAN received 29% of Chinese exports last year, while Developed Asia a further 16%. One area of concern is the rising share of Chinese exports destined for Latin America, with over 10 million tonnes last year, approximately 15% of Chinese finished exports, almost doubling from 5.5 million tonnes in which average HRC2020, or 10% of total. If, as expected, China enters a period of declining steel demand over the next decade, China must responsibly reduce its domestic steel making capacity, so that exports to the rest of the world do not rise sharply.
See “Business overview—Government regulations—Foreign trade” and “Risk factors—Risks related to the global economy and the mining and steel industry—Unfair trade practices, import tariffs and/or barriers to free trade could negatively affect steel prices were €405/tand ArcelorMittal’s results of operations in the Northvarious markets.”
Source: American Iron and €394/t in the South. Steel prices continuedAssociation total/regional imports and ASC data to increase in the third quarter and fourth quarter of 2016.November 2021, internal Company estimate for December 2021.
Steel prices for flat
Flat products in Europe were stable in Southern Europe and on a slight upward trend in Northern Europe during the first quarter of 2017 compared to December 2016. Prices of HRC increased in Northern Europe by €69/t quarter-on-quarter and in Southern Europe by €63/t quarter-on-quarter. Prices weakened in the second quarter of 2017 with an average price decline of €47/t in Europe. The average HRC prices for the first half of 2017 were at €545/t in Northern Europe and €513/t in Southern Europe compared to the first half of 2016 as described above. Prices bottomed out in July 2017, thus the downtrend reversed during August and September 2017. In the third quarter of 2017, spot HRC prices in Northern Europe remained €5/t below the second quarter 2017 average, and in Southern Europe there was an average increase of €9/t quarter-on-quarter. There was little fluctuation in prices in the fourth quarter of 2017, with a quarter-on-quarter improvement of €22/t in Northern Europe and €11/t in Southern Europe. HRC prices during the second half of 2017 increased €65/t in Northern Europe and €67/t in Southern Europe compared to the second half of 2016.
In the first quarter of 2018,2019, steel prices for flat products in Europe continued their steady upwarddownward trend which started in November 2017.September 2018. The prices of HRC prices peaked towards the end of March at €574/in Northern Europe reached €517/t in Northern Europe.January 2019, finishing the quarter €8/t lower, at €509/t. The decrease was attributable to weak domestic demand in the beginning of the year, high levels of inventories and the influence of declining international steel prices. In Southern Europe, HRC prices increased from €519/followed an inverse trend starting at €470/t in January to €558/and closing the quarter at €486/t, at€16/t higher. This inverse trend was partially driven by a stronger demand in Southern Europe and partially by the beginning of March. Turkish imports that were entering the Italian market with higher price ranges between €495/t - €500/t Cost, Insurance and Freight Free Out (“CIFFO”) effective. Domestic mills followed the Turkish import prices.
In the second quarter of 2018,2019, prices decreased sharply in USD terms followingNorthern Europe continued to decrease and ended the international market trend. However, the depreciation of the euro against USD helpedquarter at €487/t, which was €11/t lower compared to sustain domesticApril 2019. HRC prices in euro terms, with a low of €561/the Southern regions followed the same trend from the previous quarter peaking in June at €472/t, from €469/t in Northern Europe at the beginningApril. Turkish suppliers continued with their export offers of June 2018, €14 below its peak€470/t - €480/t CIFFO effective into Italy and Iberia, providing room for further increases in April 2018. In Southern Europe,European domestic prices, given there was no import price pressure. The average HRC prices bottomed out at €514/t by mid-June 2018 from a peakfor the first half of €544/t in April 2018. Average HRC prices2019 were €564/€499/t in Northern Europe and €538/€472/t in Southern Europe for the first half of 2018, compared to €545/t in Northern Europe and €513/t in Southern Europe for the first half of 2017. The provisional safeguard measures and tariff rate quotas implemented in July 2018 did not create a tangible effect on market protection in Europe and there was very limited improvement in flatEurope.
Flat products prices duringcontinued to slide down in the third quarter of 2018. In2019, impacted by soft demand and weakening international raw material prices. HRC in Northern Europe HRC prices increased slightly in euro terms compared tohad several trenches of price drops, ending the June level but only to reach a quarterly average of €566/quarter at €469/t, representing a €1/which was €18/t decrease quarter-on-quarter, while inlower versus the previous quarter. In Southern Europe the price improvementof HRC averaged at €537/€453/t, representing a €7/which was €19/t increase overlower compared to the second quarter level. In USD terms, however, prices declined across the regions due to further euro depreciation against USD.of 2019. Market seasonality, high inventory levels and imports pressured pricesimport pressure during the fourth quarter of 2018 and2019 pushed the HRC prices declinedon a downward spiral. Several attempts of price increases were rejected by the market, as real demand in euroEurope was weak. In Northern Europe, HRC prices ended the fourth quarter at €431/t, which was €38/t lower quarter-on-quarter and USD terms bothin Southern Europe, HRC averaged €413/t in the fourth quarter of 2019, €40/t lower than the previous quarter. In the second half of 2019, HRC prices averaged €450/t in Northern Europe and €433/t in Southern Europe.
Steel prices for flat products in Europe gradually deteriorated during 2019, bottoming toward the end of the year. Prices began recovering late in November 2019. Fueled by €18/a positive market outlook and absence of attractive imports, especially in Northern Europe, HRC spot prices improved until the end of February
2020, reaching €485/t in Northern Europe and €456/t in Southern Europe (+€47/t and +€23/t vs. beginning of January, respectively). However, with the COVID-19 outbreak becoming a pandemic and industries starting their preparation for shutdown, prices began softening, decreasing to €548/€473/t in Northern Europe and €443/t in Southern Europe by the end of March 2020.
During the second quarter of 2020, steel prices in Europe significantly declined due to uncertainties around the pandemic crisis, decreased demand, a focus on inventory depletion and high premium over imports. HRC prices dropped at the beginning of June to €396/t in Northern Europe (-€89/t vs. Feb 2020) and €390/t in Southern Europe (-€66/t vs. Feb 2020). As lockdown measures eased, steel prices partially rebounded across all European markets toward the end of June 2020.
In the first half of 2020, HRC prices averaged €449/t in Northern Europe and €431/t in Southern Europe, in line with the second half of 2019, but remained below the first half of 2019, down by €50/t in Northern Europe and €41/t in Southern Europe.
During the third quarter of 2020, steel activity, especially in Northern Europe, gradually picked up, demand from all sectors strengthened, inventories quickly declined, while imports in South Europe remained limited and not competitive. In addition, customers anticipated a supply deficit for the first quarter of 2021. This, coupled with the strong increase in raw material cost, supported a rebound in flat steel product prices in Europe by the end of 2020, to a 12-year high.
The HRC spot price increased by €100/t during the third quarter of 2020 in Northern Europe, and a further €166/t during the fourth quarter of 2020 (from €399/t on July 1, 2020 to €499/t on October 1, 2020 and then to €665/t on December 31, 2020). Similar increases in Southern Europe of €106/t and €170/t, in the third and fourth quarter, respectively (from €381/t on July 1, 2020 to €487/t on October 1, 2020 and then to €657/t on December 31, 2020), with the strongest day-on-day increases seen during August and December.
In the second half of 2020, HRC prices averaged €494/t in Northern Europe and €482/t in Southern Europe, an increase of €45/t and €51/t above the level in the first half of 2020, and €44/t and €49/t above the levels in the third and fourth quarter of 2019, respectively.
The price rally, which started in the second half of 2020, continued through the first half of 2021. In the first quarter of 2021, European HRC references stood at an average of €739/t in Northern Europe and €727/t in Southern Europe.
Economic recovery on the European continent has been robust since the peak of the second wave of COVID-19, at the end of 2020. Demand for steel rebounded more strongly than
anticipated and at a more rapid pace than domestic steel supply. This resulted in extended lead times at mills, while lower deliveries to customers led to the depletion of end-users’ steel inventories to historically low levels. The domestic supply-demand tightness was further worsened by limited import offers into Europe, due to the EU safeguard measures. At the same time, global demand and pricing (excl. Europe) was also strong, creating similar pressure in most markets. Hence, import lead times and prices were not competitive enough to alleviate the domestic situation in Europe (worsened by increasing freight rates and strengthening raw material prices). This drove domestic HRC pricing to record high levels up to July 2021.
During the second quarter of 2021, prices averaged at €1060/t in Northern Europe and €1,046/t in Southern Europe. The first half of 2021 registered record high prices for both Northern and Southern European HRC references, respectively at €900/t and €887/t, which indicated upsurges of €406/t and €405/t versus the second half of 2020, and increases of €451/t and €456/t, respectively, versus the first half of 2020. Overall, European HRC prices have doubled during the second half of 2021.
The strong upward price movement recorded over the last 12 months (since mid-2020) started reversing in the second half of 2021. In July 2021, HRC reference in Northern Europe was at €1,173/t, its peak for the year, while the HRC reference in Southern Europe was at €1,091/t (having its peak at €1,135/t, in June 2021). Despite the start of a declining trend, the average for the third quarter of 2021 was still at a higher level versus the previous quarter; namely, HRC reference in Northern Europe averaged €1,141/t and in Southern Europe €1,051/t, being respectively €81/t and €5/t higher over the second quarter of 2021. In the fourth quarter of 2021, the HRC reference in Northern Europe and Southern Europe moved further down to €988/t and €897/t, respectively, confirming a quarter on quarter decline of over €150/t in each of the two regions.
This price retreat was determined, among others, by €38/t to €499/t compared tosurging imports into the thirdEuropean Union. Particularly, the fourth quarter 2018 average levels. Overall,of 2021 started with the European HRC safeguard quota being exhausted immediately by one of its core importers – India. Further downward pressure on steel prices came from the automotive sector’s weakening demand, in light of the continued global shortage of microchips.
In the second half 2018of 2021, HRC prices averaged at €557/€1,065/t in Northern Europe and at €518/€974/t in Southern Europe, corresponding to a €30/respectively €571/t and €13/€492/t year-on-year increase, respectively.higher than the second half of 2020.
In the United States, spotdomestic HRC prices increased duringin the first half of 2019 continued the downward trend that began in July 2018. The first quarter of 2016. The2019 started with prices at $776/t in January and in March reached $767/t ($9/t lower). Prices in the second quarter of 2016 had a strong start and continued2019 plunged even deeper - from $749/t in April to strengthen
$598/t in June (a drop of $151/t), well below import parity levels. This descent represents the market’s search for a quarter-on-quarter improvementan equilibrium point after additional local capacity came on-stream in the second half of approximately $184/t. 2018. This additional supply availability added pressure on domestic prices at the same time as domestic mills were fighting imports. U.S. suppliers' short lead time combined with comfortable inventory levels at customers contributed to the downward trend in domestic prices.
The average HRC price for the first half of 20162019 in the United States was $547/t$723/t. In 2019, prices also fell due to weak real demand and decreasing scrap prices. The anticipated decline in imports, as comparedan outcome of the implementation of the Section 232 import tariffs was not as strong as expected. Therefore, import prices continued to an averageadd pressure on the domestic pricing. The HRC import Houston DDP index continued to decline over the first half of $541/2019, from $746/t in the first half of 2015. The spot HRC pricesquarter to $685/t in the United States started to decrease in July 2016 and continued this downward trend until October 2016. During the third quarter of 2016, the HRC price increased an average of $11/t quarter-on-quarter. The spot HRC prices in the United States reached a low at an average range of $526-552/t in October 2016, but then sharply increased toward the end of the year. second quarter.
In the fourth quarter of 2016, the spot HRC price in the United States decreased approximately $64/t quarter-on-quarter. The average spot HRC price in the second half of 2016 in2019, the United States was $618/t compared to an average of $467/t in the second half of 2015.
In the United States, spot HRC prices increased during the first quarter of 2017 by an average of $106/t quarter-on-quarter. Price levels improved sharply during January, had stability during February and peaked at $725/t by end of March 2017, to reach their highest average level since September 2014. During the second quarter of 2017, HRC spot prices decreased $11/t quarter-on-quarter, with progressive declines until the first week of June 2017, but were followed by a price pickup, sustained by declining inventories and improved international market sentiment. The average HRC price in the United States was $603/t, $330/t below the second half of 2018. The dramatic decrease is due to 2018 having been a record year in which prices were inflated by Section 232 import tariffs on steel. The average HRC price for the third quarter was $627/t, a drop of $52/t versus the previous quarter which was mainly due to the scrap USA #1 Busheling price dropping by $33/t, to $290/t and pressure from destocking at both Steel Service Centers (“SSCs”) and Original Equipment Manufacturers (“OEMs”).
Prices in the fourth quarter of 2019 averaged at $579/t, which is $48/t lower versus the third quarter. The situation further deteriorated in October due to the strike at General Motors that added to the market's negative sentiment. From November onwards, some relief came as scrap started an upward trend and international prices began to show signs of recovery. As a result, the fourth quarter ended in December at $623/t from the yearly low of $545/t, recorded in October.
Domestic HRC prices continued their upward trend which started in November 2019 through January 2020. However, prices fluctuated downwards in February and March 2020, first due to weak scrap exports and the Scrap USA #1 Busheling index price decline and, towards the end of the second quarter of 2020, due to the COVID-19 pandemic related market restrictions. HRC prices then lost $79/t between the beginning of January ($661/t) and the end of March 2020 ($582/t).
During the second quarter of 2020, prices fluctuated, seeing a low level at the end of April 2020 at $507/t, followed by an uptick during May to $559/t, supported by improvement in the scrap price then in supply scarcity, as well as good activity in non-auto segments. HRC prices deteriorated again toward the end of June to $524/t, as mini-mills were seeking volumes to fill available capacities. Domestic HRC prices averaged $593/t
during the first half of 2017 was $688/2020, a $130/t drop compared to the first half of 20162019, but just a $10/t decline compared to the second half of 2019.
Flat steel prices continued to decline in the United States at $547/t. The HRC spot price slightly improved in July and August, and stabilized towards the endbeginning of the third quarter of 2017, increasing $4/t quarter-on-quarter. Slight declines were recorded during October, but2020, as the COVID-19 pandemic and presidential election related uncertainties weighed on the market. High scrap supply and weak steel demand pressured prices picked up during November and December to reach $704/HRC reached at a 4-year low of $485/t by end of July, however, only to increase afterwards in a trend that continued until the end of 2017. The average prices2020.
Improved buying activity during the fourth quarter of 2017 decreased $2/2020, tight supply and production outage concerns pushed prices higher, while an expansion of the overall economy toward the year end, with good expectations for the first half of 2021, provided continuous support for domestic HRC to reach $1,113/t quarter-on-quarter. Overall,by end of December 2020 (+130% price increase). This is a historical high, only inferior to the pre-2008 economic crisis level of $1,185/t in July 2008.
Domestic HRC prices in the United States averaged $681/t during the second half of 2017 prices averaged at $686/2020, representing an $88/t representingimprovement compared to the first half of 2020 and a $68/$78/t increase compared to the second half of 2016.2019.
Following the July 2020 low at $505/t, the U.S. domestic Midwest HRC price increased. In January 2021, the United States, as a consequence ofprice increased to $1,191/t, which was $466/t higher than the then-ongoing Section 232 national security investigation which startedOctober 2020 level. By April 2021, the HRC price increased by another $341/t over the January level, to reach $1,530/t. Overall, prices in April 2017 and the expectation of the imminent implementation of import tariffs on steel, spot HRC prices increased sharply during the first quarter of 2018. Before2021 averaged $1,317/t, while second quarter prices increased by another $382/t to $1,699/t. Therefore, in the releasefirst half of the investigation report by the Department of Commerce on February 16, 2018,2021, U.S. domestic HRC prices reached $830/improved by 56%, averaging $1,508/t, from $723/t atmore than double the beginning of January 2018. After the release of the report that recommended tariffs in the range of 24 to 53%, prices spiked further to $936/t at the beginning of March 2018. The increase slowed down as 25% tariffs and exceptions went into effect during March 2018, closing the month at a high of $960/t. Invalue from the second quarterhalf of 2018, HRC prices surpassed2020, at $701/t. Similar to Europe, steel demand rebounded faster than supply, resulting in domestic supply-demand pressures. Demand pressure led to record long lead times at mills, with supply still being limited (Covid-19 related restrictions, domestic capacity constraints, import limitations). Flow of steel imports into the $1,000/t levelU.S. continued to be heavily controlled in line with Section 232 (25% tariff on most imports), but also given the tightness in supply across all regions. Additionally, severe weather conditions in the United States peaking at $1,012/t by the endresulted in various logistical constraints. All of June. The averagethese factors put together determined spiraling domestic HRC prices were $907/t forthroughout the first half of 2018 in2021.
The spiraling effect continued through the United States, as compared to $688/tthird quarter of 2021, when the U.S. domestic Midwest HRC price reported its peak for the firstyear, in September, at $2,156/t, averaging the quarter at a record high of $2,086/t. The robust demand environment, coupled with a still limited supply, domestically and from imports
(high lead-times), transportation congestions, skyrocketing shipping costs, all maintained the price reference at a high level.
The last quarter of 2021 brought the U.S. domestic Midwest HRC price to an average of $1,973/t, a drop of $113/t versus the previous quarter. The price inflection was reported in October 2021, at $2,121/t, declining by $35/t month on month. This was a reflection of the pressure coming from rising imports and increasing capacity utilization of domestic mills. Furthermore, the automotive industry (with its steel demand) continued to be subdued in light of the global microchip shortage. The second half of 2017, corresponding2021 averaged to a $219/$2,030/t, increase year-on-year. HRC prices hit a 10 year high of $1,014/t at the beginning of July 2018 in the United States. However, market seasonality and weakening of the international prices in the second part of the year coupled with an increase in the domestic capacity utilization rate (thus an increase in domestic supply), resulted in consistent price deterioration, with HRC prices falling to $799/t by the end of the year. Third quarter HRC prices averaged $982/t, still $2/t above the second quarter level, while average prices declined in the fourth quarter by $99/t quarter-on-quarter to $883/t. Overall, average HRC prices forwhich was higher than the second half of 2018 were $932/t as compared to $686/t for the second half of 2017 corresponding to a $246/t increase year-on-year.2020 by $1,329/t.
In China, spot HRC prices increased duringaveraged at $482/t VAT excluded in the first quarter of 2017, compared2019. The year started in January with prices at $467/t, strengthening to the average levels$494/t by March, as a result of the fourth quarter of 2016, fluctuating on an upward trend untilmarket’s resumed activity following the first part of February 2017, but deteriorated afterwards, in line with raw material basket cost decline. Domestic HRC prices increased during the first quarter of 2017 by an average of $35/t quarter-on-quarter. Prices continued to slide, hitting a bottom level of $374/t, VAT excluded by mid-May, followed however by a rapid recovery to a $439/t, VAT excluded average in June, supported by a new upward trend in raw materials cost, positive market sentiment and local mill interest to ramp up production and maximize profits. HRC spot prices decreased inChinese New Year. In the second quarter of 20172019, due to Brazil's major accident at one of its largest iron ore mining facilities, as well as due to the market seasonality, the peak prices were reached in April at $523/t VAT excluded. The second quarter of 2019 closed in at an average of $512/t VAT excluded. Despite the governmental measures targeting production cuts due to overcapacity and environmental issues, domestic mills have reacted slowly to the indications, driving the domestic price by end of June 2019 to $493/t VAT excluded, i.e. on average by $62/t quarter-on-quarter. In the first half 2017,a downward trajectory. The HRC domestic pricesprice in China averaged $427/$497/t VAT excluded compared to $317/t, VAT excluded, duringfor the first half of 2016.2019.
The downward spiral of the Chinese HRC spot pricesprice continued in China continued their steady increase in the beginning of September and increased for the third quarter of 20172019 reaching $474/t, which was $38/t lower versus the previous quarter, with increased inventory levels of both raw materials and finished products. Domestic demand was impacted by $113/t quarter-on-quarter.seasonality. The price increases slowed down during the fourth quarter of 20172019 began with further weakening of Chinese HRC prices, with October being the weakest month at an increaseaverage of $29/$441/t. The Purchasing Managers’ Index (“PMI”) dropped to its lowest point in four years, with the rate of new order intake dropping by over 5% for both domestic and exports. However, the market started to improve from November onwards when the 7-month downward spiral reversed. Better domestic demand and a decrease in finished product inventory (-10% month-on-month) helped improve the prices in November. In December, international steel prices started to improve, which also supported a positive price environment in China. The fourth quarter of 2019 ended at $462/t, quarter-on-quarter.$12/t lower than in the third quarter. HRC spot prices in China averaged $523/$468/t, VAT excluded in the second half of 2017, an increase2019.
At the beginning of $138/2020, steel prices in China continued their upward trend which started in December 2019, although peaking mid-January at $496/t, VAT excluded fromexcluded. With HRC inventory on the second halfrise, ahead of 2016.the Lunar New Year holidays
In China, spot HRC(January 24-30), prices fluctuated duringdeclined and continued the trend throughout the first quarter of 2018, peaking at $562/t VAT excluded at2020. After the end of February, followed by a sharp declineLunar New Year holidays, due to weak demandthe COVID-19 outbreak, the Chinese market opened to a reality of movement restrictions and high inventories. HRC prices bottomed out atdelayed enterprise activity. By the end of March 2020, HRC prices decreased $97/t, VAT excluded compared to the January peak, at $507/$399/t VAT excluded. Production cuts in several regions and mill inspections to ensure compliance with pollution emission standards impacted supply during
At the beginning of the second quarter of 2018. These measures supported2020, HRC prices in China which increasedbegan to improve following the ease in restrictions and gradual release in activities and local demand. HRC prices gained $58/t from $524/$408/t, VAT excluded at the beginning of April to a high of $581/$466/t, VAT excluded by mid-June. However, due to improvements in production levels and seasonal weak demand,
HRC prices declinedin China averaged at the end of the month. HRC domestic prices averaged $555/$445/t, VAT excluded, for the first half of 2018 in China, as compared to $427/2020, remaining $52/t VAT excluded forbelow the average of the first half of 2017.
Despite the implementation of tough environmental controls2019 and positive fiscal policies to expand domestic demand, production continued to increase, sustained by attractive margins, while consumption remained flat during$23/t below the second half of 2018. This2019.
resulted in further pressure on HRC prices in China, which declined by $15/t (duringIn the beginning of the third quarter 2018) as comparedof 2020, prices continued to the second quarter average level to $546/improve with domestic HRC reaching $520/t, VAT excluded, and by an additional $58/August 31, 2020. However, September was marked by a price decline, with HRC losing $23/t decreasing to $488/$497/t, VAT excluded by the end of September, as production continued at high level, exports stayed low and imports increased.
Steel prices spiked in China during the fourth quarter of 2018.
2020, as domestic demand continued strongly, while air pollution measures and production limitations in some regions fueled supply concerns. This, coupled with increases in raw material costs, pushed domestic HRC domestic prices averaged $517/to $652/t, VAT excluded (+$155/t compared to the end of September), the highest level since September 2011.
For the second half of 2020, HRC prices in China averaged at $534/t, VAT excluded, representing an $89/t increase compared to the average of the first half of 2020 and a $66/t increase compared to the second half of 2019.
In the first quarter of 2021, HRC prices in China averaged $650/t VAT excluded, which was $87/t higher versus the last quarter of 2020. The average of the first six months of 2021 reached $711/t, which was $177/t higher than the second half of 2020, and $266/t higher than the first half of 2020. Domestic prices continued an upward trend from April 2020 until May 2021, reaching the peak at $812/t, VAT excluded. In June 2021, prices have slightly weakened to $755/t, VAT excluded, a drop of $57/t month on month. This change came as a result of the abolition of export rebates announced by the Chinese Government for May 2021 onwards, a measure that was intended to discourage steel exports, and accordingly keep steel prices under check.
The third quarter of 2021 continued at an elevated level of $789/t for the HRC in China, VAT excluded, with the peak of the year reached in October at $865/t. The increasing environmental regulations imposed in China, enforcing steel production cuts in
the regions of e.g. Jiangsu, Tangshan, particularly in the second half of the year, along with tensions in raw materials limited supply have all pushed the Chinese domestic HRC price upwards. Additional pressure came with the introduction of energy supply control measures in the middle of September 2021, in an attempt to curb the short supply.
In November 2021, however, there has been a sharp decline in the Chinese HRC price, VAT excluded, reported at $666/t (a drop of $166/t month on month). That was a direct effect of Chinese Government’s intervention in loosening electricity supply crisis and relaxing the control on coal prices. Downstream demand for steel products was reported sluggish by the end of the year, given the seasonality and the uncertain epidemic situation domestically.
In the fourth quarter of 2021, the Chinese domestic HRC, VAT excluded, ended at an average of $699/t, a decrease of $90/t quarter on quarter, but still $136/t up from the last quarter of 2020. The Chinese price reference was reported for the second half of 2018, representing a $7/2021 at $744/t, decline asup $33/t compared to $524/t VAT excluded for the secondfirst half of 2017.2021.
| | | | | | | | | | | | | | |
| Flat products | | | | |
| Source: Steel Business Briefing (SBB) | Northern Europe | Southern Europe | United States | China |
| Spot HRC average price per tonne | Spot HRC average price per tonne | Spot HRC average price per tonne | Spot HRC average price per tonne, VAT excluded |
| Q1 2019 | €510 | €477 | $766 | $482 |
| Q2 2019 | €487 | €467 | $679 | $512 |
| Q3 2019 | €469 | €453 | $627 | $474 |
| Q4 2019 | €431 | €413 | $579 | $462 |
| | | | |
| Q1 2020 | €469 | €450 | $643 | $456 |
| Q2 2020 | €428 | €412 | $543 | $435 |
| Q3 2020 | €436 | €427 | $548 | $504 |
| Q4 2020 | €551 | €537 | $853 | $563 |
| | | | |
| Q1 2021 | €739 | €727 | $1317 | $650 |
| Q2 2021 | €1,060 | €1,046 | $1,699 | $773 |
| Q3 2021 | €1,141 | €1,051 | $2,086 | $789 |
| Q4 2021 | €988 | €897 | $1973 | $699 |
The following table presents the spot HRC average price range per tonne in Northern and Southern Europe, the United States and China on a quarterly basis from 2016 to 2018.
|
| | | | |
| Flat products | | | | |
| Source: Steel Business Briefing (SBB) | Northern Europe | Southern Europe | United States | China |
| Spot HRC average price per tonne | Spot HRC average price per tonne | Spot HRC average price per tonne | Spot HRC average price per tonne, VAT excluded |
| Q1 2016 | €329 | €303 | $456 | $282 |
| Q2 2016 | €413 | €400 | $639 | $353 |
| Q3 2016 | €426 | €402 | $650 | $348 |
| Q4 2016 | €498 | €474 | $586 | $423 |
| | | | | |
| Q1 2017 | €569 | €537 | $694 | $458 |
| Q2 2017 | €521 | €491 | $682 | $396 |
| Q3 2017 | €517 | €500 | $687 | $509 |
| Q4 2017 | €538 | €510 | $685 | $538 |
| | | | | |
| Q1 2018 | €561 | €545 | $834 | $549 |
| Q2 2018 | €567 | €530 | $980 | $561 |
| Q3 2018 | €566 | €537 | $982 | $546 |
| Q4 2018 | €548 | €499 | $883 | $488 |
Long products
During the first quarterPrices of 2016, long steel products saw a quarter-on-quarterin Europe continued their steady downward trend in 2019. In January 2019, rebar price and medium sections price reached €528/t and €624/t, respectively. The rebar price decline started in Europe for bothAugust 2018, while the medium sections price decline started in January 2019. By the end of March 2019, the rebar price and rebar. This downwardthe medium section
price dropped to €526/t and €588/t, respectively, reaching a quarterly average of €526/t and €605/t, respectively. In June 2019, prices bottomed further to €501/t for rebar and €579/t for medium sections. The falling domestic pricing environment followed the trend reversed duringof weakening world scrap prices on international markets.
In Europe, the second quarter of 2016. The average medium sections price for the first half of 2016 in Europe2019 was €481/€595/t compared to €521/t. The average rebar price for the first half of 2015. The average rebar price2019 was €521/t.
Prices for long steel products in Europe forcontinued their steady downward trend in the firstsecond half of 2016 was €404/t compared to €420/2019. The prices reached a floor in November 2019 at €452/t for the first half of 2015. Long steel product prices weakened again during the third quarter of 2016 for both medium sectionsrebar and rebar. Prices reached a low in October 2016, and started recovering through year end, reaching an average of €511/€521/t and €454/t in December 2016 for medium sections, and rebar, respectively, although the quarterly average prices remained down quarter-on-quarter.lowest over the last two years. The average medium sections price in Europe for the second half of 20162019 was €499/t as compared to €498/t for the second half of 2015.€548/t. The average rebar price in Europe for the second half of 20162019 was €432/t as compared to €389/€476/t.
Steel prices for long products in Europe rebounded in November 2019 and peaked by mid-January 2020 at €540/t for medium sections and €480/t for rebars. Finished steel products prices declined throughout February, alongside scrap Turkey HMS 1&2 index correction, with medium sections reaching €525/t and rebars at €453/t, although the second halffirst quarter of 2015.
Long steel product prices increased in Europe in2020 ended with similar price levels as the beginning of the first quarter of 2017, followed by a decline in mid-February, but with a recovery by the end of March. Prices then weakened duringyear.
During the second quarter of 2017 for both2020, despite a stable scrap price, long steel product prices in Europe continued declining, due to the impact of the pandemic on the market and weak downstream demand. By mid-June, medium sections reached €500/t and rebars but seemed to bottom out by the end of June with a quarter on quarter decline of €15/€430/t, and €22/t, respectively. The average price for medium sections in Europe during the first half of 2017 was €508/t compared to €481/t in the first half of 2016. The average rebar price in Europe during the first half of 2017 was €452/t compared to €404/t in the first half of 2016. Prices for long steel products were on a steady upward trendstabilizing at this level toward the end of the year. Medium sections prices increased €29/t quarter-on-quarter, while rebar prices increased €28/t quarter-on-quarter. During the fourth quarter of 2017, medium sections prices further increased €58/t quarter-on-quarter, while rebar prices increased €84/t quarter-on-quarter.quarter. The average medium sections price in Europe for the second half of 2017 was €557/t as compared to €499/t for the second half of 2016. The average rebar price in Europe for the second half of 2017 was €517/t as compared to €432/t for the second half of 2016.
Long steel product prices remained relatively stable in Europe in euro terms at the beginning of 2018 compared to the peak level in December 2017, but continued their upward trend in USD terms as the euro strengthened. Prices weakened from mid-February and towards the end of the first quarter 2018 with inventories reaching comfortable levels and a cautious market following the volatility in raw material costs. Medium sections prices declined from €625/t in January to €600/t by the end of March. Similarly, rebar prices declined from €568/t in January to €553/t in March. Prices remained stable again during April 2018 but followed a downward trend until mid-June when medium sections bottomed out at €585/t and rebar at €528/t. Average
medium sections prices were €603/t in Europe for the first half of 2018 as compared to an average of €508/t for the first half of 2017. Average rebar prices were €552/t in Europe for the first half of 2018 as compared to €452/t for the first half of 2017. Good market sentiment and strong demand supported an improvement of long product prices during the third quarter of 2018, with medium sections reaching €620/t and rebars €560/t by September corresponding to a €35/t and €32/t increase, respectively, as compared to the bottom level in June, and representing a quarter-on-quarter average improvement of €20/t for medium sections and €6 for rebars. Prices remained relatively stable during the fourth quarter of 2018 as compared to the levels at the end of September despite some weakening in rebars with a quarterly average of €538/2020 was €527/t, representing a €13/t decrease quarter-on-quarter. The average medium sections prices were €618/t in Europe for the second half of 2018 as compared to €557/€67/t for the second half of 2017. The average rebar prices were €545/t in Europe for the second half of 2018 as compared to €517/t for the second half of 2017.
With respect to scrap prices, in Turkey, even though the average first quarter 2016 price of imported scrap HMS 1&2 at $194/t CFR showed a small improvement of about $6/t against the average of the fourth quarter 2015, the average price of March 2016 at $218/t CFR represented a month-on-month increase of about $40/t. The Turkish rebar export price followed a similar trend. The March 2016 export price of Turkish rebar increased $44/t month-on-month. This upward trend continued during the first two months of the second quarter of 2016 with the export rebar price from Turkey reaching an average range of $451-457/t FOB in April, and $472-479/t FOB in May. In June 2016, rebar prices reduced to an average range of $395-403/t FOB Turkey. The average rebar export price from Turkey in the first half of 2016 was $388/t FOB compared to the first half of 2015, which2019 and a decrease of €21/t compared to the second half of 2019.
The average rebars price for the first half of 2020 was at $451/€461/t, FOB. Thea drop of €60/t compared to the first half of 2019 and a drop of €15/t compared to the second half of 2019.
During the third quarter of 20162020, as market sentiment and demand improved in July, steel prices for Long products in Europe started recovering, however rather slowly, fluctuating on an upward trend alongside scrap HMS 1&2 Turkey CFR index. From the June level, at a 3-year low, the medium sections and rebar price gained €20/t and €28/t by the end of September, reaching €522/t and €458/t, respectively.
Prices plateaued at this level during October, but spiked in November and December, pushed by an increase in the scrap index to a 9-year high. Long finished product spreads compared to the raw material basket squeezed towards the end of 2020, despite medium sections and rebars prices reaching highs of €640/t and €545/t, respectively.
The average medium sections price for the second half of 2020 was €532/t, representing a mere €5/t improvement compared to the first half of 2020, while prices declined €15/t compared to the second half of 2019.
The average rebars price for the second half of 2020 was €465/t, a mere €4/t increase compared to the first half of 2020 and decrease of €10/t compared to the second half of 2019.
2021 started in January at a level of €723/t for the medium sections and €625/t for rebars, which represented an increase of €200/t and €167/t, respectively, since October 2020 (previous quarter). By March 2021, prices strengthened by €5/t and €8/t, respectively, reaching €727/t for medium sections and €633/t for rebars. The average of the first quarter was reported at €722/t for medium sections and €629/t for rebars. In the second quarter prices continued to strengthen, reaching an average of €860/t for the medium sections and €710/t for rebars, up by €138/t and €81/t accordingly versus the first quarter.
The continued upward price movement over the first half of 2021 has been defined by the recovering domestic economies in Europe with strengthening consumer demand, hand in hand with a limited supply of steel, domestically, and resulting long lead times. In this context, EU steel safeguard measures (in place on steel products since 2019) have only put additional strain on domestic markets and limited imports. In the first half of 2021, price reference in Europe for medium sections stood at €785/t and for rebars at €670/t.
The favorable pricing environment continued through the third quarter of 2021, peaking in August at €1,050/t for medium sections and €845/t for rebars, which almost doubled over a year. The average price for the third quarter was reported at a record high level of €1,039/t for medium sections and €826/t for rebars. Strong demand, increasing freight costs and ports congestions have all reinforced the elevated price levels in Europe up to that point in time.
However, from September 2021 onwards, domestic prices started changing direction. The fourth quarter of 2021 started with October at a level of €1,000/t for medium sections and €799/t for rebars (down by roughly €50/t each since the peak in August) and ended at a lower point, in December, at €991/t and €790/t, respectively. The quarterly average was reported for medium sections at €995/t and rebars at €795/t. This decline over the last four months of the year was determined by the rebalancing of the European demand-supply situation, with domestic mills reporting strong production figures throughout the year.
The average price references in the second half of 2021 was recorded at €1,017/t for medium sections and €811/t for rebars, almost double as compared to the second half of 2020.
In Turkey, rebar export priceprices continue to align closely with the evolution of world scrap prices. The first quarter of 2019 started for Turkish rebar decreasedat one of the lowest points compared to the previous six quarters, being at $466/t FOB, which is in line with the bottomed HMS 1&2 index at $310/t CFR. However, the March 2019 rebar export price was $482/t FOB, higher by $36/t compared to January at $446/t. During the second quarter of 2019, the Turkish export rebar price followed a month over month downward trend alongside scrap HMS 1&2 index, from a high of $480/t FOB at beginning of April down to $468/t FOB at the end of June. Nevertheless, the average for the second quarter, at $473/t, was higher than the average for the previous quarter at $466/t. In the first half of 2019, the Turkish export rebar price averaged $470/t FOB.
In the third quarter of 2019, the price of Turkish rebar continued the downward trend from the previous quarter, reaching $441/t FOB, which is a $32/t decrease quarter-on-quarter. July opened the quarter at $461/t, while September closed at $413/t, representing a drop of $48/t driven by improvementsthe seasonally limited demand. In October, prices reached a floor for the year at $405/t, which was also the lowest point over the last three years. The prices subsequently increased with the overall fourth quarter of 2019 averaging at $421/t. The year closed in December with a price of $442/t, $37/t higher versus the fourth quarter.low reached in October. The increase in prices was driven by the U.S. scrap price improvement from early November, which recovered the $40/t lost in September/October and ended the year in December at $290/t, although not enough to surpass the level from the first half of the year at $348/t. The average Turkish rebar export price for the second half of 2016 from2019 was $431/t FOB.
In Turkey, was $394/rebar export prices continued to evolve alongside scrap HMS 1&2 index trend. After recovering since September 2019, the first quarter of 2020 started with the rebar Turkey export price at a peak level of $445/t Free on Board (“FOB”). It soon began fluctuating on a downward trend, hitting a four year low at the end of March at $380/t.
At the beginning of the second quarter of 2020, as signs of scrap shortages encouraged U.S. traders to increase scrap offers into Turkey, the rebar Turkey export price fluctuated upward, reaching its highest level mid-June at €419/t.
In the first half of 2020, the Turkish export rebar price averaged $416/t FOB as compared to $361/an average of $470/t FOB for the first half of 2019 and $431/t FOB for the second half of 2015.2019.
InDuring the firstthird quarter of 2017, imported2020, scrap HMS 1&2costs increased and Billet Turkey CFR price saw an uptick due to tight supply ex CIS and improved demand in Asia. This provided support for Turkey improvedrebar export price references, which continued to improve, reaching another peak at $460/t FOB by $18/mid-September (+$41/t compared to the fourth quarter of 2016 average of $275/t CFR. Rebar export prices followed closelyJune level). Slight price declines were noted
during October, but the evolution of Turkey imported Scrap HMS 1&2, decliningprice increase was evident during November and December 2020, in the beginning of 2017 from $430/t FOB in December 2016 to close to an average of $390/t FOB by the end of January 2017, and continued fluctuating towards the end of March 2017. However, Turkish rebar export prices increased during the first quarter of 2017 by $14/t quarter-on quarter. The price fluctuation continued during the second quarter of 2017, butline with an uptick towards the end of June with an overall increase of $4/t over the previous quarter. The average price in the first half of 2017 for rebar exported from Turkey was $425/t FOB compared to $388/t FOB in the first half of 2016. From July through the end of 2017, the Turkey rebar FOB price has been fluctuating on an upward trend, closely following HMS 1&2 Turkey CFR price evolution. After hitting a three-year high of $550/t FOB in the beginning of September 2017, rebar prices declined to $508/t FOB by October. This drove anstrong increase in the average price range during the third quarter of 2017 by $80/t quarter-on-quarter. Toward the end of 2017, the Turkey rebar FOB export price reached $570/t, and further improved the quarterly average price by $20/t for the fourth quarter of 2017. The average Turkey rebar export price was $517/t FOB in the second half of 2017, an increase of $123/t compared to $394/t FOB for the second half of 2016.
In the first quarter of 2018, the price of imported scrap HMS 1&2 in Turkey improved by $40/t to an average level of $363/t CFR as compared to the fourth quarter of 2017. Rebar export prices followed closely the evolution of Turkey imported scrap HMS 1&2, declining from $573/t FOB at the beginning of January to $555/t FOB by the end of the month. Rebar export prices then increased to a peak of $590/t FOB by the end of February followed by a downward trend reaching $568/t FOB at the end of March. During the second quarter of 2018, the Turkish export rebar price continued to follow a downward trend alongside the scrap HMS 1&2 index, ranging between $565/t FOB at the beginning of April to $540/t FOB at the end of May. The average Turkish export rebar price for the first half of 2018 was $562/t FOB, as compared to $425/t FOB for the first half of 2017. With US and European markets blocked for Turkish exporters due to EU safeguard measures and doubling of the Section 232 import tariffs into the U.S., Turkish producers faced increased competition on alternative markets resulting in further pressure on export rebar prices during the first part of the third quarter. Prices seemed to bottom out mid-August at $523/t; however they continued to deteriorate during October to a $500/t level. After a small uptick in November supported by an improvement in scrap pricescosts, as well as a strengthening of the Turkish Lira, Turkishimproved export rebar prices droppedand domestic demand, while material was in shortage. Rebar Turkey export price gained another $180/t by the end of the fourth quarter of 20182020, to $455/$640/t level.
In the lowest level since July 2017. The averagesecond half of 2020, the Turkish export rebar price foraveraged $473/t FOB, representing a $57/t increase compared to the first half of 2020 and $42/t increase compared to the second half of 20182019.
The price for Turkish rebar for export has been on the rise since the lows of May 2020, at $399/t FOB. In the first quarter of 2021, the rebar reference price averaged $621/t, which was $507/$114/t FOB, as compared to $518/higher quarter on quarter, and $195/t FOByear on year. January 2021 started strongly at $630/t ending the quarter only $2/t below at $628/t. At the end of March 2021, the construction season was only starting and demand for steel was growing more strongly than anticipated, COVID-19 vaccination programs were rolling, market sentiment was improving after the second wave of COVID-19 infections. Therefore, the second quarter of 2021 continued the upward trend, with April 2021 recording an export price of $639/t for Turkish rebar, and ending in June at $726/t, representing a $87/t price increase over three months.
The average for the second quarter of 2021 stood at $703/t, driving an average for the first half of 2021 at $662/t (a $190/t increase since the second half of 2017.2020 and a $246/t increase since the first half of 2020).
After the peak in export price registered in May 2021 at $744/t for Turkish rebar FOB, it started to weaken in the following months, reaching the yearly low of $665/t in September 2021. Export prices have been decreasing on account of weakening long steel demand and dropping scrap costs. Furthermore, Turkey continued to be heavily hit by the domestic financial turmoil with high inflation/interest rates and destabilized domestic currency.
| | | | | | | | | | | |
| Long products | | | |
| Source: Steel Business Briefing (SBB) | Europe medium sections | Europe rebar | Turkish rebar |
| Spot average price per tonne | Spot average price per tonne | Spot FOB average price per tonne |
| Q1 2019 | €605 | €526 | $466 |
| Q2 2019 | €583 | €515 | $473 |
| Q3 2019 | €567 | €490 | $441 |
| Q4 2019 | €529 | €461 | $421 |
| | | |
Long productsQ1 2020 | €533 | €468 | $426 |
Source: Steel Business Briefing (SBB)Q2 2020 | Europe medium sections€520 | Europe rebar€453 | Turkish rebar$406 |
Spot average price per tonneQ3 2020 | Spot average price per tonne€513 | Spot FOB average price per tonne€442 | $438 |
Q1 2016Q4 2020 | €454554 | €355488 | $335507 |
Q2 2016 | €509 | €453 | $442 |
Q3 2016Q1 2021 | €511722 | €440629 | $379621 |
Q4 2016Q2 2021 | €488860 | €424710 | $409703 |
| Q3 2021 | €1,039 | €826 | $691 |
Q1 2017Q4 2021 | €515995 | €463795 | $424 |
Q2 2017 | €501 | €441 | $427 |
Q3 2017 | €530 | €469 | $507 |
Q4 2017 | €587 | €553 | $527 |
| | | |
Q1 2018 | €614 | €558 | $572 |
Q2 2018 | €591 | €545 | $552 |
Q3 2018 | €611 | €551 | $524 |
Q4 2018 | €626 | €538 | $490713 |
Current and anticipated trends in steel production and prices
In China, in 2018, ArcelorMittal believes steel production grew approximately 2.5% (despite the 6.6% increase in official figures - see discussion in "—Steel production" above) as demand grew over 3%, yet exports declined by 8%. However, the Company expects production to be stable to slightly down in 2019 as domestic demand contracts around 1% offset by marginally higher exports. The Chinese HRC spread (difference between raw material costs and finished steel prices) in 2017 increased from approximately $150/t in the first half of 2017 to $250/t in the second half supported by an elevated crude steel utilization rate mainly due to a structural steel capacity cut and the winter heating season policy, which temporarily restricted steel supply. The high Chinese HRC spread was sustained at around $255/t in the first quarter of 2018 and increased to approximately $280/t by the middle of the year supported by an elevated crude steel utilization rate as demand was strong but capacity constrained. The spread fell from October until the end of the year to the level of $190-$195/t due to a lower winter capacity constraint compared to last year and negative sentiment on demand. The low spread has continued into the beginning of 2019, but is expected to pick up from March/April when the demand as well as positive sentiment comes back to the market.
Led by a significant increase in pipe and tube demand, U.S. ASC increased around 6% in 2017, which combined with imports relatively stable at a high level, allowed domestic production to increase as some capacity came back online. ASC increased again in 2018 by almost 2%, and with imports falling by around 10% due to the impact of the 25% Section 232 tariffs, production increased by 6.2%. The Company anticipates a small (1 to 2%) further increase in steel demand in 2019, but with imports continuing to be capped by tariffs, steel production is expected to grow at a slightly stronger rate than demand. In the EU, steel demand continues to grow slowly but imports have taken a larger share of demand over the past couple of years. While European mills output improved in 2017, crude steel output was at best only stable in 2018 (decreasing by 0.4% year-on-year) despite a 3% growth in ASC, as imports (especially longs) continued to take market share, growing over 10% year-on-year. In 2019, the Company expects much slower growth in steel consumption, which is why the safeguards measures on steel trade are important to enable European mills to benefit from any improvement in demand.
Overall, ArcelorMittal expects world ex-China ASC to grow again in 2019 due to strong demand growth in South American and developing Asian markets and the waning negative impact of declining Turkish steel demand, despite slightly slower growth in developed markets. Continued capacity restraint and relatively stable production in China, together with continued growth in demand in world ex-China should lead to a gradual improvement in utilization and support the spread of steel prices over raw material costs.
Raw materials
The primary raw material inputs for a steelmaker are iron ore, coking coal, solid fuels, metallics (e.g., scrap), alloys, electricity, natural gas and base metals. ArcelorMittal is exposed to price volatility in each of these raw materials with respect to its purchases in the spot market and under its long-term supply contracts. In the longer term, demand for raw materials is expected to continue to correlate closely with the steel market, with prices fluctuating according to supply and demand dynamics. Since most of the minerals used in the steel-making process are finite resources, theytheir prices may also rise in response to
any perceived scarcity of remaining accessible supplies, combined with the evolution of the pipeline of new exploration projects to replace depleted resources.
Throughout 2016, raw material prices became increasingly volatile and impacted by short-term changes in sentiment, mainly related to Chinese market demand sentiment for crude steel and how the government might deal with excess steelmaking capacity. Iron ore and coking coal prices increased by 5.1% and 58.2% year-on-year respectively in 2016 (Metal Bulletin 2016 vs. 2015). The increase in the average reference iron ore and hard coking coal price continued in 2017 due to the impact of induction furnaces capacities closures since 2016. In 2017, iron ore and coking coal prices increased by 22.3% and 31.5% year-on-year respectively (Metal Bulletin 2017 vs. 2016). In 2018, strong steel production in China amid its fight against air pollution and overcapacity kept iron ore and coking coal prices at elevated levels and boosted prices for high-grade qualities as steel mills chased productivity. Though prices for the most common qualities of iron ore decreased 2.2% year-on-year in 2018, the high-grade qualities of iron ore posted a price increase on an annual basis. Coking coal prices increased 10.3% compared to 2017 (Metal Bulletin 2018 vs. 2017).
As for pricing mechanisms, since 2012, quarterly and monthly pricing systems have been the main type of contract pricing mechanisms, but spot purchases also appear to have gained a greater share as steelmakers have developed strategies to benefit from increasing spot market liquidity and volatility. In 2016, 20172019, 2020 and 2018,2021 the trend for using shorter-term pricing cycles continued. Pricing is generally linked to market price indexes and uses a variety of mechanisms, including current spot prices and average prices over specified periods. Therefore, there may not be a direct correlation between market reference prices and actual selling prices in various regions at a given time.
Iron ore
After reaching $39.50/t (delivered to China Metal Bulletin Index 62% Fe) on January 13, 2016 and averaging $48.70/t for first quarter of 2016,In 2019, iron ore market reference prices reachedincreased following a low duringsupply disruption caused by the collapse of the Brumadinho dam owned by Vale in Brazil on January 25, 2019 and the
cyclone in Australia mining region (end of March 2019), averaging $93.63/t, (Metal Bulletin 2019).
In 2020, China’s demand has proven a strong price driver with crude steel production set to exceed the record 1 billion ton per year in 2020. Manufacturing activity in China continued to expand in 2020 compared to 2019 and its economy showed an enduring V-shaped recovery after the initial impacts of the COVID-19 pandemic. Iron ore market reference prices increased to an average of $109.03, up by 16.5% compared to an average of $93.63 in 2019.
In 2021, iron ore prices averaged $159.89/t (up 46.6% as compared to 2020), driven by post-pandemic fiscal stimulus packages launched in main economies, which boosted global demand for steel and iron ore and by increased crude steel production in China in the first half of the year as steel mills were driven by high steel profits. At the same time, iron ore supply recovered rather slowly due to global epidemic bringing shortages in labor and ports congestion.
In the first quarter of 2016. During2019, following the Vale owned Brumadinho dam disaster in Brazil, the seaborne iron ore market surged to $82.41/t on average. The supply shock was aggravated by the cyclone season in Australia with some Australian iron ore producers lowering their output guidance for the year, which contributed to reaching $100.92/t on average in the second quarter of 2016, the average price was $55.50/t and the period was marked by high volatility,2019 with a peak of $125.77/t observed on July 2 (Metal Bulletin) also supported by lower inventories at $70.50/Chinese ports. Prices remained elevated in July at $119.93/t on April 21, 2016in average and a lowsharply decreased in August to $90.69/t following expectations of $48.18/t on June 2, 2016. For the third quarter of 2016, the average was $58.40/t with a slight downward trend throughout September. During the fourth quarter of 2016, it increased from a minimum of $55.86/t on October 4, 2016 and reached a maximum of $83.58/t on December 12, 2016, the average for the fourth quarter was of $70.50/t and was marked by high volatility and bullish market sentiment driven by higher steel pricesweaker demand as well as closure announcementsthe impact of currency risks which were exacerbated by the Chinese authoritiesdecision of China’s central bank to depreciate the yuan in steelmaking basedresponse to decision of the U.S. government to extend punitive tariffs, both of which cast uncertainty on obsolete induction furnaces using mostly scrap as raw materials.
Ironthe iron ore future market, along with supply recovery. In September 2019, iron ore prices recovered to $85.60/t inrose again on the first quarterback of 2017 following strong demand for steel after the Chinese New Year.a supportive paper market and expectations of increased end-user restocking activity. The average price for the second quarter of 2017 decreased to $62.90/t; this downward trend was influenced by increased inventory levels at Chinese ports. In the third quarter of 2017,2019 was $102.03/t. October 2019 was bearish with continued lack of end-user demand for iron ore fines ahead of announcements for winter production cuts. However, prices recovered sharply in November amid higher end-user demand for high-grade materials and supportive futures market for steel. The fourth quarter of 2019 average price was $88.97/t and the average price increased to $71.20/for 2019 was $93.63/t driven by bullish sentiment in the steel market reflected in strong steel PMIs (Purchasing Manager Index) for China. During the fourth quarter of 2017, the price varied from a minimum of $58.52/t on October 31, 2017 and a maximum of $76.36/t December 22, 2017, with the average for the fourth quarter at $65.50/t. The quarter was marked by high volatility driven by environmental regulation announcements by the Chinese authorities to constrain emissions and steel production during the 2017-2018 winter period.
In the first quarter of 2018 iron ore prices recovered at $74.39/t, up 13.6% compared to the fourth quarter of 2017. However, great price disparities were observed. Seaborne iron ore demand was hit by a persistent weakness in downstream steel demand, the trade war developing between China and the U.S. and the extension of winter restrictions in China beyond March 15, 2018 all of which had a significant impact. In March, prices plummeted from the highest quarter price of $79.39/t in the beginning of the month to $64.99/t at the end of the month (Metal Bulletin 2017 & 2018)Bulletin). In the second quarter of 2018, prices decreased and remained stable at an average $65.30/t despite strong steel demand over the period. China iron ore port stocks remained high and concentrate production sharply decreased year-over-year as a result of mine inspections. However, steel PMI remained in expansion at 51.6 points in June. In the third quarter, prices were fairly stable, averaging $66.8/t. Low prices on the seaborne market found support in the fear of an intensification of the trade war between China and the U.S., depreciation of the Chinese currency, low future prices and environmental restriction in China. The last quarter of 2018 saw the iron ore price jumping and averaging $71.6/t. It reached $76.75/t on November 12, 2018 amid strong steel margins depleting stocks at Chinese ports and restocking demand in China before the start of the winter period. Also, the derailment of a BHP train carrying iron ore in Australia in the beginning of November provided some short-term support to the iron ore price that boosted the November average. However, prices dropped at the end of November, and in the beginning of December, mills corrected for weak off-season demand and reduced steel margins due to less stringent winter restrictions, which led to prices at the end of 2018 at $72.70/t.
Coking coal
In 2016, the spot price (Metal Bulletin Premium Hard Coking Coal FOB Australia index) traded on average at $78.90/t in the first quarter with the market contract price (price settled between major steel producers and suppliers) settling at $81/t for the same quarter; then the second quarter of 2016 had a contract settlement fixed at $84/t with the spot average for that quarter at $90.40/t while the third quarter had a market contract price settled at $92.50/t and the spot index traded between $90.20/t and $94.80/t for the first 15 days but averaged $131.50/t for the third quarter. During the fourth quarter of 2016, the spot price reached a maximum of $308.80/t on November 11, 2016 and decreased through the closing of the year to $231/t on December 30, 2016. The average spot price for the fourth quarter of 2016 was $265.80/t with quarterly market contract prices settled at $200/t. The highly volatile spot index over the second half of 2016 was influenced by the Chinese domestic supply reduction (originating from weather/logistic issues combined with regulations issued by the Chinese government on lower mining working days, from an annual rate of 330 days per year to a lower rate at 276 days, with temporary relief as described above) as well as several maintenance and mining operational issues in Australian coking coal mines during that period. Consequently, the premium HCC FOB Australia quarterly market contract price was settled at $200/t for the fourth quarter of 2016 and at $285/t for the first quarter of 2017.
In the first quarter of 2017,2020, despite the COVID-19 pandemic's impact on demand, iron ore prices were supported by increased supply issues such as a partial halt of Vale’s Brucutu mine, linked to safety issues at their waste management dams, heavy rainfalls in Brazil affecting the shipments of Vale’s Northern System (Carajas) and two tropical cyclones near iron ore ports
in Australia. In the second quarter of 2020, supply from both Brazil and Australia improved but it was offset by a very strong recovery of crude steel production in China in May. Iron ore reference prices increased in the second quarter of 2020 supported by supply risk due to the severe outbreak of COVID-19 in Brazil and low iron ore inventories at Chinese ports and steel mills.
In the third quarter of 2020, the V-shaped recovery continued in China with increasing crude steel production in the month of July and August. The strong demand in China together with partial recovery ex-China and restocking ahead of the week-long National Day holidays in China supported iron ore prices that reached a multi-year high of $130.17/t in September 2020, ending the quarter with an average of $118.06/t (Metal Bulletin).
There was a gradual recovery in ex-China demand in the fourth quarter of 2020: major steelmakers such as Germany and India grew their output year-on-year in October 2020 for the first time since the COVID-19 pandemic began. At the same time, there was a disappointing supply from major iron ore suppliers in the fourth quarter: weaker shipments from Australian companies on deferred maintenance, some operational issues and tropical storms in December in Australia and lower production from Brazilian companies on delays in restarting stalled capacity and weather impacts with heavier than normal rainfalls in December. As a result, prices in the fourth quarter of 2020 increased to $133.35/t.
In the first quarter of 2021, the seaborne iron ore price averaged $167.40/t, up 25.5% compared to previous quarter. Post-pandemic fiscal stimulus packages launched in main economies as well as easing monetary policies significantly boosted global demand for steel and indirectly for iron ore. Meanwhile, iron ore supply recovered rather slowly due to global epidemic bringing shortages in labor and ports congestion as well as due to weather disruption in major iron ore producer countries and mine safety and environmental inspection in China.
In the second quarter of 2021, the seaborne iron ore price skyrocketed to $219.26/t on June 7, 2021 and stayed high till the end of the quarter, averaging the record $200.47/t. The price increase was fueled by the high demand from China as its steel mills increased crude steel production, motivated by high steel profits. Concerns on tight supply were further increased on account of flood accident at Dahongcai mine on June 10, 2021 in Shanxi province.
In the third quarter of 2021, the seaborne iron ore price started to decline and averaged $163.39/t, having lost $37/t compared to previous quarter. Seaborne supply remained stable, while the demand dropped significantly in China mainly due to step-upped efforts by the government to cut 2021 crude steel production below 2020 levels and stringent carbon emission controls.
Meanwhile, real estate sector, the biggest steel consumption sector, has been weakening due to China’s property deleveraging campaign since the beginning of 2021.
In the fourth quarter of 2021, the seaborne iron ore price averaged $110.59/t reaching the lowest point of $87.27 of the year on November 18. China steel production further reduced due to national wide power shortage, inspection on crude steel cut and air quality control during heating season. Weakening of Chinese economy due to shrinking consumption, supply shock, weakening exports and uncertainties on Covid-19 lead to bearish market sentiment. In addition, Evergrande crisis together with other property developers, such as Fantasia Group weighted further on already debt-laden real estate sector.
Coking coal
Coking coal prices in 2019 averaged $177.36/t and were initially supported by incidents in Australia (heavy rains, accident at Anglo’s Moranbah mine) and the local Australian rail network operator trade union’s industrial action and maintenance works. However, in the second half of 2019, prices decreased, driven by coking coal import restrictions at key Chinese ports and a weak demand from India amid domestic slowdown.
Coking coal prices in 2020 averaged $123.46/t (compared to $177.36/t in 2019) and were initially supported in the first quarter of 2020 by the reduction of coal production in China related to the COVID-19 pandemic and to Mongolia’s decision to close its border with China, which boosted China’s import of seaborne traded coking coal. Coking coal prices then deteriorated from the second quarter of 2020 onwards after the global steel production collapsed ex-China due to the COVID-19 pandemic and has maintained low price levels due to the Chinese restrictions on imports of Australian coal that started in October 2020.
Coking coal prices in 2021 averaged $227.29/t as compared to $123.46/t in 2020. Metallurgical coal prices have held at historic highs for several months, as supply shortages have met strong Chinese demand and rebounding global industrial production. China’s informal import restrictions on Australian exports have obliged the country’s steel mills to draw in supply from non-Australian sources. On balance, Chinese metallurgical coal imports have dropped significantly in 2021. India, Japan, South Korea and the EU have all switched to Australian-sourced imports in response.
In the first quarter of 2019, coking coal prices were volatile ranging from $190/t to $217/t. The volatility was supported by incidents in Australia, including heavy rains, an accident at Anglo’s Moranbah mine and a trade union's industrial action at a local rail network operator. The average spot pricesprice in the first quarter of 2019 was $206.33/t (Metal Bulletin Premium Hard Coking CoalHCC FOB Australia index) sharply dropped. In the second quarter of 2019, prices first
increased to the quarter’s high of $213.16/t on May 13, 2019 fueled by the increased sentiment of potential less availability of metallurgical coal railroad capacity in Australia due to maintenance at a local rail network operator in April. Prices then decreased to $191.61/t on June 28, 2019 due to reduced steel margins putting pressure on coke prices. The average spot price in the second quarter of 2019 was $202.85/t. In the third quarter of 2019, tightening of coking coal import restrictions at key Chinese ports and weak demand from $266.50/tIndia during the monsoon season led to a decrease in December 2016 (monthly average) to $155.20/t in March 2017 (monthly average)prices with the average spot price for the first quarter at $166.80/t. The temporary relief of the Chinese working days restriction and fully recovered supply from Australia, as well as expected additional seaborne supply from North Americaallowed such a sharp drop in prices by the end of the first quarter of 2017. At the beginning of the second quarter of 2017, the cyclone Debbie that unexpectedly hit Australia caused supply disruptions and spot prices spiked. The upward trend of April up to $300/$161.03/t on April 18, 2017 and a monthly average of $257.80/t was followed by the downward trend in May and June as the Australia mining-rail-port system recovered earlier than expected from the cyclone disruption. The spot price decreased through the second quarter to $175/t in May (monthly average) and $145/t in June 2017 (monthly average), leading to an average spot price for the second quarter of 2017 of $190.60/t.
For the second quarter of 2017, a new index-based methodology was adopted for the premium(Metal Bulletin Premium HCC FOB Australia quarterly contract price between some Japanese steel makers and Australian HCC suppliers. In the third quarter of 2017, the average spot price (Metal Bulletin Premium Hard Coking Coal FOB Australia index) increased to $188.30/t driven by bullish sentiment in the steel market and strong steel PMIs for China.. In the fourth quarter supportedof 2019, the bearish trend in the coking coal market continued driven by the port congestiona slowdown in Australia, the price further increased to $203.50/t.
CokingChinese imports including a ban on imports at China’s largest coking coal prices entered 2018 as a bullish market with record high vessel queues at a keyhandling port in Queensland, Australia and Chinese restocking demand high ahead of the Chinese New Year holiday. The spot prices (Metal Bulletin Premium Hard Coking Coal FOB Australia index) averaged $228/t in the first quarter of 2018 increasing 36.8% year-on-year and 12.2% as compared to the fourth quarter of 2017. The elevated prices were then corrected in the second quarter and reached $189/t (quarterly average) due to the extension of Chinese winter restrictions until April and delayed increase of steel demand in China. However, the downward movement was limited by a continued threat of supply disruptions due to Aurizon’s announced change in the maintenance plan at its rail system in Australia, and safety check at Chinese mines. The price also found supportJingtang effective from Chinese coke prices as domestic coke producers faced environmental crackdowns. In the third quarter, coking coal prices averaged $184/t and $183/t in July and August respectively with no major supply disruption and less demand during Indian monsoon season. The prices rose again in September to $198/t withOctober 1, 2019. Weak demand from strong steel production in ChinaIndia post the monsoon season amid healthy margins and tight supply of low-Sulphur coking coal in the Chinese domestic market. Prices kept on increasing in the last quarter on the back of strong steel production and threat of supply issues from scheduled maintenance at key Australian ports which increased port queues againslowdown contributed to the record levels seen at the end of 2017.this bearish trend. The bullish sentiment found support from the breakout of a fire at one Australian mine, rendering it idle for at least six months. Theaverage coking coal spot prices increasedprice decreased to a quarterly average of $221/$139.27/t in the fourth quarter of 2018.2019.
In the first quarter of 2020, coking coal prices ranged from $150/t to $158/t (Metal Bulletin Premium HCC FOB Australia index). Coking coal prices gradually increased in the first quarter to an average of $154.80/t with a reset of Chinese import quotas at the start of the year amid price arbitrage between domestic and imported coal and the cyclone season in Australia. However, the first quarter price rally reversed in the second quarter as ex-China market demand was severely hit by the COVID-19 outbreak with a sharp drop in crude steel production in the main coking coal import regions. Consequently, the coking coal reference price dropped in the second quarter of 2020 to an average of $117.08/t. In the third quarter of 2020, limited demand from India due to the monsoon season led to a further decrease and the average coking coal spot price fell to $112.32/t. The bearish trend in the coking coal market continued in the fourth quarter of 2020. This was influenced by the Chinese ban on import of Australian coals since October, which resulted in oversupplied high-quality Australian hard coking coal in the seaborne market. The average coking coal spot price decreased to $109.88/t in the fourth quarter of 2020.
In the first quarter of 2021, the average price rose to $128.22/t, a 17% increase as compared to the previous quarter (Metal Bulletin Premium HCC FOB Australia index), effectively reversing the fall which followed China’s informal restrictions on Australian metallurgical coal imports in October 2020. Suppliers locked into new demand sources and buyers and sellers reorganized supply chains. Prices were also boosted by fears over weather disruptions at Queensland ports, with cyclone season often peaking in the late summer.
In the second quarter of 2021, the average price rose by an additional 8% to $138.78/t, supported by improving global industrial production and economic activity.
Metallurgical coal prices have continued to surge to historical highs in September 2021 and the average price for the third quarter of 2021 increased to $264.25/t, driven by tight spot supply from major producers in Queensland, Australia and rising demand from ex-China regions. The diversion of Australian coal from China to other markets was effectively complete, with the previous surplus of Australian supply now largely redirected.
In October and November, metallurgical coal prices levelled out and the average price for the fourth quarter of 2021 was settled at 369.81$/t. Cuts in crude steel production in China did not lead to any easing in prices but may have curbed further upward momentum.
ArcelorMittal has continued to leverage its iron ore and coking coal supply chain and diversified supply portfolio as well as the flexibility provided by contractual terms to mitigate regional supply disruptions and also mitigate part of the market price volatility.
| | | | | | | | |
| Iron ore | Coking coal |
| Source: Metal Bulletin | average price per tonne (Delivered to China, Metal Bulletin index, 62% Fe) | average price per tonne (premium hard coking coal FOB Australia index) |
| Q1 2019 | 82.41 | 206.33 |
| Q2 2019 | 100.92 | 202.85 |
| Q3 2019 | 102.03 | 161.03 |
| Q4 2019 | 88.97 | 139.27 |
| | |
| Q1 2020 | 89.94 | 154.8 |
| Q2 2020 | 93.52 | 117.08 |
| Q3 2020 | 118.06 | 112.32 |
| Q4 2020 | 133.35 | 109.88 |
| | |
| Q1 2021 | 167.40 | 128.22 |
| Q2 2021 | 200.47 | 138.78 |
| Q3 2021 | 163.39 | 264.25 |
| Q4 2021 | 110.59 | 369.81 |
|
| | |
|
|
|
| Iron ore | Coking coal |
| Source: Metal Bulletin | average price per tonne (Delivered to China, Metal Bulletin index, 62% Fe) | average price per tonne (Premium Hard Coking Coal FOB Australia index) |
| Q1 2016 | 48.6 | 79 |
| Q2 2016 | 55.5 | 90 |
| Q3 2016 | 58.3 | 131 |
| Q4 2016 | 70.5 | 266 |
|
|
|
| Q1 2017 | 85.6 | 167 |
| Q2 2017 | 62.9 | 191 |
| Q3 2017 | 71.2 | 188 |
| Q4 2017 | 65.5 | 203 |
|
|
|
| Q1 2018 | 74.4 | 228 |
| Q2 2018 | 65.5 | 189 |
| Q3 2018 | 66.9 | 188 |
| Q4 2018 | 71.5 | 221 |
Scrap
Both Eurofer and German Wirtschaftsvereinigung (“WV”) indexes were discontinued as of January 1, 2016. The German suppliers’ index (“BDSV”) is now used and converted into Delivered at Place (“DAP”), in order to be comparable with historical figures.
During 2018,Company considers the German suppliers' index “BDSV”("BDSV") Delivered at Place ("DAP") as market reference.
During 2021, the BDSV for reference grade E3 was quite stable startingstarted in January 2018 at €290.58/€363/t. In February, it came down to €330/t and reached a yearly maximum of €293.98/thereafter, until July kept an increasing trend reaching €449/t. In August, the trend was again decreasing until reaching €383/t in March 2018. October. Throughout November and December, it increased and settled at $423/t by end of 2021.
In 2021, monthly price movements have been more significant than in previous years.
The average index dropped continuously until December 2018 down to €279.99/price for 2021 was €395/t as Turkey’s requirements for EU scrap decreased at the end of 2018. HMS 1&2 North Europe followed a similar trend starting in January 2018 at €294/t and reached a yearly high of €297/compared to €239/t in March 2018. Unlike the German BDSV2020, a €156/t or 65% increase as compared to 2020. The average index there were up and down movements from April throughout the rest of the year but the general trend remained down and the HMS 1&2 North Europe ended the year at €238/t in December 2018. Europeanprice for 2019 was €252/t.
Turkey’s scrap price parity with exports continues. The European E3 price moved following HMS and exchange rate fluctuation. The European E3 price was $4/t below, $4/t above, $8/t above and $8/t below HMSimports increased by 11% to 21.7 million tonnes in the first second, thirdeleven months of 2021 as compared to the same period in 2020 and fourth quarter of 2018, respectively, but the European E3 price and HMS were at the same averagetheir highest level since previous high levels reported in 2018.
2012. Turkey remainedremains the main scrap buying country in the international market in 2018, with approximately 69% of itsmarket. Liquid steel production based onfor the EAF process, with the other 31% through the blast furnace route, similar to its production in 2017.first eleven months of 2021 was 36.7 million ton, up 13% from 2020.
Scrap Index HMS 1&2 CFR Turkey, North Europe origin, started January 2021 at $450/t. In 2016, the percentage of Turkey’s steel production through the EAF process and blast furnaces was 66% and 34% respectively. Steel production in Turkey stagnated in 2018 at the same level as 2017 after a 15% increase in 2017 as compared to 2016 and a 5.2% increase in 2016 as compared to 2015. There was a significant reduction of imported billets, which dropped by 46% in 2018 as compared to 2017, following a 50.1% decrease in 2017 as compared to 2016 and a 1.4% increase in 2016 as compared to 2015. As Turkish scrap import volumes increased in 2018 as compared to 2017 at 21 million tonnes, the decrease in billet imports was compensated by local scrap which increased by 7% year-on-year. In 2017, scrap imports into Turkey increased by 19% compared to 2016, with scrap imports totaling 17.7 million tonnes representing an 8.6% increase as comparedFebruary, it fell to the same periodyear low at $410/t and subsequently it increased until reaching the 2021 high in 2015.June at $500/t. It remained at levels between $481/t and $435/t during the second half of 2021 reaching $465 in December 2021. On a yearly basis, the Scrap Index HMS 1&2 CFR Turkey, North Europe origin, increased from an average of $281/t in 2020 to $459/t in 2021.
In the domestic USU.S. market, average scrap prices increased by 20% or $53/HMS 1 delivered Midwest index was $202/t higher in 2018 as compared to a $61/t increase in 2017, which represented a 29% increase as compared to 2016.2021 than 2020. The Midwest Index for HMS 1 increased from an average of 208$/$237/t in 20162020 to $269/$439/t in 2017 and $322/t in 2018. 2021.
On the export market, East CoastHMS export FOB New York average prices increasedof 2021 were at $427/t, an $162/t increase by $40/t from $280/t in 2017as compared to $320/t in 2018. 2020.
Ferro alloys and base metals
Ferro alloys
The underlying price driver for manganese alloys is ordinarily the price of manganese ore, which was at the level of $7.16$5.27 per dry metric tonne unit (“dmt”) (for 44% lump ore) on Cost, Insurance and Freight (“CIF”) China for 2018,2021, representing a 20%15% increase from $5.97/$4.58/dmt in 20172020 ($4.30/5.63/dmt in 2016)2019), mainly dueattributed to sustained demand of manganese ore from China, reflecting appetite showed bythe force majeure in South Africa in February 2021, strong manganese alloys producers. prices in first three quarters and tight logistics throughout the year .
The prices of highHigh carbon ferro manganese decreasedincreased by 7%64% from $1,428/$1,099/t in 20172020 to $1,330/$1,803/t in 20182021 ($960/1,203/t in 2016). Prices of2019), silicon manganese decreasedincreased by 8%63% from $1,343/$1,116/t in 20172020 to $1,235/$1,819/t in 20182021 ($992/1,234/t for 2016). Finally, prices forin 2019) and medium carbon ferro manganese stagnated (+1%) in 2018 at $1,930/t as compared to $1,910/increased by 83% from $1,567/t in 20172020 to $2,861/t in 2021 ($1,376/1,780/t for 2016)in 2019). This price increase was influenced by various factors including COVID-19 related lockdowns, force majeure, tight logistics and low market inventories.
Base metals
Base metals used by ArcelorMittal are zinc, tin and aluminum for coating, aluminum for deoxidization of liquid steel and nickel for producing stainless or special steels. ArcelorMittal partially hedges its exposure to its base metal inputs in accordance with its risk management policies.
The average price of zinc for 20182021 was $2,926/$3,005/t, representing a 1%33% increase as compared to the 20172020 average of $2,896/$2,265/t (the 20162019 average was $2,095/$2,549/t). Stocks registered at the London Metal Exchange (“LME”) warehouses stood at 129,325199,575 tonnes as of December 31, 2018,2021, representing a 29%around 1% decrease compared to December 31, 20172020 when registered stocks stood at 182,050202,225 tonnes (427,850(51,225 tonnes in 2016)2019).
The average price of tin for 2018 was $20,167/t, slightly above the 2017 average of $20,098/t (the 2016 average was $18,006/t).
The average price of tin for 2021 was $32,678/t, 90.7% higher than the 2020 average of $17,135/t (2019 average was $18,671/t).
The average price of aluminum for 20182021 was $2,110/$2,475/t, representing a 7%45% increase compared to the 20172020 average of $1,968/$1,702/t (the 20162019 average was $1,605/$1,792/t).
The average price of nickel for 20182021 was $13,118/$18,487/t, representing an 26%a 34% increase compared to the 20172020 average of $10,407/$13,789/t (the 20162019 average was $9,609/$13,936/t).
Energy market
Solid fuels, electricity and natural gas are some of the primary raw materialenergy inputs for a steelmaker. ArcelorMittal is exposed to price volatility in each of these raw materialsenergy types with respect to its purchases in the spot market and under its long-term supply contracts. Since most of the minerals used in the steel-making process are finite resources, they may also rise in response to any perceived scarcity of remaining accessible supplies, combined with the evolution of the pipeline of new exploration projects to replace depleted resources.
Oil
In 2019, the oil market tightened throughout the first and second quarter, finishing the first half of the year just higher than $65/bbl. While tensions grew in the Middle East fueled by renewed sanctions on Iran, the U.S. continued to pump oil at record high levels. Facing a year which was defined by political turmoil,gloomy economic outlook, at the start of the third quarter of 2019, the Organization of Petroleum Exporting Countries ("OPEC") and Russia confirmed they would continue their efforts to balance the global market by extending the 1.2 million barrels per day ("bpd") cut by another nine months.
After averaging $62.4/bbl an range-bound trading in the fourth quarter of 2019, during the first weeks of January 2020 oil market went from a tighteningprices traded up to $71/bbl, but immediately started to decline mainly due to OPEC and Russia failing to find an agreement to extend output cuts beyond March 2020, and the sudden drop of the supply/demand balancedue to the prospect of a supply surplus. This came amid the general fear of anworldwide pandemic driven lockdown, driving prices down 75% by April 2020. After reaching its lowest point since 2002, oil prices, backed by various economic slowdown beyond 2018 as an intensifying tariff war between the world’s biggest economies could dent global demand growth combined with record high shale oil output from the U.S.stimulus packages, recovered by more than $20/bbl and were
In the first quarter of 2016, after tumbling for six quarters in a row, the Brent crude oil price came to a halt
just south of $30/barrel (“bbl”). In the following six months, prices climbed back up to levels around $50/bbl. A group of producers led by OPEC (the Organization of the Petroleum Exporting Countries) and Russia agreedabove $40/bbl at the end of 2016 to cut production and cap output at 1.8 million barrels per day (“bpd”). Initially, the cuts were to last for only six months but got extended in May 2017 and again in November 2017. As a result, in the summer of 2017, the momentum shifted and prices gained 75% year-on-year from $45/bbl in May 2017 to $80/bbl in May 2018. In June 2018, OPEC and its allies decided to increase production by 1 million bpd. This came at a time when the U.S. had just pulled out of the Iran nuclear deal, and was threatening sanctions against any country which further imported Iranian oil. The market reacted with a delayed price hike with the Brent crude oil front month contract peaking at $86/bbl (a 4-year high) in October 2018, only to fall more than 30% in the following month. To stop plummeting prices, a last effort from OPEC and its allies was made in early December, when they jointly decided to cut output by 1.2 million bpd throughout the first half of 2019.2020. After a period of range-bound trading ($40 - $45/bbl for most of the time) from June to November, prices increased by 36% in the last two months of 2020.
This price increase was fueled by the optimism surrounding a COVID-19 vaccine and OPEC deciding to further cut production into 2021. In 2021, oil prices recovered strongly. In early January, Brent crude oil finishedtraded slightly below $55/bbl and rose to over $86/bbl at its highest by end of November. In 2021, Brent crude oil averaged $70.95/bbl as compared to $43.20/bbl in 2020. The strong price increase was fueled by optimism around the year at $53.8/bbl,mass vaccine roll out and a 15-month low.strong economic recovery.
The following table shows certain quarterly average prices of oil, thermal coal and CO2 for the past three years:
| | | | | | | | | | | | | | |
| Commodities | | | | |
| Source: Thomson Reuters | Brent crude oil
spot average price $ per barrel | West Texas intermediate
spot average price $ per barrel | European thermal coal import (API2)
spot average price
$ per ton | European Union allowance
average price
€ per ton of CO2 equivalent |
| | | |
| Q1 2019 | 63.83 | 54.90 | 75.38 | 22.24 |
| Q2 2019 | 68.47 | 59.91 | 57.13 | 25.55 |
| Q3 2019 | 62.03 | 56.44 | 58.75 | 26.93 |
| Q4 2019 | 62.42 | 56.87 | 58.24 | 24.88 |
| | | | |
| Q1 2020 | 50.82 | 45.78 | 49.96 | 22.81 |
| Q2 2020 | 33.39 | 28.00 | 44.61 | 21.28 |
| Q3 2020 | 43.34 | 40.92 | 51.54 | 27.41 |
| Q4 2020 | 45.26 | 42.70 | 58.69 | 27.61 |
| | | | |
| Q1 2021 | 61.32 | 58.14 | 66.76 | 37.65 |
| Q2 2021 | 69.08 | 66.17 | 85.96 | 50.17 |
| Q3 2021 | 73.23 | 70.52 | 150.49 | 57.12 |
| Q4 2021 | 79.66 | 77.10 | 165.39 | 68.83 |
|
| | | | |
| Commodities | | | | |
| Source: Thomson Reuters | Brent crude oil
spot average price $ per barrel | West Texas intermediate
spot average price $ per barrel | European thermal coal import (API2)
spot average price
$ per ton | European Union allowance
spot average price
€ per ton of CO2 equivalent |
| | | | |
| Q1 2016 | 35.21 | 33.63 | 44.84 | 5.64 |
| Q2 2016 | 47.03 | 45.64 | 49.09 | 5.77 |
| Q3 2016 | 46.99 | 44.94 | 61.84 | 4.55 |
| Q4 2016 | 51.06 | 49.29 | 81.09 | 5.52 |
| | | | | |
| Q1 2017 | 54.57 | 51.78 | 77.86 | 5.17 |
| Q2 2017 | 50.79 | 48.15 | 75.71 | 4.81 |
| Q3 2017 | 52.17 | 48.20 | 86.11 | 5.91 |
| Q4 2017 | 61.46 | 55.30 | 92.68 | 7.47 |
| | | | | |
| Q1 2018 | 67.23 | 62.89 | 86.09 | 9.80 |
| Q2 2018 | 74.97 | 67.91 | 89.97 | 14.49 |
| Q3 2018 | 75.84 | 69.43 | 98.66 | 18.85 |
| Q4 2018 | 68.60 | 59.34 | 92.45 | 20.47 |
CO2
The integrated steel process involves carbon and CO2,reduction which leads to CO2 emissions, which distinguishes integrated steel producers from mini-mills and many other industries where CO2CO2 generation is primarily linked to energy use. Launched in 2005, the European Union Emission Trading System (“EU-ETS”) is currently inhas finished its third phase, stretchingwhich stretched from 2013 to December 2020. After 2020, this systemThe fourth phase may require ArcelorMittal to incur additional costs to acquire emission allowances. However, the Company targets a reduction in emissions allowances. of 25% by 2030 and has plans to become carbon neutral by 2050 (in particular ArcelorMittal Europe is investing in two routes to carbon neutrality, Smart Carbon and an innovative DRI-based route).
The EU-ETS is based on a cap-and-trade principle; it sets a cap on greenhouse gas emissions (“GHG”) from covered installations, which is then reduced year after year. Since 2009, a surplus of emission allowances has built up in the EU-ETS, kept prices below €10 per ton of CO2 equivalent (“€/tCO2e”) until 2018. In 2016 and 2017, the price for a European Union Allowance (“EUA”) - which gives the holder the right to emit one ton of carbon dioxide (“CO2”) - ranged between €4/tCO2e and €6/tCO2e.
To boost the EUA price and to provide an incentive to the industry and the power sector to alter their behavior in terms of CO2 emissions, in July 2015 the European Commission proposed a reformkeeps reforming the scheme.
Throughout the first half of the EU-ETS for the period 2021-2030 (phase 4). More than 2 years later, inter-institutional negotiations were concluded presenting solutions to reduce the current surplus. Consequently, in November 20172019, the EUA price crossedincreased by 15% and finished the €8/tCO2e mark for the first time since January 2016. With the EU Council’s final approval in February 2018, the ETS reform became law (directive 2018/410). As a result,second quarter of 2019 at €26.5/tCO2e. Not only did the EUA price surged up further and only came to a halt after surpassingincrease but the historical high of €25/tCO2e in September 2018. This marked a 360% price increase in only nine months. The EUA price has been subsequently trading around the €20/tCO2e markmarket was highly volatile mainly driven by uncertainties around Brexit, the end of the compliance period in April and the looming market stability reserve (“MSR”) which started operating in January 2019, reducing auction supplies since the second week of January. A new historical high was reached in July 2019, when the price for an EUA reached €30 per ton of CO2 equivalent (“€/tCO2e”). However, prices were around €25/tCO2e for the rest of 2019.
For further information Prices in the first two months of 2020 remained in the same range as in the fourth quarter of 2019. In March 2020, when it became clear that Europe would go into a pandemic driven lockdown, the CO2 price went down by €10/tCO2e (40%) within less than ten trading days. After bottoming below €15/tCO2e in the last week of March 2020, the market went on the Company's CO2 emissions and related risks see "Item 4.B—Business overview—Sustainable development-Outcome 6: Responsible energy user that helps create a lower carbon future" and "Item 3.D—Key information—Risk factors—Risks related tosteady path of recovery demonstrating a strong correlation with the global economy and the mining and steel industry—Laws and regulations restricting emissions of greenhouse gases could force ArcelorMittal to incur increased capital and operating costs and could have a material adverse effect on ArcelorMittal's results of operations and financial condition."
Thermal coal
Thermal coalmarket. The CO2 prices have followed the same commodity super-cycle as crude oil and reached the low levels of $45/t at the beginning of 2016. Throughout 2016, prices had been on the rise and by the end of the year had almost doubled. After a sharp drop duringfirst half of 2020 increased again to pre-COVID-19 levels around €25/tCO2e. For the first two quarterssecond part of 2017 prices rebounded and finished the year strong. This came on the back of intensified demand from Asia which was witnessing onemarket remained hectic with price levels between €23/tCO2e and €30.5/tCO2e. Closely mimicking the movements of the coldest winters ever recorded. The 2017/2018 winter began withequity markets CO2 forward prices increased by 45% (+ €23/tCO2e) in the last two months of the year, reaching an all time high of €33.45/tCO2e as of December 31, 2020. One of the main drivers for such an increase was the acceptance of a Chinese campaign aimed at switching millions55% emissions reduction target by 2030 and the anticipation of households from using coal to natural gas for heating purposes.tighter supply in the future.
On January 1, 2021, Phase 4 of the EU-ETS started, which delayed the hand-out of free allocation. At the same time the country tightened importsUK left the scheme and set up its own, with trading starting in May. The EU Commission proposed its "Fit for 55" package and hence various changes to the EU-ETS to reduce future supply and drive decarbonization. Those events led to uncertainty and hectic trading behavior. Exacerbated by banning small ports from receiving foreign coal cargoes.the economic recovery, the EUA price went on a sharp rally. The campaign unexpectedly boosted demand from coal-fired power plants as it created a shortage of natural gas.market started the year below €35/tCO2e and ended above €80/tCO2e, while the average carbon price throughout 2021 was €68/tCO2e. The tighteninghighest point of the Asian market had some severe spill-oversyear was on the December 8, 2021 when carbon prices broke the €90/tCO2e mark.
The Company uses derivative financial instruments to manage its exposure (the Company recognized a CO2 emission provision of $492 million at December 31, 2021. See note 9.1 to the European market and pushedconsolidated financial statements) to fluctuations in prices of emission rights allowances. As of December 31, 2021, the spot price for the all publications index number 2 (“API2”) - which reflects the price for imports into ARA (Amsterdam-Rotterdam-Antwerp) - above $90/t,Company had a level not seen since the endnet notional position of 2012. Throughout the first quarter$1.6 billion with a net
positive fair value of 2018, the API2 shed almost 20% as the global supply demand balance softened amid the Chinese New Year holiday. After increasing throughout the second quarter of 2018, the API2 reached a new 6-year high when it surpassed the $100/t mark in the third quarter. This was triggered by utilities replenishing stocks and strong demand from power stations due to a hot and dry summer. In the fourth quarter of 2018, prices remained volatile but decreased almost 20% amid China's imposition of new import restrictions, and Europe benefiting from a mild start$2.4 billion. See note 6.3 to the winter.consolidated financial statements for further information.
Natural gas - Europe
Year after yearIn 2019, the natural gas market is turning more into a global commodity due to the continuous development of liquefied natural gas (“LNG”), driven by the construction of new liquefaction units (called trains) in Russia, Australia and in the U.S. The worldwide LNG exports reached 430 billion cubic meters (“bcm”) in 2018, an increase of 8.2% compared to 2017. Consequently, natural gas is increasingly exposed to the same commodity super-cycles that also affect thermal coal and crude oil, for example. Unlike thermal coal and crude oil, the European natural gas market is showing stronger seasonal patterns.
Despite starting the year at the same price level as 2017, the 2018 TTF Spot Price (the price for natural gas to be delivered the next day, which is traded on a virtual trading platform located in the Netherlands) averaged €22.85€13.55 per Megawatt hour (“€/MWh”), which is more than 30% higher than. A sharp decrease of 55% from the 2017 average (€17.32/MWh) and far above 2016 when prices settled at €14.03/MWh on average. Several events affected the transportation of natural gas in 2017 (an explosion at the Gas Connect Austria's Baumgarten site in eastern Austria and the shut-downbeginning of the Forties pipeline system, both of which happened atfirst quarter to the end of year). 2018 started with milder than normal weather but a late cold snap at the end of February brought freezing temperatures from Siberia to Europe. Combined with limited storage flexibility and supply problems across Europe, spot prices at major European hubs skyrocketed to multi-year highs. In the aftermath, northwest European natural gas storage levels dropped well below the 5-year average. Efforts to refill storages, together with strong summer demand from natural gas fired power plants, exceptional high LNG prices and an overall rising energy complex kept supporting European natural gas prices up until the start of the fourthsecond quarter of 2018 (an increase of 50% throughout the first nine months of the year). During the last quarter of the year, the TTF spot price tumbled from €29.5/MWh down to €22.0/MWh2019 happened on the back of milder than normal seasonal temperatures, significantly improvedrapidly improving storage levels, strong LNGhistorical high liquefied natural gas ("LNG") arrivals and pipelinestrong imports from Norwayof Norwegian and Russia operatingRussian piped gas. Throughout the third quarter of 2019, TTF spot prices traded on average at €10.2/MWh (year-on-year 58% decrease), with a low in September close to their maximum capacity.€7/MWh. In November, TTF spot prices increased and reached levels around €16.6/MWh. This price increase was supported by colder temperatures and the fear that Russia and Ukraine would not be able to sign a new multi-year transit contract. At the end of December 2019, the two countries agreed on a deal leading to a price decrease, closing the year at €11.7/MWh.
The TTF spot price steadily declined from January 2020 to May 2020. The average price in January 2020 was €11.1/MWh which declined further to an average of €4.6/MWh in May 2020. This price drop was fueled by oversupply in the global LNG market, continuous strong pipeline supply into Europe and weak demand due to the absence of a harsh winter and the COVID-19 pandemic slowing down industrial activity. At the end of May, the TTF spot price dropped below €4.0/MWh marking a new all-time low. It took until the end of July before prices started to recover. Between the end of July and the end of December 2020, the TTF spot price increased by almost €15.0/MWh to reach a year-high of €19.05/MWh by late December. While in August and September, U.S. LNG shut-ins limited the arrival of the super-chilled fuel, strong Asian winter demand in the fourth quarter led to poor arrivals of the period. In combination with the prospect of a quick rollout of a vaccine against COVID-19, this provided the needed support for the year-end rally.
In 2021, TTF continued its upward trend, which started in the second half of 2020. The low point of slightly below €16/MWh was reached at the end of February. While the high point was hit just before Christmas (€182/MWh). This marked a more than 1000% increase in price, amid the need to refill historical low storages, the battle for LNG with Asia, poor Russian piped supply into Northern Europe, and tension around the controversial Nord Stream 2 pipeline. The average price for TTF in 2021 was €46.5/MWh, 395% higher than 2020.
Natural gas - United States
In 2018, natural gas production in the U.S. remained strong at a level of 102 billion cubic feet per day (“bcf/d”). In North America, natural gas prices (see table below) trade independently of oil prices and are set by spot and future
contracts, traded on the NYMEX exchange or over-the-counter. U.S. thermal coal continues to be challenged as a power producing fuel. Gas power plantsdry gas production during the first took the leadquarter of 2019 was almost 13% higher than in the generation mixsame period a year earlier. This led to a faster than normal rise of working stocks in 2016,underground storage, resulting in downward pressure of the natural gas market. This downward pressure persisted throughout the second half of 2019, with only occasional spikes up to $2.7 per million British thermal units ("/MMBtu") in September and $2.9/MMBtu in November. Nevertheless, the fourth quarter of 2019 averaged $2.4/MMBtu. Prices in the first half of 2020 ranged between $1.5/MMBtu - $2.0/MMBtu, a low since the first quarter of 2016. In addition to the negative impact on demand of natural gas, the COVID-19 pandemic also impacted its production, which continuedstopped its multi-year growth trend and dropped sharply during the first half of the year. On the LNG side, U.S. exports were setting new records through the first quarter of 2020 and in 2017first half of 2020, several plants ramped-up with around 32%only slight disruptions from the pandemic. However, low natural gas prices across the global lead to some forced shut-ins of electricity produced from burning natural gas. This trend accelerated in 2018 with just over 30GW of new capacity entering commercial service.
U.S. LNG export capacity stands at 4.9 bcf/d, almost 2.4 bcf/d added in 2018 compared to 2016 (1.38 bcf/d),facilities breaking the year the U.S. entered the LNG exporting business. Projections show that U.S. LNG export capacity will reach 8.9 billion bcf/d bygrowth trend. At the end of 2019, making it the third largestquarter and into fourth quarter of 2020, exports ramped-up again to the early winter demand in the world behind Australia and Qatar. The rise of U.S. LNG is driven by the strong development of U.S. shale gas. The number of rigs increased significantly compared to 2017 levels, with the Permian basin marking the biggest increase of close to 100 additional rigs compared to 2017.
In 2017,Asia. While the Henry Hub front month price (the price for gas traded on a U.S. virtual trading platform, for deliveryaverage remained below $2.0/MMBtu during the first half, prices recovered steadily in the next calendar month) increased by 27%second half. At the end of October, Henry Hub reached its highest level of the year and breached the $3.2/MMBtu mark as compared to an average of $3.08 per million British Thermal Units (“$/MMBtu”)levels last observed in 2016. In the first nine months of 2018, month ahead prices averaged $2.85/MMBtu,January 2019.
Henry Hub experienced a 6.5% decrease compared to the first nine months of 2017. The recessionless severe price increase than other commodities in natural gas prices that held2021, from the beginning of 2015 until September 2018 changedaveraging $2.72/MMBtu in the first two weeksquarter of November 2018, as weather-related2021 up to averaging $4.84/MMBtu in the fourth quarter of 2021. In between, prices spiked to $6.3/MMBtu in early October in anticipation of colder weather and the global thirst for US LNG exports. As more liquefaction trains go online, the global gas market had a stronger impact on the US natural gas demand increased sharply, and the relatively low levels of natural gas in storage could not provide the needed flexibility leading to 60% price hike in only 10 days. In mid-November 2018, the front-month Henry Hub natural gas futures hit a price of $4.8/MMBtu, the highest price since the second quarter of 2014. Consequently, end of November natural gas inventories stood 19% lower than the previous five-year average forcing the Henry Hub Month Ahead price to average $4.0/MMBtu throughout November and December 2018.price.
Natural gas - Asia
The Platts Japan Korea Marker (JKM)("JKM") - the LNG benchmark price assessment for spot physical cargoes delivered ex-ship into Japan, South Korea, China and Taiwan - front month contract finishedprices lost 47% from the year 2017start of 2019 until the end of June 2019.
During the first half of 2019, European importers had record high levels of LNG arrivals, reflecting the abundant supply across Asia amid healthy storage levels in key importing countries as a result of a mild winter. Furthermore, a significant ramp-up of new liquefaction capacity across Australia, the U.S. and Russia meant more supply to an already oversupplied market. With muted demand and more global supply, the low prices persisted until the end of the second quarter of 2019. In the fourth quarter of 2019, amid the start of the winter, the JKM increased and averaged $5.9/MMBtu.
In the first half of 2020, JKM traded at an all-time low. The decline in prices in the first half of 2020 was mainly due to greater supply than demand, mainly from the U.S. where multiple liquefaction trains ramped up, and muted demand amid full gas storage and the impact of the pandemic on oversupply. While some countries like South Korea or India benefited from the low price environment, others had a year-on-year decrease of LNG imports. Throughout the second quarter of 2020 and into August, JKM traded below $3.0/MMBtu. It continued until September before the market showed some signs of recovery ahead of the winter demand. The second half of 2020, JKM traded at historical lows during the summer and jumped to lofty highs ($12.0/MMBtu) by end of December. This sharp increase was fuelled by strong Asia spot demand due to colder than average temperatures, supply disruptions in Australia and Middle East, as well as congestions at the highest levels sincePanama canal limiting U.S. supply to fill the void.
Driven by cold weather in Asia, JKM exploded in the first few weeks of 2021. By mid-January it traded at $20/MMBtu, a new record. In February and March, the market had cooled down again and was trading between $7 - $9/MMBtu. However, the sharp rally started in mid - April and lasted throughout the entire year, not giving the market time to breath. Prices reached almost $50/MMBtu just before Christmas, breaking the record set in the first quarter of 2015 ($11.2/MMBtu). Throughout the first quarter of 2018 prices dropped 35% (equivalent to $4/MMBtu) and bottomed at $7.2/MMBtu before entering a period of increasing prices. While prices normally would have relaxed on the back of muted demand from Asian consumers at the end of June 2018, the front month contract again surpassed the 11 USD/MMBtu level ($6/MMBtu higher year-on-year). However, in 2018 strong Asian restocking demand ahead of the winter met strong cooling needs. At the end of the first quarter of 2018, the2021. The price spread between the Pacific and the Atlantic basin dropped below $1/MMBtu erasing the arbitrage window and allowing LNG cargoes to sail to Europe. This spread quickly increased to $3.7/MMBtu dragging cargoes away from Europe. After a period of high volatility, the spread stabilized around $2.0/MMBtuincrease was fueled by the end of the third quarterglobal need to refill depleted gas storages and into the fourth quarter, fueled by lackluster Asian demand. At the same time, charter rates for LNG vessels explodeda fierce battle between Europe and moved north of $160,000/day (a long way from the lows of 2016 and 2017 when spot rates were hovering at $25,000/day). This ledAsia to trapped LNG supply in the Atlantic basin leading to sharply dropping European natural gas prices.attract cargoes.
The following table shows quarterly average spot prices of natural gas for the past three years:
| | | | | | | | | | | |
| Natural gas | | | |
| Source: Thomson Reuters | TTF
Spot average price
€ per MWh | Henry Hub
Spot average price
$ per MMBtu | JKM
Spot average price
$ per MMBtu |
| | |
| Q1 2019 | 18.47 | 2.87 | 6.86 |
| Q2 2019 | 13.02 | 2.51 | 4.94 |
| Q3 2019 | 10.20 | 2.33 | 4.74 |
| Q4 2019 | 12.66 | 2.41 | 5.91 |
| | | |
| Q1 2020 | 9.75 | 1.87 | 3.69 |
| Q2 2020 | 5.38 | 1.75 | 2.23 |
| Q3 2020 | 7.83 | 2.12 | 3.48 |
| Q4 2020 | 14.70 | 2.76 | 7.43 |
| | | |
| Q1 2021 | 18.55 | 2.72 | 8.85 |
| Q2 2021 | 25.18 | 2.98 | 9.71 |
| Q3 2021 | 48.51 | 4.32 | 17.80 |
| Q4 2021 | 94.04 | 4.84 | 34.95 |
|
| | | |
| Natural gas | | | |
| Source: Thomson Reuters | TTF
Spot average price
€ per MWh | Henry Hub
Spot average price
$ per MMBtu | JKM
Spot average price
$ per MMBtu |
| | | |
| Q1 2016 | 12.86 | 1.98 | 5.05 |
| Q2 2016 | 13.21 | 2.25 | 4.66 |
| Q3 2016 | 12.80 | 2.79 | 5.62 |
| Q4 2016 | 17.28 | 3.18 | 7.25 |
| | | | |
| Q1 2017 | 18.42 | 3.06 | 7.35 |
| Q2 2017 | 15.61 | 3.14 | 5.85 |
| Q3 2017 | 16.13 | 2.95 | 6.19 |
| Q4 2017 | 19.13 | 2.92 | 9.45 |
| | | | |
| Q1 2018 | 21.25 | 2.85 | 9.35 |
| Q2 2018 | 21.06 | 2.83 | 8.71 |
| Q3 2018 | 24.56 | 2.86 | 10.71 |
| Q4 2018 | 24.65 | 3.72 | 10.24 |
Electricity - Europe
Unlike the natural gas market, electricity prices are only indirectly influenced by commodity super-cycles. Due to the regional nature of electricity markets, prices follow mainly local drivers (i.e. energy mix of the respective country, power generation from renewables, country specific energy policies, etc.). However, unlike previous years, 2018 markedIn 2019, tumbling fuel prices, combined with healthy renewable power generation and strong nuclear output helped to pressure spot prices (see average prices in the table below) across North West Europe. The lack of a structural change withsevere summer heatwave helped to pressure the emergencethird quarter of 2019 prices. Wet early winter months, mild temperatures and good renewable power output contributed to a significant reduction in France and Belgium in the fourth quarter of 2019 as compared to 2018. This decrease occurred despite the fact that French nuclear availability was at a multi-year low for that time of the carbon price as oneyear, which is normally a strong support for prices. The 2019 trend continued into 2020, lower fuel prices meant lower generation cost while at the same time the renewable output across Europe grew year-on-year. On the demand side, the COVID-19 pandemic led to a sudden and severe demand drop. Consequently, in the first half of 2020, the power prices across Europe were almost reduced in half compared to the first half of 2019. May and June marked the low point for electricity prices across Europe. Along with natural gas and CO2 prices, the power prices recovered during the second half of the majoryear. A late heatwave in September in combination with poor renewable output provided the first strong price drivers.uptick. In December, the opposite, colder than normal temperatures in combination with poor renewables led to a second strong price uptick.
In 2021, the electricity price experienced new highs amid high fuel prices and renewable power not able to provide the needed relief. The forward baseload power contract forfourth quarter of 2021 saw the front calendar year (delivery 2019) strongly increased in all European market places throughout the year (e.g. from €40.5highest prices ever recorded, four to €59.1/MWh in Belgium (an increase of 46% year-to-date), from €41.75 to €58.45/MWh in France (an increase of 40% year-to-date) and from €36.7 to €52.7/MWh in Germany (an increase of 44% year-to-date). The 2018 price increase was mainly due to the overall fuel price increases, the unreliability of an aging French and Belgian nuclear fleet and a weak year in terms of renewable output. five times higher than 2020.
The following table shows quarterly average spot prices of electricity in Germany, France and Belgium for the past three years:
| | | | | | | | | | | |
| Electricity | | | |
| Source: Thomson Reuters | Germany
Baseload spot average price
€ per MWh | France
Baseload spot average price
€ per MWh | Belgium
Baseload spot average price
€ per MWh |
| | |
| Q1 2019 | 41.35 | 47.18 | 48.34 |
| Q2 2019 | 35.74 | 34.81 | 34.44 |
| Q3 2019 | 37.55 | 35.64 | 35.11 |
| Q4 2019 | 36.51 | 40.23 | 39.37 |
| | | |
| Q1 2020 | 26.44 | 29.29 | 29.98 |
| Q2 2020 | 20.36 | 18.13 | 18.62 |
| Q3 2020 | 36.22 | 39.13 | 36.61 |
| Q4 2020 | 38.85 | 42.22 | 42.28 |
| | | |
| Q1 2021 | 49.62 | 53.07 | 50.98 |
| Q2 2021 | 60.68 | 64.24 | 62.69 |
| Q3 2021 | 97.27 | 96.53 | 97.41 |
| Q4 2021 | 178.77 | 221.19 | 204.18 |
|
| | | |
| Electricity | | | |
| Source: Thomson Reuters | Germany
Baseload spot average price
€ per MWh | France
Baseload spot average price
€ per MWh | Belgium
Baseload spot average price
€ per MWh |
| | | |
| Q1 2016 | 25.20 | 28.89 | 28.51 |
| Q2 2016 | 24.79 | 25.89 | 27.15 |
| Q3 2016 | 28.33 | 32.37 | 32.64 |
| Q4 2016 | 37.56 | 59.92 | 58.18 |
| | | | |
| Q1 2017 | 41.32 | 54.77 | 51.58 |
| Q2 2017 | 29.76 | 33.90 | 35.74 |
| Q3 2017 | 32.73 | 34.56 | 34.17 |
| Q4 2017 | 32.49 | 56.19 | 56.47 |
| | | | |
| Q1 2018 | 36.05 | 44.09 | 45.17 |
| Q2 2018 | 36.03 | 36.78 | 44.10 |
| Q3 2018 | 53.86 | 57.58 | 61.08 |
| Q4 2018 | 51.89 | 62.47 | 71.01 |
Ocean freight[3]
Ocean freight prices increased in 2018 compared to 2017 primarily due to a lack of
The dry bulk net fleet growth and a flat demand trend, after increasingmarket experienced its weakest year in 2017 as well.2020 since 2016. The Baltic Dry Index (“BDI”) averagedaverage was at 1,066 points in 2020 compared to 1,352 points against 1,145 points in 2017, an 18% increase year-on-year.2019. The Capesize index increaseddecreased by 9%27% year-on-year to average 16,529$/day against 15,129$/$13,073/day in 2017 (7,388$/2020 compared to $18,025/day in 2016). Meanwhile the2019. The Panamax index increaseddecreased by 19%23% to an average 11,654$/of $8,587/day against 9,766$/as compared to $11,112/day in 2017 (5,562$/day2019. In 2020, on the cape size, a total of 104 vessels or 23.4 million deadweight was delivered, 45 vessels were dismantled or 10.6 million deadweight as compared to 2019 when 79 vessels or 18.8 million deadweight was delivered. Panamax in 2016). Dry bulk2020 had a total deliveries of 148 vessels or 12.2 million deadweight delivered and 0.8 million deadweight dismantled as compared to 2019 with 134 vessels or 11.1 million deadweight delivered.
Fleet growth across all segments was moderate, around an increase of 3.8% with order book and around 6% of the existing fleet growth has been slow becauseas compared to an increase of a lack of deliveries which was due to vessels not being contracted4.1% in the low market of 2016. In 2018, new build deliveries reached the lowest rate of deliveriesdeadweight terms in the last 10 years, which helped to restrict supply. Due to2019.
Throughout 2021, the market being stronger than in previous years, demolition of ships reduced. Net fleet growth was 2.8% in 2018remained firm compared to 2.9% in 2017. Demand of dry cargo2020 but was flat in 2018 affected by global political instability and disruptions. The U.S.-China trade tensions created uncertainty in the market while logistical disruptions (like BHP’s train derailment in Australia and leaks in Anglo American’s Minas Rio pipeline) constricted the supply of cargoextremely volatile, particularly in the second half of the year. Chinese imports were down year-on-year foryear with the first timethird quarter being the strongest quarter. The BDI average was at 2,943 points in 7 years. Chinese coal imports were positive in the first half of 2018 but saw a downturn in the second half as the Chinese government's policy preferred domestic production over imports. Year-on-year dry bulk trade growth was 2.3% in 20182021 as compared to 4.1%1,066 points in 2017.2020. The Capesize index increased by 155% year-on-year to an average of $33,333/day in 2021 as compared to $13,073/day in 2020. The Panamax index increased by 171% to an average of $26,898/day in 2021 as compared to $9,923/day in 2020. Supramax rates hit multiyear highs in 2021, with the Baltic TC average peaking at $39,860/day in October from $11,305/day at the start of 2021 (+253%), before ending at
$25,188/day (+$13,883 /day +123% as compared to the start of 2021). The industry is preparing forweighted average Supramax rate was $26,767/day in 2021 as compared to $8,188/day in 2020 (+227%).
Fleet growth across all segments was relatively moderate in 2021 as compared to 2020, with an increase of 3.6% with the new sulphur cap on marine fuels setaverage dry bulk demolition age climbing to 28.55 years from 27.19 in 2020, naturally driven by the International Maritime Organization that will apply from 2020 onwards. Ship owners need to decide whether to install air pollution control devices known as scrubbers which will allow owners to continue using dirty marine fuel or waive the installation and use the more expensive cleaner marine fuel oil. This will have an impact on supply and potentially pricing (as shipowners attempt to pass on the increased costs) dynamics from 2019 onwards.far stronger market conditions.
______________________________________________________________________________________________________________________________
[3] Sources: ACM Braemar, Baltic Index, Clarksons Platou
Impact of Exchange Rate Movementsexchange rate movements
Because a substantial portion of ArcelorMittal’s assets, liabilities, sales and earnings are denominated in currencies other than the U.S. dollar (its reporting currency), ArcelorMittal has exposure to fluctuations in the values of these currencies relative to the U.S. dollar. These currency fluctuations, especially the fluctuation of the U.S. dollar relative to the euro, as well as fluctuations in the currencies of the other countries in which ArcelorMittal has significant operations and sales, can have a material impact on its results of operations. For example, ArcelorMittal’s non-U.S. subsidiaries may purchase raw materials, including iron ore and coking coal, in U.S. dollars,dollar, but may sell finished steel products in other currencies. Consequently, an appreciation of the U.S. dollar will increase the cost of raw materials; thereby having a negative impact on the Company’s operating margins, unless the Company is able to pass along the higher cost in the form of higher selling prices. In order to minimize its currency exposure, ArcelorMittal enters into hedging transactions to lock-in a set exchange rate, as per its risk management policies.
In 2016, the outcome of the Brexit referendum triggered a move toward safety trades that prompted U.S. dollar strength, supporting the trend towards lower interest rates in the G10 countries. This climate was confirmed later with the U.S. presidential campaign; however, a sharp reversal of market sentiment followed Donald Trump’s election, triggered by the expectation of an ambitious fiscal and investment program. As a consequence, the euro depreciated against the U.S. dollar to 1.0541 at the end of 2016 from 1.0898 at the start of the year, further driven by the reduction of the monthly asset purchase program from the European Central Bank.
In 2017, the fluctuations on the foreign exchange markets were broadly driven by the activity of central banks that started to reduce their accommodative monetary policies, including the U.S. Federal Reserve (the "Federal Reserve"), which increased rates three times during the year. The less accommodative policies adopted by the European Central Bank (“ECB”), Bank of Canada (“BoC”) and Bank of England (“BoE”) were already anticipated by the markets and their respective currencies strengthened even before the banks' monetary decisions. The euro strengthened significantly against the U.S. dollar, from 1.0541 at the beginning of 2017 to 1.1993 at the end of the year.
InSince April 1, 2018, the Company has designated a portfolio of euro denominated debt (€5.23.7 billion as of December 31, 2018)2021) as a hedge of certain euro denominated investments (€7.88.3 billion as of December 31, 2018)2021) in order to mitigate the foreign currency risk arising from certain euro denominated subsidiaries net assets. The risk arises from the fluctuation in spot exchange rates between EUR/USD, which causes the amount of the net investments to vary. See also note 6.3 to the consolidated financial statements. As a result of the hedge designation, foreign exchange gains and losses related to the portfolio of euro denominated debt are recognized in other comprehensive income.
As of December 31, 2018,2021, the Company is mainly subject to foreign exchange exposure relating to the euro, Brazilian real, Canadian dollar, Indian rupee, KazakhstaniKazakh tenge, South African rand, Mexican peso, Polish zloty, Argentine peso and Ukrainian hryvnia against the U.S. dollar resulting from its trade payables and receivables.
In 2018, the protectionism of the U.S. administration in its trade policies and the monetary policy divergence between the United States and G10 countries led to the global appreciation of the U.S. dollar. While the Federal Reserve increased rates from 2.25% to 3.00% in 2018, the ECB announced the end of its quantitative easing program and kept rates on hold. Therefore,2021, the euro depreciated from 1.191.2271 at the start of 2018December 31, 2020 to 1.14 at the end of the year.
Elsewhere in Europe, the Czech central bank’s rate increase failed to support the Czech koruna in 2018. The Czech central bank was forced to tighten its policy at a faster pace to offset the loosening effect stemming from the Czech koruna's weakness. The Czech koruna weakened from 21.291.1326 December 31, 2021 against the U.S. dollar on December 31, 2017 to 22.47 on December 31, 2018. In Poland, the national central bank maintained the reference rate unchanged atas a record-low level of 1.50%, even though some membersresult of the current monetary policy council voted for a rate increase atpolicy’s divergence between American and
European Central Bank due to inflation, quantitative easing and the November meeting for the first time since 2015. progress of COVID-19 pandemic recovery.
The Polish zloty weakeneddepreciated against the U.S. dollar atthroughout 2021 from 3.72 on December 31, 2020 to 4.06 on December 31, 2021. Although the endCentral Bank of 2018 to 3.76 compared to 3.48 at the beginningPoland has been one of the year. central banks increasing rates the most in Europe, uncertainties have resulted in volatility in the exchange rate.
In Ukraine, contrary to most other emerging markets currencies, theThe Ukrainian hryvnia appreciated by 6% against the U.S. dollar duringin 2021 starting from 28.27 at December 31, 2020 to 27.28 on December 31, 2021. Despite the first half of 2018. Asgood global economic recover, y geopolitical tensions and surging energy prices have weighed on the economy did not show any signs of real improvement, this appreciation was probably the result of certain speculative flows. The second halfvalue of the year was marked by a tense geopolitical environment and domestic politics. As a consequence, the hryvnia erased the appreciation of the first half of the year and ended 2018 at 27.69 against the U.S. dollar. currency.
In Kazakhstan, after a strong start of the year due to an increase in oil output with the launch of the Kashagan field, the expansion lost steam on slowing growth and trade disputes with Russia.The tenge came under renewed depreciation pressure, preventing inflation from slowing and prompting the national central bank to keep interest rates on hold. TheKazakh tenge depreciated against the U.S. dollar and reached its weakest level in 2021 starting from 420.71 at December 2018 at 384.17.
In India,31, 2020 to 431.67 on December 31, 2021. The high correlation with Russia has led policy makers to weaken their currency to be profitable on the balance of payments deficit weighed on the Indian rupee, which depreciated by 15% versus the U.S. dollar from January 2018 to October 2018. However, the decrease in oil prices since October 2018 was particularly beneficial for India's external finances. trade with their neighbouring country
The Indian rupee weakeneddepreciated against the U.S. dollar in 2021 from 63.87 at the start of the year to 69.63 in December 2018. In October 2018, the Company entered into hedging programs including non deliverable forwards and non deliverable options for a total nominal amount of $5.9 billion in order to hedge the volatility between Indian Rupee and U.S. dollar in relation to the proposed acquisition of ESIL.See note 6.3 to the consolidated financial statements for further information.
South Africa exited its first half 2018 recession in the third quarter, expanding at an annualized pace of 2.2% quarter on quarter. Strong improvements in manufacturing, agriculture and services were partly offset by weakness in mining. In response to flagging growth, the government announced an economic recovery and stimulus plan in September 2018. Key proposals included visa reform to boost tourism and high-skilled immigration, implementing the mining charter, a new infrastructure fund, telecoms reform, and reviewing administered prices. The South African rand depreciated from 12.40 against the U.S. dollar73.07 at the beginning of the year to 14.4374.37 at December 31, 2021 due to the concerning COVID-19 pandemic evolution and India’s high dependency on energy imports in a context of surging prices.
The South African rand depreciated against the U.S. dollar from 14.62 at December 2018.31, 2020 to 15.91 on December 31, 2021 in the context of higher inflation that the Central Bank of South Africa considered temporary and not requiring an intervention.
In North America, another trade battle took place as the United States, Canada and Mexico tried to reshape the North American Free Trade Agreement. The Canadian dollar remained at same level in 2021 as compared to 2020 against the U.S. dollar at 1.27, despite commodity prices weighing on the currency and the economic impact of the COVID-19 pandemic. The Canadian Central Bank kept its rates on hold and would follow in the shadow of the Fed's monetary policy.
The Mexican peso were first weighed down by negative headlines regardingdepreciated in 2021 against the negotiationsU.S. dollar from 19.90 at December 31, 2020 to 20.43 at December 31, 2021. Growth in 2021 was lower than expected due to the COVID-19 pandemic, lower oil production and then supported by news suggesting that an agreement could be achieved. supply chain disruptions.
The U.S.-Mexico-Canada trade agreement (“USMCA”) was announced on October 1, 2018. Despite the announcement of this trade agreement, the Canadian dollar finally weakenedBrazilian real depreciated against the U.S. dollar in 2021 from 5.20 at December 31, 2020 to 5.58 at December 31, 2021. Uncertainty over the context of lower oil pricesnext election in Brazil and risk aversion from 1.2540the government spending bill plan have thrown uncertainty on the Brazilian real, in December 2017addition to 1.3629 at the end of 2018. In Mexico, the appreciation of the Mexicanconcerns over growing inflation.
The Argentine peso following the announcement of the USMCA was softened by the new government's decision to cancel the Mexico City airport project at Texcoco. The Mexican peso ended 2018 at 19.64depreciated against the U.S. dollar only 0.6% below its level at the beginning of the year.
In Brazil, the real depreciatedin 2021 from 3.31 to 4.17 against the U.S dollar between January and August 2018, in line with fluctuations of other emerging markets currencies.Optimism rose following the election of Jair Bolsonaro. The new president organized an economic cabinet with the nomination of Finance Minister Paulo Guedes. The Brazilian real strengthened and reached 3.87 in December 2018.
In Argentina, the Argentinian peso was subject to a very strong depreciation during the third quarter of 2018 versus the U.S dollar. When President Macri asked the IMF to speed up payments, the Argentinian peso lost more than 36% of its value. In a chain reaction, inflation has increased significantly since early 2018 and the three-year cumulative inflation rate has exceeded 100%. Argentina is now considered as a hyperinflationary economy. Inflation slowly decreased at the end of 2018; however, the current situation in addition to the 2019 general election have led to high volatility of the Argentinian currency. Starting at 18.65 against the U.S. dollar at the beginning of 2018, the Argentinian peso finished the year at 37.70. See note 2.2.2 to the consolidated financial statements for further information.
On February 17, 2016, the Venezuelan government devalued its currency by changing the official rate of the bolivar fuerte from 6.3 to 10 per U.S. dollar. It also announced the elimination of the SICAD rate and starting February 18, 2016, the SIMADI rate (renamed DICOM) was allowed to float freely at a rate of approximately 203 bolivar fuerte per U.S. dollar. The DICOM rate was originally set at 206 bolivars per U.S. dollar on March 10, 2016, before falling to 674 bolivars per U.S. dollar at December 31, 2016. The DICOM rate continued to weaken during 2017 to 3,345 bolivars per U.S. dollar on August 31, 2017, when the Venezuelan government temporarily suspended the sale of U.S. dollars through its DICOM auction system. Effective January 30, 2018, the Venezuelan government eliminated the DIPRO rate and reopened the DICOM auction system auction on February 5, 2018 at the new DICOM rate of 30,987 bolivars per euro (25,000 bolivars per U.S. dollar). DICOM is now the country’s only official exchange rate. On August 20, 2018, the bolivar soberano ("VES") replaced the bolivar fuerte ("VEF") at
a rate of 1 VES to 100,000 VEF. The VES continued to weaken and reached 638.16 against the U.S. dollar84.15 on December 31, 2018. See note 2.2.22020 to 102.72 on December 31, 2021, as a poor economy, debt issues and the consolidated financial statements for further information.
Trade and Import Competition
Europe[4]
A slowdown in global steel consumption coupled with excess capacity in China led to increased finished steel shipments into Europe in 2015, with import penetration rising to over 16% in 2018. Since then Chinese imports into Europe have fallen back from a peak of 7 million tonnes in 2015 to around 3 million tonnes in 2018. However, this has been more than offset by an increase in imports from Turkey (up from 2 million tonnes in 2015 to 7 million tonnes in 2018) and Developed Asia (2 million tonnes in 2014 to 5 million tonnes in 2018). Meanwhile, CIS imports have remained the largest share but have been relatively stable between 7 and 8 million tonnes since 2014. Overall, this continued a trend of imports growing more strongly than domestic demand. Between 2012 and 2018, Apparent Steel Consumption (“ASC”) increased by 18% while over the same period, finished steel imports increased by over 100%, taking market share from domestic producers. Over this period total finished imports have risen from just over 15 million tonnes in 2012 to over 31 million tonnes in 2018, causing import penetration to rise to a record high of almost 20%. Import penetration in flats rose strongly from 2012 (13%) to 2015 (20%). While import penetration in flats has risen slowly since 2015 (up to 22% in 2018), the significant increase recently has been in long products, where import penetration rose to 13% in 2018 up from only 10% the previous year. See “Item 4.B—InformationCOVID-19 pandemic weighed on the Company—Business overview—Government regulations—Foreign trade” and “Item 3.D—Key information—Risk factors—Risks related to the global economy and the mining and steel industry—Unfair trade practices in ArcelorMittal’s home markets could negatively affect steel prices and reduce ArcelorMittal’s profitability, while trade sanctions and barriers may have an adverse effect on ArcelorMittal’s operations in various markets.” local economy.
Finished steel imports peaked in 2014 at almost 30 million tonnes, declining to below 23 million tonnes in 2016 (or an import penetration of 25%). Imports in 2017 rose 12% year-on-year to around 25.5 million tonnes or an import penetration of over 26%. However, finished steel import penetration fell in 2018 to 23% as finished imports fell by 12% compared to a 2% year-on-year increase in ASC. Imports of semi-finished steel products continued to rise strongly, up by 11% year-on-year in 2018 after an increase of 28% during 2017.
Steel import penetration in 2018 fell back to 23%, close to the average between 2007 and 2013 and much lower than the 28% average import penetration between 2014 and 2016. The decrease in finished steel imports was due to increasing U.S. trade protection measures, despite attractive prices in the U.S. relative to international markets.
In 2018 over a third of imports came from Canada (25%) and Mexico (9%), up from around 29% in 2017. Imports from the rest of the world took a declining share, with 20% of U.S. steel imports coming from developed Asia (down 17% year-on-year), 18% from EU28 (up 1% year-on-year), 5% from Turkey (down 43% year-on-year), 3% from CIS (down 25% year-on-year) and 3% from China (down 10% year-on-year). In 2018, imports only significantly increased from ASEAN (up 13% year-on-year) taking a 5% share, mainly from Vietnam. See “Item 4.B—Information on the Company-Business overview—Government regulations—Foreign trade” and “Item 3.D—Key information-Risk factors—Risks related to the global economy and the mining and steel industry—Unfair trade practices in ArcelorMittal’s home markets could negatively affect steel prices and reduce ArcelorMittal’s profitability, while trade sanctions and barriers may have an adverse effect on ArcelorMittal’s operations in various markets.”
_______________________________________________________________________________________________________________________________
[4] Source: Eurostat trade data to November 2018, Company estimates for December 2018.
[5] Source: American Iron and Steel Association data to October 2018, Company estimates for November and December 2018.
Consolidation in the steel and mining industries
Prior to 2017, consolidation transactions had decreased significantly in terms of number and value in the context of economic uncertainties in developed economies combined with a slowdown in emerging markets.
However, in an effort to reduce the worldwide structural overcapacity, some key consolidation steps were undertaken in 20182021, 2020 and 2017,2019, specifically in China, in the U.S. and in Europe.
Steel industry consolidation in China has remained slow since 2012. As a key initiative of the Chinese central government’s five-year plan issued in March 2011, the concentration process of the steel industry was expected to reduceaims at enhancing international competitiveness, reducing overcapacity, rationalizerationalizing steel production based on obsolete technology, improveimproving energy efficiency, achieveachieving environmental targets and strengthenstrengthening the bargaining position of Chinese steel companies in price negotiations for iron ore. However,The Chinese government set a target that initiative is yet60 to produce significant tangible results. In 2015, China dropped its target objective for70 percent of steel should be produced by the top ten steel groups by 2025. In September 2019, Baowu Steel Group ("Baowu") and Magang (Group) Holding Co., Ltd ("Magang") signed a partnership agreement where Baowu secured a 51% stake in Magang, increasing Baowu's steel production capacity to approximately 90 million tonnes and representing a big step in the ongoing consolidation of the Chinese steel producers to account for 60% of national production and for at least two producers to reach 100 million tonne capacityindustry. In February 2021, Baowu acquired a 90% controlling stake in the next few years. A new industry consolidation plan published by China aims at simplifying approval procedures and facilitating acquisition financing for firms in sectors like steel. In late 2016, Baosteel Group and WuhanKunming Iron and Steel and increased accordingly its steel production capacity to 115 million tonnes. In July 2021, Baowu announced that it would take over China's seventh-largest steel producer Shandong Iron and Steel, which would increase Baowu's steel production capacity to approximately 155 million tonnes. In August 2021, Ansteel Group completedand Ben Gang Group, two of the biggest state-owned steelmakers in northeast China, started the process of merging their businesses to create the world's third-largest steel producer with an annual capacity of 63 million tonnes. In India, on December 29, 2020, Jindal Stainless Limited announced an all-equity merger creating Baowuwith Jindal Stainless (Hisar) Limited. The combined entity will have a capacity of 1.9 million tonnes and is expected to enter the top 10 stainless steel companies in the world and be the largest stainless steel company in India. The closing is expected in the second half of 2022 and is subject to regulatory approvals.
In Europe, on October 29, 2019, Liberty House Group announced a merger with GFG Alliance's steel businesses to create Liberty Steel Group with an annual productiona capacity of around 6018 million tonnes, also making ittonnes. According to the world's secondannouncement, Liberty Steel Group will be the eighth largest steelmaker.
steel producer outside China, with operations stretching from Australia to continental Europe, the United Kingdom and the United States. In Europe, 2018 was a landmark year for the consolidation of the steel industry with two major transactions. Following an announcement made in September 2017, Tata Steel and Thyssenkrupp signed a final agreement at the end of June 2018 to consolidate their European steel mills and create the joint venture Thyssenkrupp Tata Steel, Europe's second-largest steel company after ArcelorMittal. The transaction is subject to merger control clearance in several jurisdictions, including the European Union.
In addition, on November 1, 2018, ArcelorMittal completed the acquisition (via a long-term lease) of Ilva,ArcelorMittal Italia, Europe’s largest single steel site and only integrated steelmaker in Italy with its main production facility based in Taranto. Ilva also has significant steel finishing capacity in Taranto, Novi Ligure and Genova. The transaction was approved by the
European Commission on May 7, 2018 subject to the disposal of certain assets in Italy, Romania, North Macedonia, the Czech Republic, Luxembourg and Belgium, for which were sold to Liberty Steel Group in June 2019. In December 2020, ArcelorMittal submitted sales offers currently reviewed by the European Commission.signed an agreement with Invitalia to form a public-private partnership, which became effective mid-April 2021. See “Item 4.A—Information on the Company— History and development of the Company—Key"Key transactions and events in 2018.”
In another step towards consolidation in the first quarterU.S., United States Steel Corp announced on October 1, 2019 that it reached an agreement to purchase a minority stake in Big River Steel with an option to take complete control of 2018,the company over four years; and in January 2021, United States Steel acquired Big River Steel in its entirety. On December 3, 2019, AK Steel and Cleveland Cliffs announced an all stock merger which was completed in March 2020. Additionally, in December 2020, ArcelorMittal signedsold ArcelorMittal USA's operations to Cleveland-Cliffs.
In December 2019, ArcelorMittal and Nippon Steel Corporation ("NSC") completed the acquisition of AMNS India through a joint venture formation agreement with NSSMC in relation to its offer forand following the submission of a competitive resolution plan for ESIL in India setting out a positive future for the bankrupt company, an integrated flat steel producer and the largest steel company in western India. The updated plan would enable ESIL to participateSee “Business overview-Properties and capital expenditures—Investments in anticipated steel demand growthjoint ventures”.
Further consolidation in India. Further to ArcelorMittal being named the preferred bidder in October 2018, ESIL's committee of creditors announced in October that the Company has been identified as the successful applicant. ArcelorMittal's resolution plan remains subject to the approval of India's NCLT. See “Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018.”
Further future consolidation should allow the steel industry to perform more consistently through industry cycles by achieving greater efficiencies and economies of scale, and improve bargaining power with customers and, crucially, suppliers, who tend to have higher levels of consolidation.scale.
Critical accounting policies and use of judgments and estimates
Management’s discussion and analysis of ArcelorMittal’s operational results and financial condition is based on ArcelorMittal’s consolidated financial statements, which have been prepared in accordance with IFRS. The preparation of financial statements in conformity with IFRS recognition and measurement principles and, in particular, making the critical accounting judgments highlighted below require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates on an ongoing basis using currently available information. Changes in facts and circumstances or obtaining new information or more experience may result in revised estimates, and actual results could differ from those estimates.
An overview of ArcelorMittal's critical accounting policies under which significant judgments, estimates and assumptions are made may be found in note 1.2 to the consolidated financial statements.
Export sales
A. Legal proceedings
ArcelorMittal is currently and may in the future be involved in litigation, arbitration or other legal proceedings. Provisions related to legal and arbitration proceedings are recorded in accordance with the accounting policies described in note 9.1 to ArcelorMittal’s consolidated financial statements. Please refer to note 9.3 for a description of contingencies, including legal proceedings.
Operating results
The following discussion and analysis should be read in conjunction with ArcelorMittal’s consolidated financial statements included in this annual report.
ArcelorMittal reports its operations in five reportable segments: NAFTA, Brazil, Europe, ACIS and Mining. The key performance
indicators that ArcelorMittal’s management uses to analyze operations are sales, average steel selling prices, crude steel production, steel shipments, iron ore and coal production and operating income. Management’s analysis of liquidity and capital resources is driven by net cash providedflow from operations less capital expenditures.
As from April 1, 2021, ArcelorMittal implemented changes to its organizational structure whereby primary responsibility for captive mining operations whose output is mainly consumed by operating activities.their respective steel segments has been transferred to such segments. The Mining segment retains primary responsibility for the operation of the seaborne oriented operations at AMMC and AML and continues to provide technical support to all mining operations within the Company. Accordingly, the Company modified the structure of its segment information in order to reflect changes in its approach to managing its operations and segment disclosures have been recast to reflect this new segmentation. Only the seaborne-oriented operations of AMMC and AML are reported within the Mining segment. The results of all other mines are henceforth accounted for within the steel segment that it primarily supplies.
Years ended December 31, 2018, 20172021, 2020 and 20162019
Sales, operating income, crude steel production, steel shipments, average steel selling prices and mining production
The following tables provide a summary of ArcelorMittal’s performance by reportable segment for the yearyears ended December 31, 2018, 20172021, 2020 and 2016:2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales for the year ended December 31,1 | | Operating income (loss) for the year ended December 31,2 |
| 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Segment | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) |
| NAFTA | 12,530 | | | 13,668 | | | 18,706 | | | 2,800 | | | 1,684 | | | (1,144) | |
| Brazil | 12,856 | | | 6,336 | | | 8,166 | | | 3,798 | | | 777 | | | 853 | |
| Europe | 43,334 | | | 28,071 | | | 37,721 | | | 5,672 | | | (1,439) | | | (1,101) | |
| ACIS | 9,854 | | | 5,737 | | | 6,997 | | | 2,705 | | | 209 | | | 31 | |
| Mining | 4,045 | | | 2,785 | | | 2,664 | | | 2,371 | | | 1,247 | | | 1,026 | |
| Others and eliminations | (6,048) | | | (3,327) | | | (3,639) | | | (370) | | | (368) | | | (292) | |
| Total | 76,571 | | | 53,270 | | | 70,615 | | | 16,976 | | | 2,110 | | | (627) | |
1.Amounts are prior to inter-segment eliminations (except for total) and sales include non-steel sales.
2.Others and eliminations to segment operating income reflects certain adjustments made to operating income of the segments to reflect corporate costs, income from non-steel operations (e.g. energy, logistics and shipping services) and the elimination of stock margins between segments. See table below.
|
| | | | | | | | | | | |
| | Sales for the year ended December 31,1 | | Operating income (loss) for the year ended December 31,2 |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 |
| Segment | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) | | (in $ millions) |
| NAFTA | 20,332 | | 17,997 | | 15,806 | | 1,889 | | 1,185 | | 2,002 |
| Brazil | 8,711 | | 7,755 | | 6,223 | | 1,356 | | 697 | | 614 |
| Europe | 40,488 | | 36,208 | | 29,272 | | 1,632 | | 2,359 | | 1,270 |
| ACIS | 7,961 | | 7,621 | | 5,885 | | 1,094 | | 508 | | 211 |
| Mining | 4,211 | | 4,033 | | 3,114 | | 860 | | 991 | | 366 |
| Others and eliminations | (5,670) | | (4,935) | | (3,509) | | (292) | | (306) | | (302) |
| Total | 76,033 | | 68,679 | | 56,791 | | 6,539 | | 5,434 | | 4,161 |
| |
1. | Amounts are prior to inter-segment eliminations (except for total) and sales include non-steel sales. |
| |
2. | Others and eliminations to segment operating income reflects certain adjustments made to operating income of the segments to reflect corporate costs, income from non-steel operations (e.g. energy, logistics and shipping services) and the elimination of stock margins between segments. See table below.
|
|
| | | | | |
| Adjustments to segment operating income and other | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
| | (in $ millions) | | (in $ millions) | | (in $ millions) |
Corporate and shared services 1 | (170) | | (199) | | (71) |
| Financial activities | (23) | | (23) | | (17) |
| Shipping and logistics | 1 | | (16) | | (97) |
Intragroup stock margin eliminations 2 | (45) | | (41) | | (94) |
| Depreciation and impairment | (55) | | (27) | | (23) |
| Total adjustments to segment operating income and other | (292) | | (306) | | (302) |
| | |
1.155 | Includes primarily staff and other holding costs and results from shared service activities.Management report
|
| |
2. | In 2017, fourth quarter iron ore prices decreased as compared to the fourth quarter of 2016 leading to lower stock margin eliminations.
|
| | | | | | | | | | | | | | | | | |
| Others and eliminations operating (loss) income | Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| (in $ millions) | | (in $ millions) | | (in $ millions) |
Corporate and shared services 1 | (201) | | | (199) | | | (144) | |
| Financial activities | (21) | | | (22) | | | 8 | |
| Shipping and logistics | 15 | | | 6 | | | (19) | |
| Intragroup stock margin eliminations | (123) | | | (110) | | | 18 | |
Depreciation and impairment 2 | (40) | | | (43) | | | (155) | |
| Total adjustments to segment operating income and other | (370) | | | (368) | | 0 | (292) | |
Sales1.Includes primarily staff and other holding costs and results from shared service activities.
2.Depreciation charges for 2019 included $94 million of depreciation of right-of-use assets recognized in property, plant and equipment following the adoption of IFRS 16 "Leases" as of January 1, 2019 with respect to the Company’s shipping business Global Chartering, of which ArcelorMittal sold a 50% controlling interest on December 31, 2019.
Shipments and average steel selling price
ArcelorMittal had steel shipments of 62.9 million tonnes for the year ended December 31, 2021 as compared to steel shipments of 69.1 million tonnes for the year ended December 31, 2020, representing a decrease of 8.9%. On a comparable basis, excluding the shipments from ArcelorMittal USA, sold to Cleveland -Cliffs on December 9, 2020, and ArcelorMittal Italia, deconsolidated as from April 14, 2021), steel shipments for 2021 increased by 9.2% as a result of the broad based recovery in demand following the impacts of COVID-19 on 2020 operations.
Segments experienced year on year shipment growth: Europe 0.9%, Brazil 24.3%, ACIS 4.8%, while NAFTA was down 46.5% (due to the factors discussed above). On a comparable basis, all segments experienced year on year shipment growth: Europe 8.9%, Brazil 24.3%, ACIS 4.8% and NAFTA 8.0%.
Steel shipments decreased 5.2% to 32.6 million tonnes in the first half of 2021 compared to 34.3 million tonnes for the first half of 2020. Steel shipments decreased 12.8% to 30.3 million tonnes in the second half of 2021 compared to 34.8 million tonnes in the second half of 2020. On a comparable basis excluding the impact of ArcelorMittal USA and ArcelorMittal Italia, steel shipments increased by 13.4% and 4.8% in the first and second half of 2021, compared to the first and second half 2020, as economic activities continued to recover.
ArcelorMittal had steel shipments of 69.1 million tonnes for the year ended December 31, 2020 as compared to steel shipments of 84.5 million tonnes for the year ended December 31, 2019, representing a decrease of 18.2%. On a comparable basis, removing shipments from the remedy assets sold in relation to the ArcelorMittal Italia acquisition in 2019 and the shipments from ArcelorMittal USA in 2019 and 2020 due to the sale, steel shipments for 2020 declined by 15.8% to 60.1 million tonnes as compared to 71.3 million tonnes in 2019, primarily due to the impact of the COVID-19 pandemic and the slowdown that occurred in first half of 2020. Shipments were lower in Europe (22.4%), or 18.6% excluding the impact of the remedy asset
sales related to the ArcelorMittal Italia acquisition in 2019), Brazil (15.9%), NAFTA (14.4%), or 8.7% excluding ArcelorMittal USA) and ACIS (14.4%).
Steel shipments decreased 23.0% to 34.3 million tonnes in the first half of 2020 compared to 44.6 million tonnes for the first half of 2019 (down 19.4% excluding the impact of the remedy asset sales related to the ArcelorMittal Italia acquisition in the first half of 2019), while steel shipments decreased 12.9% to 34.8 million tonnes in the second half of 2020 compared to 39.9 million tonnes in the second half of 2019 (down 10.6% excluding the impact of ArcelorMittal USA on a comparable basis).
Average steel selling prices increased by 54.2% for the year ended December 31, 2021 as compared to the year ended December 31, 2020 in the context of a strong international pricing environment. Average steel selling prices in the first half of 2021 increased by 41.5% as compared to the first half of 2020 and increased by 67.5% in the second half of 2021 as compared to the second half of 2020.
Average steel selling price decreased by 8.7% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Average steel selling price in the first half of 2020 decreased by 14.7% as compared to the first half of 2019 and decreased by 1.8% in the second half of 2020 as compared to the second half of 2019.
Sales
ArcelorMittal had sales of $76.0$76.6 billion for the year ended December 31, 2018,2021, representing a 10.7%43.7% increase from sales of $68.7$53.3 billion for the year ended December 31, 2017,2020, primarily due to a 13.5% increase in the54.2% higher average steel selling prices partiallyand higher iron ore prices partly offset by a 1.6% decrease in8.9% lower steel shipments.shipments following the disposal of ArcelorMittal USA and the deconsolidation of ArcelorMittal Italia. In the first half of 2018,2021, sales were $39.2$35.5 billion increasing from sales of $33.3$25.8 billion in the first half of 2017,2020, primarily due to 16.7%41.5% higher average steel selling prices.prices partly offset by 5.2% lower steel shipments following such change in
scope of consolidation. In the second half of 2018,2021, sales of $36.8$41.1 billion represented a 4.2%49.6% increase as compared to sales of $35.3$27.5 billion in the second half of 2017,2020, primarily driven by a 10.6%67.5% increase in average steel selling prices partiallypartly offset by a 4.5% decrease in12.8% lower steel shipments.
ArcelorMittal had sales of $68.7$53.3 billion for the year ended December 31, 2017,2020, representing a 20.9% increase24.6% decrease from sales of $56.8$70.6 billion for the year ended December 31, 2016,2019, primarily due to the impacts of the COVID-19 pandemic on lower steel shipments as discussed above and a 20.4% increase8.7% decrease in the average steel selling prices, a 1.6% increase in steel shipments, 22.3% higher seaborne iron ore reference prices and 6.1% higher marketable iron ore shipments.prices. In the first half of 2017,2020, sales were $33.3$25.8 billion, increasingdecreasing from sales of $28.1$38.5 billion in the first half of 2016,2019, primarily due to 23% higher14.7% lower average steel selling prices and 43% higher seaborne iron ore reference prices.23.0% lower steel shipments. In the second half of 2017,2020, sales of $35.3$27.5 billion represented a 23.4% increase14.5% decrease as compared to sales of $28.7$32.1 billion in the second half of 2016,2019, primarily driven by a 17.5% increase1.8% decrease in average steel selling prices and a 5.8% increase12.9% decrease in steel shipments and a 6% increase in seaborne iron ore reference prices.shipments.
Cost of sales
Cost of sales consists primarily of purchases of raw materials necessary for steel-making (iron ore, coke and coking coal, scrap and alloys), electricity,energy, repair and maintenance costs, as well as direct labor costs, depreciation and impairment. Cost of sales for the year ended December 31, 20182021 was $67.0$57.3 billion as compared to $60.9$49.1 billion for the year ended December 31, 2017, primarily due to a 9.4% increase in2020, mainly driven by higher raw material costs (consistent withoffset in part by lower shipments and lower inventory related charges. Cost of sales for the increase in sales) andyear ended December 31, 2021 included a $218 million impairment charges of $1.0 billion primarilyreversal related to the remedy asset salesSestao facility in connection with the Ilva acquisition and the agreed remedy package required for the approval of the Votorantim acquisition, partiallySpain partly offset by the $0.2 billion in gain from a bargain purchase recognized$123 million charges with respect to the acquisitionexpected decommissioning costs of Ilva. Selling, general and administrative expenses (“SG&A”) were $2.5the dam at the Serra Azul mine in Brazil.
Cost of sales for the year ended December 31, 2020 was $49.1 billion as compared to $68.9 billion for the year ended December 31, 20182019, due to lower steel shipments, the cost reduction measures in response to the COVID-19 pandemic, the gain of $1.5 billion related to the sale of ArcelorMittal USA and reversal of previous impairments of property plant and equipment at ArcelorMittal USA in connection with the sale for $660 million. These decreases were offset in part by impairments of $331 million relating to the Company's plate assets classified as held for sale in Europe, charges of $104 million following the permanent closure of a blast furnace and steel plant in Krakow (Poland) as well as $146 million of site restoration and termination charges for it, charges related to the permanent closure of the coke plant in Florange (France) of $92 million and inventory related charges in NAFTA and Europe of $0.7 billion.
Depreciation charge for the year ended December 31, 2021, was $2.5 billion as compared to $3.0 billion for the year ended
December 31, 2020 largely due to the sale of ArcelorMittal USA and the deconsolidation of ArcelorMittal Italia. In 2020, the depreciation charge was stable at $3.1 billion compared to 2019. For the year 2022 depreciation expense is expected to be approximately $2.7 billion (based on current exchange rates) primarily driven by changes in the useful lives estimates for certain assets in Europe and Canada due to decarbonization projects.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A") were $2.3 billion for the year ended December 31, 2021 as compared to $2.0 billion for the year ended December 31, 2020 and $2.4 billion for the year ended December 31, 2017.2019. SG&A as a percentage of sales decreased for the year ended December 31, 2018 (3.2%2021 (2.9%) as compared to 2017 (3.4%2020 (3.8%) and 2019 (3.3%).
Cost of sales for the year ended December 31, 2017 was $60.9 billion as compared to $50.4 billion for the year ended December 31, 2016, primarily due to a 22.3% increase in iron ore reference prices, a 31.5% increase in coal reference prices and impairment charges of $206 million related to a downward revision of cash flow projections across all steel facilities in South Africa partially offset by cost optimization efforts as part of the Action 2020 plan. SG&A were $2.4 billion for the year ended December 31, 2017 compared to $2.2 billion for the year ended December 31, 2016. SG&A as a percentage of sales decreased for the year ended December 31, 2017 (3.4%) as compared to 2016 (3.9%).
Operating income
ArcelorMittal’s operating income for the year ended December 31, 20182021 was $6.5$17.0 billion as compared with an operating income of $5.4to $2.1 billion for the year ended December 31, 2017 and was2020, primarily driven by improved operating conditions (positivepositive steel price-cost effect in the steel segments), offset in part by the impact of lowereffects and improved iron ore reference prices and impairment charges of $1.0 billion primarily related to the remedy asset sales in connection with the Ilva acquisition and the agreed remedy package required for the approval of the Votorantim acquisition, partially offset by a $0.2 billion bargain purchase gain relating to the acquisition of Ilva. Operating income for the(46.7% increase year ended December 31, 2018 was also impacted by $113 million in charges related to a blast furnace dismantling in Florange (France), $60 million in charges related to the new collective labor agreement in the United States (including a signing bonus), a $146 million provision taken in the first quarter of 2018 in respect of a litigation case that was paid in the third quarter of 2018, offset in part by the recognition in Brazil of $202 million in PIS/Cofins tax credits related to prior periods.on year).
ArcelorMittal'sArcelorMittal’s operating income for the year ended December 31, 20172020 was $5.4$2.1 billion as compared with an operating incomeloss of $4.2$0.6 billion for the year ended December 31, 20162019 and was impacted by an impairment charge of $206 million related to a downward revision of cash flow projections in South Africa.the gains and impairments described above. Operating income was also impacted by weaker operating conditions as compared to 2019, including a negative price-cost effect in 2016 was positively affected by a one-time gain of $832 million on employee benefits following the signing of the new U.S. labor contractsteel segments and partially offset by an impairment charge of $49 million relatedlower steel shipments due to the held for sale classification ofCOVID-19 pandemic offset in part by the ArcelorMittal Zaragoza facility in Spainfixed cost savings described above and an impairment charge of $156 million mainly related to the Vanderbijlpark plant in South Africa. improved mining performance, driven by higher seaborne iron ore reference prices (which were up 16.2%).
Shipments and average steel selling price
ArcelorMittal had steel shipments of 83.9 million tonnesArcelorMittal’s operating loss for the year ended December 31, 2018 as compared to2019 was $0.6 billion primarily impacted by weaker operating conditions (negative price-cost effect in steel shipments of 85.2 million tonnes forsegments) reflecting both the year ended December 31, 2017, representing a decrease of 1.6%, primarily due to 10.3% decline in shipmentssteel prices and higher raw material costs (due in ACIS (including unplanned maintenanceparticular to supply-side developments in UkraineBrazil), impairments and operational issues in Kazakhstan/Ukraine)inventory related charges, offset in part by increases in Brazil (5.8%, including the impactimproved mining segment performance driven by higher seaborne iron ore reference prices (which were up 34.3%). Raw material prices increased during 2019 and for most of the Votorantim acquisition), NAFTA (1.0%, including the impact of a slower restart post blast furnace maintenance in Mexico) and Europe (0.2%, including the impactyear remained disconnected from the Ilva acquisition offset by the effect of a flood in Asturias (Spain), power outage in Fos (France) and slower ramp-up after the blast furnace reline in Poland). steel fundamentals, compressing steel spreads to unsustainably low levels.
Steel shipments increased 1.3% to 43.1 million tonnes in the first half of 2018 compared to 42.5 million tonnes for the first half of 2017 while steel shipments decreased 4.5% to 40.8 million tonnes in the second half of 2018 compared to 42.7 million tonnes in the second half of 2017.
ArcelorMittal had steel shipments of 85.2 million tonnes for the year ended December 31, 2017 as compared to steel shipments of 83.9 million tonnes for the year ended December 31, 2016, representing an increase of 1.6% primarily due to increase in NAFTA (2.6%), Brazil (0.8%) and Europe (1.7%) offset in part by decline in ACIS (1.3%). Steel shipments declined 2.4% to 42.5 million tonnes in the first half of 2017 compared to 43.6 million tonnes for the first half of 2016 while steel shipments increased 5.8% to 42.7 million tonnes in the second half of 2017 compared to 40.4 million tonnes for the second half of 2016.
Average steel selling price increased by 13.5% for the year ended December 31, 2018 as compared to the year ended December 31, 2017. Average steel selling price in the first half of 2018 increased by 16.7% as compared to the first half of 2017 and increased by 10.5% in the second half of 2018 as compared to the second half of 2017.
Average steel selling price increased by 20.4% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. Average steel selling price in the first half of 2017 increased by 23.1% as compared to the first half of 2016 and increased by 17.5% in the second half of 2017 as compared to the second half of 2016.
|
| | | | | |
| NAFTA | | | | | |
| | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2018 | | 2017 | | 2016 |
| Sales | 20,332 | | 17,997 | | 15,806 |
| Depreciation | 522 | | 518 | | 549 |
| Operating income | 1,889 | | 1,185 | | 2,002 |
| Crude steel production (thousand tonnes) | 22,559 | | 23,480 | | 22,208 |
| Steel shipments (thousand tonnes) | 22,047 | | 21,834 | | 21,281 |
| Average steel selling price (USD/tonne) | 852 | | 742 | | 672 |
Sales | | | | | | | | | | | | | | | | | |
| NAFTA | | | | | |
| Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2021 | | 2020 | | 2019 |
| Sales | 12,530 | | | 13,668 | | | 18,706 | |
| Depreciation | (325) | | | (537) | | | (638) | |
| Net impairment reversal (charges) | — | | | 660 | | | (1,300) | |
| Operating income (loss) | 2,800 | | | 1,684 | | | (1,144) | |
| Crude steel production (thousand tonnes) | 8,487 | | | 17,813 | | | 21,897 | |
| Flat product shipments | 6,879 | | | 15,422 | | | 18,261 | |
| Long product shipments | 3,088 | | | 2,884 | | | 3,260 | |
| Others and eliminations | (381) | | | (404) | | | (600) | |
| Total steel shipments (thousand tonnes) | 9,586 | | | 17,902 | | | 20,921 | |
| Average steel selling price (USD/tonne) | 1,128 | | | 702 | | | 810 | |
Sales in the NAFTA segment were $20.3 billion for the year ended December 31, 2018, representing a 13.0% increase as compared to the year ended December 31, 2017. Sales increased primarily as a result of the increase in average steel selling prices by 14.8% and a 1.0% increase in steel shipments.
Sales in the NAFTA segment were $18.0 billion for the year ended December 31, 2017, representing a 13.9% increase as compared to 2016. Sales increased primarily as a result of the increase in average steel selling prices by 10.3% and a 2.6% increase in steel shipments.
Operating income
Operating income for the NAFTA segment was $1.9 billion for the year ended December 31, 2018 as compared to operating income of $1.2 billion for the year ended December 31, 2017, primarily driven by a 14.8% increase in average steel selling prices. Operating income for the year ended December 31, 2018 included $60 million in charges related to the new collective labor agreement in the United States (which included a signing bonus).
Operating income for the NAFTA segment was $1.2 billion for the year ended December 31, 2017 as compared to operating income of $2.0 billion for the year ended December 31, 2016, affected by a negative price-cost effect for long products partially offset by a positive price-cost effect for flat products and gains from the Action 2020 program. Additionally, operating income for the year ended December 31, 2016 was positively affected by a one-time $832 million gain on employee benefits following the signing of the new U.S. labor contract.
Crude steel production, steel shipments and average steel selling price
Crude steel production for the NAFTA segment decreased 3.9%52.4% to 22.68.5 million tonnes for the year ended December 31, 20182021 as compared to 23.517.8 million tonnes for the year ended December 31, 2017.2020 primarily due to the sale of ArcelorMittal USA on December 9, 2020 (on a comparable basis crude steel production decreased marginally by 0.7%). Crude steel production declined 51.7% in particularthe first half of 2021 and 53.1% in the second half of 2018, primarily2021 as compared to the first half of 2020 and the second half of 2020, respectively, for the same reason. In the first quarter of 2021, crude steel production was impacted by the disruption at Mexican operations due to market slowdown and blast furnace reline delay in Mexico.
severe weather. Crude steel production increased 5.7%by 4.5% in the second quarter of 2021 as compared to the first quarter of 2021 following an improvement in demand and the recovery of Mexican operations post disruptions due to severe weather in the prior quarter. Crude steel production increased 16.5% in the first half of 2021 after excluding the impact of ArcelorMittal USA disposal. Crude steel production in the second half of 2021 was 0.6% lower than in the second half of 2020 on a comparable basis primarily due to operational disruptions (including the impact of Hurricane Ida in Mexico) during the third quarter of 2021.
Crude steel production for the NAFTA segment decreased 18.7% to 17.8 million tonnes for the year ended December 31, 20172020 as compared to 21.9 million tonnes for the year ended December 31, 2019. Crude steel production declined in the first half of 2020 primarily due to the adjustment of production to align with demand which was impacted by the pandemic (particularly in the U.S. and Canadian operations), with the adaptation of capacity continuing through the second quarter of 2020. Crude steel production in the second half of 2020 was 21.1% lower than the second half of 2019 mainly due to the
adjustment of production to align with demand and the sale of ArcelorMittal USA. Crude steel production in the fourth quarter of 2020 for the rest of the NAFTA segment was 2.1 million tonnes, which represented a 2.8% increase compared to the third quarter of 2020 following the gradual improvement in demand. Crude steel production in 2019 had been impacted by the restart of a blast furnace in Mexico which was only fully operational in the second quarter of 2019, loss due to power outage in Burns Harbour in the first quarter of 2019 and planned outages both in flat and long product operations in the fourth quarter of 2019.
Steel shipments in the NAFTA segment decreased 46.5% for the year ended December 31, 2021 as compared to the year ended December 31, 2016 driven2020 primarily due to the sale of ArcelorMittal USA (on a comparable basis, steel shipments increased by improved operational performance.
8.0%). Steel shipments decreased by 45.4% in the first half of 2021 compared to the first half of the 2020 and by 47.7% in the second half of 2021 as compared to the second half of 2020, primarily due to the sale of ArcelorMittal USA. On a comparable basis and reflecting the improvement in demand, steel shipments in the first half of 2021 increased 1.0%by 18.4% compared to the first half of 2020 which was impacted by COVID-19. Steel shipments decreased by 1.9% in the second half of 2021 as compared to the second half of 2020 primarily due to weaker demand in North America, including automotive and lower production as mentioned above.
Steel shipments in NAFTA segment decreased 14.4% for the year ended December 31, 20182020 as compared to the year ended December 31, 2017 reflecting improved demand in the first half and a slowdown and2019 (including the impact of the blast furnace delay insale of ArcelorMittal USA as mentioned above), reflecting the second half. Shipments were 11.4 million tonnes forlower market demand during the first half of 2018, an increase of 3% from 11 million tonnes in the first half of 2017, in line with available inventory. Shipments decreased 1.1% to 10.7 million tonnes in the second half of 2018 as compared to 10.8 million tonnes in the second half of 2017.
year. Steel shipments increased 2.6%for the rest of the NAFTA segment in the fourth quarter of 2020 by 4.9% following the gradual improvement in demand compared to the third quarter of 2020 and was only down by 1.4% compared to the fourth quarter of 2019 on a comparable basis. Shipments from the U.S. operations in 2020 were 9.14 million tonnes.
Average steel selling prices in NAFTA segment increased 60.7% for the year ended December 31, 20172021 as compared to the year ended December 31, 2016 in line with improved demand. Shipments were 11 million tonnes for2020. In the first half of 2017, an increase of 1.1% from 10.9 million tonnes in2021, average steel selling prices were 37.4% higher than the first half of 2016 which included shipments from LaPlace and Vinton which were sold2020, inline with the sharp increase in April 2016. Shipments increased 4.1% to 10.8 million tonnesmarket prices. Average steel selling prices in the second half of 20172021 were 86.8% higher as compared to 10.4 million tonnes in the second half of 2016.2020.
Average steel selling prices increased 14.8%in NAFTA segment decreased 13.4% for the year ended December 31, 20182020 as compared to the year ended December 31, 2017 in particular as a result of imports tariffs on steel implemented in the United States. Average steel selling prices increased 10.5% for2019. In the first half of 2018 as compared to2020, average steel selling prices were 18.5% lower than the first half of 2017 and 19.4% for2019, inline with the decline in market prices. Average steel
selling prices in the second half of 20182020 began to improve but remained 7.2% lower as compared to the second half of 2017. 2019.
Average steel selling prices increased 10.3%Sales
Sales in the NAFTA segment were $12.5 billion for the year ended December 31, 20172021, representing a 8.3% decrease as compared to the year ended December 31, 20162020. Sales in line with international prices. Average steel selling price increased 14% for the NAFTA segment in first half of 20172021 decreased by 18.9% as compared to the first half of 2016 and 6.4% for2020, mainly due to the sale of ArcelorMittal USA offset in part by higher average steel selling prices. Sales in the NAFTA segment in the second half of 20172021 increased by 3.2% as compared to the second half of 2016.2020, mainly due to the significant increase in average steel selling prices, partially offset by the significant decrease in steel shipments (due to sale of ArcelorMittal USA as discussed above in section steel shipments).
|
| | | | | |
| Brazil | | | | | |
| | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2018 | | 2017 | | 2016 |
| Sales | 8,711 | | 7,755 | | 6,223 |
| Depreciation | 298 | | 293 | | 258 |
| Impairments | 86 | | — | | — |
| Operating income | 1,356 | | 697 | | 614 |
| Crude steel production (thousand tonnes) | 12,264 | | 11,210 | | 11,133 |
| Steel shipments (thousand tonnes) | 11,464 | | 10,840 | | 10,753 |
| Average steel selling price (USD/tonne) | 719 | | 667 | | 536 |
Sales
In in the BrazilNAFTA segment sales increased 12.3% to $8.7were $13.7 billion for the year ended December 31, 20182020, representing a 26.9% decrease as compared to the year ended December 31, 2017,2019. Sales decreased primarily due toas a 7.7% increaseresult of a decrease in average steel selling prices by 13.4% and a 5.8% increasedecrease in shipments. Salessteel shipments by 14.4%.
Operating income (loss)
Operating income for the year ended December 31, 2018 were also negatively impacted by hyperinflation accounting in Argentina.
In the BrazilNAFTA segment sales increased 24.6% to $7.8was $2.8 billion for the year ended December 31, 20172021 as compared to the year ended December 31, 2016, primarily due to 24.5% higher average steel selling prices.
Operating income
Operating income for the Brazil segment was $1.4$1.7 billion for the year ended December 31, 2018, representing an2020. The increase of 94.6% as compared toin operating income for the year ended December 31, 2017, primarily2021 was mainly driven by increasedsignificant positive price-cost effect and offset in part by lower steel shipments following the sale of ArcelorMittal USA. Operating income in 2020 included a $1.5 billion gain on the sale of ArcelorMittal USA and higher average steel selling prices.a $660 million gain related to the partial reversal of impairments recorded in ArcelorMittal USA following the announced sale, as well as inventory related charges of $0.5 billion.
Operating income for the NAFTA segment was $1.7 billion for the year ended December 31, 2020 as compared to operating loss of $1.1 billion for the year ended December 31, 2019. Operating income for the year ended December 31, 2018 was negatively affected by foreign exchange translation impact, hyperinflation in Argentina2020 includes a $1.5 billion gain on the sale of ArcelorMittal USA and $86a $660 million impairmentgain related to the agreed remedy package required forpartial reversal of impairments recorded in ArcelorMittal USA following the approvalannounced sale, as well as inventory related charges of the Votorantim acquisition. It was positively affected by the recognition of $202 million additional PIS/Cofins tax credits in See note 8.3 to the consolidated finthe period of 2005 to 2013. See note 8
the fourth quarter of 2018 relating to favorable judgments obtained in cases filed by ArcelorMittal Brasil concerning See note 8.3 to the consolidated financial statements for further information on pending cases related to the PIS/Cofins topic. ancial statements for further information on pending cases related to the PIS/Cofins topic. .3 to the consolidated financial statements for further information on pending cases related to the PIS/Cofins topic.
$0.5 billion. Operating income for the Brazil segmentloss for the year ended December 31, 20172019 was $697 million, an increaseimpacted by impairment charges of 13.5% as compared$1.3 billion related to the year ended December 31, 2016, primarily drivenproperty, plant and equipment of ArcelorMittal USA and inventory related charges of $0.2 billion following a period of exceptionally weak steel pricing and reflected weak demand exacerbated by positive price-costprolonged customer destocking and increased domestic supply with prices well below import parity, and high raw material prices. Excluding these gains, operating performance reflected weaker operating conditions (lower volumes and negative price-
cost effect and gains fromoffset in part by lower fixed cost) due in particular to the Action 2020 program.impact of the COVID-19 pandemic, offset in part by a reduction in operating costs, in particular fixed costs.
| | | | | | | | | | | | | | | | | |
| Brazil | | | | | |
| Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2021 | | 2020 | | 2019 |
| Sales | 12,856 | | | 6,336 | | | 8,166 | |
| Depreciation | (228) | | | (228) | | | (277) | |
| | | | | |
| Operating income | 3,798 | | | 777 | | | 853 | |
| Crude steel production (thousand tonnes) | 12,413 | | | 9,539 | | | 11,001 | |
| Flat product shipments | 6,425 | | | 4,722 | | | 6,328 | |
| Long product shipments | 5,332 | | | 4,740 | | | 4,918 | |
| Others and eliminations | (62) | | | (52) | | | (54) | |
| Total steel shipments (thousand tonnes) | 11,695 | | | 9,410 | | | 11,192 | |
| Average steel selling price (USD/tonne) | 1,030 | | | 634 | | | 679 | |
Crude steel production, steel shipments and average steel selling price
Crude steel production for the Brazil segment increased 9.4%30.1% to 12.312.4 million tonnes for the year ended December 31, 20182021 as compared to 9.5 million tonnes for the year ended December 31, 2020 due to higher production in both flat (following the restart of BF#3 at ArcelorMittal Tubarao in the fourth quarter of 2020) and long products due to the continued recovery in demand as compared to 2020, when production was adapted to match the reduced demand levels driven by the COVID-19 pandemic. In particular, the Company idled ArcelorMittal Tubarão's blast furnace No. 3 from April 21, 2020, and implemented production curtailments in Argentina and of long product capacity in Brazil, to match demand levels. Subsequently, given the sharp recovery in domestic demand, improving export market conditions and a favorable cost position, the Company restarted activities at ArcelorMittal Tubarão's blast furnace No. 2 in July 2020 (idled since June 2019) and blast furnace No. 3 in October 2020 and substantially all of its long product capacity in Brazil, given the ongoing recovery in demand in the second half of 2020.
Crude steel production decreased 13.3% to 9.5 million tonnes for the year ended December 31, 2020 as compared to 11.0 million tonnes for the year ended December 31, 2019 mainly due to the COVID-19 pandemic and reduction in demand most significantly in the second quarter of 2020. Crude steel production in 2019 had been impacted by lower flat production following the stoppage of ArcelorMittal Tubarão's blast furnace #2 in response to deteriorating export market conditions and lower long product production.
Steel shipments increased 24.3% to 11.7 million tonnes for the year ended December 31, 2021 as compared to 9.4 million tonnes for the year ended December 31, 2020. Steel shipments increased 32.3% in the first half of 2021 as compared to the first half of 2020 primarily due to the recovery in demand for both flat (domestic and exports) and long products, as economic activity continued to recover throughout the first half of 2021, while the first half of 2020 was impacted by the COVID-19 pandemic. Steel shipments in the second half of 2021 increased 17.3% as compared to the second half of 2020, primarily driven by continued recovery in demand.
Steel shipments decreased to 9.4 million tonnes for the year ended December 31, 2020 as compared to 11.2 million tonnes for the year ended December 31, 2017 mainly2019. Steel shipments in the first half of 2020 decreased 22.2% as compared to the first half of 2019 primarily due to anthe impacts of the COVID-19 pandemic, while shipments for the second half of 2020 were only 9.5% lower compared to the second half of 2019.
Average steel selling prices increased 62.5% for the year ended December 31, 2021 as compared to the year ended December 31, 2020 in line with the sharp increase in market prices. Average steel selling prices increased 56.9% in the first half of 2021 compared to the first half of 2020 and increased 68.4% in the second half of 2021 compared to the second half of 2020. Steel selling prices decreased however 12.3% in the fourth quarter of 2021 as compared to the third quarter of 2021.
Average steel selling prices decreased 6.7% for the year ended December 31, 2020 as compared to the year ended December 31, 2019 in line with domestic and export prices and include the impact of the depreciation of the Brazilian Real on domestic selling prices. Average steel selling prices declined 15.0% in the first half of 2020 compared to first half of 2019 and increased 1.8% in the second half of 2020 compared to the second half of 2019 due to improvements for both domestic and export flat and long products followingproducts.
Sales
In the integrationBrazil segment, sales increased 102.9% to $12.9 billion for the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to 62.5% higher average steel selling prices and 24.3% higher steel shipments. In the first half of Votorantim. Excluding Votorantim, crude2021, sales increased 106.6% to $5.8 billion as compared to $2.8 billion for the first half of 2020 primarily due to 56.9% higher average steel productionselling prices and 32.3% higher steel shipments. In the second half of 2021, sales increased 4.9%.100.0% to $7.1 billion as compared to $3.5 billion for the second half of 2020 driven by a 17.3% increase in shipments and 68.4% increase in average steel selling prices.
In the Brazil segment, sales decreased 22.4% to 6.3 billion for the year ended December 31, 2020 as compared to the year
ended December 31, 2019, primarily due to a 6.7% decrease in average steel selling prices and a 15.9% decrease in shipments. In the first half of 2020, sales decreased 34.8% to $2.8 billion as compared to $4.3 billion for the first half of 2019 primarily due to 22.2% lower steel shipments and 15.0% lower average steel selling prices, while in the second half of 2020, sales decreased 8.6% compared to the second half of 2019 driven by a 9.5% decrease in shipments offset in part by 1.8% increase in average steel selling prices.
Operating income
Operating income for the Brazil segment was $3.8 billion for the year ended December 31, 2021, representing a 389.0% increase as compared to the year ended December 31, 2020. Operating income in the first half and the second half of the 2021, increased 539.9% and 307.1%, respectively, as compared to the first half and the second half of 2020, primarily due to a positive price-cost effect and higher steel shipments. Operating income in the second half of 2021 also included the impact of $123 million related to expected costs for the decommissioning of the dam at the Serra Azul mine in Brazil.
Operating income for the Brazil segment was $777 million for the year ended December 31, 2020, representing a 8.9% decrease as compared to the year ended December 31, 2019. In the first half of 2020 operating income decreased 42.8% primarily driven by lower steel shipments offset in part by lower costs, while operating income for the second half of 2020 increased 33.9% as compared to the second half of 2019, primarily due to a positive price-cost effect. Operating income for the first and second halves of 2020 was also negatively impacted by foreign exchange translation impact due to the significant depreciation of Brazilian Real for the year ended December 31, 2020.
| | | | | | | | | | | | | | | | | |
| Europe | | | | | |
| Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2021 | | 2020 | | 2019 |
| Sales | 43,334 | | | 28,071 | | | 37,721 | |
| Depreciation | (1,252) | | | (1,418) | | | (1,261) | |
| Net impairment reversal (charges) | 218 | | | (527) | | | (525) | |
| Operating income (loss) | 5,672 | | | (1,439) | | | (1,101) | |
| Crude steel production (thousand tonnes) | 36,795 | | | 34,004 | | | 43,913 | |
| Flat product shipments | 23,485 | | | 23,907 | | | 31,523 | |
| Long product shipments | 9,236 | | | 8,550 | | | 10,360 | |
| Others and eliminations | 461 | | | 416 | | | 469 | |
| Total steel shipments (thousand tonnes) | 33,182 | | | 32,873 | | | 42,352 | |
| Average steel selling price (USD/tonne) | 986 | | | 655 | | | 696 | |
Crude steel production, steel shipments and average steel selling price
Crude steel production for the Europe segment increased marginally8.2% to 11.236.8 million tonnes for the year ended December 31, 20172021 as compared to 34.0 million tonnes for the year ended December 31, 2020, as demand and activity levels improved, including automotive, industrial production and manufacturing activity. Crude steel production increased 12.3% to 19.1 million tonnes in the first half of 2021 from 17.0 million tonnes in the first half of 2020 (impacted by the COVID-19 pandemic), including the restart of BF#B in Ghent, Belgium in March following a planned major reline. Crude steel production increased 4.1% to 17.7 million tonnes in the second half of 2021 from 17.0 million tonnes in the second half of 2020 mainly due to the factors discussed above. Operations relating to ArcelorMittal Italia were included until April 14, 2021 and then accounted for under the equity method following the formation of a public-private partnership between Invitalia and ArcelorMittal (renamed Acciaierie d'Italia). As a result, excluding the impact of the Acciaierie d'Italia deconsolidation as discussed above, steel production increased by 17.9% in the first half of 2021 and 15.1% in the second half of 2021 compared to the previous year.
Crude steel production for the Europe segment decreased 22.6% to 34.0 million tonnes for the year ended December 31, 2020 as compared to 43.9 million tonnes for the year ended December 31, 2019. Adjusting for the impact of the sale of remedy assets related to the acquisition of ArcelorMittal Italia in 2019, production decreased 18.6%. In the first half of 2020, crude steel production decreased 30.5% to 17.0 million tonnes from 24.5 million tonnes in the first half of 2019, primarily driven by weak demand caused by the COVID-19 pandemic and lockdown measures in response to the COVID-19 pandemic and the impact of the sale of remedy assets mentioned above. In particular, the Company announced measures on March 19, 2020 to reduce production and the temporary idling of steel making and finishing assets, including operations in Italy, France, Spain, Germany, Belgium and Poland which continued in the second quarter of 2020. In the second half of 2020, crude steel production decreased 12.6% to 17.0 million tonnes from 19.5 million tonnes in the second half of 2019, in line with the improved activity levels described above. Despite the sequential improvement, steel demand remained well below pre-crisis levels. Although the Company had restarted capacity in the second half of 2020, some steel-making capacity during the last quarter of 2020 remained idled, including a blast furnace at Ghent, Belgium that restarted on March 1, 2021 following a major reline. In addition, in the second half of 2019, the Company had implemented production cuts announced in May 2019 for approximately 4.2 million tonnes of annualized production to bring supply in line with addressable demand.
Steel shipments were 33.2 million tonnes for the year ended December 31, 2021, a marginal 0.9% increase from steel shipments of 32.9 million for the year ended December 31, 2020. Excluding the impact of Acciaierie d'Italia, shipments increased 8.9% as compared to 2020. Steel shipments increased 7.4% to 17.3 million tonnes in the first half of 2021, from 16.1 million tonnes in the first half of 2020 (impacted by the COVID-19 pandemic), due to higher flat and long steel shipments, as demand and activity levels improved. Steel shipments decreased 5.3% in the second half of 2021 compared to the second half of 2020, primarily due to the lower shipments related to the deconsolidation of ArcelorMittal Italia (on a comparable basis, steel shipments in the second half of 2021 were 6.3% higher than in the second half of 2020).
Steel shipments were 32.9 million tonnes for the year ended December 31, 2020, a 22.4% decrease from 42.4 million steel shipments for the year ended December 31, 2019. On a comparable basis, adjusting for the exit of the remedy asset sales related to the acquisition of ArcelorMittal Italia in June 2019, shipments decreased 18.6%. Steel shipments decreased 31.0% to 16.1 million tonnes in the first half of 2020, from 23.4 million tonnes in the first half of 2019, including the lower shipments related to the sale of remedy assets for the ArcelorMittal Italia acquisition on June 30, 2019, primarily driven by lower industrial activity and steel demand due to the pandemic impact. Steel shipments in Europe started to decline in the latter part of March and early in the second quarter of 2020 due to the pandemic containment measures implemented. Steel shipments decreased 11.8% in the second half of 2020 compared to the second half of 2019, primarily due to the impacts of the COVID-19 pandemic.
Average steel selling prices increased 50.6% for the year ended December 31, 2021 as compared to the year ended December 31, 2016 due2020 in line with the higher market prices. Average steel selling prices increased 38.0% during the first half of 2021 as compared to an increase in flat production offset by long production duethe first half of 2020 and increased 63.8% during the second half of 2021 as compared to a scheduled reline at Monlevade.the second half of 2020.
Steel shipments increased to 11.5 million tonnesAverage steel selling prices decreased 5.8% for the year ended December 31, 2018 as compared to 10.8 million tonnes for the year ended December 31, 2017, reflecting the contribution from the acquisition of Votorantim. Excluding Votorantim, steel shipments increased 0.5%.
Total steel shipments in the Brazil segment increased 9.6% to 5.3 million tonnes for the first half of 2018 as compared to 4.8 million tonnes for the first half of 2017, driven by improved demand in long products and the integration of Votorantim, partially offset by a nationwide truck strike. Total steel shipments in the Brazil segment increased 2.6% to 6.2 million tonnes in the second half of 2018 as compared to 6.0 million tonnes for the second half of 2017.
Steel shipments remained stable for the year ended December 31, 2017 and 2016 at 10.8 million tonnes.
Average steel selling prices increased 7.7% for the year ended December 31, 20182020 as compared to the year ended December 31, 20172019 in line with internationalthe lower market prices. Average steel selling prices indecreased 11.2% during the Brazil segment increased 11.0% for the six months ended June 30, 2018first half of 2020 as compared to the six months ended June 30, 2017, in line with domesticfirst half of 2019 and export prices, and 4.9%marginally increased 0.4% during the second half of 20182020 as compared to the second half of 2017.
Average steel selling2019, reflecting improved international prices increased 24.5% forparticularly in the year ended December 31, 2017 as compared tofourth quarter of 2020 and including the year ended December 31, 2016impact of appreciation of the euro against the U.S. dollar in line with international prices. Average steel selling prices increased 34.4% during the first half of 2017 as compared to the first half of 2016 and 16.6% during the second half of 2017 as compared to the second half of 2016.2020.
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| | | | | |
| Europe | | | | | |
| | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2018 | | 2017 | | 2016 |
| Sales | 40,488 | | 36,208 | | 29,272 |
| Depreciation | 1,195 | | 1,201 | | 1,184 |
| Impairments | 908 | | — | | 49 |
| Operating income | 1,632 | | 2,359 | | 1,270 |
| Crude steel production (thousand tonnes) | 44,693 | | 43,768 | | 42,635 |
| Steel shipments (thousand tonnes) | 41,020 | | 40,941 | | 40,247 |
| Average steel selling price (USD/tonne) | 787 | | 702 | | 568 |
Sales
Sales in the Europe segment were $40.5$43.3 billion for the year ended December 31, 2018,2021, representing an 11.8%a 54.4% increase as compared to sales of $36.2$28.1 billion for the year ended December 31, 2017,2020, primarily due to a 12.2% increase in average steel selling prices, a 0.2% increase in steel shipments and the depreciation of the U.S. dollar against the euro.
Sales in the Europe segment were $36.2 billion for the year ended December 31, 2017, representing a 23.7% increase as compared to sales of $29.3 billion for the year ended December 31, 2016, primarily due to a 23.5%50.6% increase in average steel selling prices and a 1.7%0.9% increase in steel shipments. Spot prices began improvingSales increased by 48.9% and 59.5% in the second quarter of 2016 which positively impacted sales in thefirst and second half of 2016 due2021, respectively, as compared to lead timesthe first and lagged pricing.second half of 2020.
Operating income
Operating income forSales in the Europe segment for the year ended December 31, 2018 decreased to $1.6 billion as compared to $2.4were $28.1 billion for the year ended December 31, 2017, primarily due2020, representing a 25.6% decrease as compared to the impairment chargessales of $908 million mainly related to the remedy asset sales for the acquisition of Ilva (reflecting the adjustment to the carrying amount of the disposal group to the expected sale proceeds based on the offers received) as well as charges of $113 million related to blast furnace dismantling in Florange (France) and a charge of $146 million taken for the German Cartel case which settled in July 2018. Operating income for the Europe segment$37.7 billion for the year ended December 31, 2018 was positively impacted2019, primarily due to a 5.8% decrease in average steel selling prices and a 22.4% decrease in steel shipments. Sales decreased by $209 million35.6% and 13.2% in the first and second half of bargain purchase gain recognized with respect2020 as compared to the acquisitionfirst and second half of Ilva.2019, respectively.
Operating income for the Europe segment for the year ended December 31, 2017 increased to $2.42021 was $5.7 billion as compared to $1.3operating loss of $1.4 billion for the year ended December 31, 2016,2020. Operating income was significantly higher in 2021 mainly due to significant positive price cost effect offset in part by higher energy prices and a $55 million provision related to early retirement scheme in Spain in the fourth quarter of 2021. Operating income for the year ended December 31, 2021 also included a $218 million impairment reversal relating to the Sestao facility in Spain as a result of improved cash flow projections in the context of the Company's decarbonization plans in Spain following the restart of operations in 2021. Operating income was $1.9 billion for the first half of 2021 as compared to operating loss of $654 million for the fist half of 2020, primarily due to higher steel shipments inand a positive price-cost effect. Operating income was significantly higher at $3.8 billion for the flat business,second half of 2021 as compared to operating loss of $785 million for the second half of 2020 due to a positive price-cost effect and the above-mentioned Sestao impairment reversal, offset in part by lower steel shipments (due to deconsolidation of ArcelorMittal Italia) and higher energy prices in the flat businessfourth quarter of 2021. Operating loss in the first half of 2020 included an impairment charge of $0.1 billion related to the coke plant in Florange, France, which was closed at the end of April 2020 and gains frominventory related charges of $191 million due to a weaker steel pricing outlook driven by the Actionpandemic impacts. Operating loss in the second half of 2020, program, partially offsetincluded impairment charges of $331 million related to the plate assets classified as held for sale, $104 million related to the closure of the blast furnace and the steel plant in Krakow (Poland) as well as $146 million related to its site restoration and termination charges.
Operating loss for the Europe segment was $1.4 billion for the year ended December 31, 2020 as compared to $1.1 billion for
the year ended December 31, 2019. The operating loss was impacted by lower steel shipments and average steel selling prices driving a negative price-cost effect, in the long business.partly offset by fixed cost reduction and improved performance at ArcelorMittal Italia.
| | | | | | | | | | | | | | | | | |
| ACIS | | | | | |
| Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2021 | | 2020 | | 2019 |
| Sales | 9,854 | | | 5,737 | | | 6,997 | |
| Depreciation | (450) | | | (492) | | | (499) | |
| Impairment | — | | | — | | | (102) | |
| Operating income | 2,705 | | | 209 | | | 31 | |
| Crude steel production (thousand tonnes) | 11,366 | | | 10,171 | | | 12,998 | |
| Flat product shipments | 7,883 | | | 7,685 | | | 7,425 | |
| Long product shipments | 2,473 | | | 2,190 | | | 4,112 | |
| Others and eliminations | 4 | | | 6 | | | 10 | |
| Steel shipments (thousand tonnes) | 10,360 | | | 9,881 | | | 11,547 | |
| Average steel selling price (USD/tonne) | 780 | | | 464 | | | 517 | |
Crude steel production, steel shipments and average steel selling price
Crude steel production for the EuropeACIS segment increased 2.1%11.7% to 44.711.4 million tonnes for the year ended December 31, 2018 as compared to 43.82021 from 10.2 million tonnes for the year ended December 31, 2017, due primarily2020. In the first half of 2021, crude steel production increased 14.2% to the consolidation of Ilva as5.7 million tonnes from November 1, 2018, partially offset by production issues including floods in Asturias (Spain) and blast furnace reline in ArcelorMittal Zenica (Bosnia)5.0 million tonnes in the second quarterfirst half of 2020, primarily due to improved production performance in Kazakhstan and a power outage in ArcelorMittal Méditerranée (Fos-sur-Mer, France) and a slower ramp up following a blast furnace repair in Poland in the third quarter of 2018.
South Africa. Crude steel production for the Europefirst half of 2020, was negatively impacted by weak demand caused by the pandemic effects in all regions, in particular due to the lockdown measures in South Africa. In the second half of 2021, crude steel production increased 9.4% to 5.7 million tonnes from 5.2 million tonnes in the second half of 2020, primarily due to increased production in Ukraine and South Africa. Crude steel production was lower in the fourth quarter of 2021 as compared to the third quarter of 2021 due to planned and unplanned maintenance in Ukraine and South Africa.
Crude steel production for the ACIS segment increased 2.7%decreased 21.7% to 43.810.2 million tonnes for the year ended December 31, 2017 as compared to 42.6 million tonnes for the year ended December 31, 2016, reflecting better operational performance.
Steel shipments were 41.0 million tonnes for the year ended December 31, 2018, a 0.2% increase2020 from steel shipments of 40.9 million for the year ended December 31, 2017. In the first half of 2018, steel shipments increased 2.6% to 21.2 million tonnes, from 20.7 million tonnes in the first half of 2017, both for flat and long products partially offset by the operational issues described above, while steel shipments in the second half of 2018 decreased 2.3% to 19.8 million tonnes from 20.3 million tonnes in the second half of 2017 due to weak market conditions in the fourth quarter of 2018, particularly in long products, and the operational issues described above, partially offset by the consolidation of Ilva as from November 1, 2018.
Steel shipments were 40.9 million tonnes for the year ended December 31, 2017, a 1.7% increase from steel shipments for the year ended December 31, 2016. In the first half of 2017, steel shipments decreased 3.1% to 20.7 million tonnes, from 21.3 million tonnes in the first half of 2016, due to weaknesses in long market demand while steel shipments in the second half of 2017 increased 7.1% as compared to the second half of 2016. The decrease in shipments in the first half of 2017 includes the effect of the disposal of ArcelorMittal Zaragoza and the idling of Zumarraga.
Average steel selling prices increased 12.2% for the year ended December 31, 2018 as compared to the year ended December 31, 2017 in line with higher international prices. Average steel selling prices increased 18.8% during the first half of 2018 as compared to the first half of 2017 in line with higher international prices and the depreciation of the U.S. dollar against the euro and 6.0% during the second half of 2018 as compared to the second half of 2017.
Average steel selling prices increased 23.5% for the year ended December 31, 2017 as compared to the year ended December 31, 2016 in line with higher international prices. Average steel selling prices increased 23.0% both during the first half of 2017 as compared to the first half of 2016 and during the second half of 2017 as compared to the second half of 2016.
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| | | | | |
| ACIS | | | | | |
| | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | 2018 | | 2017 | | 2016 |
| Sales | 7,961 | | 7,621 | | 5,885 |
| Depreciation | 311 | | 313 | | 311 |
| Impairments | — | | 206 | | 156 |
| Operating income | 1,094 | | 508 | | 211 |
| Crude steel production (thousand tonnes) | 13,022 | | 14,678 | | 14,792 |
| Steel shipments (thousand tonnes) | 11,741 | | 13,094 | | 13,271 |
| Average steel selling price (USD/tonne) | 598 | | 515 | | 395 |
Sales
Sales in the ACIS segment were $8.0 billion for the year ended December 31, 2018, representing an increase of 4.5% as compared to the year ended December 31, 2017, primarily due to a 16.1% increase in average steel selling prices, partially offset by a 10.3% decrease in steel shipments.
Sales in the ACIS segment were $7.6 billion for the year ended December 31, 2017, representing an increase of 29.5% as compared to the year ended December 31, 2016, primarily due to a 30.5% increase in average steel selling prices, partially offset by a 1.3% decrease in steel shipments.
Operating income
Operating income for the ACIS segment for the year ended December 31, 2018 was $1.1 billion as compared to $508 million for the year ended December 31, 2017, increasing primarily due to a positive price-cost effect and partially offset by the decrease in shipments in 2018.
Operating income for the ACIS segment for the year ended December 31, 2017 was $508 million as compared to $211 million for the year ended December 31, 2016, the increase is primarily driven by a positive price-cost effect in the CIS business including gains from the Action 2020 program, partially offset by negative price-cost effect in ArcelorMittal South Africa and impairment charges of $206 million related to a downward revision of cash flow projections across all steel facilities in ArcelorMittal South Africa.
Crude steel production, steel shipments and average steel selling price
Crude steel production for the ACIS segment decreased by 11.3% to 13.0 million tonnes for the year ended December 31, 2018, from 14.72019. In the first half of 2020, crude steel production decreased 24.7% to 5.0 million tonnes for the year ended December 31, 2017, primarily due to planned (blast furnace #9) and unplanned maintenance in Ukrainefrom 6.6 million tonnes in the first half of 20182019, primarily due to weak demand caused by the pandemic effects in all regions, in particular due to the lockdown measures in South Africa as well as the impact of the permanent closure of the Saldanha facility in South Africa. During the second quarter of 2020, ArcelorMittal South Africa took several steps, including significant production cuts across all operations, to support the country's lockdown measures. The economic activity levels remained weak and an explosionhaving reassessed its strategic asset footprint for 2020, the Company decided to idle blast furnace C at a gas pipeline at Temirtau (Kazakhstan)Vanderbijlpark, and the Vereeniging electric arc furnace until demand recovered. With the improvement in demand, the Vereeniging electric arc furnace continued to operate in 2020 and blast furnace C was restarted in December 2020.
In the second half of 2020, crude steel production decreased 18.8% to 5.2 million tonnes from 6.4 million tonnes in the fourth quartersecond half of 2018.
Crude steel production for2019, primarily due to the ACIS segment decreased marginally by 0.8% to 14.7 million tonnes forimpact of COVID-19 on the year ended December 31, 2017, from 14.8 million tonnes fordemand which remained well below pre-crisis levels, and the year ended December 31, 2016. impact of the permanent closure of the Saldanha facility.
Steel shipments for the year ended December 31, 2018 decreased2021 increased by 10.3%4.8% to 11.710.4 million tonnes as compared to 13.19.9 million tonnes for the year ended December 31, 2017 reflecting the operational issues mentioned above. In the first half of 2018, steel shipments decreased 6.1% to 6.1 million tonnes from 6.5 million tonnes in the first half of 2017 due to lower CIS shipments partially offset by higher steel shipments in South Africa, while steel shipments in the second half of 2018 decreased 14.5% to 5.7 million as compared to 6.6 million in the second half of 2017,2020, primarily due to lower steel shipments in CIS following the incidents mentioned above.improved demand.
Steel shipments for the year ended December 31, 20172020 decreased by 1.3%14.4% to 13.19.9 million tonnes as compared to 13.311.5 million tonnes for the year ended December 31, 2016. Steel2019 mainly due to the COVID-19 pandemic impact in South Africa as well as the impact of permanent closure of the Saldanha facility, partially offset by improved shipments decreased 4.3% in the first half of 2017 to 6.5 million tonnes as compared to 6.8 million tonnes for the first half of 2016. In the second half of 2017, steel shipments increased 1.7% to 6.6 million as compared to 6.5 million in the second half of 2016.Kazakhstan.
Average steel selling prices increased 16.1%68.2% for the year ended December 31, 20182021 as compared to the year ended December 31, 20172020 in line with internationalthe higher market prices. Average steel selling prices increased 23.1%65.3% and 9.4%71.7% in the first and second half of 2018, respectively,2021 as compared to the same periodsfirst and second half in 2017.2020, respectively. Steel selling prices decreased however 6.3% in the fourth quarter of 2021 as compared to the third quarter of 2021.
Average steel selling prices increased 30.5%decreased 10.2% for the year ended December 31, 20172020 as compared to the year ended December 31, 20162019 in line with internationallower market prices. Average steel selling prices increased 36.9%decreased 18.0% and 24.7%1.4% in the first and second half of 2017,2020, respectively as compared to the same periods in 2016.2019.
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| | | | | | | |
| Mining | | | | | | | |
| | | | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | Note | | 2018 | | 2017 | | 2016 |
| Sales | | | 4,211 | | 4,033 | | 3,114 |
| Depreciation | | | 418 | | 416 | | 396 |
| Operating income | | | 860 | | 991 | | 366 |
| | | | | | | | |
| Own iron ore production (million tonnes) | | | 58.5 | | 57.4 | | 55.2 |
| Iron ore shipped externally and internally at market price (million tonnes) | 1,2 | | 37.6 | | 35.7 | | 33.6 |
| Iron ore shipment - cost plus basis (million tonnes) | 1 | | 20.6 | | 22.2 | | 22.3 |
| | | | | | | | |
| Own coal production (million tonnes) | | | 5.9 | | 6.3 | | 6.3 |
| Coal shipped externally and internally at market price (million tonnes) | 1,2 | | 2.5 | | 2.8 | | 3.4 |
| Coal shipment - cost plus basis (million tonnes) | 1 | | 3.3 | | 3.5 | | 3.4 |
| |
1. | There are three categories of sales: (1) “External sales”: mined product sold to third parties at market price; (2) “Market-priced tonnes”: internal sales of mined product to ArcelorMittal facilities reported at prevailing market prices; (3) “Cost-plus tonnes”: internal sales of mined product to ArcelorMittal facilities on a cost-plus basis. The determinant of whether internal sales are reported at market price or reported at cost-plus is whether or not the raw material could practically be sold to third parties (i.e., there is a potential market for the product and logistics exist to access that market).
|
| |
2. | Market-priced tonnes represent amounts of iron ore and coal from ArcelorMittal mines that could practically be sold to third parties. Market-priced tonnes that are transferred from the Mining segment to the Company’s steel producing segments are reported at the prevailing market price. Shipments of raw materials that do not constitute market-priced tonnes are transferred internally on a cost-plus basis.
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|
| | | | | | | | | | | |
| | Note | | | | | | Year ended December 31, |
| Iron ore production (million metric tonnes) | 1 | | Type | | Product | | 2018 | | 2017 | | 2016 |
| Own mines | | | | | | | | | | | |
| North America | 2 | | Open pit | | Concentrate, lump, fines and pellets | | 36.9 | | 38.1 | | 35.9 |
| South America | | | Open pit | | Lump and fines | | 2.8 | | 3.2 | | 3.1 |
| Europe | | | Open pit | | Concentrate and lump | | 1.4 | | 1.6 | | 1.8 |
| Africa | | | Open pit / Underground | | Fines | | 4.6 | | 2.0 | | 2.1 |
| Asia, CIS & Other | | | Open pit / Underground | | Concentrate, lump, fines and sinter feed | | 12.8 | | 12.5 | | 12.3 |
| Total own iron ore production | | | | | | | 58.5 | | 57.4 | | 55.2 |
| Strategic long-term contracts - iron ore | | | | | | | | | | | |
| North America | 3 | | Open pit | | Pellets | | — | | 0.9 | | 6.1 |
| Africa |
| | Open pit | | Lump and fines | |
| | — | | 0.8 |
| Total strategic long-term contracts - iron ore | | | | | | | — | | 0.9 | | 6.9 |
| | | | | | | | | | | | |
| Total | | | | | | | 58.5 | | 58.3 | | 62.1 |
| |
1. | Total of all finished production of fines, concentrate, pellets and lumps. |
| |
2. | Includes own mines and share of production from Hibbing (United States, 62.30%) and Peña (Mexico, 50%).
|
| |
3. | Consists of a long-term supply contract with Cleveland-Cliffs Inc. which expired in the first quarter of 2017.
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| | | | | | | |
| | Note | | Year ended December 31, |
| Coal production (million metric tonnes) | | 2018 | | 2017 | | 2016 |
| Own mines | | | | | | | |
| North America | | | 2.09 | | 2.06 | | 1.80 |
| Asia, CIS & Other | | | 3.82 | | 4.25 | | 4.45 |
| Total own coal production | | | 5.91 | | 6.31 | | 6.25 |
Sales
Sales in the MiningACIS segment were $4.2$9.9 billion for the year ended December 31, 2018,2021, representing ana 71.8% increase of 4.4% as compared to the year ended December 31, 2017. 2020, primarily due to a 68.2% increase in average steel selling prices and to a lower extent a 4.8% increase in steel shipments.
Sales in the ACIS segment were 2.2% higher at $2.1 billion and 6.7% higher at $2.1$5.7 billion for the first and second half of 2018, respectivelyyear ended December 31, 2020, representing an 18.0% decrease as compared to the same periodsyear ended December 31, 2019, primarily due to a 10.2% decrease in 2017.average steel selling prices and a 14.4% decrease in steel shipments.
Operating income
Operating income for the ACIS segment was $2.7 billion for the year ended December 31, 2021 as compared to $209 million for the year ended December 31, 2020 due to a positive price cost-effect and higher steel shipment volumes offset in part by higher energy prices.
Operating income for the ACIS segment was $209 million for the year ended December 31, 2020 as compared to $31 million for the year ended December 31, 2019. Operating income for the year ended December 31, 2019 was negatively impacted by impairment charges ($0.1 billion related to ArcelorMittal South Africa (of which $75 million related to the fixed assets of the Newcastle facility as a result of lower domestic volume forecasts and $20 million related to the closure of the Saldanha facility) and $0.1 billion of closure and retrenchment costs related to the Saldanha facility in relation to the announced Section 189 process). Operating income for the year ended December 31, 2020 was positively impacted by lower costs including the benefit from currency depreciation on local currency denominated costs which partially offset the impact of lower shipments and selling prices.
| | | | | | | | | | | | | | | | | | | | |
| Mining | | | | | | |
| | Performance for the year ended December 31, |
| (in millions of USD unless otherwise shown) | | 2021 | | 2020 | | 2019 |
| Sales | | 4,045 | | | 2,785 | | | 2,664 | |
| Depreciation | | (228) | | | (243) | | | (237) | |
| Operating income | | 2,371 | | | 1,247 | | | 1,026 | |
| Iron ore production (million tonnes) | | 26.2 | | | 28.3 | | | 28.3 | |
| Iron ore shipments (million tonnes) | | 26.0 | | | 28.4 | | | 28.8 | |
| | | | | | | | | | | | | | | | | | | | |
| Note | | | For the year ended December 31, |
| Iron ore production (million metric tonnes) | 1 | Type | Product | 2021 | 2020 | 2019 |
| AMMC | | Open pit | Concentrate, lump, fines and pellets | 22.0 | | 23.2 | | 23.9 | |
| ArcelorMittal Liberia Ltd | | Open pit / Underground | Fines | 4.2 | | 5.1 | | 4.4 | |
| Total iron ore production | | | | 26.2 | | 28.3 | | 28.3 | |
| | | | | | |
1.Total of all finished production of fines, concentrate, pellets and lumps.
The Mining segment had iron ore production of 26.2 million tonnes for the year ended December 31, 2021, a 7.5% decrease compared to the year ended December 31, 2020. Iron ore production decreased 9.9% for the first half of 2021 compared to the first half of 2020 primarily due to the impact of a four week labor strike action (and subsequent ramp up to full operations) and production impacts in Liberia following a rail accident in the second quarter of 2021. Iron ore production decreased 5.9% in the second half of 2021 compared to the second half of 2020 primarily due to the continuing impact of a rail accident as discussed above and heavy seasonal monsoon rains in the third quarter of 2021 in Liberia.
The Mining segment iron ore production of 28.3 million tonnes for the year ended December 31, 2020 remained stable as compared to the year ended December 31, 2019. Iron ore production decreased 9.2% for the first half of 2020 compared to the first half of 2019 primarily due to the lower production in AMMC. The direct impact of the COVID-19 pandemic on the mining operations was minimal with some initial impact at AMMC during the early part of the second quarter of 2020. The operations in AMMC resumed normal activity in early May 2020. Iron ore production increased 10.5% for the second half of 2020 compared to the second half of 2019 primarily due to higher production at AMMC. Iron ore production in 2019 had been impacted by an electrical failure at AMMC in the third quarter of 2019 which led to a temporary stoppage of the concentrator followed by a slow ramp-up in the fourth quarter of 2019.
Sales
Sales in the Mining segment were $4.0 billion for the year ended December 31, 2017, representing an increase of 29.5% as compared to the year ended December 31, 2016. Sales were 45.1% higher at $2.0 billion and 16.6% higher at $2.0 billion for the first and second half of 2017, respectively as compared to the same periods in 2016.
Sales to external customers were $1,009million for the year ended December 31, 2018, representing an increase of 2.4% as compared to the year ended December 31, 2017, primarily due to the increase in prices. Iron ore shipments were 58.3 million tonnes for the year ended December 31, 2018,2021, representing a marginal 0.7% increase as compared to 57.9 million for the year ended December 31, 2017. Iron ore shipments to external parties were 12.7 million tonnes for the year ended December 31, 2018 as compared to 11.8 million tonnes for the year ended December 31, 2017. Coal shipments were 5.8 million tonnes for the year ended December 31, 2018 as compared with 6.3 million tonnes for the year ended December 31, 2017.
Sales to external customers were $985 million for the year ended December 31, 2017, representing a 26.1%45.2% increase as compared to the year ended December 31, 2016,2020. Sales in the first half of 2021 were 82.8% higher at $2.1 billion compared to the same period in 2020 primarily due to higher seaborne iron ore reference prices and higher quality premia offset in part by decreased shipment volumes due to lower production. Sales in the increasesecond half of 2021 were 19.6% higher at $2.0 billion
compared to the same period in prices.2020 primarily driven by higher seaborne iron ore reference prices and quality premia offset in part by lower shipments volumes. Iron ore shipments were 57.926.0 million tonnes for the year ended December 31, 2017,2021, representing a 8.4% decrease as compared to 28.4 million tonnes for the year ended December 31, 2020 mainly due to lower production as described above.
Sales in the Mining segment were $2.8 billion for the year ended December 31, 2020, representing an 4.6% increase of 3.5% as compared to the year ended December 31, 2016, primarily due2019. Sales in the first half of 2020 were 23.7% lower at $1.1 billion compared to the restartsame period in 2019 and in the second half of Volcan2020 they were 40.0% higher at $1.7 billion compared to the same period in Mexico that delivered 1.7 million tonnes2019 reflecting higher sales at both AMMC and in 2017.Liberia. Iron ore shipments to external parties were 11.828.4 million tonnes for the year ended December 31, 20172020, representing a 1.2% decrease as compared to 12.328.8 million tonnes for the year ended December 31, 2016. Coal2019 mainly due to lower production in the first half of 2020 as described above.
Sales to external customers were $1.6 billion for the year ended December 31, 2021, representing an increase of 38.4% as compared to the year ended December 31, 2020 due to higher selling prices partly offset by lower shipments.
Iron ore shipments to external customers were 6.310.1 million tonnes for the year ended December 31, 20172021, representing a decrease of 16.5% as compared with 6.8to 12.1 million tonnes for the year ended December 31, 2016. Shipments2020, primarily driven by lower production in 2016AMMC and Liberia.
Sales to external customers were $1.2 billion for the year ended December 31, 2020, representing a 20.8% increase as compared to the year ended December 31, 2019 mainly due to higher from Princetonexternal shipments and seaborne iron ore reference prices and lower freight costs. Iron ore shipments to external customers were 12.1 million tonnes for the year ended December 31, 2020 as compared to 10.9 million tonnes for the year ended December 31, 2019, primarily driven by higher shipments in the U.S. from liquidation of inventory. AMMC.
The average reference iron ore price was $69.7per tonne in 2018, $71.39$159.9 per tonne in 2017 and $58.362021, $109.0 per tonne in 20162020 and $93.6 per tonne in 2019 (delivered to China, normalized to Qingdao and 62% Fe US $ per tonne, Metal Bulletin) and the average reference price for hard coking coal increased to $206.62 per tonne in 2018, $187.28 per tonne in 2017 and $142.44 per tonne in 2016 (Premium HCC FOB Aus, Metal Bulletin). The increase in the average reference hard coking coal price, accelerated in the second half of 2016 and continued significant increases in 2017 and 2018. However, there may not be a direct correlation between reference prices and actual selling prices in various regions at a given time. See also quarterly reference prices in "Raw materials" above.
Operating income
Operating income for the Mining segment was $860 million$2.4 billion for the year ended December 31, 20182021 as compared to $991 million$1.2 billion for the year ended December 31, 2017,2020, primarily driven by the decrease
increase in iron ore reference prices. Operating income increased to $1.3 billion in the first half of 2021 compared to $0.4 billion in the first half of 2020, primarily due to higher seaborne iron ore reference prices and higher quality premia, offset in part by lower coal volumes. iron ore shipments and higher freight costs. Operating income increased to $1.1 billion in the second half of 2021 as compared to $0.8 billion in the second half of 2020. Operating income was significantly higher in the third quarter of 2021 as compared to the third quarter of 2020, primarily due to higher iron ore reference prices. Operating income was lower in the fourth quarter of 2021 as compared to fourth quarter of 2020 and the third quarter of 2021, primarily due to lower iron ore reference prices (17.1% and 32.3%, respectively) while shipments were marginally higher as compared to the third quarter of 2021 but lower as compared to the fourth quarter of 2020.
Operating income for the Mining segment was $991 million$1.2 billion for the year ended December 31, 20172020 as compared to $366 million$1.0 billion for the year ended December 31, 2016,2019, primarily driven by higher shipmentsthe increase in iron ore reference prices. Operating income was $0.4 billion and the increases$0.8 billion in the iron orefirst and coal reference prices.
Production
ArcelorMittal had own iron ore productionsecond half of 58.5 million tonnes for the year ended December 31, 2018, an increase of 1.9% compared to the year ended December 31, 2017, primarily due to Liberia (production of 4.6 million tonnes in 2018 which, although above the 2017 level, was slightly below the 5 million tonne full year capacity, due to handling/logistical issues at the new Gangra deposit during the wet season2020, respectively, as operating performance improved in the second half of 2018), offset in part by lower production in Canada (lower yield from a new mix of ore bodies following a pit wall instability issue which first occurred in the fourth quarter of 2017) and Mexico.
ArcelorMittal had own iron ore production of 57.4 million tonnes for the year ended December 31, 2017, an increase of 4.0% compared to the year ended December 31, 2016, primarily attributed to an increase in production in Mexico (following the restart of the Volcan mine in 2017) and Canada. Liberia production was 2 million tonnes for the year ended December 31, 2017.
ArcelorMittal had own coking coal production of 5.9 million tonnes for the year ended December 31, 2018, a decrease of 6.3% compared to the year ended December 31, 2017 mainly due to lower production in the Kazakhstan mines following operationalimproved shipments and geological issues..higher reference prices.
ArcelorMittal had own coking coal production of 6.3 million tonnes for the year ended December 31, 2017, an increase of 0.9% compared to the year ended December 31, 2016.
Income or loss from investments in associates, joint ventures and other investments
Income from investments in associates, joint ventures and other investments was $2.2 billion for the year ended December 31, 2021, compared to $234 million for the year ended December 31, 2020. Income in 2021 was significantly higher due to the improved contribution from Calvert reflecting improved market prices, higher hot strip mill production1 (18.9% increase from 4.0 million tonnes in 2020 to 4.8 million tonnes in 2021) and higher shipments2 (16.3% increase from 3.9 million tonnes in 2020 to 4.5 million tonnes in 2021). In addition, despite the onset of further lockdowns related to the second wave of COVID-19 pandemic negatively impacting domestic demand, AMNS India was able to maintain robust production levels (11.7% increase from 6.6 million tonnes in 2020 to 7.4 million tonnes in 2021) and utilize its coastal location to divert tonnes to the export market (shipments increased by 10.6% from 6.3 million tonnes in 2020 to 6.9 million tonnes in 2021). Income in 2021 was also significantly higher due to the improved contribution of European investees as well as the annual dividend received from Erdemir of $89 million. Income from investments in associates, joint ventures and other investments in 2020 included positive contributions from AMNS India offset in part by the negative impact of the COVID-19 pandemic on investees including a $211 million impairment of the Company's investment in DHS (Germany).
1.Production: all production of the hot strip mill including processing of slabs on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel slabs.
2.Shipments: all shipments including shipments of finished products processed on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel products.
ArcelorMittal recorded income of $652$234 million from investments in associates, joint ventures and other investments for the year ended December 31, 2018,2020, as compared to $448$347 million for the year ended December 31, 20172019 and includesincluded a positive contribution from AMNS India offset in part by the negative impact of the COVID-19 pandemic on other investees including a $211 million impairment of the Company's investment in DHS (Germany) following the revised future cash flow expectations. AMNS India performed strongly in 2020 with crude steel production of 6.5 million tonnes and V-shaped demand recovery post COVID-19 lockdowns (with the second quarter and particularly April impacted by lockdown measures). The annual dividend income from Erdemir of $87was lower at $12 million as compared to $45$93 million in 2017.2019.
ArcelorMittal recorded income of $448 million from investments in associates, joint ventures and other investments for the year ended December 31, 2017, as compared to $615 million for the year ended December 31, 2016 and includes a $133 million gain from disposal of ArcelorMittal USA's 21% stake in the Empire Iron Mining Partnership and improved performance of Calvert and Chinese investees, offset in part by a loss on dilution of the Company's stake in China Oriental and the recycling of cumulative foreign exchange translation losses to the consolidated statement of operations following the disposal of the Company's 50% stake in Kalagadi ($187 million).
Financing costs-net
Financing costs-net include net interest expense, revaluation of financial instruments, net foreign exchange income/expense (i.e., the net effects of transactions in a foreign currency other than the functional currency of a subsidiary) and other net financing costs (which mainly include bank fees, accretion of defined benefit obligations and other long-term liabilities).
Net financing costs were higherlower at $2.2$1.2 billion for the year ended December 31, 20182021 as compared to $0.9$1.3 billion for the year ended December 31, 2017.2020. Net interest expense (interest expense less interest income) was lower at $0.6 billion$278 million for the year ended December 31, 20182021 as compared to $0.8 billion$421 million for the year ended December 31, 2017, driven by2020, following debt reduction including early bond repayments and lower cost of debt.liability management.
Foreign exchange losses were $235155 million as compared to a gainforeign exchange gains of $546$107 million for the years ended December 31, 20182021 and 2017,2020, respectively. The foreign exchange losses were primarily due to the effect of the depreciation of the U.S. dollar against the euro on the Company's euro denominated debt in the first quarter of 2018. As of April 1, 2018, the Company designated a portfolio of euro denominated debt (€5,169 million as of December 31, 2018) as a hedge of certain euro denominated investments (€7,804 million as of December 31, 2018) in order to mitigate the foreign currency risk arising from certain euro denominated subsidiaries' net assets. The risk arises from the fluctuation in spot exchange rates between the U.S. dollar and euro, which causes the amount of the net investments to vary. The hedged risk in the hedge of net investments is a risk of a weakening euro against the U.S. dollar that will result in a reduction in the carrying amount of the Company's net investments in the subsidiaries subject to the hedge. The euro denominated debt is designated as a hedging instrument for the change in the value of the net investments that is attributable to changes in the euro/U.S. dollar spot rate. As a result, the Company's statement of operations no longer includes foreign exchange exposure on such euro denominated debt .
Other net financing costs (including expenses related to true sale of receivables, bank fees, interest on pensions and fair value adjustments of the call option of the mandatorily convertible bond and derivative instruments) were $1.4 billion for the
year ended December 31, 2018 compared to $0.6$0.7 billion for the year ended December 31, 2017,2021 compared to $0.9 billion for the year ended December 31, 2020, and included mark-to-market losses related to the mandatory convertible bond call option totaling $0.5$44 million as compared to $68 million for the year ended December 31, 2020. Other net financing costs for 2021 also included $130 million early bond redemption premiums and fees as compared to $120 million in 2020, $163 million of charges relating to unfavorable court decision in an arbitration case over the price formula stated in the supply agreement with the associate Sitrel and $61 million of charges in connection with the early redemption of $395 million in aggregate principal amount of MCNs. Pension expenses are
lower in 2021 by $0.2 billion as compared to gainswith 2020 following the disposal of $0.8ArcelorMittal USA.
Net financing costs were lower at $1.3 billion for the year ended December 31, 2017. Other net financing costs for the year ended December 31, 2018 also included $0.1 billion premium expense on the early redemption of bonds2020 as compared to $0.4$1.7 billion for the year ended December 31, 2017. Other net financing costs in 2017 were negatively affected by mark-to-market losses relating to a derivative embedded in a pellet supply agreement in the United States (due to a payment based on the evolution of the price of steel in the United States domestic steel market) of $0.3 billion.
Net financing costs were lower at $0.9 billion for the year ended December 31, 2017 as compared to $2.1 billion for the year ended December 31, 2016.2019. Net interest expense (interest expense less interest income) was lower at $0.8 billion$421 million for the year ended December 31, 20172020 as compared to $1.1 billion$607 million for the year ended December 31, 2016, driven by2019, following debt reduction including early bond repayments.repayments and liability management transactions.
Foreign exchange gains were $546$107 million as compared to a loss of $3and $4 million for the years ended December 31, 20172020 and 2016,2019, respectively. The foreign exchange gains were primarily due to the impact of the U.S. dollar depreciation on euro denominated deferred tax assets, partially offset by foreign exchange losses on euro denominated debt. The U.S. dollar depreciated 13.8% against the euro in 2017.
Other net financing costs (including expenses related to true sale of receivables, bank fees, interest on pensions and fair value adjustments of the call option of the mandatorily convertible bond and derivative instruments) was $0.6 billion for the year ended December 31, 2017 compared towere $0.9 billion for the year ended December 31, 2016, and included $0.8 billion mark-to-market gains on derivatives (primarily the call option of the mandatory convertible bond following the market price increase in the underlying shares), mark-to-market losses relating to a derivative embedded in a pellet supply agreement in the United States (due to a payment based on the evolution of the price of steel in the United States domestic steel market) of $0.3 billion, $0.4 billion for premium expense on the early redemption of bonds and an expense of $92 million relating to the extension of the mandatory convertible bond. Other net financing costs in 2016 were negatively affected by premiums and fees of $0.4 billion relating to early redeemed bonds in 2016 and $0.1 billion non-cash expense in connection with the issuance of shares in the context of a B-BBEE transaction in South Africa, partially offset by the fair value adjustment for the mandatory convertible bonds for $0.2 billion.
Income tax expense (benefit)
ArcelorMittal recorded an income tax benefit of $0.3 billion for the year ended December 31, 2018 as compared to income tax expense of $0.4 billion for the year ended December 31, 2017. The current income tax expense of $928 million for the year ended December 31, 2018 as compared to $583 million for the year ended December 31, 2017 was primarily driven by improved results in a number of countries. The deferred tax benefit of $1,277 million for the year ended December 31, 2018 as compared with a deferred tax benefit of $151 million for the year ended December 31, 2017 included a $1.4 billion deferred tax benefit recorded mainly in Luxembourg, due to the expectation of higher future profits. This benefit included a $0.6 billion deferred tax income in the context of the change in the currency denomination of the Company's tax losses in Luxembourg as the revised taxable income projections in U.S. dollar terms reflect a change in the foreign currency exposure of the different income streams. Following the May 16, 2018 approval of the extraordinary general meeting ("EGM") to change the share capital of the ArcelorMittal parent company from euro to U.S. dollar, the parent company will file consolidated tax returns in U.S. dollar for the main Luxembourg tax integration going forward. The euro denominated tax losses and the related deferred tax asset held by the ArcelorMittal parent company in Luxembourg were translated into U.S. dollar effective as of January 1, 2018.
ArcelorMittal recorded an income tax expense of $0.4 billion for the year ended December 31, 2017 as2020 compared to $1.0 billion for the year ended December 31, 2016. The tax expense2019, and included mark-to-market losses related to the mandatory convertible bond call option totaling $68 million as compared to $356 million for the year ended December 31, 20162019. Other net financing costs for 2020 also include $178 million expenses related to the extension of the mandatory convertible bond and early bond redemption premium expenses of $120 million.
Income tax expense (benefit)
ArcelorMittal recorded an income tax expense of $2.5 billion for the year ended December 31, 2021 as compared to $1.7 billion
for the year ended December 31, 2020. The $493 million deferred tax benefit in 2021 mainly included arecognition of deferred tax assets in Luxembourg following increase in the future taxable income expectation on unrealized gains on emission rights and energy derivative instruments. The deferred tax expense in 2020 mainly included derecognition of deferred tax assets for $0.7 billion in Luxembourg largely due to the change in tax rate, while in 2017 a deferred tax asset of $0.3 billion was recorded in Luxembourg following increased expectationthe sale of future profits.ArcelorMittal USA ($624 million), due to anticipated lower intra-group income from ArcelorMittal USA (primarily lower branding, R&D fees and interest income).
ArcelorMittal recorded an income tax expense of $1.7 billion for the year ended December 31, 2020 as compared to $0.5 billion for the year ended December 31, 2019. The deferred tax expense in 2020 mainly includes derecognition of deferred tax assets recorded in Luxembourg following the sale of ArcelorMittal USA ($624 million), due to anticipated lower intra-group income from ArcelorMittal USA (primarily lower branding, R&D fees and interest income).
ArcelorMittal’s consolidated income tax expense (benefit) is affected by the income tax laws and regulations in effect in the various countries in which it operates and the pre-tax results of its subsidiaries in each of these countries, which can change from year to year. ArcelorMittal operates in jurisdictions, mainly in Eastern Europe and Asia, which have a structurally lower corporate income tax rate than the statutory tax rate as enacted in Luxembourg (26.01%(24.94%), as well as in jurisdictions, mainly in Brazil and Mexico, which have a structurally higher corporate income tax rate.
The statutory income tax expense (benefit) and the statutory income tax rates of the countries that most significantly resulted in the tax expense (benefit) at statutory rate for each of the years ended December 31, 2018, 20172021, 2020 and 20162019 are as set forth below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Statutory income tax | | Statutory income tax rate | | Statutory income tax | | Statutory income tax rate | | Statutory income tax | | Statutory income tax rate |
| Argentina | 103 | | | 35.00 | % | | 21 | | | 25.00 | % | | 3 | | | 25.00 | % |
| Belgium | 149 | | | 25.00 | % | | (60) | | | 25.00 | % | | (37) | | | 25.00 | % |
| Brazil | 943 | | | 34.00 | % | | 53 | | | 34.00 | % | | 84 | | | 34.00 | % |
| Canada | 835 | | | 25.90 | % | | 274 | | | 25.90 | % | | 234 | | | 25.90 | % |
| France | 231 | | | 25.82 | % | | (158) | | | 25.82 | % | | (164) | | | 25.82 | % |
| Germany | 134 | | | 30.30 | % | | (181) | | | 30.30 | % | | (124) | | | 30.30 | % |
| Italy | (8) | | | 24.00 | % | | (145) | | | 24.00 | % | | (254) | | | 24.00 | % |
| Kazakhstan | 149 | | | 20.00 | % | | (15) | | | 20.00 | % | | 52 | | | 20.00 | % |
| Liberia | 16 | | | 25.00 | % | | 39 | | | 25.00 | % | | 31 | | | 25.00 | % |
| Luxembourg | 660 | | | 24.94 | % | | 327 | | | 24.94 | % | | 407 | | | 24.94 | % |
| Mexico | 238 | | | 30.00 | % | | (84) | | | 30.00 | % | | (105) | | | 30.00 | % |
| Poland | 155 | | | 19.00 | % | | (54) | | | 19.00 | % | | (27) | | | 19.00 | % |
| South Africa | 136 | | | 28.00 | % | | (35) | | | 28.00 | % | | (92) | | | 28.00 | % |
| Spain | 70 | | | 25.00 | % | | (87) | | | 25.00 | % | | (73) | | | 25.00 | % |
| Ukraine | 202 | | | 18.00 | % | | (1) | | | 18.00 | % | | (21) | | | 18.00 | % |
| United States | 58 | | | 21.00 | % | | 209 | | | 21.00 | % | | (382) | | | 21.00 | % |
| Others | 75 | | | | | 33 | | | | | — | | | |
| Total | 4,146 | | | | | 136 | | | | | (468) | | | |
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| | Statutory income tax | | Statutory income tax rate | | Statutory income tax | | Statutory income tax rate | | Statutory income tax | | Statutory income tax rate |
| United States | 44 | | 21.00% | | (98) | | 21.00% | | 224 | | 35.00% |
| Argentina | 6 | | 25.00% | | 15 | | 25.00% | | 22 | | 35.00% |
| France | 48 | | 25.82% | | 112 | | 25.82% | | 17 | | 28.92% |
| Brazil | 271 | | 34.00% | | 69 | | 34.00% | | 86 | | 34.00% |
| Belgium | 55 | | 25.00% | | 105 | | 25.00% | | 71 | | 33.99% |
| Germany | (22) | | 30.30% | | 7 | | 30.30% | | (37) | | 30.30% |
| Spain | 18 | | 25.00% | | (4) | | 25.00% | | (47) | | 25.00% |
| Luxembourg | 123 | | 26.01% | | 1,139 | | 26.01% | | 196 | | 26.01% |
| Mexico | 73 | | 30.00% | | (18) | | 30.00% | | 53 | | 30.00% |
| South Africa | 19 | | 28.00% | | (115) | | 28.00% | | (96) | | 28.00% |
| Canada | 359 | | 25.90% | | 190 | | 25.90% | | 98 | | 26.10% |
| Kazakhstan | 65 | | 20.00% | | 77 | | 20.00% | | 36 | | 20.00% |
| Czech Republic | (51) | | 19.00% | | (21) | | 19.00% | | 3 | | 19.00% |
| Poland | 45 | | 19.00% | | 30 | | 19.00% | | 33 | | 19.00% |
| Romania | (44) | | 16.00% | | (7) | | 16.00% | | (11) | | 16.00% |
| Ukraine | 69 | | 18.00% | | 47 | | 18.00% | | 20 | | 18.00% |
| Trinidad & Tobago | — | | 25.00% | | — | | 25.00% | | 66 | | 25.00% |
| Liberia | (3) | | 25.00% | | (18) | | 25.00% | | 6 | | 25.00% |
| United Kingdom | 8 | | 17.00% | | (1) | | 17.00% | | 15 | | 17.00% |
| Switzerland | 17 | | 7.83% | | (67) | | 7.83% | | (13) | | 7.83% |
| Others | (57) | | | | (35) | | | | (65) | | |
| Total | 1,043 | | | | 1,407 | | | | 677 | | |
Note: The statutory tax rates are the (future) rates enacted or substantively enacted by the end of the respective period.
Non-controlling interests
Net income attributable to non-controlling interests was $181$609 million for the year ended December 31, 20182021 as compared to $7$155 million for the year ended December 31, 2017.2020. Net income attributable to non-controlling interests increased in 20182021 primarily as a result of the improved operating performance.
Net income attributable to non-controlling interests was $155 million for the year ended December 31, 2020 as compared to $63 million for the year ended December 31, 2019. Net income attributable to non-controlling interests increased in 2020 primarily as a result of the improved operating performance of ArcelorMittal South Africa.
Net income attributable to non-controlling interests was $7 million for the year ended December 31, 2017 as compared with net loss attributable to non-controlling interests of $45 million for the year ended December 31, 2016. Net income attributable to non-controlling interests for 2017 was primarily related to income generated by ArcelorMittal Mines and Infrastructure Canada and Belgo Bekaert Arames in Brazil partly offset by losses including impairment losses generated by ArcelorMittal South Africa.
Net income attributable to equity holders of the parent
ArcelorMittal’s net income attributable to equity holders of the parent was $5.1 billion, $4.6 billion and $1.8$15.0 billion for the yearsyear ended December 31, 2018, 2017 and 2016, respectively. 2021, compared to net loss of $0.7 billion in 2020. The net loss attributable to equity holders of the parent was $2.5 billion for the year ended December 31, 2019.
B. Liquidity and capital resources
ArcelorMittal’s principal sources of liquidity are cash generated from its operations and its credit facilities at the corporate level.
Because ArcelorMittal is a holding company, it is dependent upon the earnings and cash flows of, as well as dividends and distributions from, its operating subsidiaries to pay expenses and meet its debt service obligations. SignificantCash and cash equivalents are primarily centralized at the parent level and are managed by ArcelorMittal Treasury SNC, although from time to time cash or cash equivalent balances may be held from time to time at the Company’s international operating subsidiaries in particular those in France and in the United States, where the Company maintains cash management systems under which most ofor its cash and cash
equivalents are centralized, and in Brazil, Canada, India, Kazakhstan, South Africa and Ukraine.holding companies. Some of these operating subsidiaries have debt outstanding or are subject to acquisition agreements that impose restrictions on such operating subsidiaries’ ability to pay dividends, but such restrictions are not significant in the context of ArcelorMittal’s overall liquidity. Repatriation of funds from operating subsidiaries may also be affected by tax and foreign exchange policies in place from time to time in the various countries where the Company operates, though none of these policies is currently significant in the context of ArcelorMittal’s overall liquidity.
In management’s opinion, ArcelorMittal’s credit facilities are adequate for its present requirements.
As of December 31, 2018,2021, ArcelorMittal’s cash and cash equivalents, including restricted cash of $182 million,and other restricted funds amounted to $2.4$4.4 billion (including restricted cash and other restricted funds of $156 million, of which $89 million relating to various environmental obligations, true sales of receivables programs and letter of credits issued in ArcelorMittal South Africa) as compared to $2.8$6.0 billion (including restricted cash and other restricted funds of $363 million, of which $56 million relating to various environmental obligations and true sales of receivables programs in ArcelorMittal South Africa and $260 million with respect to a cash collateral provided by the Company until collection of TSR receivables retained in ArcelorMittal USA after disposal) as of December 31, 2017.2020. In addition, ArcelorMittal had available borrowing capacity of $5.5 billion under its $5.5 billion revolving credit facility as of December 31, 20182021 and 2017. 2020. For information on the currencies of cash and cash equivalents, restricted cash and other restricted funds, see note 6.1.4 to the consolidated financial statements.
As of December 31, 2018,2021, ArcelorMittal’s total debt, which includes long-term debt and short-termshort-term debt (including debt classified as held for sale) was $12.6$8.4 billion, compared to $12.9$12.3 billion as of December 31, 2017. 2020.
Net debt (defined as long-term debt ($9.36.5 billion) plus short-term debt ($3.2 billion) including debt classified as held for sale ($0.11.9 billion), less cash and cash equivalents, and restricted cash and other restricted funds ($2.44.4 billion) was $10.2$4.0 billion as of December 31, 2018, up from $10.12021, down from $6.4 billion at December 31, 2017,2020, comprised of long-term debt ($10.19.8 billion) plus short-term debt ($2.82.5 billion), less cash and cash equivalents, and restricted cash and other restricted funds ($2.86.0 billion). Most of the external debt is borrowed by the parent company on an unsecured basis and bears interest at varying levels based on a combination of fixed and variable interest rates. Gearing (defined as net debt divided by total equity) at December 31, 20182021 and 2020 was 23% as compared to 25% at December 31, 2017. 8% and 16% respectively.
The margin applicable to ArcelorMittal’s principal credit facilities ($5.5 billion revolving credit facility and certain other credit facilities) and the coupons on certain of its outstanding bonds are subject to adjustment in the event of a change in its long-term credit ratings. OnArcelorMittal's long-term credit rating was upgraded on August 9, 2021 by Moody's to 'Baa3' with stable outlook and on September 23, 2021 by Fitch to 'BBB-' with stable outlook. In February 1, 2018,2021, Standard & Poor's upgraded ArcelorMittal’srevised ArcelorMittal's outlook to stable and affirmed a long-term credit rating of 'BBB-' as described in the Risk Factors above. See "Introduction—Risk factors—Risks related to BBB-ArcelorMittal's financial position and placed ArcelorMittalorganizational structure—"ArcelorMittal's indebtedness could have an adverse impact on stable outlook. On June 22, 2018, Moody's upgraded ArcelorMittal’s credit rating to Baa3its results of operations and placed it on stable outlook. On July 13, 2018, Fitch upgraded ArcelorMittal’s credit rating to BBB-financial position, and placed it on stable outlook. These upgrades resulted in reduced interest expense.the market's perception of ArcelorMittal's leverage may affect its share price."
ArcelorMittal’sArcelorMittal's $5.5 billion revolving credit facility signed on December 19, 2018 and maturing on December 19, 2023 (with two one-year extension options (i.e. the options to extend are in the first and second years, so at end 2019 and at end 2020)),(see "Principal credit facilities" below) contains restrictive covenants. Amongcovenants, which
among other things, these covenants limit encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittal’s subsidiaries to incur debt and the ability of ArcelorMittal and its subsidiaries to dispose of assets in certain circumstances. The agreement also requirespreviously required compliance with a financial covenant, as summarized below.
ThePrior to the amendment described below and the change in the Company's long-term credit ratings described above, the Company mustwas required to 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 set out in the facility) doesdid 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, referred to by the Company as the “Leverage ratio”. ArcelorMittal’s principal credit facilities set this ratio to 4.25 to 1. The Term Facilities Agreement entered into on November 20, 2018 also includes thisOn April 13, 2021, ArcelorMittal's revolving credit facility was amended so that the Leverage Ratio financial covenant (see “—Financings—Other loanswould permanently cease to apply in the event that the Company obtained an investment grade long-term credit rating (with stable outlook) from two rating agencies (which was obtained from Moody's and facilities” below)Fitch in 2021, as described above). AsOn April 27, 2021, the revolving credit facility was also amended so that the margin payable will be increased or decreased depending on the Company’s performance against two metrics measured annually against pre-defined targets with respect to its environmental and sustainability performance (CO2 intensity of the Company’s European operations and the number of facilities which have been certified by ResponsibleSteel™). The Facility may be used for general corporate purposes and was fully available as of December 31, 2018, the Company was in compliance with the ratio.2021.
Non-compliance with the covenants in the Company’s borrowing agreements would entitlehave entitled the lenders under such facilities to accelerate the Company’s repayment obligations. The Company was in compliance with the financial covenants in the agreements related to all of its borrowings as of December 31, 2018 and December 31, 2017.2021.
As of December 31, 2018,2021, ArcelorMittal had guaranteed $99$89 million of debt of its operating subsidiaries.subsidiaries compared to $140 million as of December 31, 2020. See also note 8.49.4 to the consolidated financial statements for all othera description of guarantees by ArcelorMittal guarantees for associatesjoint ventures indebtedness of $4.3 billion as of December 31, 2021 including $3.1 billion issued on behalf of AMNS India, $279 million issued on behalf of Calvert, $323 in relation to outstanding lease liabilities for vessels operated by Global Chartering and joint ventures.$175 million on behalf of Al Jubail. ArcelorMittal’s debt facilities have provisions
whereby the acceleration of the debt of another borrower within the ArcelorMittal group could, under certain circumstances, lead to acceleration under such facilities.
In particular, with respect to joint ventures, on March 16, 2020, the parent company of AMNS India entered into a $5.1 billion ten-year term loan agreement with Japan Bank for International Cooperation, MUFG Bank LTD., Sumitomo Mitsui Banking Corporation, Mizuho Bank Europe N.V., and Sumitomo Mitsui Trust Bank, Limited (London Branch). The proceeds of the loan were used to refinance in full the amounts borrowed by it in connection with the acquisition of AMNS India, including the amounts borrowed under the $7 billion bridge term facilities agreement guaranteed by ArcelorMittal. The obligations under
the term loan agreement are guaranteed by ArcelorMittal and NSC in proportion to their interests in the joint venture, 60% and 40%. The guarantee provided by ArcelorMittal included the same “Leverage Ratio” financial covenant as that described above for its $5.5 billion revolving credit facility dated December 19, 2018. On April 28, 2021, the syndicate of Japanese banks agreed that the Leverage Ratio financial covenant would fall away in the event that the Company obtains an investment grade long-term credit rating (with a stable outlook) from two rating agencies (which occurred in 2021, as described above).
The following table summarizes the repayment schedule of ArcelorMittal’s outstanding indebtedness, which includes short-term and long-term debt, as of December 31, 2018.2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Repayment amounts per year (in billions of $) |
| Type of indebtedness as of December 31, 2021 | | 2022 | 2023 | 2024 | 2025 | 2026 | >2026 | Total |
| Bonds | | 0.6 | | 1.3 | | 0.9 | | 1.0 | | 0.4 | | 1.6 | | 5.8 | |
| Commercial paper | | 0.5 | | — | | — | | — | | — | | — | | 0.5 | |
| Lease liabilities and other loans | | 0.8 | | 0.3 | | 0.2 | | 0.2 | | 0.1 | | 0.5 | | 2.1 | |
| Total gross debt | | 1.9 | | 1.6 | | 1.1 | | 1.2 | | 0.5 | | 2.1 | | 8.4 | |
|
| | | | | | | | | | | | | | | |
| | Repayment amounts per year (in billions of $) |
| Type of indebtedness as of December 31, 2018 | | 2019 | 2020 | 2021 | 2022 | 2023 | >2023 | Total |
| Bonds | | 0.9 |
| 1.9 |
| 1.3 |
| 1.5 |
| 0.5 |
| 1.6 |
| 7.7 |
|
| Commercial paper | | 1.3 |
| — |
| — |
| — |
| — |
| — |
| 1.3 |
|
| Other loans | | 1.0 |
| 1.3 |
| 0.5 |
| 0.2 |
| 0.3 |
| 0.3 |
| 3.6 |
|
| Total gross debt | | 3.2 |
| 3.2 |
| 1.8 |
| 1.7 |
| 0.8 |
| 1.9 |
| 12.6 |
|
As of December 31, 2018,2021, the $5.5 billion revolving credit facility was fully available.
The average debt maturity of the Company was 4.05.8 years as of December 31, 2018,2021, as compared to 5.55.2 years as of December 31, 2017.2020.
Further information regarding ArcelorMittal’s outstanding short-term and long-term indebtedness as of December 31, 2018,2021, including the breakdown between fixed rate and variable rate debt, is set forth in note 6 to the consolidated financial statements. Further information regarding ArcelorMittal’s use of financial instruments for hedging purposes is set forth in note 6 to the consolidated financial statements.
Financings
TheArcelorMittal’s principal financings of ArcelorMittalcredit facilities are described below, for further information on its existing credit facilities and its subsidiaries are summarized below by category. Further information regarding ArcelorMittal’s short-termseveral debt financing and long-term indebtedness is provided inrepayment transactions completed during 2021, please refer to note 6 to the consolidated financial statements.
Principal credit facilities
On December 19, 2018, ArcelorMittal signed an agreement for a $5.5 billion revolving credit facility (the "Facility"). This Facility replaced the $5.5 billion revolving credit facility dated April 30, 2015, which was amended and extended on December 21, 2016. The agreement incorporates a single tranche of $5.5 billion. On November 27, 2019 and on November 26, 2020, ArcelorMittal exercised the option to extend the facility's maturity
by one year to December 19, 2024 and to December 19, 2025 respectively. The commitments are $5.5 billion maturing onuntil December 19, 2023 , with two one-year extension options (i.e. the options to extend are in the first and second years end of 2019 and end of 2020). The Facility may be used for general corporate purposes.$5.4 billion until December 19, 2025. As of December 31, 2018,2021, the $5.5 billion revolving credit facility was fully available. The Company makes drawdowns from and repayments on this Facility in the framework of its cash management.
On September 30, 2010, ArcelorMittal entered into thea $500 million revolving multi-currency letter of credit facility (the “Letter of Credit Facility”). The Letter of Credit Facility is used by the Company and its subsidiaries for the issuance of letters of credit and other instruments. The terms of the letters of credit and other instruments contain certain restrictions as to duration. The Letter of Credit Facility was amended on October 26, 2012 and September 30, 2014 to reduce its amount to $450 million.million and to $350 million, respectively. On September 30, 2014,July 31, 2019, the Company refinanced its Letter of Credit Facility by entering into a $350 million revolving multi-currency letter of credit facility, which matures on MayJuly 31, 2019.
2018 and early 2019 capital markets, liability management transactions and debt repayments
On March 29, 2018, at maturity, ArcelorMittal repaid the €334 million ($411 million) principal amount that remained outstanding, following the cash tender offers in April 2016 of its €500 million 4.5% unsecured bonds.
On April 9, 2018, at maturity, ArcelorMittal repaid its €400 million ($491 million) 2018 Floating Rate Notes.
2022. On August 7, 2018, pursuant5, 2020 the maturity of the Letter of Credit Facility was extended to cash tender offers and financed with existing cash and liquidity, ArcelorMittal purchased:July 31, 2023. On November 25, 2020 the amount of the Letter of Credit Facility was increased to $395 million. On June 25, 2021 the maturity of the Letter of Credit Facility was extended to July 31, 2024.
| |
• | $432 million of its U.S. dollar denominated 7.00% Notes due October 15, 2039 (the “2039 Notes”) for a total aggregate purchase price (including premiums and accrued interest) of $505 million. Following this purchase, $686 million principal amount of the 2039 Notes remained outstanding.
|
| |
• | $195 million of its U.S. dollar denominated 6.75% Notes due March 1, 2041 (the “2041 Notes”) for a total aggregate purchase price (including premiums and accrued interest) of $224 million. Following this purchase, $434 million principal amount of the 2041 Notes remained outstanding.
|
On January 17, 2019, ArcelorMittal issued €750 million 2.250% Notes due 2024. The Notes were issued under ArcelorMittal’s €10 billion wholesale Euro Medium Term Notes Program.
Mandatory convertible bond
On December 14, 2017, the Company extended the conversion date for the $1 billion privately placed mandatory convertible bond (the “MCB”) issued by Hera Ermac, a wholly-owned Luxembourg subsidiary. The MCB is mandatorily convertible into preferred shares of such subsidiary. The mandatory conversion date of the bond has been extendedPlease refer to January 29, 2021. The Company has the option to call the mandatory convertible bond until 10 business days before the maturity date. Hera Ermac invested the proceeds of the bond issuancenotes 6.3 and an equity contribution by the Company in notes issued by subsidiaries of the Company linked to the values of shares of Erdemir and China Oriental. The bond was privately placed with Credit Agricole Corporate and Investment Bank and is not listed. In connection with the extension of the conversion date of the MCB, ArcelorMittal also extended the maturities of the equity-linked notes in which the proceeds of the MCB issuances are invested. The other main features of the MCB remain unchanged. See note 10.211.2 to the consolidated financial statementsstatements.
Mandatory convertible notes
On December 23, 2021, ArcelorMittal signed separate, privately negotiated exchange agreements with a limited number of holders of the MCNs redeeming $395 million in aggregate
principal amount of MCNs at the minimum conversion ratio for additional details.
Commercial paper program
ArcelorMittal hasan aggregate cash consideration of $1,196 million including a commercial paper program enabling borrowingspremium of up to €1.5 billion. As$28 million. Following completion of December 31, 2018, the outstandingrepurchases, $608 million aggregate principal amount was $1,295 million, compared to $1,125 millionof the MCNs remained outstanding as of December 31, 2017.2021. See note 11.2 to the consolidated financial statements.
Other loansWorking capital management
The Company makes drawdowns from and facilities
On December 18, 2018, ArcelorMittal entered into an agreement for financing with a financial institution for net proceeds of CAD 292 million ($214 million) with repayment over several dates in 2019 and 2020. As of December 31, 2018, CAD 295 million ($216 million) was outstanding.
On November 20, 2018, ArcelorMittal entered into a $7 billion term facility agreement with a group of lenders in connection withrepayments on the acquisition of ESIL. The agreement has a term of one year (until November 20, 2019), subject to ArcelorMittal’s option to extend the term by six months. The facility may be used for certain payments by ArcelorMittal as well as by the joint venture through which the Company expects jointly to own and operate ESIL in partnership with Nippon Steel & Sumitomo Metal Corporation (the “Joint Venture”). Any amounts borrowed by the Joint Venture under the agreement are irrevocably and unconditionally guaranteed by ArcelorMittal.The agreement includes the same Leverage Ratio financial covenant as that includedFacility in the Company’s $5.5 billion revolving credit facility and is also subject to certain mandatory prepayment events, including the use of proceeds from debt capital market issuances by the Group or capital raising by the Joint Venture and certain disposals, in each case above $1 billion. See "Item 4.A—Information on the Company—History and development of the Company—Key transactions and events in 2018" for further information.
On August 10, 2018, ArcelorMittal entered into a €300 million ($344 million) term loan with a financial institution maturing on April 30, 2019.
On May 14, 2018, ArcelorMittal entered into a term facility agreement in the amount of $1 billion to make a payment to the financial creditors of Uttam Galva and KSS Petron to clear overdue debts in order that the offer the Company submitted for ESIL on April 2, 2018 would be eligible and considered by ESIL’s Committee of Creditors. The facility was drawn on May 14, 2018 in connection with the subsequent payment and was repaid on November 29, 2018 via a drawing under the above-referenced $7 billion term facility.
On January 16, 2018, the Company entered into a fully drawn bilateral term loan due July 16, 2018, for an amount of €400 million ($466 million). The bilateral term loan was fully repaid on July 16, 2018.
On December 21, 2017, ArcelorMittal Kryvyi Rih entered into a $175 million loan agreement with the European Bank for Reconstruction and Development in order to support the upgradeframework of its production facilities, energy efficiency improvement and environmental impact reduction. The loan agreement also provides for an additional $175 million in loan facilities which are currently uncommitted. As of December 31, 2018, $50 million was drawn undercash management. In addition, the agreement and the remainder remained fully available.
On October 9, 2017, ArcelorMittal issued a €300 million ($344 million) variable rate loan in the German Schuldschein market. The proceeds of the issuance were used to repay or prepay existing indebtedness.
On May 25, 2017, ArcelorMittal South Africa signed a 4.5 billion South African rand revolving borrowing base finance facility maturing on May 25, 2020. Any borrowings under the facility are secured by certain eligible inventory and receivables, as well as certain other working capital and related assets of ArcelorMittal South Africa. The facility is used for general
corporate purposes. The facility is not guaranteed by ArcelorMittal. As of December 31, 2018, 0.3 billion South African rand ($21 million) was drawn.
On December 16, 2016, ArcelorMittal signed a €350 million finance contract with the European Investment Bank in order to finance European research, development and innovation projects over the period 2017-2020 within the European Union, namely predominantly France, Belgium and Spain, but also in Czech Republic, Poland, Luxembourg and Romania. This operation benefits from a guarantee from the European Union under the European Fund for Strategic Investments. As of December 31, 2018, €350 million ($401 million) was fully drawn.
On May 23, 2016, ArcelorMittal USA LLC signed a $1 billion senior secured asset-based revolving credit facility maturing on May 23, 2021. Borrowings under the facility are secured by inventory and certain other working capital and related assets of ArcelorMittal USA and certain of its subsidiaries in the United States. The facility may be used for general corporate purposes. The facility is not guaranteed by ArcelorMittal. As of December 31, 2018, the facility was fully available.
In 2014, ArcelorMittal entered into certain short-term committed bilateral credit facilities. The facilities were extended in 2015, 2016, 2017 and 2018. As of December 31, 2018, the facilities, totaling approximately $0.9 billion, remained fully available.
True sale of receivables (“TSR”) programs
The Company has established a number of programs for sales without recourse of trade accounts receivable to various financial institutions (referred to as true sale of receivables (“TSR”)). As of December 31, 2018,2021, the total amount of trade accounts receivables sold amounted to $4,980 million.$5.2 billion. Through the TSR programs, certain operating subsidiaries of ArcelorMittal surrender the control, risks and benefits associated with the accounts receivable sold; therefore, the amount of receivables sold is recorded as a sale of financial assets and the balances are removed from the consolidated statements of financial position at the moment of sale.
As part of the Company’s ongoing efforts to improve its working capital position, it continually engages with its customers and suppliers with the aim of improving overall terms, including pricing, quality, just in time delivery, discounts and payment terms. Trade accounts payable have maturities from 15 to 180 days depending on the type of material, the geographic area in which the purchase transaction occurs and the various contractual agreements. The Company’s average outstanding number of trade payable days amounted to 83 over the last 5 years. The ability of suppliers to provide payment terms may be dependent on their ability to obtain funding for their own working capital needs and or their ability to early discount their receivables at their own discretion (the Company estimates that about $2.7 billion of trade payables were subject to early discount by its suppliers in 2021 as compared to $2.0 billion in 2020). Given the nature and large diversification of its supplier base the Company does not expect any material impact to its own liquidity position as a result of suppliers not having access to liquidity. As of December 31, 2021, a 5 day reduction in trade payable days would result in a trade payables decrease by $760 million.
ArcelorMittal's material cash requirements in the near and medium term
The Company's cash requirements in the near and medium term are primarily driven by the current commitments, obligations and other arrangements in place as of December 31, 2021. ArcelorMittal has various purchase commitments for materials, supplies and capital expenditure incidental to the ordinary course of business. As of December 31, 2021, ArcelorMittal had various outstanding obligations mostly related to:
•
Earnings distributionGuarantees, pledges and other collateral related to financial debt and credit lines given on behalf of third parties and joint ventures,
On November 6, 2015,•Capital expenditure commitments mainly related to commitments associated with investments in expansion and improvement projects by various subsidiaries,
•Other commitments comprising mainly commitments incurred for gas supply to electricity suppliers.
These commitments, obligations and other arrangements will become due in 2022 and beyond. These various purchase commitments and long-term obligations will have an effect on ArcelorMittal’s Boardfuture liquidity and capital resources. For further details on commitments and obligations, please refer to note 9.4 to the consolidated financial statements. ArcelorMittal also has various environmental commitments and asset retirement obligations as of Directors proposedDecember 31, 2021. For further details on environmental commitments and asset retirement obligations, please refer to note 9.1 to the suspension of the dividend for theconsolidated financial year 2015. This proposal was approved by the shareholders at the annual general meeting held on May 4, 2016. statements.
The Company had indicated that a dividend will not be proposed untilexpects to service its leverage had further improved.cash requirements in the near and medium-term with net cash provided by operating activities. In the future, the Company may enter into additional financing facilities if required. For additional information on near and medium term cash requirements, see "Outlook".
Earnings distribution
ArcelorMittal held 8.371.9 million shares in treasury as of December 31, 2018,2021, as compared to 2.022.1 million shares as of December 31, 2017.2020. As of December 31, 2018,2021, the number of shares held by the Company in treasury represented approximately 0.82%7.32% of the Company’s total issued share capital. On January 14, 2022, ArcelorMittal cancelled 45 million treasury shares to keep the number of treasury shares within appropriate levels. Following these cancellations, the aggregate number of shares issued and fully paid up decreased from 982,809,772 to 937,809,772.
On January 31, 2018, the Company announced that the Board had agreed on a new dividend policy which was approved by the shareholders at the annual general meeting of shareholders in May 2018. Given the currentCompany's then de-leveraging focus, dividends beginbegan at $0.10/share in 2018 (paid from 2017 results). The Company intendsannounced that it intended to progressively increase the base dividend paid to its shareholders, and, on attainment of the net debt target, return a percentage of net cash provided by operating activities annually. Accordingly, the Board is proposing an increase inThe Company paid the base dividend forin 2019 (paid from 2018 earnings) toof $0.20 per share to the shareholders. On February 4, 2020, given the resilient cash flow and progress towards its net debt target, the Board proposed a base dividend of $0.30 per share for 2020 (in respect of 2019). However, against the
backdrop of significant cost savings measures being taken across the business due to the COVID-19 pandemic, the Board determined during the second quarter of 2020 it both appropriate and prudent to suspend dividend payments until such a time as the operating environment normalized.
Following the achievement of the Group’s net debt target, and in line with its previous statements, the Board of Directors approved during the first quarter of 2021 a new capital return policy. See "History and development of the Company—Capital return policy". According to this policy, the Board recommended a $0.30/share base dividend, subject to the approval of shareholders, which was given at the annual general meeting of shareholders on June 8, 2021. The dividend amounted to $325 million ($312 million net of dividends paid to subsidiaries holding treasury shares) and was paid on June 15, 2021. After paying this base dividend, the Company has also implemented share buyback programs and MCN repurchases as part of its capital return policy.
In February 2022, the Board of Directors recommended an increase of the base annual dividend to $0.38/share, from $0.30/share, to be paid in June 2022, subject to the approval of shareholders at the annual general meeting of shareholders meeting in May 2019. 2022. In addition, the Company has initiated a new $1 billion share buyback program for the first half of 2022. This is the maximum based on the current authorization provided by shareholders at the annual general meeting of shareholders in June 2021. Additional authorization to repurchase shares will be sought from shareholders at the 2022 annual general meeting of shareholders.
Pension/OPEB liabilities
The defined benefit liabilities for employee benefits decreased $0.6by $0.9 billion to $6.9$3.8 billion as of December 31, 2018,2021, as compared to $7.5$4.7 billion as of December 31, 2017. The decrease is2020 mainly due toas a result of the decrease in the defined benefit obligation due to higher discount rates during 2018.rates. For additionaladditional information with respect to the Company’s pension plan and OPEB liabilities, including a breakdown by region and by typetype of plan, see note 7.28.2 to the consolidated financial statements.
IFRS 16
As described in note 1.3.2. to the consolidated financial statements, IFRS 16 “Leases” applies from January 1, 2019. At December 31, 2018 and 2017, the Company had non-cancellable operating lease commitments on an undiscounted basis of $1,869 million and $1,311 million, respectively (see note 8.4 to the consolidated financial statements). A review and assessment of the Company's lease arrangements indicates that most of these arrangements will meet the definition of a lease under IFRS 16 and the Company’s gross debt and net debt will increase accordingly. As at December 31, 2018, the Company expects to recognize on January 1, 2019 additional lease liabilities (discounted at the incremental borrowing rates at that date) and right-of-use assets for an amount of $1.1 billion.
IFRS 9
In connection with the initial application of IFRS 9, as of January 1, 2018, equity instruments with a carrying amount of $1,471 million were reclassified from assets available-for-sale to financial assets at fair value through other comprehensive income. As a result, unrealized gains and losses of investment in such equity instruments are no longer recycled to the consolidated statement of operations upon disposal but are now reclassified from other comprehensive income to retained earnings within equity upon disposal. The $608 million loss recorded in comprehensive income in 2018 was mainly related to the decrease in the share price of Erdemir.
Sources and uses of cash
Years ended December 31, 2018, 20172021, 2020 and 20162019
The following table presents a summary of cash flow of ArcelorMittal:
| | | Summary of cash flow | For the year ended December 31, | Summary of cash flow | For the year ended December 31, |
| (in $ millions) | 2018 | | 2017 | | 2016 | (in $ millions) | 2021 | | 2020 | | 2019 |
| Net cash provided by operating activities | 4,196 | | 4,563 | | 2,708 | Net cash provided by operating activities | 9,905 | | | 4,082 | | | 6,017 | |
| Net cash used in investing activities | (3,759) | | (2,830) | | (1,143) | Net cash used in investing activities | (340) | | | (2,011) | | | (3,824) | |
| Net cash used in financing activities | (689) | | (1,731) | | (2,926) | |
| Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | (10,898) | | | (1,498) | | | 514 | |
Net cash provided by operating activities
For the year ended December 31, 2018,2021, net cash provided by operating activities increased to $9.9 billion due to higher operating results, as compared with $4.1 billion for the year ended December 31, 2020. The increase in net cash provided by operating activities included an operating working capital investment of $6.4 billion as compared to an operating working capital release of $1.5 billion in 2020, including an outflow for inventories of $8.65 billion and an outflow for trade accounts receivable of $2.54 billion, partially offset by an inflow for trade accounts payable of $4.78 billion. The investment in operating working capital was mainly driven by elevated raw material prices, relatively robust finished steel prices and lower than anticipated inventory reduction.
For the year ended December 31, 2020, net cash provided by operating activities decreased to $4.2$4.1 billion, , as compared with $4.6$6.0 billion for the year ended December 31, 2017.2019. The decrease in net cash provided by operating activities was mainly due to an investment in operating working capital release of $4.38$1.5 billion which representedas compared to an operating working capital release of $2.2 billion in 2019, including an inflow for inventories of $1.79 billion, an outflow for trade accounts receivable of $0.65$0.08 billion, partially offset by an outflow for trade accounts payable of $0.21 billion. The operating working capital release in 2020 was driven by a significant reduction of inventories and improved receivable rotation days including lower overdue receivables. The operating working capital release of $2.2 billion in 2019 reflected an inflow for inventories of $4.65$2.47 billion, and an inflow for trade accounts payable and otherreceivable of $0.91$0.96 billion, partially offset by an increaseoutflow of trade accounts payables of $1.24 billion.
Net cash used in operating income driven by the increaseinvesting activities
Net cash used in average steel selling prices offset by lower steel shipments. The operating working capital investmentinvesting activities was $0.3 billion for the year ended December 31, 2018 largely reflected the price effect of improved market conditions which impacted operating working capital through higher inventories and higher trade receivables. The investment in operating working capital2021 as compared to $2.0 billion for the year ended December 31, 2018 reflected a lower than anticipated release of working capital in the fourth quarter of 2018 due to the weaker apparent demand conditions leading to an accumulation of metal stock and raw material volumes.
For2020. Capital expenditures were $3.0 billion for the year ended December 31, 2017, net2021 as compared to $2.4 billion for the year ended December 31, 2020. Capital expenditures for the year ended December 31, 2021 were
marginally above the initial guidance of $2.8 billion but slightly below the revised guidance of $3.2 billion provided after the third quarter of 2021.The Company intends to continue to spend on strategic projects designed to enhance future returns through investment in selective brownfield growth and product mix improvement projects, in Mexico and Brazil, Liberia as well as ongoing decarbonization capital expenditures to meet its 2050 zero emissions target. Accordingly, the Company expects 2022 capital expenditures to increase to $4.5 billion (including the rollover of $0.2 billion that was not spent in 2021). See “Properties and capital expenditures—Capital expenditures” and "Outlook" below.
ArcelorMittal’s major capital expenditures in 2021 included the following projects: ArcelorMittal Mexico new hot strip mill, the hot strip mill modernization in ArcelorMittal Dofasco, new pellet plant in ArcelorMittal Kryvyi Rih and Steelanol project in Ghent. Capital expenditures include $0.1 billion related to ArcelorMittal Italia which has been deconsolidated from April 14, 2021 onwards.
Net cash provided by operatingother investing activities increased to $4.6 billion, as compared withof $2.7 billion for the year ended December 31, 2016. The increase in net2021 included mainly $2.7 billion proceeds from the sale of common shares and redemption of preferred shares of Cleveland-Cliffs and refund of $0.3 billion cash provided by operating activities is mainly duecollateral related to an increase in operating income driven by the increase in average steel selling prices partiallyArcelorMittal USA disposal (see below) offset by increasesother investments including $80 million investments through the XCarb™ innovation fund and $25m for the acquisition of the remaining 67% interest in the raw material costs and an investment in operating working capital of $1.88 billion which represented an outflow for trade accounts receivable of $0.62 billion, an outflow for inventories of $2.35 billion and an inflow for trade accounts payable and other of $1.09 billion.Condesa.
Net cash used in investing activities was $2.0 billion for the year ended December 31, 2020 as compared to $3.8 billion for the year ended December 31, 2019. Capital expenditures were $2.4 billion for the year ended December 31, 2020 as compared to $3.6 billion for the year ended December 31, 2019. Capital expenditures for the year ended December 31, 2020 were in line with previous guidance of $2.4 billion (down from initial guidance of $3.2 billion). Excluding the capital expenditures of ArcelorMittal USA and ArcelorMittal Italia, capital expenditures in 2020 would have been $1.9 billion.
Cash provided by other investing activities include net consideration received of $497 million (net of cash disposed of and transaction fees paid), for the sale of ArcelorMittal USA and $127 million received during the first quarter of 2020 in connection with the sale of the 50% interest in Global Chartering Limited during the fourth quarter of 2019, partially offset by lease payments for ArcelorMittal Italia and $260 million with respect to a cash collateral provided by the Company until collection of the TSR receivables retained in ArcelorMittal USA after disposal.
ArcelorMittal’s major capital expenditures in 2020 included the following projects: the ArcelorMittal Mexico new hot strip mill, the
ArcelorMittal Italia environmental investment program, the new LF&CC 2&3 in ArcelorMittal Kryvyi Rih which was completed in the first quarter of 2020 and the hot strip mill modernization in Dofasco.
Net cash used in investing activities was $3.8 billion for the year ended December 31, 2018 as compared to $2.82019. Capital expenditures totaled $3.6 billion for the year ended December 31, 2017. Capital expenditures increased to $3.3 billion for the year ended December 31, 2018 as compared to $2.8 billion for the year ended December 31, 2017.2019. Capital expenditures for the year ended December 31, 2018 was lower than expected due to underspending in certain strategic projects (see “Item 4.D—Information on2019 were significantly below the Company—Property, plantinitial guidance of $4.3 billion but marginally above the revised $3.5 billion guidance provided after the third quarter of 2019 and equipment—Capitalbelow the mid-year guidance of $3.8 billion as the Company adapted its capital expenditure projects”) and at Ilva dueplans to the acquisition only being completed in November 2018.weaker market conditions. Cash used in investing activities included:
i.$0.8 billion net cash outflow for the year ended December 31, 2018 included the acquisition of AMNS India and $83 million additional UG payments,
ii.lease payments ($200 million) for the Uttam GalvaArcelorMittal Italia acquisition and KSS Petron debt for $1,001 million
iii.the acquisition of Münker Metallprofile GmbH in the context of the ESIL bidding process,Germany ($46 million).
These outflows were offset in part by the by:
i.proceeds from remedy asset sales for the saleArcelorMittal Italia acquisition of Go Steel Frýdek Místek ($39 million),$518 million (cash consideration of $694 million, net of cash disposed of $34 million, an escrow deposit of $125 million which was subsequently drawn and proceeds of $17 million paid to a joint venture of the secondCompany),
ii.the final installment of disposal proceeds of $44 million from the disposal of ArcelorMittal USA’sUSA's 21% stake in the Empire Iron MiningMine Partnership $220 million of sale proceeds following the disposal of the Company's 50% interest in Macsteel and $55 million relating to the release of restricted cash related to the mandatory convertible bond following contractual renegotiation.
Net cash used in investing activities was $2.8 billion for the year ended December 31, 2017 as compared to $1.1 billion for the year ended December 31, 2016. Cash from investing activities for the year ended December 31, 2017 included tangible asset disposals and proceeds from the disposal of U.S. long products Georgetown, the first installment of proceeds of $44 million from and
iii.the disposalsale of ArcelorMittal USA’s 21%remaining 2.6% stake in the Empire Iron Mining Partnership offset by $44 million cash consideration (net of cash acquiredGerdau for $14 million and $5 million to be paid upon conclusion of certain business restructuring measures) for the acquisition of a 55.5% stake in Bekaert Sumaré and $110 million deposited in a restricted cash account in ArcelorMittal South Africa in connection with various environmental obligations and true sales of receivables programs. $116 million.
ArcelorMittal’sArcelorMittal's major capital expenditures in the year ended December 31, 20182019 included the following projects: the ArcelorMittal Mexico new hot strip mill, the ArcelorMittal Italia environmental investment program, the new LF&CC 2&3 in ArcelorMittal Kryvyi Rih the modernization of ArcelorMittal Dofasco's hot strip mill, the footprint optimization project at Indiana Harbor and the new walking beam furnaces at Burns Harbor, along with other ongoing projects. See “Item 4.D—Information on the Company—Property, plant and equipment—Capital expenditure projects” for a summary of these and other projects.
In 2019, capital expenditure is expected to be approximately $4.3 billion reflecting carry over from underspend in 2018 (approximately $0.4 billion), the impact of Ilva and the continued high return investments in Mexico and Brazil and other strategic projects (largely cost optimization). See “Item 4.D—Information on the Company—Property, plant and equipment—Capital expenditure projects”.
Net cash used inprovided by financing activities
Net cash used in financing activities was $0.7$10.9 billion for the year ended December 31, 2018,2021, as compared to $1.7 billion in 2017. In 2018,the net cash used byin financing activities of $1.5 billion in 2020. In 2021, net cash used in financing activities included $0.2a $5.2 billion outflow with respect to the Company's five share buyback programs, $3.6 billion of net payments/proceeds forpayments relating to short and long-term debt (including $2.3 billion in payments of long-term debt and $1.7 billion in payments of short-term debt), $1.2 billion for the early redemption of certain MCNs, $572 million of dividend payments of $220(of which $312 million paid to ArcelorMittal shareholders and
$260 million paid to non-controlling shareholders) and $226$398 million outflow related to the share buyback program. Net cash used byfor lease payments and other financing activities for the year ended December 31, 2017 included net payments/proceeds for short and long-term debt of $1.5 billion. Net cash used by financing activities for the year ended December 31, 2017 included $1.2 billion of bonds repurchased pursuant to cash tender offers, $0.6 billion repayment at maturity of the euro denominated 4.625% Notes, $0.6 billion used to early redeem the 6.125% Notes due June 1, 2018 and $1.0 billion used to early redeem the 9.85% Notes due June 1, 2019, offset in part by a new $0.4 billion Schuldschein loan, a $0.4 billion loan from the European Investment Bank, $0.3 billion drawdown on the 4.5 billion South African rand revolving borrowing base finance facility and $0.6 billion proceeds from the issuance of euro denominated 0.95% Notes due January 17, 2023.activities. For further details related to capital markets, liability management transactions and debt repayments in 2018,2021, see “Item 5.B—Operating andnote 6.1.2 to the consolidated financial review and prospects—Liquidity and capital resources” above.
Net cash used byin financing activities was $1.7$1.5 billion for the year ended December 31, 2017,2020, as compared to $2.9net cash provided by financing activities of $0.5 billion in 2016.2019. In 2016,2020, net cash used in financing activities included $6.0an outflow of $2.4 billion for short and long-term debt, $500 million for the share buyback program, $135 million for the purchase of Intesa San Paolo S.p.A. ("ISP")'s ownership interest in ArcelorMittal Italia, dividends of $181 million paid to non-controlling shareholders and $264 million for lease payments and other financing activities. These outflows were partially offset by inflows of $1.2 billion net payments/proceeds from the issuance of the MCNs and $740 million net proceeds from the equity offering.
Net cash provided by financing activities was $0.5 billion for the year ended December 31, 2019. In 2019, net cash provided by financing activities included an inflow of $1.3 billion net proceeds (proceeds of $6.4 billion offset by payments of $5.1 billion) for short and long-term debt, partially offset by dividends of $332 million, a $90 million outflow related to the $3.1 billion proceedsshare buyback program and $326 million net outflows from the Company’s equity offering, while forlease payments and other financing activities.
Dividends during the year ended December 31, 2017, net payment/proceeds for short2021 of $572 million included $312 million paid to ArcelorMittal shareholders and long-term debt was $1.5 billion.
$260 million paid to non-controlling shareholders in subsidiaries. Dividends during the year ended December 31, 2020 of $181 million were paid to non-controlling shareholders in subsidiaries. Dividends paid during the year ended December 31, 20182019 were $220$332 million, including $101$203 million paid to ArcelorMittal shareholders and $119$129 million paid to non-controlling shareholders in subsidiaries. Dividends paid to non-controlling shareholders in subsidiaries during the year ended December 31, 2017 were $141 million. Dividends paid during the year ended December 31, 2016 were $61 million.
Equity
Equity
Equity attributable to the equity holders of the parent increased to $42.1$49.1 billion atas of December 31, 2018,2021 from $38.3 billion as compared to $38.8 billion atof December 31, 2017,2020 primarily due to net income attributable to the equity holders of the parent of $5.1$15.0 billion, $3.1 billion unrealized gains on derivative instruments (including $1.7 billion relating to CO2 emission rights) and $0.6instruments at FVOCI and $0.5 billion actuarial gains, partly offset by $2.2$5.2 billion share buyback programs, $1.2 billion foreign exchange losses.losses, $0.9 billion MCNs early redemptions and $0.6 billion dividend payments . See note 1011 to ArcelorMittal’s consolidated financial statements for the year ended December 31, 2018.2021.
Equity attributable to the equity holders of the parent increaseddecreased marginally to $38.8$38.3 billion at December 31, 2017,2020, as compared to $30.1$38.5 billion at December 31, 2016, primarily due to2019. The net incomeloss attributable
to the equity holders of the parent of $4.6 billion, $2.6$0.7 billion, foreign exchange gainslosses of $0.9 billion, $0.3 billion actuarial losses and $1.2$0.5 billion decrease for the share buyback program were largely offset by increases of $1.1 billion for the MCNs, $0.7 billion for the equity offering and a $0.4 billion increase in actuarial gains.
C. Research and development, patents and licensesthe fair value of investments held in equity instruments at FVOCI.
For information on the Company’s researchadditional analysis of sources and development policies, see "Item 4.B—Information on the Company—Business overview—Competitive strengths—Research and development" above for further details.
D. Trend information
Alluses of the statementscash in this “Trend Information” section are subject2019, please refer to and qualified by the information set forth under the “Cautionary Statement Regarding Forward-Looking Statements”. See also “Item 5—Operating"Operating and financial review and prospects—KeyLiquidity and capital resources—Sources and uses of cash” in the Company's annual report for the year ended December 31, 2020.
Disclosures about market risk
ArcelorMittal is exposed to a number of different market risks arising from its normal business activities. Market risk is the possibility that changes in raw materials prices, foreign currency exchange rates, interest rates, base metal prices (zinc, nickel, aluminum and tin) and energy prices (oil, natural gas and power) will adversely affect the value of ArcelorMittal’s financial assets, liabilities or expected future cash flows.
The fair value information presented below is based on the information available to management as of the date of the consolidated statements of financial position. Although ArcelorMittal is not aware of any factors affectingthat would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of this annual report since that date, and therefore, the current estimates of fair value may differ significantly from the amounts presented. The estimated fair values of certain financial instruments have been determined using available market information or other valuation methodologies that require considerable judgment in interpreting market data and developing estimates.
See note 6 to ArcelorMittal’s consolidated financial statements for quantitative information about risks relating to financial instruments, including financial instruments entered into pursuant to the Company’s risk management policies.
Risk management
ArcelorMittal has implemented strict policies and procedures to manage and monitor financial market risks. Organizationally, supervisory functions are separated from operational functions, with proper segregation of duties. Financial market activities are overseen by the CEO and CFO, the Corporate Finance and Tax Committee and the Executive Office.
All financial market risks are managed in accordance with the Treasury and Financial Risk Management Policy. These risks are managed centrally through Group Treasury by a group specializing in foreign exchange, interest rate, commodity, internal and external funding and cash and liquidity management.
All financial market hedges are governed by ArcelorMittal’s Treasury and Financial Risk Management Policy, which includes a delegated authority and approval framework, sets the boundaries for all hedge activities and dictates the required approvals for all Treasury activities. Hedging activity and limits are monitored on an ongoing basis. ArcelorMittal enters into transactions with numerous counterparties, mainly banks and financial institutions, as well as brokers, major energy producers and consumers.
As part of its financial risk management activities, ArcelorMittal uses derivative instruments to manage its exposure to changes in interest rates, foreign exchange rates and commodities prices. These instruments are principally interest rate, currency and commodity swaps, spots and forwards. ArcelorMittal may also use futures and options contracts.
Counterparty risk
ArcelorMittal has established detailed counterparty limits to mitigate the risk of default by its counterparties. The limits restrict the exposure ArcelorMittal may have to any single counterparty. Counterparty limits are calculated taking into account a range of factors that govern the approval of all counterparties. The factors include an assessment of the counterparty’s financial soundness and its ratings by the major rating agencies, which must be of a high quality. Counterparty limits are monitored on a periodic basis.
All counterparties and their respective limits require the prior approval of the Corporate Finance and Tax Committee. Standard agreements, such as those published by the International Swaps and Derivatives Association, Inc. (ISDA) are negotiated with all ArcelorMittal trading counterparties.
Currency exposure
ArcelorMittal seeks to manage each of its entities’ exposure to its operating currency. For currency exposure generated by activities, the conversion and hedging of revenues and costs in foreign currencies is typically performed using currency transactions on the spot market and forward market. For some of its business segments, ArcelorMittal hedges future cash flows.
Because a substantial portion of ArcelorMittal’s assets, liabilities, sales and earnings are denominated in currencies other than the U.S. dollar (its reporting currency), ArcelorMittal has exposure to fluctuations in the values of these currencies relative to the U.S. dollar. These currency fluctuations, especially the fluctuation of the value of the U.S. dollar relative to the euro, the Canadian dollar, Brazilian real, South African rand, Argentine peso, Kazakh tenge, Indian rupee, Polish zloty and Ukrainian hryvnia, as well as fluctuations in the currencies of the other countries in which ArcelorMittal has significant
operations and/or sales, could have a material impact on its results of operations”operations.
ArcelorMittal faces transaction risk, where its businesses generate sales in one currency but incur costs relating to that revenue in a different currency. For example, ArcelorMittal’s subsidiaries may purchase raw materials, including iron ore and coking coal, in U.S. dollar, but may sell finished steel products in other currencies. Consequently, an appreciation of the U.S. dollar will increase the cost of raw materials, thereby negatively impacting the Company’s operating margins, unless the Company is able to pass along the higher cost in the form of higher selling prices.
ArcelorMittal faces foreign currency translation risk, which arises when ArcelorMittal translates the financial statements of its subsidiaries, denominated in currencies other than the U.S. dollar for inclusion in ArcelorMittal’s consolidated financial statements.
The tables below illustrate the impact of an appreciation and a depreciation of the U.S. dollar of 10% against the euro, on the conversion of the net debt of ArcelorMittal into U.S. dollar as of December 31, 2021 and December 31, 2020. The impact on net debt denominated in a currency different than the euro, is computed based on historical data of how such currency would move against the U.S. dollar when the U.S. dollar appreciates/depreciates 10% against the euro. A positive sign means an increase in the net debt.
| | | | | | | | | | | | | | |
| Currency | | Impact on net debt translation of a 10% appreciation of the
U.S. dollar against the euro | | Impact on net debt translation of a 10% depreciation of the
U.S. dollar against the euro |
| In 2021 | | in $ equivalent
(in millions) | | in $ equivalent
(in millions) |
| Argentine peso | | 25 | | | (34) | |
| Brazilian real | | 8 | | | (9) | |
| Euro | | (325) | | | 325 | |
| Moroccan dirham | | 4 | | | (5) | |
| Polish zloty | | (15) | | | 19 | |
| South African rand | | 14 | | | (17) | |
| Other | | 2 | | | (3) | |
| | | | | | | | | | | | | | |
| Currency | | Impact on net debt translation of a 10% appreciation of the
U.S. dollar against the euro | | Impact on net debt translation of a 10% depreciation of the
U.S. dollar against the euro |
| In 2020 | | in $ equivalent
(in millions) | | in $ equivalent
(in millions) |
| Argentine peso | | (31) | | | 20 | |
| Brazilian real | | (6) | | | 5 | |
| Canadian dollar | | (14) | | | 15 | |
| Euro | | (444) | | | 444 | |
| Moroccan dirham | | 9 | | | (10) | |
| Polish zloty | | (10) | | | 12 | |
| Other | | 16 | | | (20) | |
Derivative instruments
ArcelorMittal uses derivative instruments to manage its exposure to movements in interest rates, foreign exchange rates and commodity prices. Changes in the fair value of derivative instruments are recognized in the consolidated statements of operations or in equity according to nature and effectiveness of the hedge.
Derivatives used are non-exchange-traded derivatives such as over-the-counter swaps, options and forward contracts.
For the Company’s tabular presentation of information related to its market risk sensitive instruments, please see note 6 to the consolidated financial statements.
Interest rate sensitivity
Cash balances, which are primarily composed of euros and U.S. dollar, are managed according to the short term (up to one year) guidelines established by senior management on the basis of a daily interest rate benchmark, primarily through short-term currency swaps, without modifying the currency exposure.
Interest rate risk on debt
ArcelorMittal’s policy consists of incurring debt at fixed and floating interest rates, primarily in U.S. dollar and euros according to general corporate needs. Interest rate and currency swaps are utilized to manage the currency and/or interest rate exposure of the debt.
For the Company’s tabular presentation of the fair values of its short and long term debt, please see note 6 to the consolidated financial statements.
Commodity price risk
ArcelorMittal utilizes a number of exchange-traded commodities in the steel-making process. In certain instances, ArcelorMittal is the leading consumer worldwide of certain commodities. In some businesses and in certain situations, ArcelorMittal is able to pass this exposure on to its customers. The residual exposures are managed as appropriate.
Financial instruments related to commodities (base metals, energy, freight and emission rights) are utilized to manage ArcelorMittal’s exposure to price fluctuations.
Hedges in the form of swaps and options are utilized to manage the exposure to commodity price fluctuations.
In case of natural gas, ArcelorMittal has a portfolio with 80% integrated capacity which means off take gases from the plant are recycled and utilized as input. Overall, the Company has hedged 50% of its requirement on 6 month rolling basis with other strategic long term hedges in place. For certain jurisdictions like Canada, energy requirements are mainly fulfilled through nuclear or hydro power.
With respect to emission rights, ArcelorMittal is partially hedged for the first half of phase 4 of ETS system. In 2021, the Company has not utilized any of its hedges and has fulfilled its shortfall requirements with spot purchases by strategically buying certificates in planned manner. As of December 31, 2021, the prices of hedged positions are significantly lower than the average prices of 2021.
For the Company’s tabular presentation of information related to its market risk sensitive instruments, please see note 6 to the consolidated financial statements.
In respect of non-exchange traded commodities, ArcelorMittal is exposed to volatility in the prices of raw materials such as iron ore (which is generally correlated with steel prices with a time lag) and coking coal. This exposure is almost entirely managed through long-term contracts, however some hedging of iron ore exposures is made through derivative contracts. For a more detailed discussion of ArcelorMittal’s iron ore and coking coal purchases, see “Operating and financial review —Economic conditions—Raw materials”.
Outlook
Outlook
Based on the current economic outlook, ArcelorMittal expects a slight expansionglobal apparent steel consumption (“ASC”) in global ASC in 2019 by +0.5%2022 to +1%grow between 0% to 1.0% (versus growth of +2.8%4% in 2018)2021). By region: ASC in
Economic activity progressively improved during 2021 as lockdown measures eased and the United Statesglobal steel industry benefited from a favorable supply demand balance supporting increasing utilization and improved demand. Although there is expectedsome moderation of the tight market conditions (and subject to pandemic-related macroeconomic uncertainties), the Company expects overall ASC to grow +0.5% to +1.5% in 2019,2022 versus 2021 with automotive demand to remain broadly stable, growth is driven by continued albeit weaker demand in machinery and construction (a moderation of growth versus +1.7% in 2018). In Europe, continued strength in construction is balanced by stable automotive demand and slower growth in machinery and is expected to support ASC growth of approximately +0.5% to +1.0% in 2019 (a moderation of growth versus +2.9% in 2018). In Brazil, ASC growth in 2019 is forecasted in the range of +3.5% to +4.5% (a moderation of growth versus +7.3% in 2018) as growth in automotive and machinery slows but construction activity grows for the first time since 2013. regional differences highlighted below:
•In the CIS,US, ASC is expected to grow +1.0%within a range of 1.0% to +2.0%3.0% in 20192022 (versus +1.8%an estimated 20.0% growth in 2018)2021). Overall, World ex-ChinaAutomotive is expected to grow strongly as semi-conductor shortages ease and manufacturing sectors are
supported by strong order backlogs and low inventory of finished goods. Infrastructure is expected to grow due to beginnings of support from the $1.2 trillion infrastructure plan.
•In Europe, ASC is expected to grow by approximately +2.0%within a range of 0.0% to +3.0%2.0% in 2019, slight stronger than2022 (versus an estimated 14.0% growth in 20182021). Automotive is expected to grow strongly, with moderate growth in infrastructure and construction to support underlying demand.
•In Brazil, ASC is expected to decline in 2022 in the range of 8.0 to 10.0% (versus a healthy 23.0% estimated growth in 2021). While ASC is expected to decline due to stabilizationdestocking, real demand is expected to increase moderately in Turkey after2022 with a significant declinerecovery in 2018automotive output offset by weakness in other steel-consuming sectors.
•In the CIS, ASC in 2022 is expected to grow within a range of 0.0% to 2.0% (versus +2.1%a 3.0% estimated growth in 2018)2021).
•In India, ASC in 2022 is expected to grow within a range of 6.0% to 8.0% (versus 17.0% estimated growth in 2021).
•As a result, overall World ex-China ASC in 2022 is expected to grow within the range of 2.5% to 3.0% (versus 11.0% in 2021) supported by mild growth in the Company's core developed markets and stronger growth in India, offset by weakness in Brazil.
•In China, overall demand is expected to continue to decline byin 2022 between -0.5%0.0% to -1.5%2.0% (versus estimated decline of 2.0% in 2019 (versus growth of +3.5% in 2018) as relatively stable demand from automotive and construction2021); weak real estate is partially offset by declining machinery output. a small pick-up in infrastructure
Given these demand expectations,the mild growth anticipated in ex-China ASC in 2022 versus 2021 (2.5% to 3.0% as well asdescribed above), in 2022 the expectation that operational disruptions (both controllable and uncontrollable) that negatively impacted 2018 shipments will not recur, the Company'sCompany expects steel shipments to grow by 3.0% versus 2021 levels (including some mix benefits and recovery post logistics issues in 2021) and strong operating income and cash flow from operations including the substantial benefits from the recently renegotiated annual contracts with automotive OEMs. While the restocking effect has run its course with inventories returning to normal levels in 2021, the Company expects real demand recovery to continue, and this is expected to support further apparent demand growth in 2022, particularly if the automotive supply chain constraints ease. The medium to longer term fundamental outlook for steel is positive. The global steel industry is expected to benefit from the structural changes that are occurring, including China’s focus on decarbonization and removal of VAT rebates on steel exports, and the actions taken by various governments to protect against the threats of unfair trade.
Based on current market conditions together with impacts from higher automotive contract price resets, the Company expects a further working capital investment in the first quarter of 2022. The 2022 full year working capital requirements will be determined by market dynamics and are expected to be consistent with operating income evolution (with the aim to return working capital rotation days to targeted levels by year-end).
In terms of cost saving, the Company has announced a new three year $1.5 billion value plan focused on creating value through well-defined commercial and operational initiatives. This plan does not include the the impact of strategic projects. The plan includes commercial initiatives, including to improve volume and mix, as operational improvements (primarily in variable costs). The plan aims at protecting the operating income potential of the business from rising inflationary pressures; improving its relative competitive position vis-a-vis its peers and supporting sustainably higher profits.
In addition, capital expenditures are expected to increase from $3.0 billion in 2019 versus 2018.
Market-priced iron ore shipments for 20192021 to $4.5 billion in 2022. Including $0.2 billion of carry-over from 2021, capital expenditures excluding strategic capital expenditures are expected to be broadly stable as compared to 2018 with increases$3.1 billion in Liberia and AMMC to be offset by lower volume in Mexico (in part due to the end of life of the Volcan mine).
The Company expects2022. Decarbonization capital expenditures to increase by $1.0 billion to $4.3 billion in 2019 from $3.3 billion in 2018, including $0.4 billion carryover from underspend from 2018, the impact of Ilva ($0.4 billion) and the continued investment in higher return projects in Mexico and Brazil. Interest isare expected to be stable at $0.6$0.3 billion and cash taxesin 2022 (net of government support). Capital expenditures relating to strategic projects are expected to increase primarilybe $1.1 billion including the mix/growth investments at Vega and Monlevade in Brazil, iron ore projects in Liberia, Serra Azul and Las Truchas and the pellet plant project in Ukraine and new section mill in Barra Mansa (Brazil).
Based on account of certaincurrent market conditions (including support from automotive contract resets that have already occurred), the Company expects strong cash tax settlements deferred from 2018.
Due toflow generation in 2022 and has announced a smaller than anticipated releaseproposed 27% increase in the fourth quarterbase annual dividend to $0.38/share (to be approved by the shareholders at the annual general meeting in May 2022) and a new $1.0 billion capital return program by the first half of 2018,2022. This is the Company invested moremaximum amount based on the authorization provided by shareholders at the annual general meeting of shareholders in working capital than expected in 2018 ($4.4 billion versus guidance of $3.0-3.5 billion). The Company expects this additional investmentJune 2021. Additional authorization to be released over the course of 2019. The extent of this releaserepurchase shares will be dictatedsought from shareholders at the 2022 annual general meeting.
The data disclosed above is before Russia’s invasion of Ukraine, whose impact is still being assessed by market conditions, particularly the priceCompany. Economic activity and volume environmentASC may be impacted in the final weeks.
E. Off-balance sheet arrangements
AsCIS and globally. See “Introduction—Risk factors—Risks related to the global economy and the mining and steel industry—Russia’s invasion of December 31, 2018,Ukraine, international reaction to it and any regional or global escalation of the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on its financial condition, revenues or expenses,conflict, could adversely affect the Company’s business and results of operations, liquidity, capital expenditures or capital resources.operations.”
F. Tabular disclosure of contractual obligations
ArcelorMittal has various purchase commitments for materials, supplies and items of permanent investment incidental to the ordinary course of business. As of December 31, 2018, ArcelorMittal’s management believes that these commitments are not in excess of current market prices and reflect normal business operations.
ArcelorMittal had outstanding, as of December 31, 2018, various long-term obligations that will become due in 2019 and beyond. These various purchase commitments and long-term obligations will have an effect on ArcelorMittal’s future liquidity and capital resources. The table below shows, by major category of commitment and obligations outstanding as of December 31, 2018, ArcelorMittal’s current estimate of their annual maturities (undiscounted except for environmental commitments and asset retirement obligations).
|
| | | | | | | | | | | | | | | |
| (amounts in $ millions) | | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
| Debt obligations—scheduled repayments—note 6.1.2 to the consolidated financial statements | | 12,483 |
| | 3,167 |
| | 4,932 |
| | 2,498 |
| | 1,886 |
|
| Operating lease obligations—note 8.4 to the consolidated financial statements | | 1,869 |
| | 322 |
| | 414 |
| | 262 |
| | 871 |
|
Environmental commitments and asset retirement obligations—note 8.1 and note 8.3 to the consolidated financial statements1 | | 1,650 |
| | 256 |
| | 456 |
| | 291 |
| | 647 |
|
| Purchase obligations—note 8.4 to the consolidated financial statements | | 24,594 |
| | 8,173 |
| | 6,573 |
| | 3,863 |
| | 5,985 |
|
Funding contribution to the pension and post-employment plans2 | | 425 |
| | 425 |
| | — |
| | — |
| | — |
|
| Scheduled interest payments | | 2,755 |
| | 455 |
| | 645 |
| | 308 |
| | 1,347 |
|
| Other long-term liabilities | | 346 |
| | 102 |
| | 164 |
| | 2 |
| | 78 |
|
| Acquisition/investment commitments—note 8.4 to the consolidated financial statements | | 697 |
| | 411 |
| | 284 |
| | 1 |
| | 1 |
|
| Total | | 44,819 |
| | 13,311 |
| | 13,468 |
| | 7,225 |
| | 10,815 |
|
| | | | | |
1Management report | ArcelorMittal may be subject to additional environmental liabilities not included in the table above.176 |
| |
2 | The funding contributions to the pension and post-retirement plans are presented for the following year and to the extent known. |
Estimated payments for long-term obligations have been determined by ArcelorMittal based on payment schedules for those long-term obligations where set payments exist. For long-term obligations with no set payment schedules, estimates have been made by ArcelorMittal based on the most likely timing of cash payments based on the facts and circumstances that exist as of December 31, 2018. Also included are liabilities related to environmental matters, which are further discussed in notes 8.1 and 8.3 to the consolidated financial statements. For further details on commitments, please refer to note 8.4 to the consolidated financial statements.
G. Safe harbor
All information that is not historical in nature and disclosed under “Item 5—Operating“Operating and financial reviewreview”, and prospects”in particular in this Outlook section, is deemed to be a forward-looking statement. See “Cautionary Statement Regarding Forward-Looking Statements”A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section “Risk factors”.
| |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. Directors and senior management
Board of Directors
ArcelorMittal places a strong emphasis on corporate governance. ArcelorMittal has five independent directors on its nine memberThe Board of Directors.Directors is composed of eleven directors, of which seven are independent directors. Mr. Bruno Lafont is the Lead Independent Director. The Board’sBoard of Directors has three committees: The Audit &and Risk Committee, the Appointment, Remuneration and Corporate Governance Committee ("ARCG Committee") and the Sustainability Committee ("SC"). Prior to July 28, 2021, the former Appointments, Remuneration, Corporate Governance and Sustainability Committee (“ARCGS Committee”)carried out the the roles of both of the current Appointments, Remuneration and Corporate Governance Committee and the new Sustainability Committee. The ARCG Committee and the Audit and Risk Committee are each
comprised exclusively of independent directors. There are two independent directors in the Sustainability Committee.
The annual general meeting of shareholders on May 9, 2018June 8, 2021 acknowledged the expiration of the terms of office of Mrs. Karyn Ovelmen and Mr. Tye Burt.
At the same meeting, the shareholders re-elected Mrs. Karyn Ovelmen and Mr. Tye Burt, and elected Mrs. Clarissa Lins for a new term of three years each.
The BoardOn February 11, 2021, Mr. Aditya Mittal, formerly President and Chief Financial Officer ("CFO"), became the Chief Executive Officer ("CEO") of Directors is composed of nine directors, of which eight are non-executive directorsthe Company and five are independent directors. The Board of Directors comprises only one executive director, Mr. Lakshmi N. Mittal remained the Chairman of the Board (now named "Executive Chairman"), see "Introduction—Key transactions and Chiefevents in 2021". The CEO Office was renamed the Executive OfficerOffice (comprised of ArcelorMittal.the Executive Chairman and the CEO), and Mr. Genuino Christino became the CFO. The descriptions throughout this annual report reflect the governance structure in place during 2021 following these changes.
Mr. Bruno Lafont is the Lead Independent Director. In the most recent assessment of the Company’s leadership structure, the ARCGSARCG Committee reviewed the key duties and responsibilities of the Company’s Chairman and Chief Executive OfficerChairman and its Lead Independent Director as follows:
|
| | | | |
| Executive Chairman | Lead Independent Director |
| * Chairs the Board of Directors' and shareholders' meetings | * Provides independent leadership to the Board of Directors |
| * Works with the Lead Independent Director to set agenda for the Board of Directors and reviews the schedule of the meetings | * Presides at executive sessions of independent directors |
| * Serves as a public face of the Board of Directors and of the Company | * Advises the Executive Chairman of any decisions reached and suggestions made at the executive sessions, as appropriate |
| * Serves as a resource for the Board of Directors | * Coordinates the activities of the other independent directors |
| * Guides discussions at the Board of Directors meetings and encourages directors to express their positions | * Oversees Board of Directors' governance processes, including succession planning and other governance-related matters |
| * Communicates significant business developments and time-sensitive matters to the Board of Directors | * Liaison between the Executive Chairman and the other independent directors |
| * Is responsible for managing day-to-day business and affairs of the Company | * Calls meetings of the independent directors when necessary and appropriate |
* Interacts with the CEOExecutive Office and Executive Officers of the Company and frequently meets stakeholders and provides feedback to the Board of Directors | * Leads the Board of Directors’ self-evaluation process and such other duties as are assigned from time to time by the Board of Directors |
The members of the Board of Directors are set out below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Age45 | | Date of joining the Board56 | | End of Term | | Position within ArcelorMittal5 |
| Lakshmi N. Mittal | | 6871 | | | May 1997 | | May 20202023 | | Executive Chairman of the Board of Directors |
Aditya Mittal8 | | 45 | | June 2020 | | May 2023 | | Director and Chief Executive Officer |
Vanisha Mittal Bhatia7 | | 3841 | | December 2004 | | May 20192022 | | Director |
Jeannot Krecké | | 68 | | January 2010 | | May 2019 | | Director |
Suzanne P. Nimocks2, 34 | | 5962 | | January 2011 | | May 20192022 | | Director |
Bruno Lafont1, 2, 34 | | 6265 | | May 2011 | | May 20202023 | | Lead Independent Director |
Tye Burt2, 3, 4 | | 6164 | | May 2012 | | May 20212024 | | Director |
Michel Wurth3 | | 6467 | | May 2014 | | May 20202023 | | Director |
Karyn Ovelmen1, 34 | | 5558 | | May 2015 | | May 20212024 | | Director |
Karel de Gucht1, 34 | | 6467 | | May 2016 | | May 20192022 | | Director |
Etienne Schneider1, 4 | | 50 | | June 2020 | | May 2023 | | Director |
Clarissa Lins2, 3, 4 | | 54 | | June 2021 | | May 2024 | | Director |
| |
1. | 1.Member of the Audit & Risk Committee. |
| |
2. | Member of the Appointments, Remuneration, Corporate Governance and Sustainability Committee.
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3. | Non-executive and independent director.
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4. | Age as of December 31, 2018.
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5. | Date of joining the Board of ArcelorMittal or, if prior to 2006, its predecessor Mittal Steel Company NV.
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2.Member of the Appointments, Remuneration and Corporate Governance Committee.
3.Member of the Sustainability Committee.
4.Non-executive and independent director.
5.Age and position as of December 31, 2021.
6.Date of joining the Board of ArcelorMittal or, if prior to 2006, its predecessor Mittal Steel Company NV.
7.Ms. Vanisha Mittal Bhatia is the daughter of Mr. Lakshmi N. Mittal and sister of Mr. Aditya Mittal.
8.Mr. Aditya Mittal is the son of Mr. Lakshmi N. Mittal and brother of Ms. Vanisha Mittal Bhatia.
Henk Scheffer is the Company Secretary and, accordingly, acts as secretary of the Board of Directors.
Lakshmi N. Mittal, 68,71, is the Executive Chairman of ArcelorMittal since February 2021. He was previously the Chairman and Chief Executive Officer of ArcelorMittal,ArcelorMittal. He is a renowned global businessman who serves on the boards of various companies and advisory councils, andcouncils. He is an active philanthropist engaged in the fields of education and child health. Mr. Mittal was born in Sadulpur in Rajasthan in 1950. He graduated from St Xavier’s College in Kolkata, where he received a Bachelor of Commerce degree. Having completed his education in India, Mr. Mittal began his career working in his family’s steelmaking business in India before moving to Indonesia in 1976 to set up a small steel company that over time grew to become ArcelorMittal, the world’s leading steel company and one of the foremost industrial companies in the world. He is widely recognized for the role he played in restructuring the steel industry towards a more consolidated and globalized model, pursuing and successfully integrating many acquisitions in North America, South America, Europe, South Africa and the CIS. Today ArcelorMittal continues to be the largest and most global steel manufacturer. "Mittal Steel" became the world’s leading steel producer in 2004 following the merger of Ispat International and LNM Holdings, and the simultaneous acquisition of International Steel Group. Shortly after, in 2006, Mittal Steel launched an ambitious bid to merge with Arcelor which created ArcelorMittal. Mr. Mittal’s contribution to business and global industry has been widely recognized. In 1996 he was awarded “Steelmaker of the Year” by New Steel in the United States and in 1998 the “Willy Korf Steel Vision Award” by World Steel Dynamics for outstanding vision, entrepreneurship, leadership and success in global steel development. He was named Fortune magazine’s “European Businessman of the Year” in 2004 and “Business Person of the year” by the Sunday Times, “International Newsmaker of the Year” by Time Magazine and “Person of the Year” by the Financial Times in 2006 for his outstanding business achievements. In January 2007, Mr. Mittal was presented with a Fellowship from King’s College London, the college’s highest award. In 2007 he also received the Dwight D. Eisenhower Global Leadership Award, the Grand Cross of Civil Merit from Spain and was named AIST Steelmaker of the year. In January 2008, Mr. Mittal was awarded the Padma Vibhushan, India’s second highest civilian honor, by the President of India. In September 2008, Mr. Mittal was chosen for the third “Forbes Lifetime Achievement Award.” In October 2010, he was awarded World Steel Association’s medal in recognition of his services to the Association as its Chairman and alsonumerous awards for his contribution to the sustainable development ofsteel industry over the global steel industry. In January 2013, Mr. Mittal was awarded a Doctor Honoris Causa by the AGH University of Scienceyears and Technologyrecently, in Krakow, Poland. In April 2018, Mr. Mittal was awarded by the American Iron and Steel Institute with the Gary medal award recognizing his great contribution to the steel industry. In addition to his role at ArcelorMittal,He is widely recognized for successfully integrating many company acquisitions in North America, South America, Europe, South Africa and the CIS. Mr. Mittal is an active participant of various boards and advisory councils. He is Chairman of the board of Aperam and a member of the board of Goldman Sachs. He previously sat on the board of Airbus N.V. He is a member of the Foreign Investment Council in Kazakhstan, the National Investment Council of Ukraine, the Global CEO Council of the Chinese People’s Association for Friendship with Foreign Countries, the World Economic Forum’s International Business Council, the World Steel Association’s Executive Committee, the European Round Table of Industrialists, the Indian School of Business and a member of the board of Trustees of Cleveland Clinic. Mr. Mittal with his wife Usha Mittal, is also an active philanthropist. The Mittal family recently made a significant gift to Harvard to support the Lakshmi Mittal South Asia Institute and Mr. Mittal is a memberfather of the Global Advisory Council of Harvard University. The Mittal family has also made important gifts to Great Ormond Street Hospital, supporting the Mittal Children’s Medical Centre which formally opened in January 2018, and UNICEF, specifically on the topic of child malnutrition in India. Mr. Mittal and his wife Usha Mittal have a son, Aditya Mittal (who is President and Chief FinancialExecutive Officer of ArcelorMittal), and a daughter,non-independent Director of ArcelorMittal) and Vanisha Mittal Bhatia (who
(who is a Non-independent Director of ArcelorMittal)ArcelorMittal Board). Mr. Mittal is a citizen of IndiaIndia.
Aditya Mittal., 68,45, is the Chairman and Chief Executive Officer since February 2021 and Director of ArcelorMittal, a renowned global businessman who serves on the boards of various advisory councils, and an active philanthropist engaged in the fields of education and child health. Mr. Mittal was born in Sadulpur in Rajasthan in 1950. He graduated from St Xavier’s College in Kolkata, where he received a Bachelor of Commerce degree. Having completed his education in India, Mr. Mittal began his career working in his family’s steelmaking business in India before moving to Indonesia in 1976 to set up a small steel company that over time grew to become ArcelorMittal, the world’s leading steel company and one of the foremost industrial companies in the world. He is widely recognized for the role he played in restructuring the steel industry towards a more consolidated and globalized model, pursuing and successfully integrating many acquisitions in North America, South America, Europe, South Africa and the CIS. Today ArcelorMittal continues to be the largest and most global steel manufacturer. "Mittal Steel" became the world’s leading steel producer in 2004 following the merger of Ispat International and LNM Holdings, and the simultaneous acquisition of International Steel Group. Shortly after, in 2006, Mittal Steel launched an ambitious bid to merge with Arcelor which created ArcelorMittal. Mr. Mittal’s contribution to business and global industry has been widely recognized. In 1996 he was awarded “Steelmaker of the Year” by New Steel in the United States and in 1998 the “Willy Korf Steel Vision Award” by World Steel Dynamics for outstanding vision, entrepreneurship, leadership and success in global steel development. He was named Fortune magazine’s “European Businessman ofpreviously the Year” in 2004 and “Business Person of the year” by the Sunday Times, “International Newsmaker of the Year” by Time Magazine and “Person of the Year” by the Financial Times in 2006 for his outstanding business achievements. In January 2007, Mr. Mittal was presented with a Fellowship from King’s College London, the college’s highest award. In 2007 he also received the Dwight D. Eisenhower Global Leadership Award, the Grand Cross of Civil Merit from Spain and was named AIST Steelmaker of the year. In January 2008, Mr. Mittal was awarded the Padma Vibhushan, India’s second highest civilian honor, by the President of India. In September 2008, Mr. Mittal was chosen for the third “Forbes Lifetime Achievement Award.” In October 2010, he was awarded World Steel Association’s medal in recognition of his services to the Association as its Chairman and also for his contribution to the sustainable development of the global steel industry. In January 2013, Mr. Mittal was awarded a Doctor Honoris Causa by the AGH University of Science and Technology in Krakow, Poland. In April 2018, Mr. Mittal was awarded by the American Iron and Steel Institute with the Gary medal award recognizing his great contribution to the steel industry. In addition to his role at ArcelorMittal, Mr. Mittal is an active participant of various boards and advisory councils. He is Chairman of the board of Aperam and a member of the board of Goldman Sachs. He previously sat on the board of Airbus N.V. He is a member of the Foreign Investment Council in Kazakhstan, the National Investment Council of Ukraine, the Global CEO Council of the Chinese People’s Association for Friendship with Foreign Countries, the World Economic Forum’s International Business Council, the World Steel Association’s Executive Committee, the European Round Table of Industrialists, the Indian School of Business and a member of the board of Trustees of Cleveland Clinic. Mr. Mittal, with his wife Usha Mittal, is also an active philanthropist. The Mittal family recently made a significant gift to Harvard to support the Lakshmi Mittal South Asia Institute and Mr. Mittal is a member of the Global Advisory Council of Harvard University. The Mittal family has also made important gifts to Great Ormond Street Hospital, supporting the Mittal Children’s Medical Centre which formally opened in January 2018, and UNICEF, specifically on the topic of child malnutrition in India. Mr. Mittal and his wife Usha Mittal have a son, Aditya Mittal (who is President and Chief Financial Officer of ArcelorMittal),ArcelorMittal. Following the formation of ArcelorMittal in 2006, Aditya Mittal held various senior leadership roles, including managerial oversight of the Group’s flat carbon steel businesses in the Americas and Europe, in addition to his role as CFO and membership of the Group Management Board. In 2008, Aditya Mittal was named ‘European Business Leader of the Future’ by CNBC Europe and was ranked fourth in Fortune magazine’s ‘40 under 40’ list in 2011. He is an active philanthropist with a daughter,particular interest in child health. Together with his wife Megha, he is a significant supporter of the Great Ormond Street Children’s Hospital in London, having funded the Mittal Children’s Medical Centre, and in India, the couple work closely with UNICEF, having funded the first ever country-wide survey into child nutrition, the results of which are being used by the Government of India to inform relevant policy. Aditya Mittal serves on the boards of ArcelorMittal, Aperam, HMEL and Iconiq Capital, and is the Chairman of the Board of ArcelorMittal Nippon Steel India. He is also a Trustee at the Brookings Institution and an alumni of the World Economic Forum Young Global Leader’s Programme. Aditya Mittal holds a Bachelor’s degree in Economics with concentrations in Strategic Management and Corporate Finance
from the Wharton School in Pennsylvania, United States. He is the son of Mr. Lakshmi N. Mittal and brother of Ms. Vanisha Mittal Bhatia (who is a Director of ArcelorMittal).Bhatia. Mr. Aditya Mittal is a citizen of India.India.
Vanisha Mittal Bhatia,, 38,41, is a non-independent Director of ArcelorMittal. She was appointed as a member of the LNM Holdings Board of Directors in June 2004. Ms. Vanisha Mittal Bhatia was appointed to Mittal Steel’s Board of Directors in December 2004, where she worked in the Procurement department leading various initiatives including "total cost of ownership program". She joined Aperam in April 2011 and since has held the position of Chief Strategy Officer. She has a Bachelor of Sciences from the European Business School. She is also the daughter of Mr. Lakshmi N. Mittal and sister of Mr. Aditya Mittal. Ms. Vanisha Mittal Bhatia is a citizen of India.
Jeannot Krecké 68,Ms. Vanisha Mittal Bhatia is a non-executive and non-independent Directorthe daughter of ArcelorMittal. He started his university studies at the Université Libre de Bruxelles (ULB) in Belgium in 1969, from where he obtained a degree in physical and sports education. He decided in 1983 to change professional direction. His interests led him to retrain in economics, accounting and taxation. He enrolled in various courses, in particular in the United States. Following the legislative elections of June 13, 2004, Mr. Krecké was appointed Minister of the Economy and Foreign Trade of Luxembourg on July 13, 2004. Upon the return of the coalition government formed by the Christian Social Party (CSV)Lakshima N. Mittal and the Luxembourg Socialist Workers’ Party (LSAP) as a resultsister of the legislative elections of June 7, 2009, Mr. Krecké retained the portfolio of Minister of the Economy and Foreign Trade on July 23, 2009. As of July 2004, Mr. Krecké represented the Luxembourg government at the Council of Ministers of the EU in the Internal Market and Industry sections of its Competitiveness configuration, as well as in the Economic and Financial Affairs Council, and in the Energy section of its Transport, Telecommunications and Energy configuration. He was also a member of the Eurogroup from July 2004 to June 2009. On February 1, 2012, Mr. Krecké retired from government and decided to end his active political career in order to pursue a range of different projects. Mr. Krecké is currently the CEO of Key International Strategy Services. He is a member of the boards of JSFC Sistema, of East West United Bank, of Calzedonia Finanziara S.A., Jan De Nul S.A. and Novenergia Holding Company S.A. Mr. Krecké is a citizen of Luxembourg. , 68, is a non-executive and non-independent Director of ArcelorMittal. He started his university studies at the Université Libre de Bruxelles (ULB) in Belgium in 1969, from where he obtained a degree in physical and sports education. He decided in 1983 to change professional direction. His interests led him to retrain in economics, accounting and taxation. He enrolled in various courses, in particular in the United States. Following the legislative elections of June 13, 2004, Mr. Krecké was appointed Minister of the Economy and Foreign Trade of Luxembourg on July 13, 2004. Upon the return of the coalition government formed by the Christian Social Party (CSV) and the Luxembourg Socialist Workers’ Party (LSAP) as a result of the legislative elections of June 7, 2009, Mr. Krecké retained the portfolio of Minister of the Economy and Foreign Trade on July 23, 2009. As of July 2004, Mr. Krecké represented the Luxembourg government at the Council of Ministers of the EU in the Internal Market and Industry sections of its Competitiveness configuration, as well as in the Economic and Financial Affairs Council, and in the Energy section of its Transport, Telecommunications and Energy configuration. He was also a member of the Eurogroup from July 2004 to June 2009. On February 1, 2012, Mr. Krecké retired from government and decided to end his active political career in order to pursue a range of different projects. Mr. Krecké is currently the CEO of Key International Strategy Services. He is a member of the boards of JSFC Sistema, of East West United Bank, of Calzedonia Finanziara S.A., Jan De Nul S.A. and Novenergia Holding Company S.A. Mr. Krecké is a citizen of Luxembourg. Aditya Mittal.
Suzanne P. Nimocks, 59, 62, is a non-executive and independent Director of ArcelorMittal and a member of the Appointments, Remuneration and Corporate Governance and Sustainability Committee. She was previously a director (senior partner) with McKinsey & Company, a global management consulting firm, from June 1999 to March 2010, and was with the firm in various other capacities beginning in 1989, including as a leader in the firm’s Global Petroleum Practice, Electric Power & Natural Gas Practice, Organization Practice, and Risk Management Practice. Ms. Nimocks chaired the Environmental Committee of the Greater Houston Partnership, the primary advocate of Houston’s business community, until December 31, 2010. She holds a Bachelor of Arts in Economics from Tufts University and a Masters in Business Administration from the Harvard Graduate School of Business. Ms. Nimocks is currently a board member forof Ovintiv Inc (formerly Encana Corporation, Rowan Companies Plc,Corporation), and as of April 15, 2021, Lead Independent Director of the Board of Owens Corning, all listed companies. EncanaOvintiv Inc is a major natural gas exploration and production company Rowan Companies provides drilling services for the oil and gas industry and Owens Corning is a manufacturer of building products. In the non-profit sector, she is a member of the board of directors of the Houston Zoo and serves as a Trustee of the Texas Children’s Hospital.Hospital and is on the global Advisory Board of Advancing Women in Energy. Ms. Nimocks is a citizen of the United States of America.
Bruno Lafont, 62, 65, is Lead Independent Director of ArcelorMittal, a member of the Audit & Risk Committee and chairman of the Appointments, Remuneration and Corporate Governance Committee and Sustainability Committee. He began his career at Lafarge in 1983 and has held numerous positions in finance and international operations with the same company. In 1995, Mr. Lafont was appointed Group Executive Vice President, Finance, and thereafter, Executive Vice President of the Gypsum Division in 1998. Mr. Lafont joined Lafarge’s General Management as Chief Operating Officer between May 2003 and December 2005, Chief Executive Officer in January 2006, and he was appointed Chairman and Chief Executive Officer in May 2007. In July 2015 Mr. Lafont was appointed Honorary Chairman of Lafarge. He
was co-Chairman of the Board of Directors of LafargeHolcim between July 2015 and May 2017. He is presentlywas a board member of EDF and a member offrom 2008 to 2019. Mr. Lafont left the Executive Committee of the World Business Council for Sustainable Development (WBCSD). in December 2019. Born in 1956, Mr. Lafont is a graduate from the Hautes Etudes Commerciales business school (HEC 1977, Paris) and the Ecole Nationale d’Administration (ENA 1982, Paris). Mr. Lafont is a citizen of France. Mr. Lafont has informed the Company that, on December 8, 2017, he (along with five other former Lafarge officers) was placed under formal investigation (mis en examen) in his capacity as former CEO of Lafarge SA, in relation to alleged payments made by a subsidiary of Lafarge SA (Lafarge Cement Syria) to terrorist groups in Syria, and that alleged violations of EU economic sanctions and French labor law are also being investigated.
Tye Burt 61,, 64, is a non-executive and independent Director of ArcelorMittal and a member of the Appointments, Remuneration and Corporate Governance Committee andCommittee as well as of the Sustainability Committee. He was appointed President and Chief Executive Officer of Kinross Gold Corporation in March 2005. He held this position until August 1, 2012. Kinross is listed on the New York Stock Exchange and the Toronto Stock Exchange. Mr. Burt was also a member of the board of directors of Kinross. Mr. Burt has broad experience in the global mining industry, specializing in corporate finance, business strategy and mergers and acquisitions. Prior to joining Kinross, he held the position of Vice Chairman and Executive Director of Corporate Development at Barrick Gold Corporation. He was President of the Cartesian Capital Group from 2000 to 2002; Chairman of Deutsche Bank Canada and Deutsche Bank Securities Canada; Global Managing Director of Global Metals and Mining for Deutsche Bank AG from 1997 to 2000; and Managing Director and Co-Head of the Global Mining Group at BMO Nesbitt Burns from 1995 to 1997, holding various other positions at BMO Nesbitt Burns from 1986 to 1995. Mr. Burt is the Chair and Principal at Carbon Arc Capital Investments Corp. and was the Life Sciences Research Campaign Chair of the University of Guelph's Better Planet Project. Mr. Burt is a member of the Duke of Edinburgh's Award Charter for Business Board of Governors and is Vice-ChairDirectors of the Governors of the Royal Ontario Museum Foundation. He isBoart Longyear, a graduate of Osgoode Hall L, 61, is a non-executive and independent Director of ArcelorMittal and a member of the Appointments, Remuneration, Corporate Governance Committee and Sustainability Committee. He was appointed President and Chief Executive Officer of Kinross Gold Corporation in March 2005. He held this position until August 1, 2012. Kinross is listed on the New York Stock Exchange and the Toronto Stock Exchange. Mr. Burt was also a member of the board of directors of Kinross. Mr. Burt has broad experienceglobal leader in the global mining industry, specializing in corporate finance, business strategydrilling services and mergers and acquisitions. Prior to joining Kinross, he held the position of Vice Chairman and Executive Director of Corporate Development at Barrick Gold Corporation. He was President of the Cartesian Capital Group from 2000 to 2002; Chairman of Deutsche Bank Canada and Deutsche Bank Securities Canada; Global Managing Director of Global Metals and Mining for Deutsche Bank AG from 1997 to 2000; and Managing Director and Co-Head of the Global Mining Group at BMO Nesbitt Burns from 1995 to 1997, holding various other positions at BMO Nesbitt Burns from 1986 to 1995. Mr. Burt is the Chair and Principal at Carbon Arc Capital Investments Corp. and the Life Sciences Research Campaign Chair of the University of Guelph's Better Planet Project. Mr. Burt is a member of the Duke of Edinburgh's Award Charter for Business Board of Governors and is Vice-Chair of the Governors of the Royal Ontario Museum Foundation.equipment industry. He is a graduate of Osgoode Hall Law Scho
aw School, a member of the Law Society of Upper Canada,Ontario, and he holds a Bachelor of Arts degree from the University of Guelph. Mr. Burt is a citizen of Canada. ol, a member of the Law Society of Upper Canada, and he holds a Bachelor of Arts degree from the University of Guelph. Mr. Burt is a citizen of Canada.
Michel Wurth, 64, 67, is a non-independent Director of ArcelorMittal.ArcelorMittal and a member of the Sustainability Committee. He joined Arbed in 1979 and held a variety of functions before joining the Arbed Group Management Board and becoming its chief financial officer in 1996. The merger of Aceralia, Arbed and Usinor, leading to the creation of Arcelor in 2002, led to Mr. Wurth’s appointment as senior executive vice president and CFO of
Arcelor. He became a member of ArcelorMittal’s Group Management Board in 2006, responsible for Flat Carbon Europe, Global R&D, Distribution Solutions and Long Carbon Worldwide respectively. Michel Wurth retired from the GMB in April 2014 and was elected to ArcelorMittal’s board of directors in May 2014. He holds a Law degree from the University of Grenoble, France, and a degree in Political Science from the Institut d’Études Politiques de Grenoble as well as a Master’s of Economics from the London School of Economics, UK. Mr. Wurth is also doctor of laws honoris causa of the Sacred Heart University, Luxembourg. Mr. Wurth is Chairman of ArcelorMittal Luxembourg S.A. (a wholly owned subsidiary of ArcelorMittal S.A.) as well as Vice Chairman of the supervisory board of Dillinger Hütte AG and Dillinger Hütte Saarstahl AG (associates of ArcelorMittal). Mr. Wurth hasis Board member of Orion Engineered Carbon S.A. a global company active in the black carbon industry, listed on the NASDAQ. Mr. Wurth served as Chairman of the Luxembourg Chamber of Commerce sincebetween May 2004 and May 2019 and is a member of the Council of the Central Bank of Luxembourg. He is also non-executive Chairman of Paul Wurth Real Estate S.A. and member of the supervisory board of SMS Group (the controlling shareholder of Paul Wurth Real Estate S.A.), as well as non-executive Chairman of BIP Investment Partners S.A., non-executive Director of BGL BNP Paribas and BIP Capital Partners S.A., of SMS Group and non-executive Board member of Brasserie Nationale. Paul Wurth S.A. is controlled by SMS Group, a leading family owned equipment and engineering supplier for the steel and non-ferrous metal producing industry. BIP Investment Partners is aand BIP Capital Partners S.A. are Luxembourg based company, mainly investedcompanies organized as investment funds investing in small and mid-cap private equity BGL BNP Paribas is a Luxembourg bank, majority owned by BNP of France and Brasserie Nationale is a privately owned brewery based in Luxembourg. Mr. Wurth is vice-chairman of the Luxembourg Red Cross. Mr. Wurth is a citizen of Luxembourg.
Karyn Ovelmen, 55, 58, is a non-executive and independent Director of ArcelorMittal as well as the chairman of the Audit & Risk Committee. SinceFrom January 2019 to December 31, 2019, Mrs. Ovelmen has beenwas the Gas Power Transformation Leader for the General Electric Company. Prior to that, she served as Executive Vice President and Chief Financial Officer of Flowserve, a position that she held from June 2015 to February 2017. Previously, she also served as Chief Financial Officer and Executive Vice President of LyondellBasell Industries NV from 2011 to May 2015, as Executive Vice President and Chief Financial Officer of Petroplus Holdings AG from May 2006 to September 2010 and as Executive Vice President and Chief Financial Officer of Argus Services Corporation from 2005 to 2006. Prior to that, she was Vice President of External Reporting and Investor Relations for Premcor Refining Group Inc. She also spent 12 years with PricewaterhouseCoopers, primarily serving energy industry accounts. Mrs. Ovelmen is a member of the Hess Corporation Board of Directors and a member of the Audit Committee as of November 4, 2020. Mrs.
Ovelmen was a member of the Gates Industrial Corporation plc. Board of Directors as a non-executive director and iswas a member of their Audit Committee sincefrom December 2017.2017 to March 2019. Mrs. Ovelmen holds a Bachelor of Arts degree from the University of Connecticut, USA, and is a Certified Public Accountant ("CPA"). Mrs. Ovelmen is a citizen of the United States of America.
Karel de Gucht, 64, 67, is a non-executive and independent Director.Director and a member of the Audit & Risk Committee. Mr. de Gucht is a Belgian Minister of State. He was the European Commissioner for Trade in the 2nd Barroso Commission from 2010 to 2014 and for Development and Humanitarian Aid in the 1st Barroso Commission from 2009 to 2010. Previously, Mr. De Gucht served as Belgium's Minister of Foreign Affairs from 2004 to 2009 and Vice Prime Minister of Belgium from 2008 to 2009. In addition, in 2006, he was the Chairman in Office of the Organization for Security and Cooperation in Europe (OSCE) and Member of the Security Council of the United Nations from 2007 to 2008. Since 1991, Mr. De Gucht has been a Professor of Law at the VUB (the Dutch-speaking Free University Brussels). He is currently a member of the European Advisory Board of CVC Capital Partners, a member of the board of directors of the listed company Proximus NV and the president of the IES, the Institute of European Studies at the VUB. In the course of 2021, Mr. De Gucht has been nominated Chairman of the Board of YOUSTON NV, a Belgian company specialized in archiving, digitalization and processing. Mr. de Gucht holds a Master of Law degree from the VUB. Mr. de GuchtVUB and is a Belgian citizen.
Etienne Schneider, 50, is a non-executive and independent Director and a member of the Audit & Risk Committee. Etienne Schneider joined the government of Luxembourg in 2012 as Minister of the Economy and Foreign Trade before being appointed Deputy Prime Minister, Minister of the Economy, Minister of Internal Security and Minister of Defense in 2013. In 2018, Mr. Schneider became Deputy Prime Minister, Minister of the Economy and Minister of Health and in February 2020 retired from politics. He has previously filled several positions as a senior civil servant, such as a research assistant at the European Parliament in Brussels, economist for the LSAP parliamentary group in the Chamber of Deputies and project leader with NATO in Brussels. He also served as a government advisor responsible for various Directorates. Mr. Schneider became a member of the executive board of several companies, such as the Société électrique de l’Our (SEO), Enovos International SA, Enovos Deutschland AG and the National Credit and Investment Company (SNCI). Upon being appointed minister in 2012, he resigned from all of these positions. In 2021 Mr. Schneider became president of the board of LuxTP, a Luxembourgish affilate of the Belgian construction company Besix Group in which he holds a position as independent board member since 2020. Mr. Schneider holds a degree from the
Institut Catholique des Hautes Etudes Commerciales (ICHEC) in Brussels and from Greenwich University in London in commercial and financial sciences. Mr. Schneider is a citizen of Luxembourg.
Clarissa Lins, 54, is a non-executive and independent Director of ArcelorMittal as well as the chairman of the Sustainability Committee. Mrs. Lins is a senior executive with consolidated experience in strategy, sustainability, and corporate governance. With a distinguished education background in economy, she worked on relevant projects in the public sector at the beginning of her career - she was part of Brazil’s Ministry of Finance team that produced the economic stabilization program known as the Real Plan in 1994, under President Cardoso. She also served as an Advisor to the President of Brazil’s BNDES Development Bank, participating in the structuring of the country’s large-scale privatization projects from 1995 to 1999. She was head of Corporate Strategy at Petrobras from 1999 to 2002, when the state-owned oil and gas company shifted its strategy and improved its corporate governance practices while doing an IPO at the NYSE. Mrs. Lins moved her focus more specifically towards Sustainability in 2004, when she joined the FBDS Fundação Brasileira para o Desenvolvimento Sustentável (Brazilian Foundation for Sustainable Development). In 2013 she founded the consultancy Catavento, advising corporations in the areas of strategy and sustainability. Mrs. Lins was the President of the Brazilian Institute of Petroleum and Gas (IBP)
from November 2019 till March 2021, after serving as Executive Director for more than 3 years. She serves on Boards and Committees of leading companies operating in Brazil - including Suzano's Sustainability Committee (the world’s largest producer of market pulp), and the Board of Directors of Votorantim Cimentos. Other companies in which she has held relevant Board Committee positions include Shell, Vale and Petrobras. Mrs. Lins is a citizen of Brazil.
Senior management
On December 15, 2015, the Company announced that it would simplify its management structure in-line with the ongoing drive to promote a performance-driven culture, empowering the segments to deliver optimum business results. As a result the GMB, which was established to ensure a smooth integration following the creation of ArcelorMittal, was replaced, effective January 1, 2016, with a more flexible structure. As of December 31, 2018,2021, ArcelorMittal’s senior management iswas comprised of the CEOExecutive Office supported by fiveseven other Executive Officers. ArcelorMittal’s CEOExecutive Office iswas comprised of the Chief Executive Officer (“CEO”),Chairman, Mr. Lakshmi N. Mittal and the President and Chief Financial Officer (“CFO”),CEO, Mr. Aditya Mittal. Together, the Executive Officers are responsible for the implementation of the Company strategy, overall management of the business and all operational decisions.
On February 10, 2022, Vijay Goyal, Vice President of ArcelorMittal and Chief Executive Officer of ArcelorMittal CIS (ArcelorMittal Kryvyi Rih, Ukraine and ArcelorMittal Temirtau, Kazakhstan) and Dilip Oomen, Vice President of ArcelorMittal and Chief Executive Officer of AM/NS India were nominated Executive Officer and Executive Vice President of ArcelorMittal with immediate effect.
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| Name | | Age1 | | Position |
Lakshmi N. Mittal1 | | 6871 | | Executive Chairman and of ArcelorMittal |
Aditya Mittal1 | | 45 | | Chief Executive Officer of ArcelorMittal |
Aditya MittalGenuino Christino1 | | 4250 | | President and Chief Financial Officer of ArcelorMittal Investor Relations, and |
Stefan Buys1 | | 50 | | Executive Vice President, CEO ArcelorMittal Mining |
Jefferson de Paula1 | | 63 | | Executive Vice President, CEO ArcelorMittal South America Long |
Geert Van Poelvoorde1 | | 56 | | Executive Vice President, CEO ArcelorMittal Europe |
Bart Wille1 | | 60 | | Executive Vice President, Head of HR |
John Brett1 | | 56 | | Chief Executive Officer of ArcelorMittal EuropeNorth America |
Brian AranhaBradley Davey1 | | 6357 | | Executive vice president, headVice President and Head of strategy, CTO, R&D, CCM, and global automotiveCorporate Business Optimization |
Vijay Goyal2 | |
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Jefferson de PaulaDilip Oommen2 | | 6063 | | Executive vice president,Vice President, CEO ArcelorMittal South America Long |
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Geert Van Poelvoorde | | 53 | | Executive vice president, CEO ArcelorMittal Europe Flat |
Simon C. Wandke | | 59 | | Executive vice president, CEO ArcelorMittal Mining |
Bart Wille | | 57 | | Executive vice president, head of HRAM/NS India |
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1. | 1.Age and position as of December 31, 2021. 2.Age and position as of date of appointment. Age as of December 31, 2018.
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Lakshmi N. Mittal (See “–“—Board of Directors”).
Aditya Mittal, 42,(See "—Board of Directors")
Genuino M. Christino, 50, is the President and Chief Financial Officer and Executive Vice President of ArcelorMittal.ArcelorMittal since February 2021. He is also the Chief Executive Officer of ArcelorMittal Europe. Following the formation of ArcelorMittal in 2006, Aditya Mittal held various senior leadership roles, including managerial oversighta member of the Group's flat carbon steel businessesGroup management committee since 2016. Prior to Mr. Christino’s appointment as Chief Financial Officer, he was the Group Head of Finance since 2016. As Chief
Financial Officer, Mr. Christino is responsible for all of the Company’s financial functions, including treasury, corporate finance, accounting, performance management, insurance and investor relations. In addition, Mr. Christino oversees group Merger & Acquisitions, Legal and IT activities and is a member of the Company’s Investment Allocation Committee. Mr. Christino also heads the Company’s Corporate Finance and Tax
Committee where all key financial transactions of the group are reviewed and approved.
Prior to joining the ArcelorMittal Group in 2003, Mr. Christino had spent ten years at KPMG in Brazil and in the AmericasUnited Kingdom, as an auditor and Europe, in addition to his role as CFO and membership in the Group Management Board. Aditya Mittal joined Mittal Steel in January 1997, serving in various finance and management roles. In 1999, he was appointed Head of Mergers and Acquisitions. In his position, he led the Company's acquisition strategy, resulting in Mittal Steel's expansion into Central Europe, Africa and the United States. Subsequently, he was also involved in post-merger integration, turnaround and improvement strategies of the acquired companies. Between 2004 and 2006, Aditya Mittal was the President and CFO of Mittal Steel. In 2006, he initiated and led Mittal Steel's offer for Arcelor, creating the world's first 100 million tonnes plus steel company. In 2008, Aditya Mittal was named 'European Business Leader of the Future' by CNBC Europe and was ranked fourth in Fortune magazine's '40 under 40' list in 2011. He is an active philanthropist with a particular interest in child health. Together with his wife Megha, he is a significant supporter of the Great Ormond Street Children’s Hospital in London, having funded the Mittal Children’s Medical Centre, and in India, the couple work closely with UNICEF, having funded the first ever country-wide survey into child nutrition, the result of which will be used by the Government of India to inform relevant policy. Aditya Mittal serves on the board of Aperam, Iconiq Capital and Wharton School and is Chairman of India’s second largest refinery, HPCL-Mittal Energy Limited (HMEL). He is also a trustee at Brookings Institute and an alumni of the World Economic Forum Young Global Leader’s Programme. Aditya Mittalconsultant. Mr. Christino holds a Bachelor’sbachelor’s degree in Economics with concentrations in Strategic Managementaccounting and Corporate Financebusiness administration from the Wharton SchoolUniversidade Paulista in Pennsylvania, United States. Aditya Mittal isSão Paolo, Brazil and has also completed an Executive MBA Program from the son ofDom Cabral Foundation in Belo Horizonte, Brazil. Mr. Lakshmi N. Mittal and brother of Ms. Vanisha Mittal Bhatia. Aditya MittalChristino is a citizen of India. Brazil.
Brian AranhaJefferson de Paula, 63, is a member of the Group management committee, .President of ArcelorMittal Brazil, CEO of ArcelorMittal Long LATAM and Mining Brazil. Counting over 36 years of work in the steel industry, Mr. De Paula has been with the Group since 1991, occupying several executive positions in Brazil, Argentina, Americas and Europe. He joined Dofasco in 1979 as a memberis Vice President of the company's Research and Development Department. In 1989, he was assigned toFederation of Industries of the American Iron & Steel Institute (AISI) in Washington, D.C. and in 1991 he was partState of a Canadian consortium conducting a study for the World Bank on restructuring the Polish steel industry. In 1992, Brian returned to Dofasco where he held various positions in Supply Chain, Quality, Technology and Commercial sections until 2003 when he was namedMinas Gerais (FIEMG), Vice President - Commercial. Mr. Aranha took up additional responsibilities asof the Steering Committee of Instituto Aço Brasil (IABr), Vice President NAFTA automotive, after integration into ArcelorMittal in 2007. He moved to Europe as CMO and head of Global Automotive in 2009 followed by other assignments in NAFTA region in 2012. Currently based in Luxembourg, Mr. Aranha has responsibility for Global Automotive, R&D, Strategy, Commercial Coordination, Corporate Capital Goods Procurement, Corporate Communications and CSR as well as ArcelorMittal's automotive joint ventures in China and the tubular joint venture in Saudi Arabia. Mr. Aranha holds a Bachelor of Applied Science degree from the University of Toronto, Canada. In addition, he has completed the Executive Development Program at Queen's University, School of Business, Canada. Mr. Aranha is a citizen of Canada.
Jefferson de Paula 60, is a memberCommittee of the Group management committee who joined the group in 1991 as Meltshop Manager of Cariacica’s plant (Brazil) and became the plant’s General Manager in 1998. In 2001, he moved to Acindar in Argentina as COO and was appointed its Industrial and Commercial Vice President in 2006. In 2008, he joined Long Carbon Europe as COO of the Sections, Rails and Piles business division, later becoming CEO of Long Carbon Europe - South D, 60,Latin American Steel Association (ALACERO). Mr. De Paula is a member of the Group management committee who joined the group in 1991 as Meltshop Manager of Cariacica’s plant (Brazil) and became the plant’s General Manager in 1998. In 2001, he moved to Acindar in Argentina as COO and was appointed its Industrial and Commercial Vice President in 2006. In 2008, he joined Long Carbon Europe as COO of the Sections, Rails and Piles business division, later becoming CEO of Long Carbon Europe - South Division. In 2011,
ivision. In 2011, he was named CEO of Long Carbon Americas, which in 2014 became Long Carbon Central & South America. Mr. de Paula holds a Bachelor’s Degreegraduated in metallurgical engineering from Universidade Federal Fluminense (Brazil),. He also holds a Master’s Degree in finance and marketing from Universidad Austral (Argentina) and has attended to senior executive courses from Insead (France) and from Kellogg - Northwestern University (USA). In addition to his position in the Group, Mr. de Paula is the current vice president and member of the strategic board of Minas Gerais State Industry Association (FIEMG), he sits in the board of directors of Brazil’s Steel Association (Aço Brasil) and is the former president and member of Latin American Steel Association board (Alacero). Mr. de Paula is a citizen of Brazil. he was named CEO of Long Carbon Americas, which in 2014 became Long Carbon Central & South America. Mr. de Paula holds a Bachelor’s Degree in metallurgical engineering from Universidade Federal Fluminense (Brazil), a Master’s Degree in finance and marketing from Universidad Austral (Argentina) and has attended to senior executive courses from Insead (France) and from Kellogg - Northwestern University (USA). In addition to his position in the Group, Mr. de Paula is the current vice president and member of the strategic board of Minas Gerais State Industry Association (FIEMG), he sits in the board of directors of Brazil’s Steel Association (Aço Brasil) and is the former president and member of Latin American Steel Association board (Alacero). Mr. de Paula is a citizen of Brazil.
Geert Van Poelvoorde, 53, 56, is a member of the Group management committee. He started his career in 1989 as a project engineer at the Sidmar GentGhent hot strip mill, where he held several senior positions in the automation and process computer department. He moved to Stahlwerke Bremen in 1995 as senior project manager. Between 1998 and 2002, he headed a number of departments, and in 2003 he was appointed director of Stahlwerke Bremen, responsible for operations and engineering. In 2005, Mr. Van Poelvoorde returned to ArcelorMittal GentGhent to take up the position of Chief Operating Officer. In 2008, he became Chief Executive OfficerCEO of ArcelorMittal GentGhent with direct responsibility for primary operations. He was appointed Chief Executive OfficerCEO of the Business Division North within Flat Carbon Europe in 2009 and in2009. In January 2014, he was appointed Chief Executive OfficerCEO of Flat Carbon Europe and Purchasing.Purchasing and in February 2021 he became CEO of ArcelorMittal Europe. Since November 2015, he is also president of Eurofer, the European steel federation.federation and is serving on several boards. He graduated from the University of Ghent with a degree in civil engineering and electronics. Mr. Van Poelvoorde is a citizen of Belgium.
Simon C. Wandke, 59, is a member of the Group management committee and the Chief Executive Officer of ArcelorMittal Mining. He joined ArcelorMittal in January 2011 as chief commercial officer of ArcelorMittal Mining. He has over 30 years’ experience in the mining and minerals industry, starting his career in 1981 at BHP, where he held positions in mines in Australia and Indonesia and held other commercial offices globally until 2002. He then joined Destra Consulting Group as Partner before becoming Chief Marketing Officer for Ferrexpo plc in 2006 based in Hong Kong, Switzerland & United Kingdom. Simon is a graduate of the Australian Institute of Company Directors with a diploma in Company Directorship. He also holds a post graduate diploma in Corporate Finance from Swinburne University as well as a B.A., Psych, Marketing (Comm) from the University of Melbourne. Mr. Wandke holds dual citizenship in Australia and the United Kingdom.
Bart Wille,, 57,60, is a member of the Group management committee. He was appointed head of human resources in January 2018. He joined ArcelorMittal after more than 30 years
of global human resources management experience in various multinational companies. Mr. Wille joined Unilever in 1985 withand he served the company during 22 years, of service andwith positions held in Belgium, the United Kingdom, Brazil and the Netherlands. After having joined Puratos (food ingredients) for a short period, Mr. Wille pursued his career with Bekaert as chief human resources officer at the beginning of 2009. As a member of the Bekaert Group Executive Board, Mr. Wille was responsible for human resources and the reorganization agenda of the company worldwide. In this role, he supported the international expansion of the company and he participated in the restructuring and change of the company's organization, as well as the continuous transformation of its culture. Mr. Wille is a graduate in international business administration of UFSIA, the University of Antwerp. Mr. Wille is a citizen of Belgium.
John Brett, 56, is a member of the Group management committee and the Chief Executive Officer of ArcelorMittal North America. He joined the group at former Inland Steel in 1988 as an associate accountant, and progressed to become a manager specializing in financial analysis and systems in 1997. In 1998, John took on the role of controller for Ispat Inland Steel and in 2005, he was promoted to vice president, finance and planning and controller for Mittal Steel USA. In 2012, Mr. Brett was appointed executive vice president finance, planning and procurement for ArcelorMittal USA. Prior to becoming CEO ArcelorMittal North America in January 2021, Mr. Brett was CEO ArcelorMittal USA. Mr. Brett holds an MBA from the University of Chicago and is a graduate in economics from DePauw University. Mr. Brett is a citizen of the United States of America.
B. Compensation
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ContentManagement report | 182 |
Automotive, R&D, CTO, Commercial Coordination, Corporate Capital Goods Procurement, Corporate Communications and Corporate Responsibility, Automotive, JV’s in China and India, Tailored Blanks Americas, and is Vice Chairman of the Investment Allocation Committee. Mr. Davey holds a mechanical engineering degree from McMaster University, Canada. Mr. Davey is a citizen of Canada.
Stefan Buys, 50, is a member of the Group management committee and the CEO of ArcelorMittal Mining. He joined the group on October 1, 2021. He has over 25 years experience in the mining and minerals industry, starting his career in 1994 at Iscor Vanderbijlpark in South Africa. He joined Xstrata in 1995 and led various operational units, the last one as Chief Operating Officer of Xstrata Copper North Chile. In 2010, he joined BHP as Asset President Olympic Dam and later served as Project Director Organization Design. Before joining ArcelorMittal he joined RioTinto in 2018 as Managing Director Pilbara Mines. He holds a bachelor’s degree in metallurgical engineering from the University of Pretoria, a post graduate diploma in management from the University of South Africa and a post graduate diploma in teaching from the University of Western Australia. Mr. Buys holds dual citizenship in Australia and South Africa.
Vijay Goyal, 50, is a member of the Group management committee and the Chief Executive Officer of ArcelorMittal CIS (ArcelorMittal Kryvyi Rih, Ukraine and ArcelorMittal Temirtau, Kazakhstan). The joint venture ArcelorMittal Tubular Products Jubail is also part of his scope. After having started his career as an internal auditor at ITC Ltd in India, he joined Mittal Steel in 1999 and held various positions in the finance function. In 2007, he was nominated as CFO and Head of Strategy for Long Carbon Europe, followed by his appointment as CFO and Head of central supply chain of Flat Carbon Europe in 2008. From 2014 to 2016, he was CFO of ArcelorMittal Europe, additionally in charge of legal, IT and the Shared Service Center Europe before being appointed CEO of ArcelorMittal Downstream Solutions and member of the Group Management Committee in October 2016. During 2019, he focused on the leadership of strategic projects for ArcelorMittal, primarily with respect to the acquisition of ESIL with the Company's joint venture partner NSC to create AMNS India, prior to his appointment as CEO of ArcelorMittal CIS from January 2020 onwards. Mr. Goyal is a graduate from St Xavier’s College, Calcutta. He is a chartered accountant and cost and works accountant from the respective institutes in India. He has also completed executive education programs at Wharton Business School. Mr. Goyal is a citizen of India.
Dilip Oommen, 63, is a member of the Group management committee. He was appointed CEO of AMNS India in December 2019 after the acquisition of ESIL. He has more than 38 years of experience in the steel industry. Mr. Oommen joined ESIL in
2003 as chief operating officer, before moving to senior leadership positions within the company. He was appointed Managing director and Chief Executive Officer of ESIL in 2019. Prior to joining ESIL, Mr. Oommen had worked in various leadership roles in Hadeed (SABIC), both in Long and Flat Product divisions. In 2020, Mr. Oommen was elected President of the Indian Steel Association, the industry body that represents major public and private sector steel companies in India. He has also served in the past as Co-Chair of the Federation of Indian Chambers of Commerce & Industry’s ("FICCI") Steel Committee, one of several industry leadership roles he has taken on during his career. Mr. Oommen is a metallurgical engineer from the Indian Institute of Technology, Kharagpur. He has attended several management and technical programs across the globe. Mr. Oommen is a citizen of India.
| | | | | |
| Content | |
Annual statement by the ARCGSARCG Committee Chairman | |
| Board of Directors | |
| Remuneration at a glance - senior management | Overview of the Company's remuneration policy and rationale of each performance metric |
Remuneration at a glance - 20182021 pay outcomes | Comparison of pay outcomes 20182021 vs. 2017 2020
Explanation of results for 20172020 short-term incentives paid in 2018 2021 |
| Remuneration | |
| Remuneration strategy | Explanation of what informs the ARCGS'sARCG's decision on pay |
| Remuneration policy | Explanation of policies applied to senior management
|
| Remuneration mix | Overview of the remuneration mix for senior management |
20182021 Total remuneration | Overview of 20182021 outcomes |
| Short-term incentives | Description of short-term incentives plan ("STI") |
| Long-term incentive plan | Description of long-term incentive plan ("LTIP" or "LTI"s) |
| Global stock option plan | Description of global stock option plan |
| Other benefits | Description of other benefits |
| SOX 304 and Clawback | Explanation of SOX section 304 rules regarding clawbacks of CEO/CFO remuneration |
| |
| Abbreviations | |
| EBITDA | Operating income plus depreciation, impairment expenses and exceptional items |
| FCF | Free cash flow |
| STI | Short-term incentives |
| LTI/LTIP | Long-term incentives (plans) |
| EPS | Earnings per share |
PSUESG | Environment, social and governance |
| PSU | Performance share units |
| RSU | Restricted share units |
| ROCE | Return on capital employed |
| TSR | Total shareholder return |
Annual statement by the ARCGSARCG Committee Chairman
Dear Shareholders,
Description of the year:
Business and results
ArcelorMittal's 2018After the unprecedented disruption we faced in 2020, our business has seen a strong recovery this year. Despite the volatility we continue to see because of the ongoing presence and repercussions of the COVID-19 pandemic, 2021 has been a very strong year for ArcelorMittal. We have re-positioned our balance sheet, we are growing strategically through high-quality, high-return projects and we are returning capital to shareholders through 171 million shares bought back in 2021. The sale of ArcelorMittal USA to Cleveland-Cliffs together with other cost reduction measures essentially improved overall cost competitiveness. ArcelorMittal’s $4.0 billion net income of $5.1debt ($8.4 billion gross debt) at December 31, 2021 was substantially higher, as compareddown from $6.4 billion ($12.3 billion gross debt) at December 31, 2020. We continued to its net income of $4.6 billion for 2017. The strong financial performance is in line with ArcelorMittal’sfocus on improving our costs through strategic plan, ActionM&A activity. In 2020, that aims at making the Company strongersold ArcelorMittal USA and on April 14, 2021, the Company created the joint venture Acciaierie d'Italia, a leading steel producer in Italy, with structural improvementsInvitalia, an Italian state-owned company. Acciaierie d'Italia produces high-quality and sustainable steel to optimize cost, capture volume opportunitiesbe used in attractive markets and increasea range of vital industry sectors across the sharedomestic steel market. Moreover, we took a leading role in the steel industry’s transition towards a low-carbon future, by launching three XCarb™ initiatives, as part of high added value products. Although operational issues had an impact on the Company's progressjourney to deliver on Actionits 2050 net zero commitment: i) issuing XCarb™ green steel certificates; ii) XCarb™ recycled and renewably produced steel that is made with recycled material (scrap), using renewable electricity and giving it an extremely low CO2 footprint; and iii) the XCarb™ innovation fund in which ArcelorMittal will invest up to $100 million annually in groundbreaking companies developing pioneering breakthroughs that will accelerate the steel industry's transition to carbon neutral steelmaking.
Remuneration report and policy
At the Annual General Meeting of Shareholders, held on June 8, 2021, we submitted our Remuneration Policy and Remuneration Report for 2020 during 2018, we are confident that theseto our shareholders. The shareholders voted 96.6% in favor to approve our Remuneration Policy for the coming four years. This Policy is well-supported and will be resolved and that ArcelorMittal will deliver its full potential, through focused and effective leadership. This should enablefurther developed to meet the Company to outperform the competition in its different market environments.Company’s new challenges.
Governance, Board and Committee compositionCommittees
During its meeting2021, we successfully transitioned to a new CEO and separated the Executive Chairman and CEO roles ensuring both
continuity and succession. The Board of May 8, 2018,Directors has overall responsibility for the Board renewed its emphasis on four key areas (Health & Safety, Environmentgovernance and Community Relations, Climate Changestrategic direction of ArcelorMittal, including considering the effects of climate change. In 2021, we reviewed management efforts in the field of climate change and Social issues) andother ESG initiatives. Several years ago, we added thesesustainability to the scopetasks of the ARCG Committee to ensure a Board level review of these important topics. Accordingly,developing it into the ARCG Committee was renamed the ARCGS Committee ("Appointments, Remuneration, Corporate Governance and Sustainability Committee") to highlight the Company’s focus on these key areas. AsCommittee. After a result, ArcelorMittal complies with the new Principle 9 on companies' corporate social responsibility introduced subsequently to the revision of the 10 Principles of the Luxembourg Stock Exchange. According to Recommendation 9.3 under the Principles, the Board shall regularly consider the Company's non-financial risks, including social and environmental risks. To this end, the ARCGS oversees the Company's sustainable development plans and associated management systems, to ensure that ArcelorMittal is well positioned to meet the evolving expectations of stakeholders including investors, customers, regulators, employees and communities.
Executive remuneration
In preparationsuccessful journey we are now ready for the General Meeting held in May 2018, the ARCGS Committee found that in general the Company’s remuneration policy, including the base remunerationnext step. Our activity and short- and long-term incentives for the most senior executives was well supported by our shareholders and stakeholders in 2018. The ARCGS Committee believes that the Long-Term Incentive Plan achieves its objective of being competitive and properly incentivizes management in line with shareholder priorities. Going forward, the ARCGS Committeeprogress will continue to interactbe overseen by a robust governance structure that, at the board level, now includes a Sustainability Committee (“SC”), chaired by a newly appointed independent director. The SC was created for informative and advisory purposes. Its primary function includes being familiar with proxy advisors and shareholdersshaping the Group’s policies, objectives, and guidelines on remunerationenvironmental, safety, and sustainability matters, analyzing and reporting to the Board of Directors on the expectations of the Company’s various stakeholders, and supervising relations with them. It also proposes approval of Sustainability Policies to the Board of Directors and reviews and assesses management and control systems for non-financial risks. The creation of this new Committee highlights the importance of sustainability and especially health and safety at the board level. A number of fatal incidents occurred at different sites of ArcelorMittal (in Ukraine, in Kazakhstan, in South Africa), which points out the Company's need to strengthen the safety of its workforce with an absolute focus on eradicating fatalities. The ARGC Committee will now focus on Remuneration, Board appointments and corporate governance related mattersgovernance. At the senior management level, the Company’s response to climate change is coordinated and welcomes their questionsprogressed by the Group Climate Change and comments.Environment Committee (“CCEC”) and chaired by one of the Executive Officers of the group. During the year, the Committee had a major focus on Health & Safety and held three separate additional meetings together with both senior and operational management to review progress on Health & Safety and make recommendations for improvement. The SC also plays a key role in building up a true safety culture within the ArcelorMittal Group. While the Global Health and Safety Council of the Group monitors progress on safety, the SC is responsible for oversight on behalf of the Board. The SC meets quarterly, and safety is at the top of every agenda. In addition, it calls ad hoc meetings regarding safety with executives and other leaders from across the business.
Activities
Throughout 2018,Remuneration and Nomination
During 2021, the ARCGSARCG Committee conducted the Annual Self-Assessment of the Board of Directors, it reviewed and approved bonusshort-term incentive proposals for senior management, and it approved the remuneration report for 2018.2021. The ARCGSARCG Committee recommended remuneration and governance-related proposals for the annual general meeting of shareholders. The
ARCG Committee also reviewed remuneration and governance related proposals for the General Meeting of Shareholders. The ARCGS Committee revised succession plans for the Board, the CEO officeExecutive Office, and senior executives. The ARCGSARCG Committee also reviewed and approved nominations and the salariesremuneration for the Executive Chairman, the CEO, the CFO and the Executive Vice Presidents. ItPresidents and tested market conformity, as well as an appropriate link between executive pay and performance. The ARCG Committee reviewed the grant and vesting criteria for future grants, reviewedequity awards, assessed and selected performance and compensation peer groups under the Long-Term Incentive Plan and confirmed the vesting of existing plans in accordance with each plan’s criteria: the ARCG Committee strengthened the corporate responsibility objectives and criteria set– in advance. The ARCGS Committee also considered the need for additional retention plans. Furthermore, the Committee integrated Sustainability in its Charter and had discussionsparticular in the contextareas of environmentalHealth & Safety, Diversity & Inclusion and social improvement, supply chainClimate Change – for both the short- and healthlong-term incentive plans.
Climate and safety topics.Sustainability
Going forward
The integration of Ilva and the potential acquisition of Essar Steel India remain important strategic steps for ArcelorMittal. The successful HR integration forms the greatest challenge in our M&A transactions, strong management capabilities and engagement are critical for organizational success. Hence, a thorough and objective leadership selection process, as well as robust succession planning discussion are important priorities for the coming year. Going forward, the ARCGS Committee willoutlook remains positive: underlying demand is expected to continue to focusimprove; and, although below the recent record highs, steel prices remain at elevated levels, something which is being reflected in the annual contracts for 2022.
Over this past year, we have engaged with our stakeholders on climate change and health & safety more than ever before. We expect 2022 will demonstrate how seriously we took stakeholder inputs, how closely we have listened to their questions, and how committed we are to providing solutions. We expect that the global challenges of sustainability,year ahead will enable us to make further progress on our
journey to zero harm to our people and what they mean for us as the world’s largest steel company. The
ARCGS Committee intends to progress a positive dialogue in 2019 and to put even more focus on sustainability. The ARCGS Committee lookswe look forward to discussing its activities atleading the upcoming Annual General Meeting in May 2019.
Sincerely yours,
Bruno Lafont
Board of Directors
Directors’ fees
The ARCGSARCG Committee of the Board of Directors prepares proposals on the remuneration to be paid annually to the members of the Board of Directors.
At the May 9, 2018June 8, 2021 annual general meeting of shareholders, the shareholders approved the annual remuneration for non-executive directors for the 20172020 financial year, based on the following annual fees (euro denominated amounts are translated into U.S. dollarsdollar as of December 31, 2018) 2020):
| |
• | Basic director’s remuneration: €144,720 ($165,704);
|
| |
• | Lead Independent Director’s remuneration: €204,120 ($233,717);
|
| |
• | Additional remuneration for the Chair of the Audit & Risk Committee: €28,080 ($32,152);
|
| |
• | Additional remuneration for the other Audit & Risk Committee members: €17,280 ($19,786);
|
| |
• | Additional remuneration for the Chairs of the other committees: €16,200 ($18,549); and
|
| |
• | Additional remuneration for the members of the other committees: €10,800 ($12,366).
|
•Basic director’s remuneration: €154,995 ($190,194);
•Lead Independent Director’s remuneration: €218,612 ($268,259);
•Additional remuneration for the Chair of the Audit & Risk Committee: €30,074 ($36,904);
•Additional remuneration for the other Audit & Risk Committee members: €18,507 ($22,710);
•Additional remuneration for the Chairs of the other committees: €17,350 ($21,290); and
•Additional remuneration for the members of the other committees: €11,567 ($14,194).
The total annual remuneration of the members of the Board of Directors
paid in 2018 and 2017for their service for the last five financial years was as follows:
|
| | | | | |
| | Year ended December 31, |
| (Amounts in $ thousands except Long-term incentives information) | 2018 | | 2017 |
Base salary1 | 1,604 |
| | 1,505 |
|
| Director fees | 1,509 |
| | 1,744 |
|
Short-term performance-related bonus1 | 2,775 |
| | 2,333 |
|
Long-term incentives 1, 2 | 70,302 |
| | 49,431 |
|
| |
1 | Chairman and CEO only. Slight differences between the years are possible, due to foreign currency effects.
|
| |
2 | See “Item 6.B—Directors, senior management and employees—Compensation—Remuneration—Long-term incentive plan.” |
| | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| (Amounts in $ thousands except Long-term incentives information) | 2021 | 2020 | | 2019 | 2018 | 2017 |
Base salary1 | 3,483 | | 2,635 | | | 1,569 | | 1,604 | | 1,505 | |
| Director fees | 1,784 | | 1,706 | | | 1,554 | | 1,509 | | 1,744 | |
Short-term performance-related bonus1 | 5,133 | | 935 | | | 3,198 | | 2,775 | | 2,333 | |
Long-term incentives 1, 2 | 109,143 | | 148,422 | | | 89,933 | | 70,302 | | 49,431 | |
1Includes Executive Chairman and CEO in 2021, Chairman and CEO and President and CFO in 2020 and Chairman and CEO in all prior years. Slight differences between the years are possible, due to foreign currency effects.
2See “Management and employees—Compensation—Remuneration—Long-term incentive plan.”
The annual remuneration paid for 2018 and 2017the last five financial years to the current and former members of the Board of Directors for services in all capacities in the years in which they were Directors was as follows:
| | | | | | | | | | | | | | | | | | | | |
| (Amounts in $ thousands) | | 20211 | 20201 | 20191 | 20181 | 20171 |
| Lakshmi N. Mittal | | 1,700 | | 1,374 | | 1,569 | | 1,604 | | 1,505 | |
| Aditya Mittal | | 1,783 | | 1,261 | | — | | — | | — | |
| Vanisha Mittal Bhatia | | 176 | | 186 | | 171 | | 166 | | 174 | |
| Narayanan Vaghul | | — | | — | | — | | — | | 69 | |
| Suzanne P. Nimocks | | 189 | | 200 | | 183 | | 178 | | 187 | |
| Wilbur L. Ross, Jr. | | — | | — | | — | | — | | 32 | |
| Lewis B. Kaden | | — | | — | | — | | — | | 95 | |
| Bruno Lafont | | 302 | | 306 | | 280 | | 272 | | 255 | |
| Tye Burt | | 194 | | 200 | | 183 | | 178 | | 187 | |
| Karyn Ovelmen | | 221 | | 223 | | 204 | | 198 | | 203 | |
| Jeannot Krecké | | — | | 78 | | 171 | | 166 | | 174 | |
| Michel Wurth | | 181 | | 186 | | 171 | | 166 | | 174 | |
| Karel de Gucht | | 208 | | 209 | | 191 | | 185 | | 194 | |
| Etienne Schneider | | 197 | | 118 | | — | | — | | — | |
| Clarissa Lins | | 116 | | — | | — | | — | | — | |
| Total | | 5,267 | | 4,341 | | 3,123 | | 3,113 | | 3,249 | |
1.Remuneration for non-executive Directors with respect to 2021 will be paid in 2022 subject to Board of Directors proposal and to the shareholder approval at the annual general meeting to be held on May 4, 2022. Remuneration for non-executive Directors with respect to 2020, 2019, 2018 and 2017 was paid in 2021, 2020, 2019 and 2018, respectively, following the shareholder approval at the annual general meetings held on June 8, 2021, June 13, 2020, May 7, 2019 and May 9, 2018, respectively. Slight differences between the years are possible, due to foreign currency effects.
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| | | | | | | | | | | | |
| | | | | | | 2018 | | 2017 | | 2018 | | 2017 |
| (Amounts in $ thousands except share information) | | 20181 | | 20171 | | Short-term Incentives | | Short-term Incentives | | Long-term Number of PSUs | | Long-term Number of PSUs |
| Lakshmi N. Mittal | | 1,604 | | 1,505 | | 2,775 | | 2,333 | | 70,302 | | 49,431 |
| Vanisha Mittal Bhatia | | 166 | | 174 | | — | | — | | — | | — |
| Narayanan Vaghul | | _ | | 69 | | — | | — | | — | | — |
| Suzanne P. Nimocks | | 178 | | 187 | | — | | — | | — | | — |
| Wilbur L. Ross, Jr. | | _ | | 32 | | — | | — | | — | | — |
| Lewis B. Kaden | | _ | | 95 | | — | | — | | — | | — |
| Bruno Lafont | | 272 | | 255 | | — | | — | | — | | — |
| Tye Burt | | 178 | | 187 | | — | | — | | — | | — |
| Karyn Ovelmen | | 198 | | 203 | | — | | — | | — | | — |
| Jeannot Krecké | | 166 | | 174 | | — | | — | | — | | — |
| Michel Wurth | | 166 | | 174 | | — | | — | | — | | — |
| Karel de Gucht | | 185 | | 194 | | — | | — | | — | | — |
| Total | | 3,113 | | 3,249 | | 2,775 | | 2,333 | | 70,302 | | 49,431 |
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1.187 | Remuneration for non-executive Directors with respect to 2018 (subject to shareholder approval at the annual general meeting to be held on May 7, 2019) will be paid in 2019 and is included in the 2018 column. Remuneration for non-executive Directors with respect to 2017 (paid after shareholder approval at the annual general meeting held on May 9, 2018) is included in the 2017 column. Remuneration for non-executive Directors with respect to 2018 and paid after shareholder approval at the annual general meeting held on May 10, 2017 is included in the 2017 column. Slight differences between the years are possible, due to foreign currency effects.Management report |
As of December 31, 2018, ArcelorMittal did not have any loans or advances outstanding to members of its Board of Directors
Except for the Executive Chairman and ArcelorMittal had not given any guarantees in favor of any member of its Board of Directors.
None of the CEO, members of the Board of Directors have not received any remuneration from any subsidiary of the Group in 2021.
The annual remuneration for the last five financial years on a full-time equivalent basis of employees of ArcelorMittal S.A. was as follows:
| | | | | | | | | | | | | | | | | |
| (Amounts in $ thousands) | 20211 | 20201 | 20191 | 20181 | 20171 |
| Average Remuneration | 446 | | 412 | | 389 | | 408 | | 379 | |
1.The annual remuneration is calculated for approximately 20 employees with a labor contract with ArcelorMittal S.A (not including any employees employed by other entities within the Chairman and CEO, benefit from an ArcelorMittal pension plan. Group)
ArcelorMittal has performed a benchmarking on remuneration with its selected peers and fixed the remuneration of the employees and Directors based on the outcome of that exercise.
The policy of the Company is not to grant any share-based remuneration to members of the Board of Directors who are not executives of the Company. As of December 31, 2021, ArcelorMittal did not have any loans or advances outstanding to
members of its Board of Directors and ArcelorMittal had not given any guarantees in favor of any member of its Board of Directors. None of the members of the Board of Directors, other than the CEO, benefit from an ArcelorMittal pension plan. Short-term incentives paid to executive directors (including the current CEO beginning in 2020) were as follows for the last five financial years:
| | | | | | | | | | | | | | | | | | | | |
| | Short-term Incentives |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Lakshmi N. Mittal | | 2,908 | | — | | 3,198 | | 2,775 | | 2,333 | |
| Aditya Mittal | | 2,226 | | 935 | | — | | — | | — | |
The following tables provide a summary of the options and the exercise price of options and PSUs granted (long-term incentives) to the Chairman and CEO, who is the sole executive directordirectors on the Board of Directors (including the current CEO beginning in 2020), as of
December 31, 2021. There were no outstanding stock options as of December 31, 2018. 2021.
| | | | | | | | | | | | | | | | | | | | |
| | PSUs granted in 2021 | PSUs granted in 2020 | PSUs granted in 2019 | PSUs granted in 2018 | PSUs granted in 2017 | PSUs granted in 2016 |
| Lakshmi N. Mittal | 52,166 | | 77,372 | | 89,933 | | 70,302 | | 49,431 | | 84,107 | |
| Aditya Mittal | 56,977 | | 71,050 | | — | | — | | — | | — | |
| Term (in years) | 3 | 3 | 3 | 3 | 3 | 5 |
Vesting date1 | January 1, 2025 | January 1, 2024 | January 1, 2023 | January 1, 2022 | January 1, 2021 | January 1, 2022 |
1.See “Management and employees—Compensation—Remuneration—ArcelorMittal Equity Incentive Plan", for vesting conditions.
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| | | | | | | |
| | Options granted in 2010 | | Options granted in 2009 | | Options Total | | Weighted Average Exercise Price of Options |
Lakshmi N. Mittal1 | 18,833 | | 20,000 | | 38,833 | | $100.82 |
| Exercise price | 91.98 | | 109.14 | | — | | $100.82 |
| Term (in years) | 10 | | 10 | | — | | — |
| Expiration date | Aug. 3, 2020 | | Aug. 4, 2019 | | — | | — |
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1.Management report | The options granted in the table above were revised following the completion of the Company's share consolidation of each three existing shares into one share without nominal value on May 22, 2017.
188 |
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| | PSUs granted in 2018 | PSUs granted in 2017 | PSUs granted in 2016 | |
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Lakshmi N. Mittal2 | 70,302 | 49,431 | 168,214 | |
|
| Term (in years) | 3 | 3 | 3+2 | |
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Vesting date1 | January 1, 2022 | January 1, 2021 | January 1, 2020 and January 1, 2022 | |
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1. | See “Item 6.B—Directors, senior management and employees—Compensation—Remuneration—Long-term incentive plan", for vesting conditions. |
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2. | The options granted in the table above were revised following the completion of the Company's share consolidation of each three existing shares into one share without nominal value on May 22, 2017. |
The PSUs granted in 2015 gave the right to receive ArcelorMittal shares at the end of the vesting period as the performance conditions set at the date of the grant have been partially met. See “—2018 LTI vesting (2015 grants)” below for more information.
Remuneration at a glance - senior management
The following table provides a brief overview of the Company’s remuneration policy for senior management. Additional information is provided below.
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| ArcelorMittal's Remuneration Policy | | |
| Remuneration | Period | Strategy | | Characteristic |
| Salary | 20182021 | Recruitment and retention | l | Reviewed annually by the ARCGSARCG Committee considering market data |
| l | Increases based on the Company performance and individual performance |
| STI | 20182021 | Delivery of strategic priorities and financial success | l | Maximum STI award of 270% of base salary for the Executive Chairman, and the CEO 225%and 157.5% of base salary for the CFO and 135% of base salary for other
Executive Officers
|
| l | 100% STI paid in cash |
| l | ArcelorMittal's first priority Health and Safety is part of the STI |
| l | Overperformance towards competition |
| LTIP | 2019-20212022-2024 | Encourages long term shareholder return | l | Performance share units granted with a face value of 100% of base salary for the CEOExecutive Chairman and CFO and between 50-60%CEO
Performance share units / Restricted share units granted with a total face value of 75% as a guideline for other Executive Officers |
| l | Shares vest after a three-year performance period |
| l | Performance related vesting |
|
| | | | | | | | | | |
Key Performance Metrics from 20182021 |
| Metrics | Scheme | | Rationale |
| EBITDA | STI | l | Demonstrates growth and operational performance of the underlying businesses |
| FCF | STI | |
ROCE | STI | l | Critical factor for long-term success and sustainability of the Company |
| Gap to competition | STI / LTIP | l | Outperform peers |
| Health & Safety | STI | l | Employee health and safety is a core value for the Company |
Business Specific measuresESG | STILTIP | l | For corporate functions, links reward to strategic priorities of their functionsImprove health & safety outcome, achieve decarbonization and diversity & inclusion targets |
| EPS | LTIP | l | Links reward to delivery of underlying equity returns to shareholders |
| TSR | LTIP | l | Creates a direct link between executive pay and shareholder value |
| l | Measure is split equally between comparison against S&P 500 index and a peer group of companies |
Remuneration at a glance - 20182021 Pay outcomes
The following graphics comparepresent in thousands of U.S. dollar the compensation paid to the Executive Chairman (CEO until February 11, 2021) in 2021, 2020, 2019, 2018 and 2017 and to the CEO (President and CFO until February 11, 2021) in 2021 and 2020. Amounts presented for the CFO and other Executive Officers in 2018relate to the former President and 2017 in thousands of U.S. dollars.CFO (Aditya Mittal) and other Executive Officers until February 11, 2021 and to the CFO and other Executive Officers thereafter. Information with respect to total remuneration paid is provided under “—Renumeration—2018Remuneration—2021 Total remuneration” below.
20172020 short-term incentives paid in 20182021
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| Business Units | Executive | Realization as % of business target |
CEO officeExecutive Office | Lakshmi N. Mittal
Aditya Mittal | 134%99% |
| Corporate | Brian Aranha | 146%109% |
CorporateNAFTA | Henri BlaffartJohn Brett1
| 145%86% |
| Corporate | Genuino Christino | 114% |
| Corporate | Bradley Davey | 93% |
| Flat Carbon Europe | Geert van Poelvoorde | 135%100% |
| Long Carbon South America | Jefferson de Paula | 113%150% |
| Mining | Simon Wandke | 85%145% |
50% NAFTA
50% CalvertCorporate | Robrecht HimpeBart Wille2
| 84%100% |
Note: Individual performance not included in the percent of realization.
1 Mr. Blaffart retired from the Company on April 1, 2018.2 Mr. Himpe retired from the Company on July 1, 2018.
2018 LTI vesting (2015 grants)
The following tables provide information about theThere was no vesting in 20182021 for the Executive Office for the first half of long-term incentives granted to senior management in prior years. See also note 7.3 to the consolidated financial statements.PSU 2017 grant as the performance targets were not met.
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TSR Vesting - 50% of overall opportunity | EPS Vesting - 50% of overall opportunity |
l | The Company’s TSR performance was 36.9% for the three-year performance period | l | The Company’s EPS performance was higher than 2,000% for the three-year performance period |
l | This was above the target compared to the S&P 500 and the peer group performance | l | This was an over-performance
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l | As a result, 105.8% of the TSR component of the 2015 LTIP has vested | l | As a result, 150% of the EPS component of the 2015 LTIP has vested (as set forth in the table below) |
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| | Number of PSUs granted in 2015 outstanding in 2018 | Number of shares vested |
| CEO | 59,773 | 76,450 |
President and CFO and other ex-GMB members1 | 94,994 | 70,389 |
1.For ex-GMB members the vesting was pro-rata temporis.
CFO and Other Executive Officers
In 2018,2021, the following long-term incentives vested:
| | | | | | | | | | | | | | |
| Vehicle | Date of vesting | Date of grant | Number of PSUs granted to CFO and other Executive officers and outstanding | Number of shares acquired by CFO and other Executive officers |
| PSUs* | January 1, 2021
Performance approved by the ARCG committee on April 21, 2021 | June 30, 2016 | 229,640 | 67,855 |
| PSUs | January 1, 2021
Performance approved by the ARCG committee on April 21, 2021 | December 20, 2017 | 66,897 | 12,143 |
| RSUs | December 14, 2021 | December 14, 2020 | 21,873 | 21,873 |
* the grant number corresponds to half of the grant of 2016 as only half remained to vest in 2021 |
| | | | |
| Vehicle | Date of vesting | Date of Grant | Number of PSUs/RSUs granted to the Executive Officers and outstanding | Number of Shares acquired by the Executive Officers |
| PSUs | January 1, 2018 Performance approved by ARCGS Committee on March 6, 2018 | December 17, 2014 | 14,668 | 16,174 |
| RSUs | December 18, 2018 | December 18, 2015 | 16,002 | 14,948 |
Remuneration
Remuneration strategy
The ARCGSARCG Committee assists the Board of Directors to maintain a formal and transparent procedure for setting policy on senior management's remuneration and to determine an appropriate remuneration package for senior management. The ARCGSARCG Committee should ensure that remuneration arrangements support the strategic aims of the business and enable the recruitment, motivation and retention of senior executives while complying with applicable rules and regulations.
Board oversight
To this end, the Board of Directors has established the ARCGSARCG Committee to assist it in making decisions affecting employee remuneration. All members of the ARCGSARCG Committee are required to be independent under the Company’s corporate governance guidelines, the NYSE standards and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange.
The members are appointed by the Board of Directors each year after the annual general meeting of shareholders. The members have relevant expertise or experience relating to the purposes of the ARCGSARCG Committee. The ARCGSARCG Committee makes decisions by a simple majority with no member having a casting vote and is chaired by Mr. Bruno Lafont, Lead Independent Director.
Appointments, remuneration and corporate governance and sustainability committee
The primary function of the ARCGSARCG Committee is to assist the Board of Directors with respect to the following:
•review and approve corporate goals and objectives regarding remuneration relevant to the Executive Office and Executive Officers and other members of executive management as deemed appropriate by the committee, and assess performance against goals and objectives;
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•191 | review and approve corporate goals and objectives regarding remuneration relevant to the CEO Office and Executive Officers and other members of executive management as deemed appropriate by the committee, and assess performance against goals and objectives; Management report
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• | make recommendations to the Board with respect to incentive remuneration plans and equity-based plans;
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• | identify candidates qualified to serve as members of the Board, the CEO Office and Executive Officers;
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• | recommend candidates to the Board for appointment by the general meeting of shareholders or for appointment by the Board to fulfill interim Board vacancies;
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• | develop, monitor and review corporate governance principles applicable to the Company;
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• | facilitate the evaluation of the Board;
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• | review the succession planning and the executive development of the members of the CEO Office and Executive Officers;
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• | submit proposals to the Board on the remuneration of the members of the CEO Office and Executive Officers, and on the appointment of new members thereto and new directors; and
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• | make recommendations to the Board of Directors in respect of the Company’s framework of remuneration for the members of the CEO Office and Executive Officers and such other members of the executive management as designated by the committee. In making such recommendations, the committee may take into account factors that it deems necessary. This may include a member’s total cost of employment (factoring in equity/long term incentives, any perquisites and benefits in kind and pension contributions). •make recommendations to the Board with respect to incentive remuneration plans and equity-based plans; |
•identify candidates qualified to serve as members of the Board, the Executive Office and Executive Officers;
•recommend candidates to the Board for appointment by the general meeting of shareholders or for appointment by the Board to fulfill interim Board vacancies;
•develop, monitor and review corporate governance principles applicable to the Company;
•facilitate the evaluation of the Board;
•review the succession planning and the executive development of the members of the Executive Office and Executive Officers;
•submit proposals to the Board on the remuneration of the members of the Executive Office and Executive Officers, and on the appointment of new members thereto and new directors; and
•make recommendations to the Board of Directors in respect of the Company’s framework of remuneration for the members of the Executive Office and Executive Officers and such other members of the executive management as designated by the committee. In making such recommendations, the committee may take into account factors that it deems necessary. This may include a member’s total cost of employment (factoring in equity/long term incentives, any perquisites and benefits in kind and pension contributions).
The ARCGSARCG Committee met six6 times in 2018.2021. Its members comprise Mr. Bruno Lafont (Chairman), Mrs.Ms. Suzanne Nimocks, Ms. Clarissa Lins and Mr. Tye Burt.
Regular invitees include Mr. Lakshmi N. Mittal (CEO and(Executive Chairman) and Mr. Bart Wille (Head of Group Human Resources and Corporate Services)Resources). Mr. Henk Scheffer (Company Secretary) acts as secretary.
Individual remuneration is discussed by the ARCGSARCG Committee without the person concerned being present. The ARCGSARCG Committee Chairman presents its decisions and findings to the Board of Directors after each ARCGSARCG Committee meeting.
Remuneration policy
The ARCGSARCG Committee set policies applied to Senior Managementsenior management on base salary, short-term incentives and long-term incentives. According to Shareholders Right Directive II, that was transposed into Luxembourg law in August 1, 2019, the
Scope
remuneration policies must be approved at the AGM at least every 4 years and whenever there is a material change.
Scope
ArcelorMittal’s remuneration philosophy and framework apply to the following groups of senior management:
•the Executive Chairman and the CEO; and
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• | the CEO and the President and CFO; and
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• | the other Executive Officers.
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•the CFO and other Executive Officers.
The remuneration philosophy and governing principles also apply, with certain limitations, to a wider group of employees including Executive Vice Presidents, Vice Presidents, General Managers and Managers.
Remuneration philosophy
Remuneration philosophy
ArcelorMittal’s remuneration philosophy for its senior management is based on the following principles:
•
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• | provide total remuneration competitive with executive remuneration levels of peers of similar size, scope and industry;
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• | encourage and reward performance that will lead to long-term enhancement of shareholder value; and
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• | promote internal pay equity by providing base pay and total remuneration levels that reflect the role, job size and responsibility as well as the performance and effectiveness of the individual.
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Remuneration frameworkprovide total remuneration competitive with executive remuneration levels of peers of similar size, scope and industry:
–Korn Ferry (KF) and WillisTowersWatson (WTW) provide benchmarking services to ArcelorMittal for all Management Committee members, an average between KF and WTW data is performed;
–For the Steel division: Large industry - industrial segment including metals, chemicals, mining, transport, energy & utilities, upper revenues range;
–For the Mining division: Large companies with a significant mining divisions or companies similar to ArcelorMittal Mining division;
–Data are linked to each local market.
•encourage and reward performance that will lead to long-term enhancement of shareholder value; and
•promote internal pay equity by providing base pay and total remuneration levels that reflect the role, job size and responsibility as well as the performance and effectiveness of the individual.
Remuneration framework
The ARCGSARCG Committee develops proposals for senior management remuneration annually for the Board of Directors' consideration. Such proposals include the following components:
•fixed annual salary;
•short-term incentives (i.e., performance-based bonus); and
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•Management report | fixed annual salary;
192 |
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• | short-term incentives (i.e., performance-based bonus); and
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• | long-term incentives (i.e., stock options (prior to May 2011), RSUs and PSUs (after May 2011), PSUs only as from 2016).
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•long-term incentives (i.e., stock options (prior to May 2011), RSUs and/or PSUs (after May 2011) depending on the grant year).
The Company does not have any deferred compensation plans for senior management, including the Executive Chairman and CEO.
The following table provides an overview of the remuneration policy applied by the ARCGS:
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| Remuneration component and link to strategy | Operational and performance framework | Opportunity |
Fixed annual salary
Competitive base salary to attract and retain high-quality and experienced senior executives | * Base salary levels are reviewed annually with effect from April 1 (except promotion) compared to the market to ensure that ArcelorMittal remains
* Reviews are based on market information obtained but not led by benchmarking to comparable roles, changes in responsibility and general economic conditions | The ARCGSARCG does not set a maximum salary, instead when determining any salary increases it takes into account a number of reference points including salary increases across the Company |
Benefits
Competitive level to ensure coverage of the executives | * May include costs of health insurance, death and disability insurances, company car, tax return preparation, etc.
* Relocation benefits may be provided where a change of location is made at Company’s request | The cost to the Company of providing benefits can change from year to year. The level of benefit provided is intended to remain competitive |
Pension
Competitive level of post-employment benefit to attract and retain executives | * Local benchmark of pension contributions for comparable roles | |
Short term incentives (STI)
Motivate the senior executives to achieve stretch performance on strategic priorities | * Scorecard is set at the commencement of each financial year
* Measures and relative weights are chosen by the ARCGSARCG Committee to drive overall performance for the coming year
* STI calculations for each executive reflect the performance of ArcelorMittal and /or the performance of the relevant business units, the achievement of specific objectives of the department and the individual executive’s overall performance
* No STI is paid for a performance below threshold 80%; for each criteria; 100% STI payout for performance achieved at 100%; for each criteria; 150% STI payout for performance achieved at 120% or above for each criteria | Range for Executive Chairman and CEO: 0 to 270% with a target at 120% of base salary
Range for PresidentCFO and CFO:Executive Officers: 0 to 225%157.5% with a target at 100%70% of base salary
Range for Executive Officers: 0 to 135% with a target at 60% of base salary |
LTIP
Sustain shareholder wealth creation in excess of performance of a peer group and incentivize executives to achieve strategy | CEOExecutive Office LTIP
* The vesting is subject to a relative TSR (Total Shareholder Return) compared to the S&P 500 and a peer group and to a relative EPS of a peer group over a three year- period
*The peer group is determined by the ARCGSARCG Committee
* No vesting will occur below the median for all grants as from 2016
* Performance is determined by the ARCGSARCG Committee
CFO and Executive Officers LTIP
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*The vesting is subject to a relative TSR compared to a peer group and eventually an additional strategic priority in someone or two measures depending on the business units (such asor group, Gap to competition or TCOE) in 2018
- Theand TSR/EPS vs. peer group is determined by the ARCGS Committee
- No vesting *Vesting will occur belowif the median for all grants for the TSR portion
- performance is reached *Performance is determined by the ARCGSARCG Committee | Maximum value at grant:
100% of base salary for CEOExecutive Chairman and President and CFOCEO
50 to 60%Guideline: 75% of base salary for CFO and Executive Officers |
Remuneration mix
The total remuneration target of the Executive Chairman, CEO and the President and CFO is structured to attract and retain executives; the amount of the remuneration received is dependent on the achievement of superior business and individual performance and on generating sustained shareholder value from relative performance.
The following remuneration charts, which illustrate the various elements of the Executive Chairman, CEO, the President and CFO and the other Executive Officers' compensation, are applicable for 2018.2021. For each of the charts below, the columns on the left, middle and on the right, respectively, reflect the breakdown of compensation if targets are not met, met and exceeded.
Note: no pension contribution
Note: Other benefits, as shown above, do not include international mobility incentives that may be provided.
20182021 Total remuneration
The total remuneration paid in 20182021 to members of ArcelorMittal’s senior management listed in “Item 6.A—Directors, senior management“Management and employees—Directors and senior management” (including Mr. Lakshmi N. Mittal in his capacity as Executive Chairman and Mr. Aditya Mittal as CEO) was $7.3$8.9 million in base salary and other benefits paid in cash (such as health, other insurances, lunch allowances, financial services, gasoline and car allowance) and $8.3$12.3 million in short-term performance-related variable remuneration
consisting of a short-term incentive linked to the Company’s 20172020 results. During 2018,2021, approximately $0.9$1.5 million was accrued by ArcelorMittal to provide pension benefits to senior management (other than Mr. Lakshmi N. Mittal).
No loans or advances to ArcelorMittal’s senior management were made during 2018,2021, and no such loans or advances were outstanding as of December 31, 2018. 2021.
The following table shows the remuneration received by the Executive Chairman, CEO, the President and CFO and the other Executive Officers as determined by the ARCGSARCG Committee in relation to 2018 and 2017the five most recent financial years including all remuneration components:
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| | | Chief Executive Officer | | President and Chief Financial Officer and Executive Officers |
| (Amounts in $ thousands except for Long-term incentives) | | 2018 | | 2017 | | 20185 | | 2017 |
Base salary1 | | 1,604 | | 1,505 | | 5,371 | | 4,709 |
| Retirement benefits | | — | | — | | 862 | | 849 |
Other benefits2 | | | | — | | 41 | | 314 | | 250 |
Short-term incentives3 | | | | 2,775 | | 2,333 | | 5,495 | | 4,468 |
| Long-term incentives | | - fair value in $ thousands4 | | 1,166 | | 1,130 | | 2,702 | | 1,922 |
| | | - number of share units | | 70,302 | | 49,431 | | 141,109 | | 94,553 |
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1.195 | The base salaries of the CEO and President and CFO were increased by 7.5% in 2018, including as a result of the promotion of the CFO and CEO ArcelorMittal Europe to President of ArcelorMittal.Management report |
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2. | Other benefits comprise benefits paid in cash such as lunch allowances, financial services, gasoline and car allowances. Health insurance and other insurances are also included.
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3. | Short-term incentives are entirely performance-based and are fully paid in cash. The short-term incentive for a given year relates to the Company’s results in the previous year.
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4. | Fair value determined at the grant date is recorded as an expense using the straight line method over the vesting period and adjusted for the effect of non-market based vesting conditions. The remuneration expenses recognized for the PSUs granted to the CEO and to the President and CFO and Executive Officers was $4 million (net of reversal of expenses relating to unvested PSUs) for the year ended December 31, 2018. The remuneration expenses recognized for the PSUs granted to the CEO and to the President and CFO and Executive Officers was $3 million (net of reversal of expenses relating to unvested PSUs) for the year ended December 31, 2017. |
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5. | Henri Blaffart is included until March 31, 2018, Robrecht Himpe is included until June 30, 2018. |
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| | Executive Chairman8 | CEO7 | Chief Financial Officer and Executive Officers 6 |
| (Amounts in $ thousands except for Long-term incentives) | | 2021 | 2020 | 2019 | 2018 | 2017 | 2021 | 2020 | 20219 | 2020 | 2019 | 20185 | 2017 |
Base salary1 | | 1,700 | | 1,374 | | 1,569 | | 1,604 | | 1,505 | | 1,783 | | 1,261 | | 5,056 | | 2,970 | | 4,643 | | 5,371 | | 4,709 | |
| Retirement benefits | | | — | | — | | — | | — | | 178 | | 146 | | 1,348 | | 555 | | 698 | | 862 | | 849 | |
Other benefits2 | | 66 | | 45 | | 47 | | 48 | | 41 | | 38 | | 33 | | 237 | | 144 | | 223 | | 314 | | 250 | |
Short-term incentives3 | | 2,908 | | — | | 3,198 | | 2,775 | | 2,333 | | 2,226 | | 935 | | 7,158 | | 2,169 | | 6,015 | | 5,495 | | 4,468 | |
| Long-term incentives | | - fair value in $ thousands4 | | 1,419 | | 1,407 | | 1,339 | | 1,166 | | 1,130 | | 1,550 | | 1,292 | | 4,396 | | 1,834 | | 3,096 | | 2,702 | | 1,922 | |
| - number of share units | | 52,166 | | 77,372 | | 89,933 | | 70,302 | | 49,431 | | 56,977 | | 71,050 | | 146,600 | | 90,069 | | 183,084 | | 141,109 | | 94,553 | |
1.After the salary decrease applied in 2020, the base salaries of the CEO and President and CFO were set back to the original amounts in 2021. A salary increase of 9% was applied which includes the promotion of Mr. Aditya Mittal as CEO.
2.Other benefits comprise benefits paid in cash such as lunch allowances, financial services, gasoline and car allowances. Health insurance and other insurances are also included.
3.Short-term incentives are entirely performance-based and are fully paid in cash. The short-term incentive for a given year relates to the Company’s results in the previous year.
4.Fair value determined at the grant date is recorded as an expense using the straight line method over the vesting period and adjusted for the effect of non-market based vesting conditions.
5.Henri Blaffart was included until March 31, 2018, Robrecht Himpe was included until June 30, 2018.
6.President and Chief Financial Officer included from 2017 through 2019.
7.Amounts presented for 2021 and 2020 reflect the compensation as President and Chief Financial Officer until February 11, 2021 and as CEO thereafter.
8.Amounts presented reflect the compensation as CEO until February 11, 2021 and as Executive Chairman thereafter.
9.Brian Aranha was included until March 31, 2021. Simon Wandke was included until September 30, 2021. New executive officers were included as of their respective nomination date.
Short-term incentives
Targets associated with ArcelorMittal’s 2018 performance short-term incentive2021 Annual Performance Bonus Plan were aligned with itsthe companies’ strategic objectives of improving health and safety performance and overall business performance and competitiveness.
For the CEOExecutive Chairman and the President and CFO,CEO, the 2018 short-term incentive2021 annual performance bonus formula is based on: on the achievement of the following performance targets:
•EBITDA targets at Group level: 40% (acts as circuit breaker for financial measures EBITDA and FCF);
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•FCF targets at Group level: 25%; • | EBITDA at the Group level: 30% (this acts as “circuit breaker” with respect to group-level financial performance
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measures as explained below);
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• | FCF at the Group level: 20%;
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• | ROCE at the Group level: 20%;
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Gap to competition targets at the Group level: 20%; and
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• | Health and safety performance at the Group level: 10%.
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EBITDA operating as a “circuit breaker” for financial measures means that at least 80% of target must be met to trigger any short-term incentive payment with respect to the EBITDA and FCF performance measures.
•Health and safety performance targets at Group level: 15% (fatalities act as circuit breaker for this measure).
For the CEO , the performance short-term incentive atExecutive Chairman, 100% achievement of the agreed performance targets linked to the business plan is equal toresults in an annual performance bonus which equals 120% of his base salary. For the CFO, the performance short-term incentive atCEO, 100% achievement of the agreed performance targets linked to the business plan is equalresults in an annual performance bonus which equals to 100% of his base salary.
The different performance measures are combined through a cumulative system: each measure is calculated separately and is added up for the performance short-term incentive calculation.
Performance below threshold will result in zero performance short-term incentive payout.
For the CFO and other Executive Officers, the 2018 short-term incentive2021 annual performance bonus formula has been tailored for their
respective positions and is generally based on the following:
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• | EBITDA at the Group, segment and / or Business unit level: this acts as the “circuit breaker” with respect to financial performance measures except for Mining where the Mining volume is the “circuit breaker”;
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• | FCF at the Group, segment or Business unit level;
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• | ROCE at the Group level, segment or Business unit level;
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• | Gap to competition at the Group level, segment or Business unit level;
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• | Health and safety performance; and
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• | Business specific measures for corporate functions.
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•EBITDA targets at Group, segment or Business unit level; (acts as circuit breaker for financial measures EBITDA and FCF)
•FCF targets at Group, segment or Business unit level;
•Gap to competition targets at Group level, segment or Business unit level;
•Health and safety performance targets at Group, Segment or Business unit level (fatalities act as circuit breaker for this measure); and
•Business specific measures for corporate functions.
For the CFO and other Executive Officers, the performance short-term incentive at 100% achievement of the agreed performance targets linked toresults in an annual performance bonus which equals 70% of base salary.
For the business plancalculation of the annual performance bonus, the achievement level of every performance target is equal to 60% of their base salary. calculated separately, and these are added up.
Individual performance and assessment ratings define the individual short-term incentiveannual performance bonus multiplier that will be applied to the annual performance short-term incentivebonus calculated based on
actual performance against the performance measures. Those individuals who consistently perform at expected levels will have an individual multiplier of 1. For outstanding performers, an individual multiplier of up to 1.5 may cause the annual performance short-term incentivebonus pay-out to be higher than 150% of the target short-term incentive,annual performance bonus, up to 270% of the target short-term incentiveannual performance bonus being the absolute maximum for the Executive Chairman and the CEO. Similarly, a reduction factor will be applied for those at the lower end.
In exceptional circumstances, the ARCG committee can exercise discretion in the final determination of the annual performance bonus.
The achievement level of performance for the short-term incentiveannual performance bonus for the Executive Chairman, the CEO, the President and CFO and the other Executive Officers is summarized as follows:
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| Functional level | | Target achievement threshold @ 80% | | Target achievement @ 100% | | Target achievement ≥ ceiling @ 120% |
Chief Executive OfficerChairman and CEO | | 60% of base pay | | 120% of base pay | | 180% of base pay |
PresidentCFO and Chief Financial OfficerExecutive Officers | | 50%35% of base pay | | 100%70% of base pay | | 150%105% of base pay |
Executive Officers | | 30% of base pay | | 60% of base pay | | 90% of base pay |
Long-term incentive planArcelorMittal Equity Incentive Plan
ArcelorMittal operates a long-term incentive plan to incentivize shareholder wealth creation in excess of performance of a peer group and incentivize executives to achieve strategy.
On May 10, 2011, the annual general meeting of shareholders approved the ArcelorMittal Equity Incentive Plan, a new equity-based incentive plan that replaced the Global Stock Option Plan (see below and note 7.38.3 to the consolidated financial statements for a description of the Global Stock Option Plan). The ArcelorMittal Equity Incentive Plan is intended to align the interests of the Company’s shareholders and eligible employees by allowing them to participate in the success of the Company. The ArcelorMittal Equity Incentive Plan provides for the grant of RSUs and PSUs to eligible employees of the Company employees (including the Executive Officers) and is designed to incentivize employees, improve the Company’s long-term performance and retain key employees. On May 8, 2013, the annual general meeting of shareholders approved the GMB PSU Plan, which provides for the grant of PSUs to GMB members (and is now applicable to the CEOExecutive Office). Until the introduction of the GMB PSU Plan in 2013, GMB members were eligible to receive RSUs and PSUs under the ArcelorMittal Equity Incentive Plan.
In 2016, a special grant was approved in order to align the grant with the Action 2020 plan put in place by ArcelorMittal.
The maximum number of PSUs (andand RSUs previously) available for grant during any given year is subject to the prior approval of the Company’s shareholders at the annual general meeting. The annual shareholders’ meeting on May 4, 2016 approved the maximum to be granted until the next annual shareholders’ meeting. For the period from the May 2016 annual general shareholders’ meeting to the May 2017 annual general shareholders’ meeting, a maximum of 30,000,000 PSUs (10,000,000 after the reverse stock split) may be allocated to eligible employees under the ArcelorMittal Equity Incentive Plan2018, 2019 and the GMB PSU Plan combined. The 2017 Cap2020 Caps for the number of PSUsPSUs/RSUs that may be allocated to the CEOExecutive Office and other retention and performance based grants below the CEOExecutive Office waslevel, were approved at the annual shareholders' meetingAGMs on May 10, 20177, 2019, June 13, 2020 and 8 June 2021 respectively, at a maximum of 3,000,0002,500,000 shares (9,000,000 before the reverse stock split). The 2018 Cap for the number of PSUs that may be allocated to4,250,000 shares and 3,500,000 shares respectively.
the CEO Office and other retention based grants below the CEO Office level was approved at the annual shareholders’ meeting on May 9, 2018 at a maximum of 1,500,000 (one million five hundred thousand) shares.
In 2016, ArcelorMittal adapted the plan:
•To consider the comments of shareholders that vesting should not happen below the median and
•To adapt to Action 2020 (Special grant).
Starting in 2021, the performance criteria for the PSUs for the Executive Office and Executive Officers include an ESG criteria comprised of a health & safety, a climate action and a diversity & inclusion target.
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•197 | To consider the comments of shareholders that vesting should not happen below the median andManagement report
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• | To adapt to Action 2020 (Special grant)
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Conditions of the 20182021 grant were as follows:
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| CEO Office |
| Executive Officers |
| 2018 Grant | l | PSUs with a three year performance period |
| PSUs with a three year performance period
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| l | Value at grant 100% of base salary for the CEO and the President and CFO |
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| l | Vesting conditions: | l | Vesting conditions |
| Threshold | Target |
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| Target |
| TSR/EPS vs. peer group
| 100% median | ≥120% median |
| ROCE |
| 100% target
100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% outperformance |
| Gap to competition (where applicable) |
| 100% target
100% vesting |
| Vesting percentage
| 50% | 100% |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Executive Office | | Executive Officers |
| 2021 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions |
| Threshold | Target | | | Target | Stretch |
| TSR vs. peer group (50%) / EPS vs. peer group (20%)
| 100% median | ≥120% median | | TSR vs. peer group (40%) | 100% weighted average | ≥120% weighted average |
| Vesting percentage | 50% | 100% | | Vesting percentage | 100% | 150% |
| | | | | | Gap to competition (40%) | 100% of target | 120% of target |
| ESG (30%) | | 100% of target | | Vesting percentage | 100% | 150% |
| | | | | | ESG | 20% | 100% of target | 120% of target |
| | | | | | | | 100% | 150% |
| Vesting percentage | | 100% | l | RSUs with a three year vesting period |
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| | | | | | l | RSUs with a two year vesting period |
Awards made in previous financial years which have not yet reached the end of the vesting period2016 through 2020
The Company's Long-TermEquity Incentive Plan for senior management including Executive Officers follows the Company's strategy.
In addition to the 2021 grant, the summary of outstanding plans as of December 31, 2021 is as follows:
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| | Executive office | | |
| 2016 Special Grant | l | PSUs with a five year performance period, 50% vesting after three year performance period and 50% after additional two year performance period | | |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | | |
| l | Value at grant: 150% of base salary for the CEO and the President and CFO | | |
| l | Vesting conditions: | | | |
| Threshold | Target | | | | | |
| TSR/EPS vs. peer group | 100% median | ≥120% median | | | | |
| TSR vs. S&P 500 | Performance equal to Index | ≥Performance equal to Index + 2% p.a. outperformance | | | | |
| Vesting percentage | 50% | 100% | | | |
In 2015, the Company's goal was to achieve ROCE and Mining volumes for the Mining segment and therefore the target was based on these performance measures.
In 2016, a special grant was deployed on a five-year performance period to achieve the Company's Action 2020 plan. ROCE remained a key target and Gap to Competition was added as performing against competition is essential.
The plans in 2015, 2016 and 2017 are summarized below.
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| CEO Office |
| Other Executive Officers |
| 2015 Grant | l | PSUs with a three-year performance period | l | RSUs with a three-year vesting period (2015 grant vested in December 2018) |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | PSUs with a three-year performance period |
| l | Value at grant: 100% of base salary for the CEO and 80% for the President and CFO | l | Performance target: mainly ROCE and mining volume plan for the Mining segment |
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| l | One PSU can give right to 0 through up to 1.5 share |
| l | Vesting conditions: | l | Vesting conditions: |
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| Threshold | Target | Stretch |
| Performance | Threshold | Target | Stretch |
| TSR/EPS vs. peer group | 80% median | 100% median | ≥120% median |
| Performance | 80% | 100% | ≥120% |
| TSR vs. S&P 500 | Performance equal to 80% of Index
| Performance equal to Index | ≥Performance equal to Index + 2% outperformance |
| Vesting | 50% | 100% | 150% |
| Vesting percentage
| 50% | 100% | 150% |
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| 2016 Special Grant | l | PSUs with a five-year performance period, 50% vesting after three-year performance period and 50% after additional two-year performance period | l | PSUs with a five-year performance period, 50% vesting after three-year performance period and 50% after additional two-year performance period |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | Performance criteria: ROCE and Gap to competition in some areas
one target grant: a share will vest if performance is met at target
one overperformance grant: a share will vest if performance exceeds 120% |
| l | Value at grant: 150% of base salary for the CEO and the President and CFO | l | Vesting conditions: |
| l | Vesting conditions: |
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| Threshold | Target |
| Performance |
| 100% | ≥120% |
| TSR/EPS vs. peer group |
| 100% median | ≥120% median |
| Target award vesting | 100% | 100% |
| TSR vs. S&P 500 |
| Performance equal to Index
| ≥Performance equal to Index + 2% outperformance |
| Overperformance award (=20% of target award) | - | 100% |
| Vesting percentage
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| 50% | 100% |
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| 2017 Grant | l | PSUs with a three-year performance period |
| l | PSUs with a three-year performance period |
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| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | Performance criteria: TSR and Gap to competition in some areas |
| l | Value at grant: 100% of base salary for the CEO and the President and CFO |
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| l | Vesting conditions: |
| l | Vesting conditions: |
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| Threshold | Target |
| Performance |
| Threshold | Target |
| TSR/EPS vs. peer group
| 100% median | ≥120% median |
| TSR vs. peer group
| 100% median 50% vesting | ≥120% median 100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% outperformance |
| Gap to competition (where applicable) | - | 100% target
100% vesting |
| Vesting percentage
| 50% | 100% |
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| | Executive Office | | Executive Officers |
| 2018 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions |
| Threshold | Target | | | | Target |
| TSR/EPS vs. peer group
| 100% median | ≥120% median | | ROCE | | 100% target
100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% p.a. outperformance | | Gap to competition (where applicable) | | 100% target
100% vesting |
| Vesting percentage | 50% | 100% | | |
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| | Executive Office | | Executive Officers |
| 2019 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions |
| Threshold | Target | | | | Target |
| TSR/EPS vs. peer group
| 100% median | ≥120% median | | ROCE | | 100% target
100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% p.a. outperformance | | Gap to competition (where applicable) | | 100% target
100% vesting |
| Vesting percentage | 50% | 100% | | |
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| | Executive Office | | Executive Officers |
| 2020 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions |
| Threshold | Target | | | Threshold | Target |
| TSR/EPS vs. peer group
| 100% median | ≥120% median | | TSR/EPS vs. peer group | 100% median | ≥120% median |
| | | | | | Vesting percentage | 50% | 100% |
| | | | | | Gap to competition (where applicable) | | 100% target
100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% p.a. outperformance | | Vesting percentage | 0% | 100% |
| Vesting percentage | 50% | 100% | l | RSUs with a three year vesting period |
| | | | | | l | RSUs with a one year vesting period |
See note 7.38.3 to the consolidated financial statements for further details on RSUs and PSUs.
Global Stock Option Plan
Prior to the May 2011 annual general shareholders’ meeting adoption of the ArcelorMittal Equity Incentive Plan described above, ArcelorMittal’s equity-based incentive plan took the form of a stock option plan known as the Global Stock Option Plan.
See note 7.38.3 to the consolidated financial statements for further details on stock options.
Other benefits
In addition to the remuneration described above, other benefits may be provided to senior management and, in certain cases, other employees. These other benefits can include insurance, housing (in cases of international transfers), car allowances and tax assistance.
SOX 304 and clawback policy
Under Section 304 of the Sarbanes-Oxley Act, the SEC may seek to recover remuneration from the CEO and CFO of the Company in the event that it is required to restate accounting information due to any material misstatement thereof or as a result of misconduct in respect of a financial reporting requirement under the U.S. securities laws (the “SOX Clawback”).
Under the SOX Clawback, the CEO and the CFO may have to reimburse ArcelorMittal for any short-term incentive or other incentive-incentive-based or equity-based remuneration received during the 12-month period following the first public issuance or filing with the SEC (whichever occurs first) of the relevant filing, and any profits realized from the sale of ArcelorMittal securities during that 12-month period.
The Board of Directors, through its ARCGSARCG Committee, decided in 2012 to adopt its own clawback policy (the “Clawback Policy”) that applies to the members of the former GMB and to the Executive Vice President of Finance of ArcelorMittal. In 2016, the Clawback Policy was updated to reflect the Company’s structural changes and now applies to the CEOExecutive Office and the Executive Officers.
The Clawback Policy comprises cash short-term incentives and any other incentive-based or equity-based remuneration, as well as profits from the sale of the Company’s securities received during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the filing that contained the material misstatement of accounting information.
For purposes of determining whether the Clawback Policy should be applied, the Board of Directors will evaluate the circumstances giving rise to the restatement (in particular, whether there was any fraud or misconduct), determine when any such misconduct occurred and determine the amount of remuneration that should be recovered by the Company. In the event that the Board of Directors determines that remuneration
should be recovered, it may take appropriate action on behalf of the Company, including, but not limited to, demanding repayment or cancellation of cash short-term incentives, incentive-based or equity-based remuneration or any gains realized as the result of options being exercised or awarded or long-term incentives vesting. The Board may also choose to reduce future remuneration as a means of recovery.
C. Board practices/corporate governance
This section describes the corporate governance practices of ArcelorMittal for the year ended December 31, 2018.
Board of Directors and senior management
ArcelorMittal is governed by a Board of Directors and managed by the senior management. As described in Item 6A above, ArcelorMittal’s senior management is comprised of the CEO Office - comprising the CEO, Mr. Lakshmi N. Mittal and the President and CFO, Mr. Aditya Mittal. The CEO Office is supported by a team of five other Executive Officers, who together encompass the key regions and corporate functions.
A number of corporate governance provisions in the Articles of Association of ArcelorMittal reflect provisions of the Memorandum of Understanding signed on June 25, 2006 (prior to Mittal Steel Company N.V.’s merger with Arcelor), amended
in April 2008 and which mostly expired on August 1, 2009. For more information about the Memorandum of Understanding, see “Item 10.C—Additional information—Material contracts—Memorandum of Understanding”.
ArcelorMittal fully complies with the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. This is explained in more detail in “—Other corporate governance practices” below. ArcelorMittal also complies with the New York Stock Exchange Listed Company Manual as applicable to foreign private issuers.
Board of Directors
Composition
The Board of Directors is in charge of the overall governance and direction of ArcelorMittal. It is responsible for the performance of all acts of administration necessary or useful in furtherance of the corporate purpose of ArcelorMittal, except for matters reserved by Luxembourg law or the Articles of Association to the general meeting of shareholders. The Articles of Association provide that the Board of Directors is composed of a minimum of three and a maximum of 18 members, all of whom, except the CEO, must be non-executive directors. None of the members of the Board of Directors, except for the CEO, may hold an executive position or executive mandate within ArcelorMittal or any entity controlled by ArcelorMittal.
The Articles of Association provide that directors are elected and removed by the general meeting of shareholders by a simple majority of votes cast. Other than as set out in the Company’s Articles of Association, no shareholder has any specific right to nominate, elect or remove directors. Directors are elected by the general meeting of shareholders for three-year terms. In the event that a vacancy arises on the Board of Directors for any reason, the remaining members of the Board of Directors may by a simple majority elect a new director to temporarily fulfill the duties attaching to the vacant post until the next general meeting of the shareholders.
The Board of Directors is comprised of nine members, of which 8 are non-executive directors and one is an executive director. The CEO of ArcelorMittal is the sole executive director. For further information on the composition of the Board of Directors, including the expiration of each Director’s term and the period during which each Director has served, see Item 6.A above.
Mr. Lakshmi N. Mittal was elected Chairman of the Board of Directors on May 13, 2008. Mr. Mittal is also ArcelorMittal’s CEO. Mr. Mittal was re-elected to the Board of Directors for a three-year term at the annual general meeting of shareholders on May 10, 2017.
Five of the 9 members of the Board of Directors are independent. The non-independent directors are Mr. Lakshmi N. Mittal, Ms. Vanisha Mittal Bhatia, Mr. Jeannot Krecké and Mr. Michel Wurth. A director is considered “independent” if:
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(a) | he or she is independent within the meaning of the New York Stock Exchange Listed Company Manual, as applicable to foreign private issuers,
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(b) | he or she is unaffiliated with any shareholder owning or controlling more than two percent of the total issued share capital of ArcelorMittal, and
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(c) | the Board of Directors makes an affirmative determination to this effect.
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For these purposes, a person is deemed affiliated to a shareholder if he or she is an executive officer, a director who also is an employee, a general partner, a managing member or a controlling shareholder of such shareholder. The 10 Principles of Governance of the Luxembourg Stock Exchange, which constitute ArcelorMittal's domestic corporate governance code, require ArcelorMittal to define the independence criteria that apply to its directors, which are described in article 8.1 of its Articles of Association.
Specific characteristics of the director role
The Company’s Articles of Association do not require directors to be shareholders of the Company. The Board of Directors nevertheless adopted a share ownership policy on October 30, 2012, that was amended on November 7, 2017, considering that it is in the best interests of all shareholders for all non-executive directors to acquire and hold a minimum number of ArcelorMittal ordinary shares in order to better align their long-term interests with those of ArcelorMittal’s shareholders. The Board of Directors believes that this share ownership policy will result in a meaningful holding of ArcelorMittal shares by each non-executive director, while at the same time taking into account the fact that the share ownership requirement should not be excessive in order not to unnecessarily limit the pool of available candidates for appointment to the Board of Directors. Directly or indirectly, and as sole or joint beneficiary owner (e.g., with a spouse or minor children), within five years of the earlier of October 30, 2012 or the relevant person’s election to the Board of Directors, the Lead Independent Director should own a minimum of 6,000 ordinary shares and each other non-executive director should own a minimum of 4,000 ordinary shares. Each director will hold the shares acquired on the basis of this policy for so long as he or she serves on the Board of Directors. Directors purchasing shares in compliance with this policy must comply with the ArcelorMittal Insider Dealing Regulations and, in particular, refrain from trading during any restricted period, including any such period that may apply immediately after the Director’s departure from the Board of Directors for any reason.
On October 30, 2012, the Board of Directors also adopted a policy that places limitations on the terms of independent directors as well as the number of directorships that directors may hold in order to align the Company’s corporate governance practices with best practices in this area. The policy provides that an independent director may not serve on the Board of Directors for more than 12 consecutive years, although the Board of Directors may, by way of exception to this rule, make an affirmative determination, on a case-by-case basis, that he or she may continue to serve beyond the 12-year rule if the Board of Directors considers it to be in the best interest of the Company based on the contribution of the Director involved and the balance between the knowledge, skills, experience and need for renewal of the Board.
As membership of the Board of Directors represents a significant time commitment, the policy requires both executive and non-executive directors to devote sufficient time to the discharge of their duties as a director of ArcelorMittal. Directors are therefore required to consult with the Chairman and the Lead Independent Director before accepting any additional commitment that could conflict with or impact the time they can devote to their role as a Director of ArcelorMittal. Furthermore, a non-executive director may not serve on the boards of directors of more than four publicly listed companies in addition to the ArcelorMittal Board of Directors. However, a non-executive Director’s service on the board of directors of any subsidiary or affiliate of ArcelorMittal or of any non-publicly listed company is not taken into account for purposes of complying with the foregoing limitation.
Although non-executive directors of ArcelorMittal who change their principal occupation or business association are not necessarily required to leave the Board of Directors, the policy requires each non-executive director, in such circumstances, promptly to inform the Board of Directors of the action he or she is contemplating. Should the Board of Directors determine that the contemplated action would generate a conflict of interest, such non-executive director would be asked to tender his or her resignation to the Chairman of the Board of Directors, who would decide to accept the resignation or not.
None of the members of the Board of Directors, including the executive director, have entered into service contracts with ArcelorMittal or any of its subsidiaries that provide for any form of remuneration or for benefits upon the termination of their term. All non-executive Directors of the Company signed the Company’s Appointment Letter, which confirms the conditions of their appointment by the General Meeting of the Shareholders including compliance with certain non-compete provisions, the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange and the Company’s Code of Business Conduct.
All members of the Board of Directors are required to sign the Company’s Code of Business Conduct upon first joining the Board of Directors and confirm their adherence thereto on an annual basis thereafter.
The remuneration of the members of the Board of Directors is determined on a yearly basis by the annual general meeting of shareholders.
Share transactions by management
In compliance with laws prohibiting insider dealing, the Board of Directors of ArcelorMittal has adopted insider dealing regulations, which apply throughout the ArcelorMittal group. These regulations are designed to ensure that insider information is treated appropriately within the Company and avoid insider dealing and market manipulation. Any breach of the rules set out in this procedure may lead to criminal or civil charges against the individuals involved, as well as disciplinary action by the Company.
Shareholding requirement for non-executive directors
In consideration of corporate governance trends indicating that a reasonable amount of share ownership helps better align the interests of the directors with those of all shareholders, the Board of Directors adopted on October 30, 2012 share ownership guidelines for non-executive directors as described above under “—Specific characteristics of the director role”. These share ownership guidelines have been amended on November 7, 2017.
Operation
General
The Board of Directors and the Board committees may engage the services of external experts or advisers as well as take all actions necessary or useful to implement the Company’s corporate purpose. The Board of Directors (including its two committees) has its own budget, which covers functioning costs such as external consultants, continuing education activities for directors and travel expenses.
Meetings
The Board of Directors meets when convened by the Chairman of the Board or any two members of the Board of Directors. The Board of Directors holds physical meetings at least on a quarterly basis as five regular meetings are scheduled per year. The Board of Directors holds additional meetings if and when circumstances require, in person or by teleconference and can take decisions by written circulation, provided that all members of the Board of Directors agree.
The Board of Directors held twelve meetings in 2018. The average attendance rate of the directors at the Board of Directors’ meetings was 92.59%.
In order for a meeting of the Board of Directors to be validly held, a majority of the directors must be present or represented, including at least a majority of the independent directors. In the absence of the Chairman, the Board of Directors will appoint by majority vote a chairman for the meeting in question. The Chairman may decide not to participate in a Board of Directors’ meeting, provided he has given a proxy to one of the directors who will be present at the meeting. For any meeting of the Board of Directors, a director may designate another director to represent him or her and vote in his or her name, provided that the director so designated may not represent more than one of his or her colleagues at any time.
Each director has one vote and none of the directors, including the Chairman, has a casting vote. Decisions of the Board of Directors are made by a majority of the directors present and represented at a validly constituted meeting, except for the decisions of the Board of Directors relating to the issue of any financial instruments carrying or potentially carrying a right to equity pursuant to the authorization conferred by article 5.5 of the Articles of Association, which shall be taken by a majority of two-thirds of the directors present or represented at a validly constituted meeting.
Lead Independent Director
In April 2008, the Board of Directors created the role of Lead Independent Director. His or her function is highlighted above in Item 6A.
Mr. Bruno Lafont was elected by the Board of Directors as ArcelorMittal's second Lead Independent Director and re-elected as a director for a three-year term at ArcelorMittal annual general shareholder's meeting held on May 10, 2017.
The agenda of each meeting of the Board of Directors is decided jointly by the Chairman of the Board of Directors and the Lead Independent Director.
Separate meetings of independent directors
The independent members of the Board of Directors may schedule meetings outside the presence of non-independent directors. Five meetings of the independent directors outside the presence of management were held in 2018.
Annual self-evaluation
The Board of Directors decided in 2008 to start conducting an annual self-evaluation of its functioning in order to identify potential areas for improvement. The first self-evaluation process was carried out in early 2009. The self-evaluation process includes structured interviews between the Lead Independent Director and each director and covers the overall performance of the Board of Directors, its relations with senior management, the performance of individual directors, and the performance of the committees. The process is supported by the Company Secretary under the supervision of the Chairman and the Lead Independent Director. The findings of the self-evaluation process are examined by the ARCGS Committee and presented with recommendations from the ARCGS Committee to the Board of Directors for adoption and implementation. Suggestions for improvement of the Board of Directors’ process based on the prior year’s performance and functioning are implemented during the following year.
The 2018 Board of Directors’ self-evaluation was completed by the Board on February 5, 2019. The Board of Directors was of the opinion that it and the management had cooperated successfully during 2018 on important matters including operational and financial performance, the acquisition of Ilva and of Essar Steel, the ongoing strengthening of the balance sheet, strategy, especially on short term strategic planning, sustainability, labor relations and health and safety. The extension of the role of Audit Committee to Risk and of the role of ARCGS Committee to environment and sustainability is proving to be effective. The Board of Directors reviewed the practical implementation of the governance structure and thought it was working well. The Board set new priorities for discussion and review and identified a number of priority topics for 2019.
The Board of Directors believes that its members have the appropriate range of skills, knowledge and experience, as well as the degree of diversity necessary to enable it to effectively govern the business. The Board of Directors composition is reviewed on a regular basis and additional skills and experience are actively searched for in line with the expected development of ArcelorMittal’s business as and when appropriate.
Required skills, experience and other personal characteristics
Diverse skills, backgrounds, knowledge, experience, geographic location, nationalities and gender are required in order to effectively govern a global business the size of the Company’s operations. The Board of Directors and its committees are therefore required to ensure that the Board has the right balance of skills, experience, independence and knowledge necessary to perform its role in accordance with the highest standards of governance.
The Company’s directors must demonstrate unquestioned honesty and integrity, preparedness to question, challenge and critique constructively, and a willingness to understand and commit to the highest standards of governance. They must be committed to the collective decision-making process of the Board of Directors and must be able to debate issues openly and constructively, and question or challenge the opinions of others. Directors must also commit themselves to remain actively involved in Board decisions and apply strategic thought to matters at issue. They must be clear communicators and good listeners who actively contribute to the Board in a collegial manner. Each director must also ensure that no decision or action is taken that places his or her interests before the interests of the business. Each director has an obligation to protect and advance the interests of the Company and must refrain from any conduct that would harm it.
In order to govern effectively, non-executive directors must have a clear understanding of the Company’s strategy, and a thorough knowledge of the ArcelorMittal group and the industries in which it operates. Non-executive directors must be sufficiently familiar with the Company’s core business to effectively contribute to the development of strategy and monitor performance.
With specific regard to the non-executive directors of the Company, the composition of the group of non-executive directors should be such that the combination of experience, knowledge and independence of its members allows the Board to fulfill its obligations towards the Company and other stakeholders in the best possible manner.
The ARCGS Committee ensures that the Board of Directors is comprised of high-caliber individuals whose background, skills, experience and personal characteristics enhance the overall profile of the Board and meets its needs and diversity aspirations by nominating high quality candidates for election to the Board by the general meeting of shareholders.
Board profile
The key skills and experience of the directors, and the extent to which they are represented on the Board of Directors and its committees, are set out below. In summary, the non-executive directors contribute:
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• | international and operational experience;
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• | understanding of the industry sectors in which ArcelorMittal operates;
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• | knowledge of world capital markets and being a company listed in several jurisdictions; and
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• | an understanding of the health, safety, environmental, political and community challenges that ArcelorMittal faces.
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Each director is required to adhere to the values set out in, and sign, the ArcelorMittal Code of Business Conduct.
Renewal
The Board of Directors plans for its own succession, with the assistance of the ARCGS Committee. In doing this, the Board of Directors:
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• | considers the skills, backgrounds, knowledge, experience and diversity of geographic location, nationality and gender necessary to allow it to meet the corporate purpose;
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• | assesses the skills, backgrounds, knowledge, experience and diversity currently represented;
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• | identifies any inadequate representation of those attributes and agrees the process necessary to ensure a candidate is selected who brings them to the Board of Directors; and
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• | reviews how Board performance might be enhanced, both at an individual director level and for the Board as a whole.
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The Board believes that orderly succession and renewal is achieved through careful planning and by continuously reviewing the composition of the Board.
When considering new appointments to the Board, the ARCGS Committee oversees the preparation of a position specification that is provided to an independent recruitment firm retained to conduct a global search, taking into account, among other factors, geographic location, nationality and gender. In addition to the specific skills, knowledge and experience required of the candidate, the specification contains the criteria set out in the ArcelorMittal Board profile.
Diversity
In line with the worldwide effort to increase gender diversity on the boards of directors of listed and unlisted companies, the Board met its goal of increasing the number of women on the Board to at least three by the end of 2015 with the election of Mrs. Karyn Ovelmen in May 2015. Out of 9 members of the Board of Directors, women represent 33.33% in 2018. The ArcelorMittal Board’s diversity not only relates to gender, but also to the region, background and industry of its members.
Director induction, training and development
The Board considers that the development of the directors’ knowledge of the Company, the steel-making and mining industries, and the markets in which the Company operates is an ongoing process. To further bolster the skills and knowledge of directors, the Company set up a continuous development program in 2009.
Upon his or her election, each new non-executive director undertakes an induction program specifically tailored to his or her needs and includes ArcelorMittal’s long-term vision centered on the concept of “Safe Sustainable Steel”.
The Board’s development activities include the provision of regular updates to directors on each of the Company’s products and markets. Non-executive directors may also participate in training programs designed to maximize the effectiveness of the directors throughout their tenure and link in with their individual performance evaluations. The training and development program may cover not only matters of a business nature, but also matters falling into the environmental, social and governance area.
Structured opportunities are provided to build knowledge through initiatives such as visits to plants and mine sites and business briefings provided at Board meetings. Non-executive directors also build their Company and industry knowledge through the involvement of the CEO Office and other senior employees in Board meetings. Business briefings, site visits and development sessions underpin and support the Board’s work in monitoring and overseeing progress towards the corporate purpose of creating long-term shareholder value through the development of the ArcelorMittal business in steel and mining. The Company therefore continuously builds directors’ knowledge to ensure that the Board remains up-to-date with developments within the Company’s segments, as well as developments in the markets in which the Company operates.
During the year, non-executive directors participated in the following activities:
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• | comprehensive business briefings intended to provide each director with a deeper understanding of the Company’s activities, environment, key issues and strategy of the Company’s segments. These briefings are provided to the Board of Directors by senior executives, including CEO Office members. The briefings provided during the course of 2018 covered health and safety processes, HR, legal and compliance, corporate responsibility, marketing, steel-making, strategy, international trade trends in steel industry in Europe. Certain business briefings were combined with site visits and thus took place on-site and, in other cases, they took place at Board meetings;
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• | briefing meetings with Company executives in charge of specific business segments or markets;
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• | site visits to plants and R&D centers; and
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• | development sessions on specific topics of relevance, such as health and safety, commodity markets, HR, investor relations, accounting, the world economy, changes in corporate governance standards, directors’ duties and shareholder feedback.
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The ARCGS Committee oversees director training and development. This approach allows induction and learning opportunities to be tailored to the directors’ committee memberships, as well as the Board of Directors' specific areas of focus. In addition, this approach ensures a coordinated process in relation to succession planning, Board renewal, training, development and committee composition, all of which are relevant to the ARCGS Committee’s role in securing the supply of talent to the Board.
Board of Directors committees
The Board of Directors has two committees:
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• | the Audit & Risk Committee, and
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Audit & Risk Committee
In 2015, the Board decided to combine the Audit Committee with the Risk Management Committee in order to provide their members with a more holistic view of ArcelorMittal’s current governance, risks and control systems.
The primary function of the Audit & Risk Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing:
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• | the integrity of the financial reports and other financial information provided by the Company to any governmental body or the public;
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• | the Company’s compliance with legal and regulatory requirements;
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• | the registered public accounting firm’s (Independent Auditor) qualifications and independence;
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• | the Company’s system of internal control regarding finance, accounting, legal compliance, ethics and risk management that management and the Board have established;
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• | the Company’s auditing, accounting and financial reporting processes generally; and
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• | the identification and management of risks to which the ArcelorMittal group is exposed.
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The Audit & Risk Committee must be composed solely of independent members of the Board of Directors. The members are appointed by the Board of Directors each year after the annual general meeting of shareholders. The Audit & Risk Committee comprises three members, all of whom must be independent under the company’s corporate governance guidelines, the New York Stock Exchange (NYSE) standards as applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Audit & Risk Committee makes decisions by a simple majority with no member having a casting vote.
At least one member must qualify as an Audit & Risk Committee “financial expert” as defined by the SEC and determined by the Board.
At least one member must qualify as an Audit & Risk Committee “risk management expert” having experience in identifying, assessing, and managing risk exposures of large, complex companies.
The Audit & Risk Committee currently consists of 3 members: Mrs. Karyn Ovelmen, Mr. Bruno Lafont and Mr. Karel de Gucht, each of whom is an independent Director according to the NYSE standards and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Chairman of the Audit & Risk Committee is Mrs. Ovelmen.
According to its charter, the Audit & Risk Committee is required to meet at least four times a year. During 2018, the Audit & Risk Committee met seven times. The Audit & Risk Committee performs an annual self-evaluation and completed its 2018 self-evaluation on February 5, 2019. The charter of the Audit & Risk Committee is available from ArcelorMittal upon request.
Appointments, Remuneration, Corporate Governance and Sustainability Committee (former ARCG Committee)
The ARCGS Committee is comprised of three directors, each of whom is independent under the New York Stock Exchange standards as applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange.
The members are appointed by the Board of Directors each year after the annual general meeting of shareholders. The ARCGS Committee makes decisions by a simple majority with no member having a casting vote.
The Board of Directors has established the ARCGS Committee to:
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• | determine, on its behalf and on behalf of the shareholders within agreed terms of reference, ArcelorMittal’s compensation framework, including short and long term incentives for the CEO, the President and CFO and for the five other Executive Officers;
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• | review and approve succession and contingency plans for key managerial positions at the level of the Executive Officers;
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• | consider any candidate for appointment or reappointment to the Board of Directors at the request of the Board of Directors and provide advice and recommendations to it regarding the same;
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• | evaluate the functioning of the Board of Directors and monitor the Board of Directors’ self-evaluation process;
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• | assess the roles of the Chairman and CEO and deliberate on the merits of the Board’s leadership structure to ensure that the most efficient and appropriate structure is in place; and
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• | develop, monitor and review corporate governance principles and corporate responsibility policies applicable to ArcelorMittal, as well as their application in practice.
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During its meeting of May 8, 2018, the Board renewed its emphasis on four key areas (health & safety, environment and community relations, climate change and social issues) and added these to the scope of the ARCG Committee to ensure a Board level review of these important topics. Accordingly, the ARCG Committee was renamed the ARCGS Committee ("Appointments, Remuneration, Corporate Governance and Sustainability Committee") to highlight the Company’s focus on these key areas. As a result, ArcelorMittal complies with the new Principle 9 on companies' corporate social responsibility introduced subsequently to the revision of the 10 Principles of the Luxembourg Stock Exchange. According to Recommendation 9.3 under the Principles, the Board shall regularly consider the Company's non-financial risks, including social and environmental risks. To this end, the ARCGS Committee oversees the Company's sustainable development plan and associated management systems to ensure that ArcelorMittal is well positioned to meet the evolving expectations of stakeholders including investors, customers, regulators, employees and communities.
The ARCGS Committee’s principal criteria in determining the compensation of executives is to encourage and reward performance that will lead to long-term enhancement of shareholder value. The ARCGS Committee may seek the advice of outside experts.
The three members of the ARCGS Committee are Mr. Bruno Lafont, Mrs. Suzanne P. Nimocks and Mr. Tye Burt, each of whom is independent in accordance with the NYSE standards applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Chairman of the ARCGS Committee is Mr. Lafont.
The ARCGS Committee is required to meet at least twice a year. During 2018, this committee met six times.
The ARCGS Committee performs an annual self-evaluation and completed its 2018 self-evaluation on February 5, 2019.
The charter of the ARCGS Committee is available from ArcelorMittal upon request.
Succession management
Succession management at ArcelorMittal is a systematic, structured process for identifying and preparing employees with potential to fill key organizational positions, should the position become vacant. This process applies to all ArcelorMittal key positions up to and including the CEO Office. Succession management aims to ensure the continued effective performance of the organization by providing for the availability of experienced and capable employees who are prepared to assume these roles as they become available. For each position, candidates are identified based on performance, potential and an assessment of leadership capabilities and their “years to readiness”. Development needs linked to the succession plans are discussed, after which “Personal Development Plans” are put in place, to accelerate development and prepare candidates. Regular reviews of succession plans are conducted at different levels of the organization to ensure that they are accurate and up to date, leading to at least once yearly a formal review by the CEO Office, of all key positions. Succession management is a necessary process to reduce risk of vacant positions or skill gap transitions, create a pipeline of future leaders, ensure smooth business continuity and improve employee motivation and engagement. This process has been in place for several years and reinforced, widened and made more systematic in all regions of the organization. The responsibility to review and approve succession plans and contingency plans at the highest level rests with the Board’s ARCGS Committee.
Other corporate governance practices
ArcelorMittal is committed to adhere to best practices in terms of corporate governance in its dealings with shareholders and aims to ensure good corporate governance by applying rules on transparency, quality of reporting and the balance of powers. ArcelorMittal continually monitors U.S., EU and Luxembourg legal requirements and best practices in order to make adjustments to its corporate governance controls and procedures when necessary, as evidenced by the new policies adopted by the Board of Directors in 2012.
ArcelorMittal complies with the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange in all respects. However, in respect of Recommendation 1.3 under the Principles, which advocates separating the roles of chairman of the board and the head of the executive management body, the Company has made a different choice. This is permitted, however, as, unlike the 10 Principles themselves with which ArcelorMittal must comply, the Recommendations are subject to a more flexible “comply or explain” standard.
The nomination of the same person to both positions was approved by the shareholders (with Lumen and Nuavam, companies controlled by the Significant Shareholder abstaining). Since that date, the rationale for combining the positions of CEO and Chairman of the Board of Directors has become even more compelling. The Board of Directors is of the opinion that Mr. Mittal’s strategic vision for the steel industry in general and for ArcelorMittal in particular in his role as CEO is a key asset to the Company, while the fact that he is fully aligned with the interests of the Company’s shareholders means that he is uniquely positioned to lead the Board of Directors in his role as Chairman. The combination of these roles was revisited at the Annual General Meeting of Shareholders of the Company held in May 2017, when Mr. Lakshmi N. Mittal was re-elected to the Board of Directors for another three year term by a strong majority.
Ethics and conflicts of interest
Ethics and conflicts of interest are governed by ArcelorMittal’s Code of Business Conduct, which establishes the standards for ethical behavior that are to be followed by all employees and Directors of ArcelorMittal in the exercise of their duties. Each employee of ArcelorMittal is required to sign and acknowledge the Code of Conduct upon joining the Company. This also applies to the members of the Board of Directors of ArcelorMittal, who signed the Company’s Appointment Letter in which they acknowledged their duties and obligations. Any new member of the Board of Directors must sign and acknowledge the Code of Conduct upon appointment.
Employees must always act in the best interests of ArcelorMittal and must avoid any situation in which their personal interests conflict, or could conflict, with their obligations to ArcelorMittal. Employees are prohibited from acquiring any financial or other interest in any business or participating in any activity that could deprive ArcelorMittal of the time or the attention needed to devote to the performance of their duties. Any behavior that deviates from the Code of Business Conduct is to be reported to the employee’s supervisor, a member of the management, the head of the legal department or the head of the internal assurance department.
Code of Business Conduct training is offered throughout ArcelorMittal on a regular basis in the form of face-to-face trainings, webinars and online trainings. Employees are periodically trained about the Code of Business Conduct in each location where ArcelorMittal has operations. The Code of Business Conduct is available in the “Corporate Governance-Our Policies-Code of Business Conduct” section of ArcelorMittal’s website at www.arcelormittal.com.
In addition to the Code of Business Conduct, ArcelorMittal has developed a Human Rights Policy and a number of other compliance policies in more specific areas, such as antitrust, anti-corruption, economic sanctions, insider dealing and data protection. In all these areas, specifically targeted groups of employees are required to undergo specialized compliance training. Furthermore, ArcelorMittal’s compliance program also includes a quarterly compliance certification process covering all business segments and entailing reporting to the Audit & Risk Committee.
Process for Handling Complaints on Accounting Matters
As part of the procedures of the Board of Directors for handling complaints or concerns about accounting, internal controls and auditing issues, ArcelorMittal’s Anti-Fraud Policy and Code of Business Conduct encourage all employees to bring such issues to the Audit & Risk Committee’s attention on a confidential basis. In accordance with ArcelorMittal’s Anti-Fraud and Whistleblower Policy, concerns with regard to possible fraud or irregularities in accounting, auditing or banking matters or bribery within ArcelorMittal or any of its subsidiaries or other controlled entities may also be communicated through the “Corporate Governance — Whistleblower” section of the ArcelorMittal website at www.arcelormittal.com, where ArcelorMittal’s Anti-Fraud Policy and Code of Business Conduct are also available in each of the main working languages used within the Group. In recent years, ArcelorMittal has implemented local whistleblowing facilities, as needed.
During 2018, there were 145 complaints received relating to alleged fraud, which were referred to and duly reviewed by the Company’s Internal Assurance Department. Following review by the Audit & Risk Committee, none of these complaints was found to be significant.
Internal assurance
ArcelorMittal has an Internal Assurance function that, through its Head of Internal Assurance, reports to the Audit & Risk Committee. The function is staffed by full-time professional staff located within each of the principal operating subsidiaries and at the corporate level. Recommendations and matters relating to internal control and processes are made by the Internal Assurance function and their implementation is regularly reviewed by the Audit & Risk Committee.
Independent auditors
The appointment and determination of fees of the independent auditors is the direct responsibility of the Audit & Risk Committee. The Audit & Risk Committee is further responsible for obtaining, at least once each year, a written statement from the independent auditors that their independence has not been impaired. The Audit & Risk Committee has also obtained a confirmation from ArcelorMittal’s principal independent auditors to the effect that none of its former employees are in a position within ArcelorMittal that may impair the principal auditors’ independence.
Measures to prevent insider dealing and market manipulation
The Board of Directors of ArcelorMittal has adopted Insider Dealing Regulations (“IDR”), which are updated when necessary (most recently in January 2019) and in relation to which training is conducted throughout the Group. The IDR’s most recent version has been updated in light of the new Market Abuse Regulation and is available on ArcelorMittal’s website, www.arcelormittal.com.
The IDR apply to the worldwide operations of ArcelorMittal. The compliance and data protection officer of ArcelorMittal is also the IDR compliance officer and answers questions that members of senior management, the Board of Directors, or employees may have about the IDR’s interpretation. The IDR compliance officer maintains a list of insiders as required by Regulation No 596/2014 of the European Parliament and the Council dated 16 April 2014 on market abuse or “MAR” and the Commission Implementing Regulation 2016/347 of 10 March 2016 laying down technical standards with regard to the precise format of insider lists and for updating insider lists in accordance with MAR. The IDR compliance officer may assist senior executives and directors with the filing of notices required by Luxembourg law to be filed with the Luxembourg financial regulator, the CSSF (Commission de Surveillance du Secteur Financier). Furthermore, the IDR compliance officer has the power to conduct investigations in connection with the application and enforcement of the IDR, in which any employee or member of senior management or of the Board of Directors is required to cooperate.
Selected new employees of ArcelorMittal are required to participate in a training course about the IDR upon joining ArcelorMittal and every three years thereafter. The individuals who must participate in the IDR training include the members of senior management, employees who work in finance, legal, sales, mergers and acquisitions and other areas that the Company may determine from time to time. In addition, ArcelorMittal’s Code of Business Conduct contains a section on “Trading in the Securities of the Company” that emphasizes the prohibition to trade on the basis of inside information, as amended in July 2016. An online interactive training tool based on the IDR was developed in 2010 and deployed across the group through ArcelorMittal’s intranet, with the aim to enhance the staff’s awareness of the risks of sanctions applicable to insider dealing. The importance of the IDR was again reiterated in the Group Policies and Procedures Manual in 2013.
D. Employees
As of December 31, 2018,2021, ArcelorMittal employs approximately 209,000158,000 people directly, as well as a large number of contractors and part-time workers.
The table below sets forth the total number of employees by segment for the past three years.
| | | Segment | 2018 | 2017 | 2016 | Segment | 2021 | 2020 | 2019 |
| NAFTA | 26,550 | 26,324 | 27,233 | NAFTA | 13,410 | | 13,138 | | 27,988 | |
| Brazil | 19,555 | 18,058 | 18,380 | Brazil | 19,450 | | 18,752 | | 19,362 | |
| Europe | 88,768 | 78,643 | 80,975 | Europe | 60,525 | | 71,682 | | 74,900 | |
| ACIS | 41,544 | 42,451 | 41,989 | ACIS | 58,438 | | 58,178 | | 62,986 | |
| Mining | 30,579 | 30,088 | 28,455 | Mining | 4,426 | | 4,289 | | 4,397 | |
| Other activities | 1,587 | 1,544 | 1,485 | Other activities | 1,660 | | 1,704 | | 1,615 | |
| Total | 208,583 | 197,108 | 198,517 | Total | 157,909 | | 167,743 | | 191,248 | |
ArcelorMittal employees in various parts of the world are represented by trade unions and ArcelorMittal is a party to collective bargaining agreements with employee organizations in certain locations. The following description summarizes the status of certain of these agreements and relationships.
The Company is committed to open, respectful and transparent social dialogue at all of its operations, to strong employee relations, and safe, healthy and quality working lives for all its workers.
COVID-19 – Supporting the Company's people
Since ArcelorMittal’s creation, the health, safety and well-being of its workforce has been the number one priority. Since 2020, given the unprecedented global health crisis resulting from the COVID-19 pandemic, that pledge has never been more important. The virus spread across the globe and is present in all the countries where ArcelorMittal produces steel. The challenge and responsibility the Company therefore has, to ensure the safety and well-being of its near 158,000 strong workforce, is paramount.
ArcelorMittal has developed a COVID-19 governance structure to ensure a regular flow of information between the leadership and critical functional networks and task forces, which have either been created for the current crisis or previously existed and have been brought together more frequently.
This structure is vital in establishing pandemic safety principles (see —"Sustainable development—Management Theme #1: Safety"), considering the impacts on ArcelorMittal`s people, maintaining regular communication, acknowledging and appreciating the incredible efforts and resilience of our workforce, ensuring organization effectiveness, and closely monitoring and supporting the most affected regions.
ArcelorMittal rigorously adhered to guidelines and recommendations from the World Health Organization and the governments of the countries in which it operates. Moreover, it has implemented many measures at all operating sites to proactively address health concerns and limit the possibility of the virus spreading. These include ensuring the operations have sufficient supplies of sanitation products and essential personal protective equipment, strictly following social distancing procedures, conducting enhanced and regular cleaning operations and monitoring the health of the employees when they enter and exit work premises.
ArcelorMittal also temporarily closed many offices, with people working from home during lockdown conditions throughout the year. This loss of social contact creates new challenges, and the Company has taken the time to listen to and understand people’s concerns and provide them with the support, advice and guidance they need as they adjusted to new and unusual working conditions.
The ArcelorMittal University continue to play a very important role in the development of specific learning modules to build the competencies and capabilities required by ArcelorMittal`s people in dealing with the crisis worldwide. They provided training on the key guidelines, remote working, managing through the crisis and supporting people dealing with the stress and anxieties. Remote, live sessions were held regularly at the global level with nearly 18,000 in attendance. In My Virtual Campus, the ArcelorMittal University online learning platform, nearly 64,000 active learners participated in over 282,000 hours of learning across over 1,000 courses.
Employee relationsdevelopment
Sourcing, developing and engagement
Finding and developingretaining the right people iscontinues to be a strategic priority to buildfor ArcelorMittal in building a high-performing organization. We recognize thatThe Company recognizes the world of work has changed and that the expectations of employees and potential employeesnew talents have changed with it. The COVID-19 pandemic, with its health and economic impact, has perhaps accelerated the importance of some factors (such as emotional resilience), and the implementation of others (such as digitalization) and has also reminded the Company of the importance of certain values and behavior, including strengthened focus on Diversity & Inclusion.
Communicating and connecting with the Company's employees is certainly an area where it has made a concerted effort during 2021, through more proximity meetings and other means of communication. Virtual meetings have been around for the past 20 years, but the explosion since 2020, through Teams, Zoom and other collaboration vehicles has really increased the connectivity of ArcelorMittal's people.
There iscontinues to be a strong demand for the best talent and the CompanyArcelorMittal wants to ensure it is considered as an aspirational place to work.
That means ensuring employees feel safe, respected and valued. It also means building a culture that constantly keeps employees committed, motivated, encouraged to learn and eager to perform at their best.
Employee development, including succession planning and the development of young talent, is also crucial in building a high-performing organization. The Company aims to have a clear career pathway for employees, supported with ongoing initiatives to build their technical capabilities through training. ArcelorMittal has programs designed to spot people with potential and manage the succession of key roles, as part of its overall strategic workforce planning process, which is overseen by the ARCG Committee. Strategic workforce planning is a key element of business unit quarterly reviews.
In 2018, ArcelorMittal surveyed2021, the Company has continued to harness skills and resources and has stepped up its efforts to identify and accelerate the development and readiness of its High Potential employees (HiPos) to take on increased responsibilities. This has been achieved by having the right people in the right place at the right time; identifying people for key succession plans; anticipating and filling vacancies; ensuring a wide grouphealthy and diverse leadership pipeline; nurturing internally the generations of managers at all levelstomorrow and preparing future leaders; encouraging individual performance and making sustainable performance gains; and ensuring the retention of HiPos, through acknowledgement, empowerment, motivation and challenges.
An effective succession planning process is based on open career discussions with HiPos. Every HiPo has a career counselling discussion with his/her manager and HR, which focuses on the ‘right casting for the role’ to determine fit, readiness and match with individual drivers and motivations. The outcome of this discussion is used in the succession planning process.
For the accelerated development of HiPos, the Company has developed Leadership Pipeline learning journeys, preparing them for promotion. The programs are partly personalized, based on assessments. They are customized and delivered through a blended format of face-to-face (when available) and digital.
The Talent Acceleration Pool ("TAP") is an accelerated development program for HiPos who have been identified deep in the organization (below Manager) and who have potential to gather feedbackreach at least Manager level in the organization. The HiPos are provided consistent and structured development opportunities, through assessments, career interviews, tailored individual development plans and learning journeys to support the creation of a pipeline of HiPo candidates for succession to Manager+ roles.
TAP 2 program (a new cohort) was successfully launched with the revised approach for the program management and the candidates development in the third quarter of 2021.
The TAP 2 program in 2021 included 78 participants from 21 nationalities, of which 23 were women (30%).
At the beginning of the COVID-19 pandemic, there were initial challenges as we pivoted from the delivery of learning and development in a traditional classroom format to expanding access through digital learning. In 2021, we have seen a large growth in active virtual learners throughout ArcelorMittal as we have continued to expand to our global community. These active learners invested an average of 4.4 hours each, a 20% increase from 2020. An excellent example of this was the involvement of over 60,000 employees worldwide in our global virtual Learning Week in June 2021. The Company also offered world class leadership programs to its talents and future leaders digitally. Over 350 HiPos attended leadership journeys in 2021 to prepare themselves for their next career steps.
Another important program is the Company's Group Mentoring Program, which is designed to provide all ArcelorMittal employees an opportunity to participate in a mentoring relationship with a Group Mentor. By the end of 2021, there were 135 mentors and 324 mentees active in the program.
In addition, in 2021 work continued with the first pilots of a global Human Capital Management system which will provide unification of the Company's employee systems around recruitment, performance, succession planning, career development and learning. This will provide the enhanced infrastructure necessary to analyze data and identify areas for continuous improvement in ArcelorMittal's global diversity and inclusion efforts.
Speak Up +, the new global employee survey
For many years Speak Up! has been the group’s flagship employee engagement survey, designed to assess professionals and leadership opinion on how it can continue to develop its employer brand. The results of this project will enablethey feel about working at ArcelorMittal, what the Company does well and, if there are areas where they believe we fall short, how they can be improved.
In 2021, ArcelorMittal launched the Speak Up + surveys, which serve as the ongoing vehicle to better communicatesupport the value propositionCompany’s leaders in closely keeping a finger on the pulse of our organization, in a rapidly changing environment. The goal is to understand how the engagement of our people worldwide evolves – by regularly listening to the aspirations and concerns of ArcelorMittal people – and to ensure that opportunities for employeesempower leaders to spot and resolve potential issues quickly.
The survey occurs multiple times throughout the year and includes questions related to engagement, health & safety, well-being, values and diversity & inclusion. The outcomes from each Speak Up + survey are better understood both among existing employeescompared to multiple benchmarks, internally and amongst potential recruits of ArcelorMittal.over-time, and externally against industry peers. This enables the Company’s leaders to spot specific strengths and risks, e.g. attrition risk, and to define actions to improve employee engagement.
Employee engagement is key and feedback is integrated into action plans,Concrete actions to address employees’ concerns. Every two years, a Company-wide engagement survey gauges employees’ opinions, attitudesconcerns are continuously defined and levels of satisfaction. This "Speak up!" survey seeks feedback in a range of areas, including organizational direction, leadership and professional deployment and development. It allows employees to relay feedback anonymously to the executive leadership and the Company to build specific action plans to address employee’s concerns. A representative, random sample of Company employees is also included in ArcelorMittal's reputation surveys, which canvas the views of a wide range of stakeholders. Other surveys, conducted at a country level to gauge the most important issues for stakeholders, also include employee samples and in 2018, these were conducted in the United States and Luxembourg, where the results have led to concrete follow-up plans.
ArcelorMittal conducts an open and continuous dialogue with its employees to create a working environmentimplemented based on mutual trust, understanding and respect andthe outcomes of the Speak Up + survey rounds to ensure that the rights of its workers are protected. It prides itself on productive working relationships with unions and it works to maintain collective bargaining agreements with employees in all countries of production.
Diversity and inclusion
ArcelorMittal values diversity as a way of bringing fresh perspectives and experiences to the business and as part of its ambition to be an employer of choice. The Company has a presence in over 60 countries and employees from many more and its diversity and inclusion policy aims to encompass different cultures, generations, genders, ethnic groups, nationalities, abilities, and social backgrounds. In November 2018, the Company was one of some 50 leading companies from the European Roundtable of Industrialists (ERT), to sign the #EmbraceDifference pledge, to promote diversity and inclusion in the workplace.
ArcelorMittal’s senior management is committed to building a more inclusive culture and recruiting, retaining, and promoting more talented women. It also recognizes the increasing expectations of stakeholders, including employees and investors, to report on progress in this area. In 2018,2020, the Company developed KPIs to support this commitment, which it will report against inbenchmarked its Integrated Annual Review. It also began an internal benchmarking project to compare the diversity and inclusion policies against other companies to identify gaps and initiativesopportunities, engaged with several stakeholders on this topic and developed a strategy to address this issue. The topic was thoroughly discussed at the ARCG committee and had the full attention and support of both the Executive Chairman and the CEO. As a result of this initiative, the Company announced new plans to double the number of women at leadership positions within the next decade. By 2030, the aim is to reach 25% management positions held by women.
To achieve this figure, the Company is reviewing its policies and HR practices to give women employees greater flexibility to fit work into their lives; it will tackle unconscious bias and discrimination through training; and intend to consider at least one woman (either internal or external) in place at 11 sites, alongside consultation with employees.its recruitment shortlists for all professional and leadership positions. To
improve the gender balance in its leadership positions, the Company's Executive Office will oversee an annual career development planning process for high-potential women, and will include a minimum of one woman in every senior management succession plan. A newly established Diversity and Inclusion Council oversees the Group's Diversity and Inclusion ("D&I") performance and progress.
In 2018, women held 12.4%2021, 14% of management positions; this comprised 6%positions were held by women and 56% of Vice-Presidentkey positions 6%have at General Manager level and 14% of Managers. 11.4% of senior succession plan candidatesleast one woman assigned as successor - those who are foreseen to take over senior manager positions at General Managers level and above - are women.
In line with the worldwide effort to increase gender diversity in company boards,at the board level, ArcelorMittal met its goal of increasing the number of women on the Board of Directors to at least three by the end of 2015. In 2018, 32021, four of the 9eleven positions on the Board of Directors were held by women.
A number of programs are in place to develop women as leaders. These are supported by initiatives including training programs for women employees, mentoring and coaching, networking, and role model involvement. This is aligned with a commitment to support future leaders in science, technology, engineering and mathsmathematics ("STEM"). In 2018,2021, the Company ran initiatives in a number of countries,all segments, including Francethe participation in the TopWomenTech in Europe and the United States, specifically designed to attractpartnership with Universities and schools, campaigns and job fairs focused on attracting women applicants with STEM backgrounds.
In 2017, the ArcelorMittal University launched Women@ArcelorMittal, a program which includes an online learning channel, webinars and face-to-face training; 84 employees attended in 2018. To2021, to help foster a broader inclusive culture, the ArcelorMittal University also runs trainingconducted learning programs for employees to build their understanding of how cultural orientations affect attitudes and actions, and how they can manage interactions between different cultural perspectives and communication styles.
Initiatives in a number of countries support people with disabilities in the workplace. In France,Brazil, there is a robust Diversity and Inclusion program. The program's governance is composed by the seven sitesExecutive Committee, National Diversity and Inclusion Committee and a Committee per each key area (Gender, People with Disabilities, Racial, LGBTI+). Among the key actions in Brazil during 2021, includes training of ArcelorMittal Atlantique & Lorraine have an agreement with three unions to promotemore than 1,000 people on inclusive leadership, individual accessibility mapping and diverse learning programs. In Europe, launching of the vocational integration of workers with disabilitiesD&I campaign, participation in career fairs and they run a dedicated awareness week for the workforce. In its Fos-sur-Mer site, the Company runs a training program aimed at qualifying unemployed people with disabilities to work in metallurgical roles in partnership with Agefiph (Fund foruniversities and schools and multiple learning activities. In 2021, the Integrationprogram 'Women of Steel' from ArcelorMittal Mexico,
received a recognition in the Disabled). Alsocategory of Intersectoral Alliances, thanks to the 36 alliances achieved in Brazil, an inclusion program includes a workforce target for people with disabilities.
Employee development
Employee development, including succession planning andits 11 years in favor of the development of young talent, is also crucial in building a high-performing organization. It goes to the heart of the Company's aspiration to engageLázaro Cárdenas and retain employees, as described above. The Company aims to have a clear career pathway for employees, supported with ongoing initiatives to build their technical capabilities through training. ArcelorMittal has programs designed to spot people with potential and manage the succession of key roles, as part of its overall strategic workforce planning process, which is overseen by the Appointments, Remuneration and Corporate Governance Committee. Strategic workforce planning is a key element of business unit quarterly reviews.other communities, benefiting more than 43,000 people.
Employees chart their personal and professional progress through a performance review process with their line managers. This is tracked centrally for non-hourly employees, of whom 96.7 % had twice yearly reviews in 2018, compared to 97.2% in 2017.
Employees can select online and classroom training courses from the ArcelorMittal University, as well as a range of leadership, management, functional, technical and bespoke programs for lifelong learning and professional progression. The ArcelorMittal University is based in Esch-sur-Alzette (Luxembourg) and it has campuses in Temirtau and Karaganda (Kazakhstan), Hamilton (Canada), Aviles (Spain), Ostrava (Czech Republic), Vanderbijlpark (South Africa), Kryvyi Rih (Ukraine) and Tubarão (Brazil). Career committees oversee the management and development of individuals, the improvement
of competency levels across the organization and the availability of a pipeline of talent for all key positions. Every year, top management reviews individual succession plans for around 300 key positions worldwide.
Collective Labor Agreements
The Joint Global Health and Safety Agreement signed in 2008 between the Company and the IndustriALL union at the European and international level (formerly European and International Metalworkers Federations, respectively) and United Steelworkers Union in North America remained in effect in 2018.2021. This agreement which is the first of its kind in the steel industry, recognizes the vital role played by trade unions in improving health and safety. It sets out minimum standards for every site the GroupCompany operates with the objective of achieving world-class performance. These standards includeAs a result of this agreement, the commitment to form joint managementJoint Global Health and Safety ("H&S") Committee, composed of union health and safety committees, as well as training and education programs at the facility level in order to make a meaningful impact on health and safety across the Group. The creation of a joint global health and safety committee is also included in the agreement. This committee consists of13 representatives of management and the unions and focuses on helping ArcelorMittalwas created to help ArcelorMittal's steel and mining activities to further improve their health and safety performance. This committee meets regularly to support improvements inAmong its main priorities, it focuses on the efficiencyoverview deployment and the monitoring of the compliance of local committees. joint H&S committees, the development of guidelines to progress and training programs
In 2018,2021, due to the COVID-19 pandemic and the worldwide sanitary crisis, three virtual meetings took placewere organized throughout the year in February in Polandorder to discuss transversal specific topics with regard to the health and in October in South Africa.the safety of our people. In addition, several other safety training programs, including the Take Care Training, were"Safety Leadership" and "Take Care" Trainings continued to be rolled out in 20182021, including using some virtual sessions when sanitary situation required it, in order to support the “Journey to Zero” program aimed at reducing the amount of injuries and fatalities in the GroupCompany to zero. See “Item 4B—Information on the Company—Business“Business overview—Competitive strengths—Sustainable development—Outcome 1: Safe, healthy, quality working lives for ArcelorMittal’s people.Management Theme #1: Health and safety.”
In 2018,2021, collective labor agreements (“CLAs”) were entered into or renewed in the United States, Argentina, Brazil, Liberia, Mexico, South Africa,various entities and most European countries.
ArcelorMittal USA renewed a CLA in 2018 which covers most of the Company’s unionized employees in the United States. After the existing CLA expired on September 1, 2018, an agreement for a new labor contract was achieved in November 2018 and will be effective until it expires on September 1, 2022.
At ArcelorMittal Long Products Canada, unionized employees at Contrecoeur West continue to work under an agreement with the United Steel Workers ("USW") renewed in July 2020 and expiring in July 2020.2026. The six-year labor agreementsagreement ratified in February 2016, covering Contrecoeur East and Longueuil facilities remains valid until January 31, 2022. The positive vote of the workers assembly on February 27, 2022 concluded the CLA negotiations for a new six-year CLA ending the labor dispute which began on February 2, 2022. It ensured a return to normal operations at the Contrecoeur East and Longueuil facilities on February 28, 2022. The collective agreement with USW covering the Contrecoeur Scrap Recycling Center employees renewed in April 2016 for a six-year term expiring on March 31, 2022 remains valid. The collective agreement with USW at Hamilton-East Wire, renewed in 2016 for a five-year term expiringexpired in July 31,
2021 - the negotiation with the union started in June 2021 and thea new collective agreement was signed in July 2021, expiring on May 30, 2026. The agreement with USW at St-Patrick Wire was renewed in 2017 for a six-year term expiring(expiring on December 31, 20232023) also remainremains valid.
ArcelorMittal Mexico and the National Miners Union agreed to a new, one-year contract effective August 1, 2018.2021. ArcelorMittal Mexico continues to explore opportunities with the union to improve workforce productivity, efficiency and competitivenesscompetitiveness.
The North America branch of ArcelorMittal Tubular products renewed most of its labor agreements in light2021. After a strike in November 2021, following the expiration of the significant market challenges for 2019. labor agreement which was in effect from 2017, ArcelorMittal Tubular Products Shelby plant reached an agreement with the union and signed the new four-year labor contract valid through October 31, 2025.
ArcelorMittal Tubular Products Woodstock ratified a new three-year contract with UNIFOR on February 20, 2021 which will expire on April 1, 2024.
ArcelorMittal Tubular Products Brampton signed a new four-year agreement with USW on December 13, 2021 which will expire on September 30, 2025.
At ArcelorMittal Tubular Products Monterrey, the collective agreement with the National Federation of Independent Unions expired onwas renewed effective February 15, 2019 and negotiations2021 for a renewal areone-year period. Negotiations with the union for the new period will take place in progress.
In Brazil, 2021 was also a challenging year due to the 2017 “Labor Reform” had an important impact on labor negotiations, including an immediate decreasecontinuity of employment related litigations. In 2018, the number of cases decreased by 40% as comparedCOVID-19 pandemic. Vaccination programs enabled to 2017. The post-"Labor Reform" environment was more peaceful for negotiationorganize a hybrid return to work with the trade unions. The Company’s CLA negotiations vary from one plantimplementation of a series of measures adapted to another as these are locatedwork environments and in different citiescompliance with the sanitary protocols in Brazil.
Throughout the year, Brazil Long segment renewed 14 collective agreements and statesconventions, most of them replacing inflation, which throughout the country. Seventeen CLAyear varied between 7.7% and 11.08%. In addition, the Company signed collective agreements on the Bank of Hours and Work Regime. Collective agreements last for one year, maturing in several months.
For Tubarão and Vega do Sul, high inflation rate and a booming steel market weighed in the negotiations took place between Maythat also led to the renewal of CLAs. In Tubarão, an inflation rate of 10.78% as well as the allocation of meal tickets were incorporated in the agreement. In Vega do Sul, the new agreement included an inflation rate of 10.96% and November, of which fifteen were signed and concluded without undue delay, while twoa one-time bonus. The negotiations are still ongoing. The main criteria for ArcelorMittal Contagem led to a salary increase at the adjustment of salaries takes into account thecurrent rate of inflation registered(5.39%) for the period.
In Argentina, a salary increase of 50.2% was granted to employees, in line with the 12 months period precedinginflation projected for the date ofyear 2021. Until December 2021, the CLA.
The Argentinian economy continues to suffer from economic recession and financial volatility. There is high uncertainty, due to interest rates increases of up to 70% annuallyCompany has implemented 35.2% increase and the 2018 GDP falling between 2% to 2.5% and inflation rate ending the year at around 47.5%. In the context, Acindar signed a CLA with the Union UOM in October 2018 to adjust salaries, and a further adjustmentrest will be agreed toimplemented in the first quarter of 2019.
In Venezuela, the economic collapse continues its course in the absence of corrective measures, hyperinflation has decimated the buying powerEurope, most of the population. GDP fell in 2018 for the fifth consecutive yearCLAs were renewed and there is still a lot of volatility in the country. No CLA was signed in 2018 but - with hyperinflation continuing - frequent increases of employee salaries have taken place to account for the impact of inflation.
In response to weak market conditions in Europe since 2011, ArcelorMittal has reviewed its footprint and adapted its operations to respond to changing demands and to optimize its costs and capacity utilization. Management and unions have been engaged in constructive social dialogue to better face the challenging economic environment.
new agreements were entered into. In France, a one-year salary agreement covering 20192022 was concluded for three of the majorfinalized in December 2021 covering flat products entities representing approximately 60% of the Company’s French employees, namely ArcelorMittal Méditerranée, ArcelorMittal Atlantique & Lorraine and Industeel. Allsome AMDS entities. For other French legal entities, have started theirsalary agreement negotiations targeting agreement dates within the first quarter of 2019. During 2018, successful negotiations were reached with three trade unions regarding the Company's pension scheme.
will start early 2022. Regular meetings have been held with national representatives of the main trade unions to share all relevant information especially about the impact of the COVID-19 pandemic on various topics, includingArcelorMittal's activities and employees, and also addressing the key challenges forthat the steel industry. These meetings are aimed at sharing viewsindustry is facing. A major social agreement about working time organization and reinforcing social dialogue at all levels. As the French law on employee representative bodiesmanagement has changed, ArcelorMittal has entered (or will enter) into negotiations in order to adapt to the new framework to its different legal entities. Somebeen renewed for 3 years. In some entities, company agreements about working from home policy have already been successfully concludedsigned and others are expected to be reached throughout 2019.
In Luxembourg, the Company continued the implementation of the « PostLux2016 » agreement signed in September 2016, which is aimed at securing investments on production sites on the one hand, while enabling pre-retirement and maintaining the talent pool resulting from previous reorganizations. This agreement will be valid until July 1, 2019. As of September 2018, the Company entered, upon request from trade unions, into negotiations for renewal of a CLA in steel, as well as of an agreement for free hours for delegates in view of the social elections that are to take place on March 12, 2019.
In Belgium, 2018 was the second year of the 2017-2018 CLA period. No new CLA negotiations took place and there were zero salary increases. Significant efforts were exerted across management levels to complete the Gent-Liège cluster organization. Intensive social dialogue was conducted relating to the carve out of certain Liège production facilities in the context of the remedies for the acquisition of Ilva. Political tensions related to elections in May 2019 and upcoming CLA negotiations for the 2019-2020 period are expected to bring challengesimplemented during the year.
In Romania,Luxembourg, the collective labor agreement signed in June 2019 with the representatives from the two unions in the Company remains active. In January 2021, a Job Retention Plan was signed with the Government and the unions. This tripartite agreement is valid until the end of 2025. The commitments are mainly related to investments, unemployment (labor pool) and pre-retirement.
In Belgium, the economic crisis and health crisis for last two years resulted in substantial efforts from our employees. ArcelorMittal Belgium faced some social actions in Ghent in September 2021, which was a trigger to start CLA negotiations forand discuss the 2019concerns of the employees. CLA beganwas focused on 4 main elements: respect, staffing and workload, working conditions and financial compensation. A commitment has been made and an action plan was set up with an implementation in November 2018 and were finalized in January. The negotiating context also changed for several reasons, including the increase in minimum base salary, the introduction of a minimum salary for university degree employees with one year of seniority, and further changes and minimum wage increases expected during the 2019 election year.coming years.
In Germany, employee relations were managedthe main focus was on managing the COVID-19 pandemic within the high and increased production volume. health and safety measures have been embedded into the operational everyday life. Still at the end of 2021, there was increased pressure due to the fourth wave with critical situations in a calm and prudent manner.some sites to reach the necessary shift strengths. Social partners met twice in the social dialogue group (digital and one in person), comprised of both employer and employee representatives. The focus wasNegotiations on CLA were closed at the European Works Council’s (EWC) work in relation tobeginning of 2021 without a structural increase. Only bonus payments have been agreed for 2021 and 2022. New negotiations will start during the Ilva acquisition, as well as on local health and safety topics. second half of 2022.
Throughout the year, the union supported the Company in its demandtransformation plans within the political landscape.
In 2021, social dialogue at ArcelorMittal Poland was developed in many areas. The new areas of cooperation are in the field of taking care of employees covered by business transformation and securing employees during the COVID-19 pandemic. Negotiations with trade unions on the new CLA framework were completed. ArcelorMittal Poland has also signed a CLA for safeguard measures2021 and an agreement on mitigating the social effects resulting from the implementation of restructuring processes. The agreement defines the emissions trading system (ETS) or lower costsrules for taking care of energyemployees from reduced positions. Social Fund regulations for 2022 have been agreed with trade unions. Negotiations on CLA for year 2022 have started. Throughout 2021, regular meetings with trade unions took place to maintaincooperate on COVID-19 pandemic activities to protect workers and production. Proximity meeting in plants with CEO were organized in the competitivenesssanitary regime. Cooperation with trade unions is carried out at the national level supporting the transformation of the steel industryindustry.
In Spain, as in Germanythe rest of the world, 2021 has been strongly influenced by the effects of the COVID-19 pandemic. In the context deriving from the 2020 health and Europe.financial crises, labor relations at ArcelorMittal have been characterized by a focus on promoting social dialogue, in spite of the objective difficulties. Management and unions have had to address the challenges posed by the uncertainties affecting the Company's activities, in a permanent effort to adapt to the circumstances and demonstrate flexibility, which has facilitated the temporary layoff plan (ERTE) in effect since 2009 and extended, through an agreement with the employee representatives, up to December 31, 2021. During 2021, signed CLAs were implemented and the remaining CLAs were signed at the sites where this process had not yet been completed. Following the Memorandum of Understanding signed by ArcelorMittal with the Spanish Government in July 2021 to foster decarbonization, discussions have been initiated with the unions to address the labor implications of this strategy. At the end of 2018, the existing CLA expiredyear, there were some important social challenges pending, not only relating to the above-mentioned decarbonization strategy, but also relating to the expiry of the CLAs and to the aforementioned temporary layoff plan.
Despite the sanitary constraints due to the COVID-19 pandemic crisis, regular online meetings were organized throughout the year in order to inform the European Works Council ("EWC") representatives about the health and safety and business situation of the Company's operations in Europe, including the EWC bureau (10), the Select Committee (3) and the union published steep demands. Negotiations forPlenary Assembly.
In 2019, ArcelorMittal and the renewalEWC began negotiations aimed at revising some of the CLAelements of the agreement signed in 2007.
The negotiations started in early November 2019 and were expected to be finalized in the first quarter of 2020. Due to the COVID-19 pandemic (lockdown and sanitary restrictions), negotiations were put on hold and then relaunched in 2021. A two-day meeting with IndustriAll Europe and Unions federations was organized in September 2021, after several discussions with IndustriAll Europe’s representatives and the negotiations are ongoing.expected to come to a conclusion by early 2022.
The employee situation in Ukraine remained stable in 2021. Trade unions organized four peaceful non-numerous protest actions with request for a salary increase. The situation was resolved via a constructive dialogue and continuous negotiation process.
In South Africa, out of the Czech Republic,6,726 employees of the Company, 4,608 employees, who are part of the bargaining unit, are covered by a deferred CLA signedconcluded in 2016 for 3 years remained valid2020 with the recognized unions NUMSA and only amendments on salaries negotiated on a yearly basis were negotiated. A deal was reachedSolidarity which expires in December 2018 whichMarch 2022. The agreement included a permanent salary increaseremuneration adjustment of 1830 CZK5% in November 2020 and 2% in April 2021. NUMSA renounced this agreement and subsequently declared a dispute of refusal to bargain with the Center for Dispute Resolution (CDR). At the conciliation session, ArcelorMittal South Africa raised a jurisdictional issue, arguing that CDR did not have jurisdiction to hear the matter since NUMSA did not follow the internal dispute procedure stipulated in the Recognition Agreement. Upon issuing the advisory award, the CDR commissioner advised NUMSA to follow the Recognition Agreement with a view to requesting an internal dispute meeting and thereby withdrawing the current dispute. Upon receiving the advisory award, NUMSA provided ArcelorMittal South Africa with notice that it would commence strike action. ArcelorMittal South Africa sought relief in the Labor Court on average per employee per month. The CLA's of ArcelorMittal Ostrava's subsidiaries remain under discussion. In termsan urgent basis to obtain an urgent Court injunction of the scope of labor activities,impending strike action. After hearing arguments from both parties, the Labor Court agreed with ArcelorMittal Frýdek-Místek (with 466 employees) was soldSouth Africa’s view that NUMSA had not followed the Recognition Agreement and thus granted the injunction requested by ArcelorMittal South Africa. NUMSA did not take any further action on the matter, most likely deciding to raise the issue again during formal negotiations in 2022.
ArcelorMittal Temirtau's CLAs were expiring at the end of February 2018 to Stalprodukt S.A.
At2021. ArcelorMittal Poland,Temirtau and the current CLA will remain valid until one of the parties terminates it. Salary increases are agreed during the annual negotiations as the CLA does not provide for any automatic renewal mechanism. In 2018, for the first time in history, ArcelorMittal Poland reached a salary agreement covering a 2-year period (2018 and 2019). An agreement with trade unions on general rules that conditional bonuses partially depend on profitability were also concluded. Regular meetings were held with the main trade unions in order to share all relevant information on various topics connected with maintenance of ArcelorMittal Poland's production installations. These meetings are aimed at sharing views and reinforcing social dialogue atentered into new levels. In the area of remuneration and employment, employee relations were managed in the context of decreasing unemployment in the country and rising wages in Poland (with the minimum wage increasing by 7.1% in 2019). The focus of discussions with social partners on enhancing a culture of cooperation based on mutual respect and supporting creative ideas that bring added value and support the labor market.
In Spain, ArcelorMittal's policy aims at promoting social dialogue. Accordingly, management and unions have consistently worked together in efforts to find solutions to regain competitiveness and to maintain social dialogue. With this objective, a framework agreement was used between 2016 to 2018 for flat products and some specific companies of ArcelorMittal Downstream Solutions, which included a defined but moderate base salary increase. An additional variable premium linked to productivity and financial objectives of2021, the Company was included in the framework agreement. All other Spanish legal entities from Long Products have extended their CLA covering 2017 and 2018 and negotiations for 2019 are ongoing.
Additionally, the Temporary Layoff Plan, in force since June 2009 and designed to adapt the available human resources to the levels of activity in the facilities was extended until the end of 2020. It is being applied on a plant-by-plant basis depending on the activity.
ArcelorMittal remains committed to a strong and continuous social dialogue in sensitive contexts. Continuous and high-level conversation, a reactive process based on the exchange of views and fully transparent discussions underlies ArcelorMittal's fundamental approach to anticipating and managing change within the Company. In 2018, the European Works Council (EWC) experienced an extraordinarily intensive level of activity due to the acquisition of Ilva; the number of meetings doubled to ensure updated information on the acquisition and the remedies was available to the employee representatives.
Meanwhile, the EWC meetings also represented an opportunity to review ArcelorMittal activities in Europe and to identify and highlight the Company’s key challenges. The Company regularly presented and commented on safety, financial results, market outlooks, quality, industrial performance, human resources topics, recent developments or projects maintaining the proximity with the top-level management and employee representative bodies. As part of the EWC missions, three working groups on health and safety, employment and social responsibility have met during the year on the common topic of subcontractor management.
In November 2018, a three-day training session on environment and health and safety topics, was organized by management and was attended by more than 50 employee representatives. In December, the plenary session was dedicated to the review of the segments’ key information such as health and safety, employment, financial results and business perspective with the participation of the respective CEOs of the businesses operating in Europe.
In Ukraine, five collective labor disputes were registered at Kryviy rih, of which two were suspended pending court decision (one registered in 2017 and one in 2018). Three collective labor disputes (one registered in 2016 and two in 2017) are under review.
In South Africa, the Company’s operations are currently covered by the CLA concluded in August 2018 with the two recognized trade unions, Solidarity and NUMSA, for a period of three years ending March 31, 2021. The focus on productivity will remain integral to the Business Transformation Project, which was initiated in June 2018, as well as the Strategic Workforce Planning process that commenced in January 2019. Formal engagements with labor, as part of these processes, will be initiated if required as per the relevant South African legislation. A further factor affecting the labor relations landscape relates to the treatment under South African law of different categories of temporary labor and related rulings in South African courts, including the Constitutional Court. The Company is currently reviewing the implications thereof, as well as measures it may be required to take.
In Kazakhstan, all the requirements, terms and conditions of the CLA were fulfilled in 2018. Social dialogue with trade unions is stable. The current CLA was concluded for 3 years covering 2018, 2019 and 2020.
In 2018, the miningMining segment has maintained productive social dialogue and relationships with its trade unions and communities where there are operations. Like every year,The CLA with USW in Canada was renegotiated in 2021 and remains in force. As part of the annual negotiations in Canada with SINDEXTRA UnionUSW, a four week strike occurred, which furthermore underlined the need for continuous dialogue with the Company's employees and the unions. The Company expects productive continuous interactions in Serra Azul in Brazil were concluded within the mandate. Similarly, the CLAnext
years. The agreement with UWUL in Liberia was under negotiation and is expected to be closed in the first quarter of 2022.
Corporate governance
This section describes the corporate governance practices of ArcelorMittal for the year ended December 31, 2021.
Board of Directors and senior management
ArcelorMittal is governed by a Board of Directors and managed by the senior management. As described in "Directors and senior management" above, ArcelorMittal’s senior management was comprised of the Executive Office - comprising the Executive Chairman, Mr. Lakshmi N. Mittal and the CEO, Mr. Aditya Mittal. The Executive Office was supported by a team of seven other Executive Officers, who together encompass the key regions and corporate functions.
A number of corporate governance provisions in the Articles of Association of ArcelorMittal reflect provisions of the
Memorandum of Understanding signed on June 25, 2006 (prior to Mittal Steel Company N.V.’s merger with Arcelor), amended in April 2008 and which mostly expired on August 1, 2009. For more information about the Memorandum of Understanding, see “Additional information—Material contracts—Memorandum of Understanding”.
ArcelorMittal fully complies with the UWUL union, a 3 year collective agreement, was successfully concluded within mandate during November 2018. In Canada,10 Principles of Corporate Governance of the implementationLuxembourg Stock Exchange. This is explained in more detail in “—Other corporate governance practices” below. ArcelorMittal also complies with the New York Stock Exchange Listed Company Manual as applicable to foreign private issuers. There are no significant differences between the corporate governance practices of ArcelorMittal and those required of a 3 years CLA agreed toU.S. domestic issuer under the Listed Company Manual of the New York Stock Exchange.
Board of Directors
| | | | | | | | | | | | | | | | | | | | |
| 11 members | | 9 non-executive directors | | 7 independent directors | | 2 executive directors (CEO and Executive Chairman) |
| | | | | | | | | | | | | | | | | | | | |
| 36% women | | 64% men | | 8 average years on the Board | | 58 average age of directors |
The Board of Directors is in 2017 with USW Unioncharge of the overall governance and direction of ArcelorMittal. It is currently under way.
E. Share ownership
Asresponsible for the performance of December 31, 2018,all acts of administration necessary or useful in furtherance of the aggregate beneficial share ownershipcorporate purpose of ArcelorMittal, except for matters reserved by Luxembourg law or the Articles of Association to the general meeting of shareholders. The Articles of Association provide that the Board of Directors is composed of a minimum of three and a maximum of 18 members.
The Articles of Association provide that directors are elected and removed by the general meeting of shareholders by a simple majority of votes cast. Other than as set out in the Company’s Articles of Association, no shareholder has any specific right to nominate, elect or remove directors. Directors are elected by the general meeting of shareholders for three-year terms. In the event that a vacancy arises on the Board of Directors for any reason, the remaining members of the Board of Directors may by a simple majority elect a new director to temporarily fulfill the
duties attaching to the vacant post until the next general meeting of the shareholders.
For further information on the composition of the Board of Directors, including the expiration of each Director’s term and the period during which each Director has served, see section "—Directors and senior management (15 individuals) totaled 370,557 ArcelorMittal shares (excluding shares beneficially owned by" above.
Mr. Lakshmi N. Mittal was elected Chairman of the Significant Shareholder), including optionsBoard of Directors on May 13, 2008. Mr. Lakshmi N. Mittal was also ArcelorMittal’s CEO until February 11, 2021. Mr. Lakshmi N. Mittal was re-elected to acquire 138,384 ArcelorMittal ordinary shares that are exercisablethe Board of Directors for a three-year term at the annual general meeting of shareholders on June 13, 2020.
A director is considered “independent” if:
(a)he or she is independent within 60 daysthe meaning of December 31, 2018, representing 0.04%the New York Stock Exchange Listed Company Manual, as applicable to foreign private issuers,
(b)he or she is unaffiliated with any shareholder owning or controlling more than two percent of the total issued share capital of ArcelorMittal. Excluding optionsArcelorMittal, and
(c)the Board of Directors makes an affirmative determination to this effect.
For these purposes, a person is deemed affiliated to a shareholder if he or she is an executive officer, a director who also is an employee, a general partner, a managing member or a controlling shareholder of such shareholder. The 10 Principles of Governance of the Luxembourg Stock Exchange, which constitute ArcelorMittal's domestic corporate governance code, require ArcelorMittal to define the independence criteria that apply to its directors, which are described in article 8.1 of its Articles of Association.
Specific characteristics of the director role
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Required share ownership
Lead Independent Director - minimum of 6,000 ordinary shares
Non-executive directors - minimum of 4,000 ordinary shares | | Maximum 12 year service (independent directors) | | May not serve on the boards of directors of more than four publicly listed companies (non-executive directors) | | Required to sign the Company’s Code of Business Conduct and confirm their adherence annually |
The Company’s Articles of Association do not require directors to be shareholders of the Company. The Board of Directors nevertheless adopted a share ownership policy on October 30, 2012, that was amended on November 7, 2017, considering that it is in the best interests of all shareholders for all non-executive directors to acquire and hold a minimum number of ArcelorMittal ordinary shares (and excludingin order to better align their long-term interests with those of ArcelorMittal’s shareholders. The Board of Directors believes that this share ownership policy will result in a meaningful holding of ArcelorMittal shares beneficially ownedby each non-executive director, while at the same time taking into account the fact that the share ownership requirement should not be excessive in order not to unnecessarily limit the pool of available candidates for appointment to the Board of Directors. Directors must hold their shares directly or indirectly, and as sole or joint beneficiary owner (e.g., with a spouse or minor children), at the latest within three years of his or her election to the Board of Directors. Each director will hold the shares acquired on the basis of this policy for so long as he or she serves on the Board of Directors. Directors purchasing shares in compliance with this policy must comply with the ArcelorMittal Insider Dealing Regulations and, in particular, refrain from trading during any restricted period, including any such period that may apply immediately after the Director’s departure from the Board of Directors for any reason.
On October 30, 2012, the Board of Directors also adopted a policy that places limitations on the terms of independent directors as well as the number of directorships that directors may hold in order to align the Company’s corporate governance practices with best practices in this area (as highlighted in the
table above). Nevertheless, the Board of Directors may, by way of exception to this rule, make an affirmative determination, on a case-by-case basis, that a Director may continue to serve beyond the 12-year rule if the Board of Directors considers it to be in the best interest of the Company based on the contribution of the Director involved taking into consideration the balance between the knowledge, skills, experience of the director and the need for renewal of the Board.
As membership of the Board of Directors represents a significant time commitment, the policy requires both executive and non-executive directors to devote sufficient time to the discharge of their duties as a Director of ArcelorMittal. Directors are therefore required to consult with the Chairman and the Lead Independent Director before accepting any additional commitment that could conflict with or impact the time they can devote to their role as a Director of ArcelorMittal. A non-executive Director’s service on the board of directors of any subsidiary or affiliate of ArcelorMittal or of any non-publicly listed company is not taken into account for purposes of complying with the service limitation.
Although non-executive directors of ArcelorMittal who change their principal occupation or business association are not necessarily required to leave the Board of Directors, the policy requires each non-executive director, in such circumstances, to promptly inform the Board of Directors of the action he or she is contemplating. Should the Board of Directors determine that the contemplated action would generate a conflict of interest, such non-executive director would be asked to tender his or her
resignation to the Chairman of the Board of Directors, who would decide to accept the resignation or not.
None of the members of the Board of Directors, including the executive director, have entered into service contracts with ArcelorMittal or any of its subsidiaries that provide for any form of remuneration or for benefits upon the termination of their term. All non-executive Directors of the Company signed the Company’s Appointment Letter, which confirms the conditions of their appointment by the Significant Shareholder), these 15General Meeting of the Shareholders including compliance with certain non-compete provisions, the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange and the Company’s Code of Business Conduct.
The remuneration of the members of the Board of Directors is determined on a yearly basis by the annual general meeting of shareholders.
Share transactions by management
In compliance with laws prohibiting insider dealing, the Board of Directors of ArcelorMittal has adopted insider dealing regulations, which apply throughout the ArcelorMittal group. These regulations are designed to ensure that insider information is treated appropriately within the Company and avoid insider dealing and market manipulation. Any breach of the rules set out in this procedure may lead to criminal or civil charges against the individuals beneficiallyinvolved, as well as disciplinary action by the Company.
Operation
General
The Board of Directors and the Board committees may engage the services of external experts or advisers as well as take all actions necessary or useful to implement the Company’s corporate purpose. The Board of Directors (including its three committees) has its own 232,173budget, which covers functioning costs such as external consultants, continuing education activities for directors and travel expenses.
Meetings
The Board of Directors meets when convened by the Chairman of the Board or any two members of the Board of Directors. The Board of Directors holds physical meetings at least on a quarterly basis as five regular meetings are scheduled per year. The Board of Directors holds additional meetings if and when circumstances require, in person or by teleconference and can take decisions by written circulation, provided that all members of the Board of Directors agree.
In 2021 the Board of Directors held 5 meetings with 100% of the average attendance rate.
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| 5 meetings (2021) | | 100% Average attendance rate |
In order for a meeting of the Board of Directors to be validly held, a majority of the directors must be present or represented, including at least a majority of the independent directors. In the absence of the Chairman, the Board of Directors will appoint by majority vote a chairman for the meeting in question. The Chairman may decide not to participate in a Board of Directors’ meeting, provided he has given a proxy to one of the directors who will be present at the meeting. For any meeting of the Board of Directors, a director may designate another director to represent him or her and vote in his or her name, provided that the director so designated may not represent more than one of his or her colleagues at any time.
Each director has one vote and none of the directors, including the Chairman, has a casting vote. Decisions of the Board of Directors are made by a majority of the directors present and represented at a validly constituted meeting, except for the decisions of the Board of Directors relating to the issue of any financial instruments carrying or potentially carrying a right to equity pursuant to the authorization conferred by article 5.5 of the Articles of Association, which shall be taken by a majority of two-thirds of the directors present or represented at a validly constituted meeting.
Lead Independent Director
Mr. Bruno Lafont was elected by the Board of Directors as ArcelorMittal's Lead Independent Director and re-elected as a director for a three-year term at ArcelorMittal ordinary shares. Other than Mr. Lakshmi Mittal,AGM held on June 13, 2020.
The agenda of each meeting of the Board of Directors is decided jointly by the Chairman of the Board of Directors and the Lead Independent Director.
Separate meetings of independent directors
The independent members of the Board of Directors may schedule meetings outside the presence of non-independent directors. Five meetings of the independent directors outside the presence of management were held in 2021.
Annual self-evaluation
The Board of Directors decided in 2008 to start conducting an annual self-evaluation of its functioning in order to identify potential areas for improvement. The first self-evaluation process was carried out in early 2009. The self-evaluation process includes structured interviews between the Lead Independent Director and each director and covers the overall performance of the Board of Directors, its relations with senior
management, the performance of individual directors, and the performance of the committees. The process is supported by the Company Secretary under the supervision of the Chairman and the Lead Independent Director. The findings of the self-evaluation process are examined by the ARCG Committee and presented with recommendations from the ARCG Committee to the Board of Directors for adoption and implementation. Suggestions for improvement of the Board of Directors’ process based on the prior year’s performance and functioning are implemented during the following year.
The 2021 Board of Directors’ self-evaluation was completed by the Board on January 25, 2022. The Board of Directors was of the opinion that it and the management had cooperated successfully during 2021. Strong focus was given on health and safety, sustainability, on JV performance and structure, on shareholders returns including share buyback. on policies including incorporating of ESG criteria and targets in the short-term and long term incentive structure.The Board of Directors reviewed the practical implementation of the governance structure and thought it was working well. The Board set new priorities for discussion and review and identified a number of priority topics for 2022.
The Board of Directors believes that its members have the appropriate range of skills, knowledge and experience, as well as the degree of diversity necessary to enable it to effectively govern the business. The Board of Directors composition is reviewed on a regular basis and additional skills and experience are actively searched for in line with the expected development of ArcelorMittal’s business as and when appropriate.
Required skills, experience and other personal characteristics
Diverse skills, backgrounds, knowledge, experience, geographic location, nationalities and gender are required in order to effectively govern a global business the size of the Company’s operations. The Board of Directors and its committees are therefore required to ensure that the Board has the right balance of skills, experience, independence and knowledge necessary to perform its role in accordance with the highest standards of governance.
The Company’s directors must demonstrate unquestioned honesty and integrity, preparedness to question, challenge and
critique constructively, and a willingness to understand and commit to the highest standards of governance. They must be committed to the collective decision-making process of the Board of Directors and must be able to debate issues openly and constructively, and question or challenge the opinions of others. Directors must also commit themselves to remain actively involved in Board decisions and apply strategic thought to matters at issue. They must be clear communicators and good listeners who actively contribute to the Board in a collegial manner. Each director must also ensure that no decision or action is taken that places his or her interests before the interests of the business. Each director has an obligation to protect and advance the interests of the Company and must refrain from any conduct that would harm it.
In order to govern effectively, non-executive directors must have a clear understanding of the Company’s strategy, and a thorough knowledge of the ArcelorMittal group and the industries in which it operates. Non-executive directors must be sufficiently familiar with the Company’s core business to effectively contribute to the development of strategy and monitor performance.
With specific regard to the non-executive directors of the Company, the composition of the group of non-executive directors should be such that the combination of experience, knowledge and independence of its members allows the Board to fulfill its obligations towards the Company and other stakeholders in the best possible manner.
The ARCG Committee ensures that the Board of Directors is comprised of high-caliber individuals whose background, skills, experience and personal characteristics enhance the overall profile of the Board and meets its needs and diversity aspirations by nominating high quality candidates for election to the Board by the general meeting of shareholders.
Board profile
The key skills and experience of the directors, and the extent to which they are represented on the Board of Directors and its committees, are set out below. In summary, the non-executive directors contribute:
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| International and operational experience | | Understanding of the industry sectors in which ArcelorMittal operates | | Knowledge of global capital markets and being a company listed in several jurisdictions | | Understanding of the health, safety, environmental, political and community challenges that ArcelorMittal faces |
Renewal
The Board of Directors plans for its own succession, with the assistance of the ARCG Committee. In doing this, the Board of Directors:
•considers the skills, backgrounds, knowledge, experience and diversity of geographic location, nationality and gender necessary to allow it to meet the corporate purpose;
•assesses the skills, backgrounds, knowledge, experience and diversity currently represented;
•identifies any inadequate representation of those attributes and agrees the process necessary to ensure a candidate is selected who brings them to the Board of Directors; and
•reviews how Board performance might be enhanced, both at an individual director level and for the Board as a whole.
The Board believes that orderly succession and renewal is achieved through careful planning and by continuously reviewing the composition of the Board.
When considering new appointments to the Board, the ARCG Committee oversees the preparation of a position specification that is provided to an independent recruitment firm retained to conduct a global search, taking into account, among other factors, geographic location, nationality and gender. In addition to the specific skills, knowledge and experience required of the candidate, the specification contains the criteria set out in the ArcelorMittal Board profile.
Diversity
In line with the worldwide effort to increase gender diversity on the boards of directors of listed and unlisted companies, the Board met its goal of increasing the number of women on the Board to at least three by the end of 2015 with the election of Mrs. Karyn Ovelmen in May 2015. Out of 11 members of the Board of Directors, women represent 36% in 2021. The ArcelorMittal Board’s diversity not only relates to gender, but also to the region, background and industry of its members.
Director induction, training and development
The Board considers that the development of the directors’ knowledge of the Company, the steel-making and mining industries, and the markets in which the Company operates is an ongoing process. To further bolster the skills and knowledge of directors, the Company set up a continuous development program in 2009.
Upon his or her election, each new non-executive director undertakes an induction program specifically tailored to his or
her needs and includes ArcelorMittal’s long-term vision centered on the concept of “Safe Sustainable Steel”.
The Board’s development activities include the provision of regular updates to directors on each of the Company’s products and markets. Non-executive directors may also participate in training programs designed to maximize the effectiveness of the directors throughout their tenure and link in with their individual performance evaluations. The training and development program may cover not only matters of a business nature, but also matters falling into the environmental, social and governance area.
Structured opportunities are provided to build knowledge through initiatives such as visits to plants and mine sites and business briefings provided at Board meetings. Non-executive directors also build their Company and industry knowledge through the involvement of the Executive Office and other senior employees in Board meetings. Business briefings, site visits and development sessions underpin and support the Board’s work in monitoring and overseeing progress towards the corporate purpose of creating long-term shareholder value through the development of the ArcelorMittal business in steel and mining. The Company therefore continuously builds directors’ knowledge to ensure that the Board remains up-to-date with developments within the Company’s segments, as well as developments in the markets in which the Company operates.
During the year, non-executive directors participated in the following activities:
•comprehensive business briefings intended to provide the directors with a deeper understanding of the Company’s activities, environment, key issues and strategy of the Company’s segments. These briefings are provided to the Board of Directors by senior executives, including Executive Office members. The briefings provided during the course of 2021 covered health and safety processes, cyber security, risk management, corporate responsibility, carbon reduction strategy in steelmaking, capital allocation process and strategy. Business briefings took place at Board and committee meetings;
•briefing meetings with the Company executives in charge of specific business segments or markets;
•development sessions on specific topics of relevance, such as health and safety, commodity markets, HR, investor relations, accounting, the world economy, changes in corporate governance standards, directors’ duties and shareholder feedback.
The ARCG Committee oversees director training and development. This approach allows induction and learning
opportunities to be tailored to the directors’ committee memberships, as well as the Board of Directors' specific areas of focus. In addition, this approach ensures a coordinated process in relation to succession planning, Board renewal, training, development and committee composition, all of which are relevant to the ARCG Committee’s role in securing the supply of talent to the Board.
Board of Directors committees
The Board of Directors has three committees:
•the Audit & Risk Committee,
•the ARCG Committee, and
•the Sustainability Committee.
Audit & Risk Committee
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4 members (100% independent) | | 6 meetings (2021) |
In 2021, 6 meetings of the Audit & Risk Committee were held with an attendance rate of 100%.
In 2015, the Board decided to combine the Audit Committee with the Risk Management Committee in order to provide their members with a more holistic view of ArcelorMittal’s current governance, risks and control systems.
The primary function of the Audit & Risk Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing:
•the integrity of the financial reports and other financial information provided by the Company to any governmental body or the public;
•the Company’s compliance with legal and regulatory requirements;
•the registered public accounting firm’s (Independent Auditor) qualifications and independence;
•the Company’s system of internal control regarding finance, accounting, legal compliance, ethics and risk management that management and the Board have established;
•the Company’s auditing, accounting and financial reporting processes generally;
•the identification and management of risks to which the ArcelorMittal group is exposed; and
•conducting investigations into any matters, including whistleblower complaints, within its scope of responsibility and obtaining advice from outside legal, accounting, or other advisers, as necessary, to perform its duties and responsibilities.
The Audit & Risk Committee must be composed solely of independent members of the Board of Directors. The members are appointed by the Board of Directors each year after the annual general meeting of shareholders. The Audit & Risk Committee comprises four members, all of whom must be independent under the Company’s corporate governance guidelines, the New York Stock Exchange (NYSE) standards as applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Audit & Risk Committee makes decisions by a simple majority with no member having a casting vote.
At least one member must qualify as an "audit committee financial expert” as defined by the SEC and determined by the Board.
At least one member must qualify as an Audit & Risk Committee “risk management expert” having experience in identifying, assessing, and managing risk exposures of large, complex companies.
The Audit & Risk Committee currently consists of 4 members: Mrs. Karyn Ovelmen, Mr. Bruno Lafont, Mr. Karel de Gucht and Mr. Etienne Schneider, each of whom is an independent Director according to the NYSE standards and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Chairman of the Audit & Risk Committee is Mrs. Ovelmen who is an “audit committee financial expert” as defined by the SEC.
Please see “Directors and senior management—–Board of Directors” above for Mrs. Ovelmen's experience.
According to its charter, the Audit & Risk Committee is required to meet at least four times a year. The Audit & Risk Committee performs an annual self-evaluation and completed its 2021 self-evaluation on January 25, 2022. The charter of the Audit & Risk Committee is available from ArcelorMittal upon request.
Appointments, Remuneration and Corporate Governance Committee (former ARCGS Committee)
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4 members (100% independent) | | 9 meetings (2021) |
In 2021, 9 meetings of the ARCG Committee were held, with an attendance rate of 100%.
The ARCG Committee is comprised of four directors, each of whom is independent under the New York Stock Exchange standards as applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange.
The members are appointed by the Board of Directors each year after the annual general meeting of shareholders. The ARCG Committee makes decisions by a simple majority with no member having a casting vote.
The Board of Directors has established the ARCG Committee to:
•determine, on its behalf and on behalf of the shareholders within agreed terms of reference, ArcelorMittal’s compensation framework, including short and long term incentives for the CEO, the Executive Chairman and for the seven other Executive Officers;
•review and approve succession and contingency plans for key managerial positions at the level of the Executive Officers;
•consider any candidate for appointment or reappointment to the Board of Directors at the request of the Board of Directors and provide advice and recommendations to it regarding the same;
•evaluate the functioning of the Board of Directors and monitor the Board of Directors’ self-evaluation process;
•assess the roles of the Chairman and CEO and deliberate on the merits of the Board’s leadership structure to ensure that the most efficient and appropriate structure is in place;
•develop, monitor and review corporate governance principles and corporate responsibility policies applicable to ArcelorMittal, as well as their application in practice; and
•review the company’s sustainable development plan and associated management systems and ensure the group is well positioned to meet the evolving expectations of stakeholders, including investors, customers, regulators, employees and communities.
During its meeting of May 8, 2018, the Board renewed its emphasis on four key areas (health & safety, environment and community relations, climate change and social issues) and added these to the scope of the ARCG Committee to ensure a
Board level review of these important topics. Accordingly, the ARCG Committee was renamed the ARCGS Committee ("Appointments, Remuneration, Corporate Governance and Sustainability Committee") to highlight the Company’s focus on these key areas. During its meeting of July 27, 2021, the Appointment, Remuneration, Corporate Governance and Sustainability Committee became again ARCG Committee and the new Sustainability Committee was created.As a result, ArcelorMittal complies with the new Principle 9 on companies' corporate social responsibility introduced subsequently to the revision of the 10 Principles of the Luxembourg Stock Exchange. According to Recommendation 9.3 under the Principles, the Board shall regularly consider the Company's non-financial risks, including social and environmental risks.
The ARCG Committee’s principal criteria in determining the compensation of executives is to encourage and reward performance that will lead to long-term enhancement of shareholder value. The ARCG Committee may seek the advice of outside experts.
The four members of the ARCG Committee are Mr. Bruno Lafont, Mrs. Suzanne P. Nimocks, Mrs. Clarissa Lins and Mr. Tye Burt, each of whom is independent in accordance with the NYSE standards applicable to foreign private issuers and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Chairman of the ARCG Committee is Mr. Lafont.
The ARCG Committee is required to meet at least three times a year.
The ARCG Committee performs an annual self-evaluation and completed its 2021 self-evaluation on January 25, 2022.
The charter of the ARCG Committee is available from ArcelorMittal upon request.
Succession management
Succession management at ArcelorMittal is a systematic, structured process for identifying and preparing employees with potential to fill key organizational positions, should the position become vacant. This process applies to all ArcelorMittal key positions up to and including the Executive Office. Succession management aims to ensure the continued effective performance of the organization by providing for the availability of experienced and capable employees who are prepared to assume these roles as they become available. For each position, candidates are identified based on performance, potential and an assessment of leadership capabilities and their “years to readiness”. Development needs linked to the succession plans are discussed, after which “Personal Development Plans” are put in place, to accelerate development and prepare candidates. Regular reviews of succession plans are conducted at different levels of the organization to ensure
that they are accurate and up to date, leading to at least once a year formal review by the Executive Office, of all key positions. Succession management is a necessary process to reduce risk of vacant positions or skill gap transitions, create a pipeline of future leaders, ensure smooth business continuity and improve employee motivation and engagement. This process has been in place for several years and reinforced, widened and made more systematic in all regions of the organization. The responsibility to review and approve succession plans and contingency plans at the highest level rests with the Board’s ARCG Committee.
Sustainability Committee
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3 members (67% independent) | | 2 meetings (2021) |
In 2021, 2 meetings of Sustainability Committee were held, with an attendance rate of 100%.
The Sustainability Committee comprises three members, of whom two are independent. The members are appointed by the Board of Directors. The Sustainability Committee makes decisions by simple majority with no member having a casting vote.
The primary function of the Sustainability Committee is to assist the Board of Directors on the following areas:
•review Group level frameworks, policies, standards, and guidelines in sustainability matters;
•review the Company`s sustainable development plan and associated management systems and ensure the Group is well positioned to meet the evolving expectations of stakeholders, including investors, customers, regulators, employees, and communities;
•review the effectiveness of the process for assessing and managing catastrophic risks;
•coordinate the SC’s risk management work with the Audit and Risk Committee, in relation to reporting to the Board;
•review the findings of important climate action report and the management response;
•support and provide guidance to management in developing and updating policies and procedures relating to employee health & safety, environment, climate change and community relations;
•monitor any current, pending or threatened legal actions with respect to safety, climate change, environment, and community relations;
•produce a report on sustainable development plan to be included in ArcelorMittal`s Annual Report;
•review and recommend to the Board of Directors on the adequacy of the reporting on sustainability opportunities, risks and issues in the Annual Report, Sustainability Report, and other relevant public documents;
•make recommendations to the Board of Directors with respect to trends in results and programs in all covered areas;
•ensure that the SC Chair (or in his or her absence, an alternative member) of the SC attends the Company’s Annual General Meeting to answer questions concerning sustainability and their development and/or implementation;
•oversee any investigation and/or undertake any thorough analysis which is within its scope.
The three members of the Sustainability Committee are Mrs. Clarissa Lins, Mr. Tye Burt and Mr. Michel Wurth. Mrs Lins and Mr Burt are independent in accordance with the Company’s corporate governance guidelines, the NYSE standards and the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange. The Chairman of the Sustainability Committee is Mrs. Lins.
The members have relevant expertise or experience relating to the objective of the Sustainability Committee. The responsible senior managers pertaining to their respective areas of responsibility - health and safety, environment, climate change, for community relations - are permanent invitees to the meetings of the SC. The Chairman of the SC makes a verbal report of the SC’s decisions and findings to the Board of Directors after each SC meeting.
Other corporate governance practices
ArcelorMittal is committed to adhering to best practices in terms of corporate governance in its dealings with shareholders and aims to ensure good corporate governance by applying rules on transparency, quality of reporting and the balance of powers. ArcelorMittal continually monitors U.S., EU and Luxembourg legal requirements and best practices in order to make adjustments to its corporate governance controls and procedures when necessary, as evidenced by the policies adopted by the Board of Directors in 2012.
ArcelorMittal complies with the 10 Principles of Corporate Governance of the Luxembourg Stock Exchange in all respects.
Ethics and conflicts of interest
Ethics and conflicts of interest are governed by ArcelorMittal’s Code of Business Conduct, which establishes the standards for ethical behavior that are to be followed by all employees and directors of ArcelorMittal in the exercise of their duties, including the Company's CEO and CFO. Each employee of ArcelorMittal is required to sign and acknowledge the Code of Conduct upon joining the Company. This also applies to the members of the Board of Directors of ArcelorMittal, who signed the Company’s Appointment Letter in which they acknowledged their duties and obligations. Any new member of the Board of Directors must sign and acknowledge the Code of Conduct upon appointment.
Employees must always act in the best interests of ArcelorMittal and must avoid any situation in which their personal interests conflict, or could conflict, with their obligations to ArcelorMittal. Employees are prohibited from acquiring any financial or other interest in any business or participating in any activity that could deprive ArcelorMittal of the time or the attention needed to devote to the performance of their duties. Any behavior that deviates from the Code of Business Conduct is to be reported to the employee’s supervisor, a member of the management, the head of the legal department or the head of the internal assurance department.
Code of Business Conduct
Conduct training is offered throughout ArcelorMittal on a regular basis in the form of face-to-face trainings, webinars and online trainings. Employees are periodically trained about the Code of Business Conduct in each location where ArcelorMittal has operations. The Code of Business Conduct is available in the “Corporate Governance-Our Policies-Code of Business Conduct” section of ArcelorMittal’s website at www.arcelormittal.com and has been disseminated through company-wide communications.
In addition to the Code of Business Conduct, ArcelorMittal has developed a Human Rights Policy and a number of other compliance policies in more specific areas, such as antitrust, anti-corruption, economic sanctions, insider dealing and data protection. In all these areas, specifically targeted groups of employees are required to undergo specialized compliance training. Furthermore, ArcelorMittal’s compliance program also includes a quarterly compliance certification process covering all business segments and entailing reporting to the Audit & Risk Committee.
ArcelorMittal intends to disclose any amendment to or waiver from the Code of Business Conduct applicable to any of ArcelorMittal’s directors, its CEO, CFO or any other person who
is an executive officer of ArcelorMittal on ArcelorMittal’s website at www.arcelormittal.com.
Process for Handling Complaints on Accounting Matters
As part of the procedures of the Board of Directors for handling complaints or concerns about accounting, internal controls and auditing issues, ArcelorMittal’s Anti-Fraud Policy and Code of Business Conduct encourage all employees to bring such issues to the Audit & Risk Committee’s attention on a confidential basis. In accordance with ArcelorMittal’s Anti-Fraud and Whistleblower Policy, concerns with regard to possible fraud or irregularities in accounting, auditing or banking matters or bribery within ArcelorMittal or any of its subsidiaries or other controlled entities may also be communicated through the “Corporate Governance — Whistleblower” section of the ArcelorMittal website at www.arcelormittal.com, where ArcelorMittal’s Anti-Fraud Policy and Code of Business Conduct are also available in each of the main working languages used within the Group. In recent years, ArcelorMittal has implemented local whistleblowing facilities, as needed.
During 2021, there were 169 complaints received relating to alleged fraud, which were referred to and duly reviewed by the Company’s Internal Assurance Department. Following review by the Audit & Risk Committee, none of these complaints were found to be significant.
Internal assurance
ArcelorMittal has an Internal Assurance function that, through its Head of Internal Assurance, reports to the Audit & Risk Committee. The function is staffed by full-time professional staff located within each of the principal operating subsidiaries and at the corporate level. Recommendations and matters relating to internal control and processes are made by the Internal Assurance function and their implementation is regularly reviewed by the Audit & Risk Committee.
Independent auditors
The appointment and determination of fees of the independent auditors is the direct responsibility of the Audit & Risk Committee. The Audit & Risk Committee is further responsible for obtaining, at least once each year, a written statement from the independent auditors that their independence has not been impaired. The Audit & Risk Committee has also obtained a confirmation from ArcelorMittal’s principal independent auditors to the effect that none of its former employees are in a position within ArcelorMittal that may impair the principal auditors’ independence.
Measures to prevent insider dealing and market manipulation
The Board of Directors of ArcelorMittal has adopted Insider Dealing Regulations (“IDR”), which are updated when necessary (most recently in January 2019) and in relation to which training is conducted throughout the Group. The IDR’s most recent version has been updated in light of the new Market Abuse Regulation and is available on ArcelorMittal’s website, www.arcelormittal.com.
The IDR apply to the worldwide operations of ArcelorMittal. The compliance and data protection officer of ArcelorMittal is also the IDR compliance officer and answers questions that members of senior management, the Board of Directors, or employees may have about the IDR’s interpretation. The IDR compliance officer maintains a list of insiders as required by Regulation No 596/2014 of the European Parliament and the Council dated 16 April 2014 on market abuse or “MAR” and the Commission Implementing Regulation 2016/347 of 10 March 2016 laying down technical standards with regard to the precise format of insider lists and for updating insider lists in accordance with MAR. The IDR compliance officer may assist senior executives and directors with the filing of notices required by Luxembourg law to be filed with the Luxembourg financial regulator, the CSSF (Commission de Surveillance du Secteur Financier). Furthermore, the IDR compliance officer has the power to conduct investigations in connection with the application and enforcement of the IDR, in which any employee or member of senior management beneficiallyor of the Board of Directors is required to cooperate.
Selected new employees of ArcelorMittal are required to participate in a training course about the IDR upon joining ArcelorMittal and every three years thereafter. The individuals who must participate in the IDR training include the members of senior management, employees who work in finance, legal, sales, mergers and acquisitions and other areas that the Company may determine from time to time. In addition, ArcelorMittal’s Code of Business Conduct contains a section on “Trading in the Securities of the Company” that emphasizes the prohibition to trade on the basis of inside information. An online interactive training tool based on the IDR was developed in 2010 and deployed across the group through ArcelorMittal’s intranet, with the aim to enhance the staff’s awareness of the risks of sanctions applicable to insider dealing. The importance of the IDR was again reiterated in the Group's internal Group Policies and Procedures Manual in 2013.
owns less
Shareholders and markets
Major shareholders
The following table sets out information as of December 31, 2021 with respect to the beneficial ownership of ArcelorMittal ordinary shares by each person who is known to be the beneficial owner of more than 1%5% of ArcelorMittal’s shares. the shares and all directors and senior management as a group.
| | | | | | | | | | | |
| ArcelorMittal Ordinary Shares |
| Number | | % |
Significant Shareholder1 | 330,940,242 | | | 33.67 | % |
Treasury Shares2 | 71,916,570 | | | 7.32 | % |
| Other Public Shareholders | 579,952,960 | | | 59.01 | % |
| Total | 982,809,772 | | | 100.00 | % |
Of which: BlackRock inc.4 | 52,460,418 | | | 5.34 | % |
Of which: Société Générale SA4 | 49,485,652 | | | 5.04 | % |
Of which: Directors and Senior Management3 | 115,132 | | | 0.01 | % |
| Significant Shareholder voting rights (outstanding shares) | | | 36.33 | % |
| | | |
1For purposes of this Item 6.E,table, ordinary shares heldowned directly by Mr. Lakshmi N. Mittal and his wife, Mrs. Usha Mittal, and options held directly by Mr. Lakshmi Mittal, are aggregated with those ordinary shares beneficially owned by the Significant Shareholder. In addition, see “Item 7.A—MajorShareholder (other than those resulting from the conversion of mandatorily convertible subordinated notes). At December 31, 2021, Mr. Lakshmi Mittal and his wife, Mrs. Usha Mittal, had direct ownership of ArcelorMittal ordinary shares and beneficial ownership (within the meaning set forth in Rule 13d-3 of the Exchange Act), through the Significant Shareholder, of the outstanding equity of two holding companies that own ArcelorMittal ordinary shares—Nuavam Investments S.à r.l. (“Nuavam”) and Lumen Investments S.à r.l. (“Lumen”). Nuavam, a limited liability company organized under the laws of Luxembourg, was the owner of 63,658,348 ArcelorMittal ordinary shares. Lumen, a limited liability company organized under the laws of Luxembourg, was the owner of 266,969,652 ArcelorMittal ordinary shares. Mr. Lakshmi N. Mittal was the direct owner of 286,742 ArcelorMittal ordinary shares. Mrs. Mittal was the direct owner of 25,500 ArcelorMittal ordinary shares. Mr. Lakshmi N. Mittal, Mrs. Mittal and the Significant Shareholder shared beneficial ownership of 100% of the outstanding equity of each of Nuavam and Lumen (within the meaning set forth in Rule 13d-3 of the Exchange Act). Accordingly, Mr. Lakshmi N. Mittal was the beneficial owner of 330,914,742 ArcelorMittal ordinary shares, Mrs. Mittal was the beneficial owner of 330,653,500 ordinary shares, and the Significant Shareholder (when aggregated with ordinary shares of ArcelorMittal held directly by Mr. and Mrs. Mittal) was the beneficial owner of 330,940,242 ordinary shares. The foregoing statement does not give effect to the ordinary shares resulting from the conversion of the mandatorily convertible subordinated notes issued in May 2020 outstanding as of December 31, 2021. Assuming conversion of all outstanding mandatorily convertible subordinated notes issued in May 2020 (including those held by the Significant Shareholder), the Significant Shareholder would, together with Mr. and Mrs. Mittal, beneficially own 341,828,522 ordinary shares representing 32.58% of issued shares (assuming conversion of all notes at the maximum conversion ratio) or 340,206,842 ordinary shares representing 32.74% of issued shares (assuming conversion of all notes at the minimum conversion ratio). As of December 31, 2021 and 2020, the Significant Shareholder (together with Mr. Lakshmi N. Mittal and Mrs. Mittal) held 33.67% and 35.64% of the Company’s ordinary shares respectively. During 2021, the Company repurchased 62.2 million shares from the Significant
Shareholder under its five buy back programs for $1.9 billion. See "Related party transactions-Share Repurchase Agreement".
2Represents ArcelorMittal ordinary shares repurchased pursuant to share repurchase programs, fractional shares returned in various transactions, and the use of treasury shares in various transactions.
3Includes shares beneficially owned by directors and members of senior management listed in section "Management and employees—Directors and senior managers" of this annual report; excludes shares beneficially owned by Mr. Lakshmi N. Mittal. Note that ordinary shares included in this item are included in “Other Public Shareholders” above.
4Note that ordinary shares included in this item are included in “Other Public Shareholders” above.
Aditya Mittal is the direct owner of 120,413 ArcelorMittal ordinary shares representing 0.01% of the ArcelorMittal ordinary shares outstanding. Aditya Mittal holds a total of 344,331 PSUs of which 133,720 may vest in 2022, 82,584 may vest in 2023, 71,050 may vest in 2024 and 56,977 may vest in 2025. As the vesting of PSUs is dependent on the Company's performance criteria not fully within the control of the PSU holder, Aditya Mittal does not beneficially own ArcelorMittal ordinary shares by virtue of his ownership of the PSUs. Aditya Mittal is the son of Mr. Lakshmi N. Mittal and Mrs. Mittal and is CEO and non-independent director of ArcelorMittal. Vanisha Mittal Bhatia is the direct owner of 8,500 ArcelorMittal ordinary shares, representing less than 0.1% of the ArcelorMittal ordinary shares outstanding. Vanisha Mittal Bhatia is the daughter of Mr. Lakshmi N. Mittal and Mrs. Mittal and a member of the Company’s Board of Directors.
The ArcelorMittal ordinary shares may be held in registered form on the Company’s register only. Registered shares are fully fungible and may consist of:
a.ArcelorMittal Registry Shares, which are registered directly on ArcelorMittal’s Luxembourg shareholder register,
b.shares traded on Euronext Amsterdam, Euronext Paris, the regulated market of the Luxembourg Stock Exchange and the Spanish Stock Exchanges, which are held in Euroclear, or
c.shares traded on the NYSE, the ("New York Registry Shares"), which are registered (including in the name of the nominee of DTC) in a New York Share Register kept on behalf of ArcelorMittal by Citibank N.A., its New York transfer agent.
On May 18, 2020, ArcelorMittal announced that a 5.11% shareholding notification by BlackRock, Inc. was available in the Luxembourg Stock Exchange’s electronic database OAM on www.bourse.lu and on the Company’s website corporate.arcelormittal.com under ‘Investors - Corporate Governance - Shareholding structure’. On August 27, 2020 ArcelorMittal announced that BlackRock Inc. has notified it of a
decrease in its voting rights in ArcelorMittal from 5.04% to 4.98% as based on an amended form submitted on August 25, 2020. The notification was available in the Luxembourg Stock Exchange’s electronic database OAM on www.bourse.lu and on the Company’s website corporate.arcelormittal.com under ‘Investors - Corporate Governance - Shareholding structure’.
On February 5, 2021, BlackRock, Inc. filed a Schedule 13G with the SEC stating that it beneficially owned 57,171,259 shares or 5.2% of ArcelorMittal’s issued shares as of December 31, 2020.
On March 10, 2021, BlackRock, Inc. filed a Schedule 13G/A with the U.S. Securities and Exchange Commission stating that it beneficially owned 51,468,777 shares or 4.7% of ArcelorMittal’s issued shares as of February 28, 2021.
On February 4, 2022, BlackRock, Inc. filed a Schedule 13G/A with the U.S. Securities and Exchange Commission stating that it beneficially owned 52,460,418 shares or 5.3% of ArcelorMittal’s issued shares as of December 31, 2021.
On January 19, 2022, BlackRock, Inc. provided a notification to the Company stating that it beneficially owned 49,166,064 shares or 5.24% of ArcelorMittal’s issued shares as of January 18, 2022.
There were notifications from Société Générale SA on June 22, on November 12, 19 and 24, on December 18 and 30, 2020 and on January 4, 6 and 25, 2021 with a closing percentage on December 31, 2020 of 4.75% subsequently increasing to 5.18% on January 4, 2021 and decreasing to 4.79% on January 21, 2021.
There were notifications from Société Générale SA on January 4, 6 and 25, 2021, on March 8, 12, 25 and 31, 2021, on May 5 and 19, 2021, on June 7, 2021, on August 6 and 16, 2021, on September 6, 2021, on October 29, 2021, on November 10, 2021 and on December 1, 6 and 29 with a closing percentage on December 31, 2021 of 5.04%.
On January 26, 2022, there was a notification from Société Générale SA stating that it beneficially owned 44,777,728 shares or 4.88% of ArcelorMittal’s issued shares as of January 21, 2022. These notifications are available in the Luxembourg Stock Exchange’s OAM electronic database on www.bourse.lu and on the Company’s website corporate.arcelormittal.com under “Investors - Corporate Governance - Shareholding structure”. The notifications were published in reference to the Luxembourg law and the Grand Ducal regulation of January 11, 2008, on transparency requirements for issuers of securities ("Transparency Law") in view of a shareholding notification going above or below the 5% voting rights threshold.
Under Luxembourg law, the ownership of registered shares is evidenced by the inscription of the name of the shareholder, the
number of shares held by such shareholder and the amount paid up on each share in the shareholder register of ArcelorMittal.
At December 31, 2021, 2,585 shareholders other than the Significant Shareholder, holding an aggregate of 44,268,913 ArcelorMittal ordinary shares, were registered in ArcelorMittal’s shareholder register, representing approximately 4.5% of the ordinary shares issued (including treasury shares).
At December 31, 2021, there were 159 registered shareholders holding an aggregate of 82,879,056 New York Registry Shares, representing approximately 8.43% of the ordinary shares issued (including treasury shares). ArcelorMittal’s knowledge of the number of New York Registry Shares held by U.S. holders is based solely on the records of its New York transfer agent regarding registered ArcelorMittal ordinary shares.
At December 31, 2021, 535,672,879 ArcelorMittal ordinary shares were held through the Euroclear/Iberclear clearing system in The Netherlands, France, Luxembourg and Spain, representing approximately 54.5% of the ordinary shares issued (including treasury shares).
Voting rights
Each share entitles the holder to one vote at the general meeting of shareholders, and related party transactions—Majorno shareholder benefits from special voting rights. For more information relating to ArcelorMittal shares, see “Additional information—Memorandum and Articles of Association—Voting and information rights”.
Management share ownership
As of December 31, 2021, the aggregate beneficial share ownership of ArcelorMittal directors and senior management (16
individuals) totaled 115,132 ArcelorMittal shares (excluding shares beneficially owned by the Significant Shareholder, Mr. Lakshmi N. Mittal) representing 0.012% of the total issued share capital of ArcelorMittal. Other than Mr. Lakshmi N. Mittal, each director and member of senior management beneficially owns less than 1% of ArcelorMittal’s shares. See "Major shareholders” for the beneficial share ownership of the Significant Shareholder, Mr. Aditya Mittal and Ms. Vanisha Mittal Bhatia.
On April 27, 2015, ArcelorMittal adopted share ownership guidelines for its CEO. The share ownership policy aims to demonstrate to ArcelorMittal’ shareholders, the investing public and the Company’s employees, the commitment of the CEO to the Company and directly aligns his interests with those of the Company’s shareholders. Accordingly, the CEO should, within 5five years of the end of the current calendar year, own shares of the Company’s common shares at least equal to 3three times his annual salary and hold the purchased shares for so long as he serves the Company.
In accordance with the Luxembourg Stock Exchange’s 10 Principles of Corporate Governance, independent non-executive members of ArcelorMittal's Board of Directors do not receive share options, RSUs or PSUs, and the policy of the Company is not to grant any share-based remuneration to members of the Board of Directors who are not executives of the Company.
See “Item 6.B—Directors, senior management“Management and employees—Compensation” for a description of options, RSUs and PSUs held by members of ArcelorMittal’s senior management, including the Chairman and CEO.
The following tables summarize outstanding share options, as of December 31, 2018, granted to the members of the ex-GMB and Executive Officers of ArcelorMittal:
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| | | | | | | | | |
| | Options granted in 2010 | | Options granted in 2009 | | | | Options Total | | Weighted Average Exercise Price of Options |
| Ex-GMB (Including Chief Executive Officer) | 56,967 | | 61,333 | | | | 118,300 | | — |
Exercise price1 | $91.98 | | $109.14 | | | | — | | $100.88 |
| Term (in years) | 10 | | 10 | | | | — | | — |
| Expiration date | Aug. 3, 2020 | | Aug. 4, 2019 | | | | — | | — |
| |
1 | The options granted in the table above were revised following the completion of the Company’s share consolidation of each three existing shares into one share without nominal value on May 22, 2017. |
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| | | | | | | | | |
| | Options granted in 2010 | | Options granted in 2009 | | | | Options Total | | Weighted Average Exercise Price of Options |
Executive Officers1 | 29,250 | | 29,667 | | | | 58,917 | | — |
Exercise price2 | $91.98 | | $109.14 | | | | — | | $100,62 |
| Term (in years) | 10 | | 10 | | | | — | | — |
| Expiration date | Aug. 3, 2020 | | Aug. 4, 2019 | | | | — | | — |
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1 | Any Executive Officer who has been a GMB member is included in the Ex-GMB members in the prior table. |
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2 | The options granted in the table above were revised following the completion of the Company’s share consolidation of each three existing shares into one share without nominal value on May 22, 2017. |
The following tables summarize outstanding PSUs and RSUs granted to the members of the ex-GMBExecutive Office and Executive Officers of ArcelorMittal in 2018, 2017, 2016for the last five years.
| | | | | | | | | | | | | | | | | | | | |
| PSUs granted in 2021 | PSUs granted in 2020 | PSUs granted in 2019 | PSUs granted in 2018 | | PSUs granted in 2017 |
| Executive Office | 109,143 | | 148,422 | | 172,517 | | 134,861 | | | 90,084 | |
| Term (in years) | 3 | 3 | 3 | 3 | | 3 |
Vesting date1 | January 1, 2025 | January 1, 2024 | January 1, 2023 | January 1, 2022 | | January 1, 2020 - January 1, 2022 |
1See “Directors, senior management and 2015.employees—Compensation—Remuneration—Long-term incentives plans”, for vesting conditions.
|
| | | | | | |
| | PSUs granted in 2018 | PSUs granted in 2017 | | PSUs granted in 2016 | | |
| Ex-GMB (Including Chief Executive Officer) | 134,861 | 90,084 | | 306,536 | | |
| Term (in years) | 3 | 3 | | 3+2 | | |
Vesting date1 | January 1, 2022 | January1, 2021 | | January 1, 2020 - January 1, 2022 | | |
| | | | | |
1217 | See “Item 6.B—Directors, senior management and employees—CompensationManagement report—Remuneration—Long-term incentives plans”, for vesting conditions.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| RSUs granted in December 2021 | RSUs granted in May 2021 | PSUs granted in 2021 | RSUs granted in 2020 | PSUs granted in 2019 | PSUs granted in 2018 | | PSUs granted in 2017 |
| CFO and Other Executive Officers | 32,400 | | 25,000 | | 89,200 | | 15,169 | | 24,900 | | 100,500 | | 76,550 | | | 44,720 | |
| Term (in years) | 3 | 2 | 3 | 1 | 3 | 3 | 3 | | 3 |
Vesting date1 | December 16, 2024 | May 7, 2023 | January 1, 2025 | December 14, 2021 | December 14, 2023 | January 1, 2023 | January 1, 2022 | | January 1, 2021 |
1See note 8.3 to the consolidated financial statements, for vesting conditions.
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| | | | | | |
| | PSUs granted in 2018 | PSUs granted in 2017 | | PSUs granted in 2016 | | PSUs granted in 2015 |
Executive Officers2 | 76,550 | 44,720 | | 445,560 | | 10,668 |
| Term (in years) | 3 | 3 | | 3+2 | | 3 |
Vesting date1 | January 1, 2022 | January 1, 2021 | | January 1, 2019 -January 1, 2021 | | January 1, 2019 |
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1 | See note 7.3 to the consolidated financial statements, for vesting conditions. |
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2 | Any Executive Officer who has been a GMB member is included in the Ex-GMB members in the prior table. |
See note 7.38.3 of the consolidated financial statements for a description of ArcelorMittal’s equity-settled share-based payments to certain employees, including stock options, RSUs and PSUs.
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ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. Major shareholders
The following table sets out information as of December 31, 2018 with respect to the beneficial ownership of ArcelorMittal ordinary shares by each person who is known to be the beneficial owner of more than 5% of the shares and all directors and senior management as a group. |
| | | | | |
| | ArcelorMittal
Ordinary Shares1 |
| | Number | | % |
Significant Shareholder2 | 382,297,751 |
| | 37.41 | % |
Treasury Shares3 | 8,335,365 |
| | 0.82 | % |
Other Public Shareholders4 | 631,270,507 |
| | 61.77 | % |
| Total | 1,021,903,623 |
| | 100.00 | % |
Of which: Directors and Senior Management5 | 370,557 |
| | 0.04 | % |
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1 | For purposes of this table, a person or group of persons is deemed to have beneficial ownership of any ArcelorMittal ordinary shares as of a given date on which such person or group of persons has the right to acquire such shares within 60 days after December 31, 2018 upon exercise of vested portions of stock options. All stock options that have been granted to date by ArcelorMittal have vested.
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2 | For purposes of this table, ordinary shares owned directly by Mr. Lakshmi Mittal and his wife, Mrs. Usha Mittal, and options held directly by Mr. Lakshmi Mittal, are aggregated with those ordinary shares beneficially owned by the Significant Shareholder. At December 31, 2018, Mr. Lakshmi Mittal and his wife, Mrs. Usha Mittal, had direct ownership of ArcelorMittal ordinary shares and beneficial ownership (within the meaning set forth in Rule 13d-3 of the Exchange Act), through the Significant Shareholder, of the outstanding equity of two holding companies that own ArcelorMittal ordinary shares—Nuavam Investments S.à r.l. (“Nuavam”) and Lumen Investments S.à r.l. (“Lumen”). Nuavam, a limited liability company organized under the laws of Luxembourg, was the owner of 63,658,348 ArcelorMittal ordinary shares. Lumen, a limited liability company organized under the laws of Luxembourg, was the owner of 318,288,328 ArcelorMittal ordinary shares. Mr. Mittal was the direct owner of 286,742 ArcelorMittal ordinary shares and held options to acquire an additional 38,833 ArcelorMittal ordinary shares, all of which are, for the purposes of this table, deemed to be beneficially owned by Mr. Mittal due to the fact that these options are exercisable within 60 days. Mrs. Mittal was the direct owner of 25,500 ArcelorMittal ordinary shares. Mr. Mittal, Mrs. Mittal and the Significant Shareholder shared beneficial ownership of 100% of the outstanding equity of each of Nuavam and Lumen (within the meaning set forth in Rule 13d-3 of the Exchange Act). Accordingly, Mr. Mittal was the beneficial owner of 382,272,251 ArcelorMittal ordinary shares, Mrs. Mittal was the beneficial owner of 381,972,176 ordinary shares and the Significant Shareholder (when aggregated with ordinary shares of ArcelorMittal and options to acquire ordinary shares of ArcelorMittal held directly by Mr. and Mrs. Mittal) was the beneficial owner of 382,297,751 ordinary shares. Excluding options, Mr. Lakshmi Mittal and Mrs. Usha Mittal together beneficially owned 382,258,918 ArcelorMittal ordinary shares at such date. As of December 31, 2017 and 2016 , the Significant Shareholder (together with Mr. Mittal and Mrs. Mittal) held 37.41% and 37.40% of the Company’s ordinary shares respectively.
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3 | Represents ArcelorMittal ordinary shares repurchased pursuant to share repurchase programs, fractional shares returned in various transactions, and the use of treasury shares in various transactions; includes (1) 138,384 stock options that can be exercised by senior management (other than Mr. Mittal) and (2) 38,833 stock options that can be exercised by Mr. Mittal, in each case within 60 days of December 31, 2018, i.e. 0.02% of the total amount of outstanding shares. If exercised, the shares underlying these options will either have to be delivered out of Treasury shares or by the issuance of additional shares.
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4 | The Capital Group Companies Inc.’s shareholding increased to 168,541,781 shares, corresponding to an interest of 5.49% on April 11, 2016 and subsequently decreased to 147,321,072 on January 25, 2017, corresponding to an interest of 4.8%. Following the reverse stock split in May 2017, the Capital Group Companies Inc. was the owner of 49,107,024 ArcelorMittal shares on December 31, 2018.
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5 | Includes shares beneficially owned by directors and members of senior management listed in Item 6.E of this annual report; excludes shares beneficially owned by Mr. Mittal. Note that (i) stock options included in this item that are exercisable within 60 days are excluded from “Treasury Shares” above (see also note 3 above) and (ii) ordinary shares included in this item are included in “Other Public Shareholders” above.
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Aditya Mittal is the direct owner of 120,413 ArcelorMittal ordinary shares and holds options to acquire an additional 31,067 ArcelorMittal ordinary shares, together representing 0.1% of the ArcelorMittal ordinary shares outstanding. Aditya Mittal holds a total of 243,534 PSUs of which 40,653 may vest in 2021, 64,559 may vest in 2022 and 138,322 of which 50% may vest after 3 years in 2020 and 50% may vest after five years in 2022. As the vesting of PSUs is dependent on company performance criteria not fully within the control of the PSU holder, Aditya Mittal does not beneficially own ArcelorMittal ordinary shares by virtue of his ownership of the PSUs. Aditya Mittal is the son of Mr. Mittal and Mrs. Mittal and is Group President and CFO and CEO of ArcelorMittal Europe. Vanisha Mittal Bhatia is the direct owner of 8,500 ArcelorMittal ordinary shares, representing less than 0.1% of the ArcelorMittal ordinary shares outstanding. Vanisha Mittal Bhatia is the daughter of Mr. Mittal and Mrs. Mittal and a member of the Company’s Board of Directors.
As of December 31, 2015, 1,817,869 Mandatorily Convertible Notes had been converted at the option of their holders. On January 15, 2016, ArcelorMittal issued 137,967,116 (45,989,039 after reverse stock split mentioned below) new ordinary shares of the Company upon conversion as at such date of the 88,182,131 outstanding Mandatorily Convertible Notes at a conversion ratio of 1.56457. Following this issuance, the share capital of the Company was comprised of 1,803,359,338 (601,119,779 after reverse stock split mentioned below) shares and the Significant Shareholder (when aggregated with ordinary shares of ArcelorMittal and options to acquire ordinary shares of ArcelorMittal held directly by Mr. and Mrs. Mittal) held 37.41% of the outstanding shares.
Following the Company’s equity offering authorized by the EGM which closed on April 8, 2016, the Company’s issued share capital was increased from 1,803,359,338 (601,119,779 after reverse stock split mentioned below) ordinary shares to 3,065,710,869 (1,021,903,623 after reverse stock split mentioned below) ordinary shares.
The EGM of ArcelorMittal shareholders held on May 10, 2017 approved a reverse stock split. Following this approval, on May 22, 2017 ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into one share without nominal value. As a result, the aggregate number of shares issued and fully paid up decreased from 3,065,710,869 to 1,021,903,623.
The ArcelorMittal ordinary shares may be held in registered form on the Company’s register only. Registered shares are fully fungible and may consist of:
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a. | ArcelorMittal Registry Shares, which are registered directly on ArcelorMittal’s Luxembourg shareholder register,
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| |
b. | shares traded on Euronext Amsterdam, Euronext Paris, the regulated market of the Luxembourg Stock Exchange and the Spanish Stock Exchanges, which are held in Euroclear, or
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c. | shares traded on the NYSE, named New York Registry Shares, which are registered (including in the name of the nominee of DTC) in a register kept by or on behalf of ArcelorMittal by its New York transfer agent.
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Under Luxembourg law, the ownership of registered shares is evidenced by the inscription of the name of the shareholder, the number of shares held by such shareholder and the amount paid up on each share in the shareholder register of ArcelorMittal.
At December 31, 2018, 2,709 shareholders other than the Significant Shareholder, holding an aggregate of 21,821,253 ArcelorMittal ordinary shares were registered in ArcelorMittal’s shareholder register, representing approximately 2.14% of the ordinary shares issued (including treasury shares).
At December 31, 2018, there were 200 registered shareholders holding an aggregate of 57,620,574 New York Shares, representing approximately 5.64% of the ordinary shares issued (including treasury shares). ArcelorMittal’s knowledge of the number of New York Shares held by U.S. holders is based solely on the records of its New York transfer agent regarding registered ArcelorMittal ordinary shares.
At December 31, 2018, 571,154,196 ArcelorMittal ordinary shares were held through the Euroclear/Iberclear clearing system in The Netherlands, France, Luxembourg and Spain.
Voting rights
Each share entitles the holder to one vote at the general meeting of shareholders, and no shareholder benefits from specific voting rights. For more information relating to ArcelorMittal shares, see “Item 10.B—Additional information—Memorandum and Articles of Association—Voting and information rights”.
B. Related party transactions
ArcelorMittal engages in certain commercial and financial transactions with related parties, including associates and joint ventures of ArcelorMittal. Please refer to note 1112 of ArcelorMittal’s consolidated financial statements. Further information related to required disclosure of related party transactions under the Shareholders’ Rights Law of August 1, 2019 implementing the European Union's Shareholders' Rights Directive in Luxembourg (the "Shareholders' Rights Law") is included in “Memorandum and Articles of Association—Voting and information rights”.
Shareholder’s Agreement
Mr. Lakshmi Mittal and ArcelorMittal are parties to a shareholder and registration rights agreement (the “Shareholder’s Agreement”) dated August 13, 1997. Pursuant to the Shareholder’s Agreement and subject to the terms and conditions thereof, ArcelorMittal shall, upon the request of certain holders of restricted ArcelorMittal shares, use its reasonable efforts to register under the Securities Act of 1933, as amended, the sale of ArcelorMittal shares intended to be sold by those holders. By its terms, the Shareholder’s Agreement may not be amended, other than for manifest error, except by approval of a majority of ArcelorMittal’s shareholders (other than the Significant Shareholder and certain permitted transferees) at a general shareholders’ meeting.
Memorandum of Understanding
The Memorandum of Understanding entered into in connection with the Mittal Steel acquisition of Arcelor, certain provisions of which expired in August 2009 and August 2011, is described under “Item 10.C—Additional“Additional information—Material contracts—Memorandum of Understanding”.
Agreements with Aperam SA post-Stainless Steel Spin-Off
In connection with the spin-off of its stainless steel division into a separately focused company, Aperam SA (“Aperam”), which was completed on January 25, 2011, ArcelorMittal entered into
several agreements with Aperam and/ or certain Aperam subsidiaries which are still in force: a purchasing services agreement for negotiation services from ArcelorMittal Purchasing (the “Purchasing Services Agreement”) as well as certain commitments regarding cost-sharing in Brazil and certain other ancillary arrangements governing the relationship between Aperam and ArcelorMittal following the spin-off, as well as certain agreements relating to financing.
The parties agreed to renew a limited number of services where expertise and bargaining power created value for each party. ArcelorMittal has provided in 2021 and will continue to provide in 2022 certain services in 2019 relating to areas including environmental and technical support.
In the area of research and development at the time of the spin-off, Aperam entered into a framework arrangementagreement with ArcelorMittal in 2011, and as amended in 2015 to establish a structure for future cooperation in relation to certain ongoing or new research and development programs. Currently, only limitedfew but valuable research and development support issupports are implemented through this agreement, but new collaborative endeavorsagreement. New exchanges about breakthrough technologies or possible technical developments interesting both companies were launched in 2020 and 2021 and are foreseenstill ongoing.
In Europe, Aperam purchased most of its electricity and natural gas through energy supply contracts put in 2019.place for the period 2014-2020 through ArcelorMittal Energy SCA and ArcelorMittal Purchasing SAS, and such contracts have been renewed in 2021.
Under the terms of the Purchasing Services Agreement,Regarding procurement, Aperam still relies on ArcelorMittal for supplies and services in relation to the negotiation of certain contracts with global or large regional suppliers, including those relatingsuppliers. The Purchasing Services Agreement entered into for an initial term of two years until January 24, 2013 has been renewed and remains in force in relation to the following key categories: operating materials (rolls, electrodes and(only hot strip mill), refractory materials),materials, spare parts, transport,sea freight, industrial products and services.support services (excluding industrial services). The Purchasing Services Agreement also permits Aperam to avail itself of the services and expertise of ArcelorMittal for certain capital expenditure items. The Purchasing Services Agreement wasexpenditures.
Another supply agreement entered into between Aperam and ArcelorMittal Sourcing is effective since January 2020 for an initial termthe sale of two years, which was to expire on January 24, 2013. However, since that date, the Purchasing Services Agreement has been extended successively and will remain in force until 2021.electrodes. Specific IT service agreements have been put in place with Aperam, one for Asset Reliability Maintenance Program (ARMP)("ARMP") in its Brazilian entities, and two others for the use in Europe of ARMP and for the use of the global wide area network (WAN). In Europe, Aperam purchased most of its electricity and natural gas though energy supply contracts put in place for the period 2014-2019 with ArcelorMittal Energy SCA and ArcelorMittal Purchasing SAS.
Purchasing activities will continue to be provided to Aperam pursuant to existing contracts with ArcelorMittal entities that it has specifically elected to assume. In addition, since 2011, a services agreement has been concluded between ArcelorMittal Shared Service Center Europe Sp z.o.o. Sp.k. and Aperam for accounting services.
In connection with the spin-off, management also renegotiated an existing Brazilian cost-sharing agreement between ArcelorMittal Brasil and Aperam Inox América do Sul S.A. (formerly known as ArcelorMittal, Aperam Inox Brasil)Serviços Brasil Ltda., pursuantAperam Inox Tubos Brasil Ltda. and Aperam Bioenergia Ltda.pursuant to which, starting as of April 1, 2011, ArcelorMittal Brasil continued to perform purchasing for the benefit of certain ofthese Aperam’s Brazilian subsidiaries, with costs being shared on the basis of cost allocation parameters agreed between the parties.parties on a yearly basis.
C. InterestArcelorMittal Kirchberg Real Estate S.à r.l., Kennedy 2020 SAS, and Aperam Real Estate S.à r.l, which are subsidiaries of expertsArcelorMittal and counselAperam, respectively, signed a land use right for a combined head office project in Kirchberg, Luxembourg with Fonds Kirchberg on March 7, 2019.
Not applicable.Share Repurchase Agreement
The Significant Shareholder has entered into a share repurchase agreement with ArcelorMittal on February 12, 2021 (as amended from time to time), (the "Share Repurchase Agreement"), to sell each trading day on which ArcelorMittal has purchased shares under its 2021 share buyback programs (the "Programs") an equivalent number of shares, at the proportion of the Significant Shareholders's stake in ArcelorMittal of 36.34% of issued and outstanding shares of ArcelorMittal, at the same price as the shares repurchased on the market. The effect of the Share Repurchase Agreement is to maintain the Significant Shareholders's voting rights in ArcelorMittal's issued share capital (net of treasury shares) at the current level, pursuant to the Programs. On March 4, June 18, July 7, November 17 and December 29, 2021, ArcelorMittal announced the completion of five consecutive Programs under the authorization given by the annual general meetings of shareholders held on June 13, 2020 and June 8, 2021 (see "Introduction—Key transactions and events in 2021" and "Purchases of equity securities by the issuer and affiliated purchasers"). To maintain Significant
Shareholder's current level of voting rights as per the Share Repurchase Agreement, in the context of the first, second, third, fourth and fifth Programs, the Company repurchased, 9.9 million, 6.5 million, 8.9 million, 24.5 million and 12.4 million shares, respectively, from the Significant Shareholder for $236 million, $207 million, $273 million, $799 million and $363 million, respectively.
On February 11, 2022, ArcelorMittal announced a new $1 billion share buyback program. To maintain Significant Shareholder's current level of voting rights as per the Share Repurchase Agreement, the Company repurchased 525,177 shares from the Significant Shareholder for $16.2 million. On February 25, 2022, the Company announced the decision of the Significant Shareholder not to further participate to such program. Accordingly, the Share Repurchase Agreement was terminated with respect to this program (see "Introduction—Key transactions and events in 2021—Recent developments").
Markets
ArcelorMittal shares are listed and traded (through a single order book) on the Euronext European markets (Paris and Amsterdam) (symbol “MT”), are admitted to trading on the Luxembourg Stock Exchange’s regulated market and listed on the Official List of the Luxembourg Stock Exchange (symbol “MT”) and are listed and traded on the Spanish Stock Exchanges (symbol “MTS”). In the United States, ArcelorMittal shares are listed and traded on the NYSE (symbol “MT”).
Additionally, ArcelorMittal’s 5.50% mandatorily convertible notes due 2023, which were issued on May 18, 2020, are listed and traded on the NYSE.
Paying agents
The paying agent for shareholders who hold shares listed on the NYSE is Citibank and the paying agent for shareholders who hold shares listed on Euronext Amsterdam, Euronext Paris, and Luxembourg Stock Exchange is ABN AMRO since March 29, 2021, date as from which it replaced BNP Paribas Securities Services.
New York Registry Shares
The Company does not have any American Depositary Receipts. As described under “Additional information—Memorandum and Articles of Association—Form and transfer of shares”, the Company maintains a New York share register with Citibank, N.A. for its shares that trade on the NYSE. As of December 31, 2021, 82,879,056 shares (or approximately 8.43% of ArcelorMittal’s total issued shares) were ArcelorMittal New York Registry Shares. Holders of ArcelorMittal New York Registry Shares do not pay fees to Citibank as a general matter, but do incur costs of up to $5 per 100 shares for transactions that require canceling or issuing New York Registry Shares, such as cross-border trades where New York Registry Shares
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ITEM 8.219 | FINANCIAL INFORMATIONManagement report |
A. Consolidated statements and other financial information
Export sales
Becauseare cancelled in exchange for shares held in ArcelorMittal’s customers are mainly based outside its home country of Luxembourg, all of its sales are consideredEuropean register, or vice-versa. Subject to be export sales. Annual salescertain conditions, Citibank reimburses the Company on an annual basis for expenses incurred by the Company in relation to a single individual customer did not exceed 5% of sales in anythe ongoing maintenance of the periods presented.
Legal proceedings
ArcelorMittal is currently and mayNew York share facility (e.g., investor relations expenses, NYSE listing fees, etc.). In 2021, Citibank paid the Company $790,621 in respect of reimbursements of expenses incurred by the future be involvedCompany in litigation, arbitration or other legal proceedings. Provisions related to legal and arbitration proceedings are recorded in accordance with the principles described in note 8.1 to ArcelorMittal’s consolidated financial statements. Please refer to note 8.3 for a description of contingencies, including legal proceedings.2021.
Dividend distributions
Based on Luxembourg law and its Articles of Association, ArcelorMittal allocates at least five percent of its net profits to the creation of a reserve. This allocation ceases to be compulsory when the reserve reaches ten percent (10%) of its issued share capital, and becomes compulsory once again when the reserve falls below that percentage. Under Luxembourg law, the amount of any dividends paid to shareholders may not exceed the amount of the profits at the end of the last financial year plus any profits carried forward and any amounts drawn from reserves that are available for that purpose, less any losses carried forward and sums to be placed in reserve in accordance with Luxembourg law or the Articles of Association. A company may not pay dividends to shareholders when, on the closing date of the last financial year, the net assets are, or following the payment of such dividend would become, lower than the amount of the subscribed capital plus the reserves that may not be distributed by law or by virtue of the articles of association. ArcelorMittal’s Articles of Association provide that the portion of annual net profit that remains unreserved is allocated as follows by the general meeting of shareholders upon the proposal of the Board of Directors:
•a global amount is allocated to the Board of Directors by way of directors’ fees (“tantièmes”). This amount may not be less than €1,000,000. In the event that the profits are insufficient, the amount of €1,000,000 shall be imputed in whole or in part to charges. The distribution of this amount among the members of the Board of Directors shall be effected in accordance with the Board of Directors’ rules of procedure; and
•the balance is distributed as dividends to the shareholders or placed in the reserves or carried forward.
Interim dividends may be distributed under the conditions set forth in Luxembourg law by decision of the Board of Directors.
No interest is paid on dividends declared but not paid which are held by the Company on behalf of shareholders.
On November 6, 2015, ArcelorMittal’s Board of Directors proposed the suspension of the dividend for the financial year 2015. This proposal was approved by the shareholders at the annual general meeting held on May 4, 2016.
The Board of Directors reviewed the progress made in 2016, and although not concerned by the sustainability of the Company’s performance, it nevertheless wanted to see further progress. As such, deleveraging remained the near-term priority for surplus cash flow and the Board of Directors decided against proposing a dividend from 2016 earnings. This proposal was approved by the shareholders at the annual general meeting held on May 10, 2017.
On January 31, 2018, the Company announced that the Board has agreed on a new dividend policy following two years of no dividends, which was proposed to shareholders at the annual general meeting of shareholdersAGM in
May 2018. Given the current deleveraging focus, dividends were proposed to begin at $0.10/share in 2018 (paid from 2017 results) and were approved at the annual general meeting of shareholders on May 9, 2018 . They amounted to $101 million and were paid on June 13, 2018. Furthermore,Accordingly, the Board proposesproposed an increase in the base dividend for 2019 (paid from 2018 earnings) from $0.10 (paid in 2018 from 2017 earnings) to $0.20 per share which will be proposed towas approved by the shareholders at the AGM in May 2019 and was paid on June 13, 2019. On February 6, 2020, given the resilient cash flow and progress towards its net debt target (revised to $7 billion during 2019 to reflect impact of IFRS 16), the Board proposed a base dividend of $0.30 per share for 2020 (in respect of 2019). However, against the backdrop of significant cost saving measures being taken across the business due to the COVID-19 outbreak, the Board determined it both appropriate and prudent to suspend dividend payments until such a time as the operating environment normalizes.
OnceOn June 8, 2021 at the annual general meeting of shareholders, the shareholders approved the Company’s proposed dividend of $0.30 per share. The dividend amounted to $325 million ($312 million net of dividends paid to subsidiaries holding treasury shares) and was paid on June 15, 2021.
In February 2022, the Board of Directors recommended an increase of the base annual dividend to $0.38/share, from $0.30/share, to be paid in June 2022, subject to the approval of shareholders at the annual general meeting of shareholders in May 2022. In addition, the Company achieves nethas initiated a new $1 billion share buyback program for the first half of 2022. This is the maximum based on the current authorization provided by shareholders at the annual general meeting of shareholders in June 2021. Additional authorization to repurchase shares will be sought from shareholders at the 2022 annual general meeting of shareholders.
Purchases of equity securities by the issuer and affiliated purchasers
In accordance with the authorization provided by the annual general meeting of shareholders of June 13, 2020 as described in “Memorandum and Articles of Association”, on September 28, 2020, ArcelorMittal announced a share buyback program with the intent to acquire shares intended to meet the Company’s obligations i) under debt at obligations exchangeable into equity securities, and/or belowii) to reduce its $6 billion target, thenshare capital. ArcelorMittal intended to repurchase, between 28 September 2020 and 31 March 2021, shares for an aggregate maximum amount of $500 million in accordance with the Company is committed to returning a portionresolution of the amountannual general meeting of annual net cash provided by operating activities less capital expenditures to shareholders.shareholders held on June 13, 2020 and applicable market abuse regulations.
B. Significant changes
Not applicable.
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ITEM 9.Management report | THE OFFER AND LISTING220 |
A. OfferOn March 4, 2021, ArcelorMittal announced the completion of its first share buyback program under the authorization given by the annual general meeting of shareholders held on June 13, 2020. By market close on March 3, 2021, the Company repurchased 27.1 million shares for a total amount of €537 million ($650 million) at an average price per share of €19.79 (equivalent to $23.97).
The annual general meeting of shareholders held on June 8, 2021 decided (a) to cancel with effect as of the date of the meeting the authorization granted to the Board of Directors by the annual general meeting of shareholders held on June 13, 2020 with respect to the share buy-back program, and listing details
Nature(b) to authorize, effective immediately after the General Meeting, the Board of trading market
Directors, with the option to delegate to the corporate bodies of the other companies in the ArcelorMittal shares are listed and traded on the NYSE (symbol "MT"). ArcelorMittal shares are listed and traded (through a single order book as from January 14, 2009) on the Euronext European markets (Paris and Amsterdam) (symbol “MT”), are admitted to trading ongroup in accordance with the Luxembourg Stock Exchange’s regulatedlaw of August 10, 1915 on commercial companies, as amended (the “Law”), to acquire and sell shares in the Company in accordance with the Law and any other applicable laws and regulations, including but not limited to entering into off-market and over-the-counter transactions and to acquire shares in the Company through derivative financial instruments.
On June 18, 2021, ArcelorMittal announced the completion of its second share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 13, 2020 and June 8, 2021. At market closure on June 17, 2021, ArcelorMittal had repurchased 17.8 million shares for a total value of approximately €469 million (equivalent to $570 million) at an average price per share of €26.27 (equivalent to $31.94).
On July 7, 2021, ArcelorMittal announced the completion of its third share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 13, 2020 and listedJune 8, 2021. At market closure on July 5, 2021, ArcelorMittal
had repurchased 24.5 million shares for a total value of €630 million (equivalent to $750 million) at an average price per share of €25.77 (equivalent to $30.66).
On November 17, 2021, ArcelorMittal announced the Official Listcompletion of its fourth share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 8, 2021. At market closure on November 16, 2021, ArcelorMittal had repurchased 67.4 million shares for a total value of €1,881 million (equivalent to $2,200 million) at an average price per share of €27.91 (equivalent to $32.64).
On December 29, 2021, ArcelorMittal announced the completion of its fifth share buyback program announced on November 17, 2021 pursuant to an authorization by the annual general meeting of shareholders on June 8, 2021. At market closure on December 28, 2021, ArcelorMittal had repurchased 34.0 million shares for a total value of €886 million (equivalent to $1,000 million) at an average price per share of €25.99 (equivalent to $29.34).
On February 11, 2022, ArcelorMittal announced a new $1 billion share buyback program pursuant to an authorization by the annual general meeting of shareholders on June 8, 2021. At market closure on March 10, 2022, ArcelorMittal had repurchased 7.1 million shares for a total value of €193 million (equivalent to $214 million) at an average price per share of €27.14 (equivalent to $30.08).
As described in “Memorandum and Articles of Association”, the maximum number of shares that may be acquired does not in any event exceed 15% of the Luxembourg Stock Exchange (symbol “MT”Company’s issued share capital. The maximum number of own shares that the Company may hold at any time directly or indirectly may not have the effect of reducing its net assets (“actif net”) below the amount mentioned in paragraphs 1 and are listed and traded on the Spanish Stock Exchanges (symbol “MTS”).
B. Plan2 of distribution
Not applicable.
C. Markets
ArcelorMittal shares are listed and traded (through a single order book as from January 14, 2009) on the Euronext European markets (Paris and Amsterdam) (symbol “MT”), are admitted to trading on the Luxembourg Stock Exchange’s regulated market and listed on the Official ListArticle 461-272-1 of the Luxembourg Stock Exchange (symbol “MT”) and are listed and traded on the Spanish Stock Exchanges (symbol “MTS”). ArcelorMittal shares are also listed and traded on the NYSE (symbol “MT”).Law.
D. Selling shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the issue
Not applicable.
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ITEM 10.221 | ADDITIONAL INFORMATIONManagement report |
A. | | | | | | | | | | | | | | | | | |
Program1 | 2021 | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Number of Shares that may yet be purchased under the Plans or Programs (see above explanations) |
| First buyback program | February 1 - February 28 | 21,684,751 | | $ | 23.86 | | 21,684,751 | | 5,428,570 | |
| First buyback program | March 1 - March 31 | 5,428,570 | | $ | 24.42 | | 5,428,570 | | — | |
| Second buyback program | April 1 - April 30 | 2,328,711 | | $ | 29.75 | | 2,328,711 | | 15,518,346 | |
| Second buyback program | May 1 - May 31 | 8,644,669 | | $ | 31.72 | | 8,644,669 | | 6,873,677 | |
| Second buyback program | June 1 - June 30 | 6,873,677 | | $ | 32.95 | | 6,873,677 | | — | |
| Third buyback program | June 1 - June 30 | 18,006,801 | | $ | 30.38 | | 18,006,801 | | 6,451,723 | |
| Third buyback program | July 1 - July 31 | 6,451,723 | | $ | 31.45 | | 6,451,723 | | — | |
| Fourth buyback program | August 1 - August 31 | 24,621,120 | | $ | 33.92 | | 24,621,120 | | 42,782,946 | |
| Fourth buyback program | September 1 - September 30 | 18,705,626 | | $ | 32.40 | | 18,705,626 | | 24,077,320 | |
| Fourth buyback program | October 1 - October 31 | 16,357,268 | | $ | 31.07 | | 16,357,268 | | 7,720,052 | |
| Fourth buyback program | November 1 - November 30 | 7,720,052 | | $ | 32.46 | | 7,720,052 | | — | |
| Fifth buyback program | November 1 - November 30 | 16,205,010 | | $ | 29.40 | | 16,205,010 | | 17,875,039 | |
| Fifth buyback program | December 1 - December 31 | 17,875,039 | | $ | 29.29 | | 17,875,039 | | — | |
1.Commencement of first, second, third, fourth and fifth buyback programs was announced on February 15, 2021, March 4, 2021, June 18, 2021, July 29, 2021 and November 17, 2021, respectively, for an aggregate amount of $650 million, $570 million, $750 million, $2.2 billion and $1 billion, respectively, and the completion of these programs was announced on March 4, 2021, June 18, 2021, July 7, 2021, November 17, 2021 and December 29, 2021, respectively. The first four buyback programs and the fifth one were scheduled to be completed by December 31, 2021 and February 2022, respectively. As of December 31, 2021, all of these programs are closed.
Share capital
As of December 31, 2018,2021, the Company’s issued share capital was $364$350 million represented by 1,021,903,623982,809,772 ordinary shares without nominal value. The Company's issued share capital changed as described below in 2016, 20172020 and 2018.2021.
Out of the total of 1,021,903,623982,809,772 shares in issue, 8,335,36571,916,570 shares were held in treasury by ArcelorMittal at December 31, 2018,2021, representing approximately (0.82)%7.32% of its issued share capital.
The Company’s authorized share capital, including the issued share capital, was $411$442 million represented by 1,151,576,9211,241,418,599 ordinary shares without nominal value as of December 31, 2018.
On January 15, 2016, following the maturity of the $2.25 billion 6% Mandatorily Convertible Subordinated Notes due 2016 (the “Notes”), the Company’s issued share capital increased by €570 million from €6,883 million, represented by 1,665,392,222 shares without nominal value, as of December 31, 2015 to €7,453 million represented by 1,803,359,338 shares without nominal value. For the 1,817,869 Notes converted at the option of their holders during the fourth quarter of 2015, the Company delivered a total of 2,275,026 treasury shares.
On February 5, 2016, the Company announced its intention to increase its capital through a rights issue with shareholders benefiting from non-statutory preferential subscription rights on terms to be determined by the Company. At its meeting on February 3, 2016, the Board of Directors resolved, among other things and subject to approval by an extraordinary general meeting of shareholders, to authorize the issue of up to 30,000,000,000 new ordinary shares, to cancel the statutory preferential subscription rights of the existing shareholders and to authorize the granting of preferential subscription rights to existing shareholders on terms to be determined based on market practice and conditions (the “equity offering”).
2021. The extraordinary general meeting (the “EGM”) of ArcelorMittal shareholders, held on March 10, 2016, approved the two resolutions on its agenda:
to reduce the share capital of the Company without distribution to shareholders, in order to reduce the par value of the shares in the Company to an amount of 10 euro cents per share and
to increase the Company’sCompany's authorized share capital includingchanged as described below in 2020 and 2021.
On May 14, 2020, the authorization to limit or cancel the shareholders’ preferential subscription rights.
Following such approval, the Company’s share capital decreased on March 10, 2016 from €7,453 million to €180 million represented by 1,803,359,338 ordinary shares without nominal value. The Company’s authorized share capital decreased from €8,249 million asCompany completed an offering of December 31, 2015 represented by 1,995,857,213 shares to €200 million with an unchanged number of shares and subsequently increased to €3,200 million represented by 31,995,857,213 shares.
As a result of the Company’s equity offering authorized by the EGM and which closed on April 8, 2016 at a price of €2.20 per share, the Company’s issued share capital increased from €180 million to €306 million represented by 3,065,710,869 ordinary shares without nominal value. The Company’s authorized share capital including the issued share capital decreased from €3,200 million represented by 31,995,857,213 shares to €337 million represented by 3,372,281,956 ordinary shares without nominal value.
The EGM of ArcelorMittal shareholders held on May 10, 2017 approved a reverse stock split and an increase of the Company’s authorized share capital from €337 million to €345 million. Following this approval, on May 22, 2017 ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into one share without nominal value. As a result, the authorized share capital increased from €337 million represented by 3,372,281,956 ordinary shares, without nominal value asfor $750 million at a price of December 31, 2016$9.27 per share; and on May 18, 2020, the Company completed an offering of mandatorily convertible subordinated notes ("MCNs") for $1,250 million, respectively (see note 11.2 to €345 million represented by 1,151,576,921the consolidated financial statements). At the closing of the offering of ordinary shares, without nominal value. There was no change in the Company issued 80,906,149 fully paid up shares. Accordingly, the share capital of ArcelorMittal which continues to amount to €306 million but theand aggregate number of shares issued and fully paid up decreased from 3,065,710,869increased to 1,021,903,623.$393 million represented by 1,102,809,772 ordinary shares
without nominal value. Subsequently, on December 15, 2020, ArcelorMittal signed separate, privately negotiated agreements with certain MCN holders to exchange $247 million in aggregate principal amount of MCNs for an aggregate of 22,653,933 shares. See note 11.2 to the consolidated financial statements.
On June 13, 2020, at the EGM of ArcelorMittal shareholders, the shareholders approved an increase of the Company's authorized share capital to $485 million represented by 1,361,418,599 ordinary shares without nominal value. The increase was needed to deliver the necessary ordinary shares upon conversion of the MCNs, which were on the basis of the conversion ratio when issued on May 18, 2020, mandatorily convertible into up to 134,843,500 ordinary shares of the Company and for the Company to have adequate flexibility going forward, whilst taking into account the issue of 80,906,149 ordinary shares in an offering which closed on May 14, 2020. In addition, the EGM of ArcelorMittal shareholders held on May 16, 2018 approvedJune 13, 2020 authorized the changeBoard of currencyDirectors, during a period of five years from the date of the Company'sEGM meeting, i) to issue additional ordinary shares in the Company within the limit of the authorized share capital from euroand ii) to U.S. dollar based onlimit or suspend the exchange rate published bypreferential subscription rights of existing shareholders in the European Central Bank on May 15, 2018. As a result,event of any increase in the issued share capital amountsup to $364 million at December 31, 2018. There was no change inand including the aggregateshare capital. For more information, see note 11 to the consolidated financial statements.
In line with the authorization granted by the EGM of ArcelorMittal shareholders held on June 8, 2021, the Board of Directors has decided to keep the number of treasury shares issuedwithin appropriate levels to cancel:
(i) on August 4, 2021, 70 million treasury shares. As a result of this cancellation, ArcelorMittal had 1,032,772 shares in issue (compared to 1,102,809,772 before the cancellation),
(ii) on September 22, 2021, 50 million treasury shares. As a result of this cancellation, ArcelorMittal had 982,809,772 shares in issue (compared to 1,032,809,772 before cancellation),
(iii) on January 14, 2022, 45 million treasury shares. As a result of this cancellation, ArcelorMittal has 937,809,772 shares in issue (compared to 982,809,772 before cancellation).
The first two cancellations took into account the $2.2 billion share buyback program announced on July 29, 2021 which continues to amount to 1,021,903,623 ordinary shares fully paid without nominal value. The Company’s authorizedcompleted on November 16, 2021 whereas the third cancellation took into account the $1 billion share capital, including the issued share capital, amounts to $411 million atbuyback program announced on November 17, 2021 which completed on December 31, 2018 represented by 1,151,576,921 ordinary shares without nominal value.28, 2021.
Over the years, ArcelorMittal has issued equity-settled share-based payments to certain employees, including stock options, restricted share units and performance share units. See Note 7.3note 8.3 to the consolidated financial statements.
B. Memorandum and Articles of Association
Below is a summary of ArcelorMittal’s Articles of Association, filed as an exhibit to this annual report on Form 20-F and incorporated by reference herein.Association. The full text of the Company’s Articles of Association is also available on www.arcelormittal.com under “Investors—Corporate Governance—Board“Investors-Corporate Governance-Articles of Directors.”Association”.
Corporate purpose
Article 3 of the Articles of Association provides that the corporate purpose of ArcelorMittal is the manufacture, processing and marketing of steel, steel products and all other metallurgical products, as well as all products and materials used in their manufacture, their processing and their marketing, and all industrial and commercial activities connected directly or indirectly with those objects, including mining and research activities and the creation, acquisition, holding, exploitation and sale of patents, licenses, know-how and, more generally, intellectual and industrial property rights.
The Company may realize its corporate purpose either directly or through the creation of companies, the acquisition, holding or acquisition of interests in any companies or partnerships, membership in any associations, consortia and joint ventures.
In general, the Company’s corporate purpose comprises the participation, in any form whatsoever, in companies and partnerships and the acquisition by purchase, subscription or in any other manner as well as the transfer by sale, exchange or in any other manner of shares, bonds, debt securities, warrants and other securities and instruments of any kind.
It may grant assistance to any affiliated company and take any measure for the control and supervision of such companies.
It may carry out any commercial, financial or industrial operation or transaction that it considers to be directly or indirectly necessary or useful in order to achieve or further its corporate purpose.
Form and transfer of shares
The shares of ArcelorMittal are issued in registered form only and are freely transferable. There are no restrictions on the rights of Luxembourg or non-Luxembourg residents to own ArcelorMittal shares.
UnderIn accordance with Luxembourg law, the ownership of registered shares is evidenced by the inscription of the name of the shareholder and the number of shares held by such shareholder in the shareholders’ register. Each transfer of shares is made by a written declaration of transfer recorded in the shareholders’ register of ArcelorMittal, dated and signed by the transferor and the transferee or by their duly appointed agent. ArcelorMittal may accept and enter into its shareholders’ register any transfer based on an agreement between the transferor and the transferee provided a true and complete copy of thesuch agreement is provided to ArcelorMittal.
The Articles of Association provide that shares may be held through a securities settlement (clearing) system or a professional depositary of securities. Shares held in this manner have the same rights and obligations as the registered shares. Shares held through a securities settlement system or a professional depositary of securities may be transferred in accordance with customary procedures for the transfer of securities in book-entry form.
The ArcelorMittal ordinary shares may be held in registered form on the Company’s register only. Registered shares are fully fungible and may consist of:
a.ArcelorMittal Registry Shares, which are registered directly on ArcelorMittal’s Luxembourg shareholder register,
b.shares traded on Euronext Amsterdam, Euronext Paris, the regulated market of the Luxembourg Stock Exchange and the Spanish Stock Exchanges, which are held in Euroclear, or
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a.223 | ArcelorMittal Registry Shares, which are registered directly on ArcelorMittal’s Luxembourg shareholder register,Management report
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b. | shares traded on Euronext Amsterdam, Euronext Paris, the regulated market of the Luxembourg Stock Exchange and the Spanish Stock Exchanges, which are held in Euroclear, or
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c. | shares traded on the NYSE, named New York Registry Shares, which are registered in a register (including in the name of the nominee of DTC) kept by or on behalf of ArcelorMittal by its New York transfer agent.
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c.shares traded on the NYSE (the "New York Registry Shares"), which are registered (including in the name of the nominee of Depository Trust Company) in a New York Share Register kept on behalf of ArcelorMittal by Citibank, N.A., its New York transfer agent.
Since March 2009, ArcelorMittal hashad used the services of BNP Paribas Securities Services to assist it with certain administrative tasks relating to the day-to-day administrative management of the shareholders’ register. However, on March 29, 2021, the Company replaced BNP Paribas Securities Services with ABN AMRO. The Company maintains a New York shareholders' register with Citibank, N.A. (located at 388 Greenwich Street, New York, New York 10013) for its New York Registry Shares that trade on the NYSE with underlying positions held in Euroclear. As of December 31, 2021, 82,879,056 shares (or approximately 8.43% of ArcelorMittal's total issued shares) were New York Registry Shares.
The law of April 6, 2013 concerning dematerialized securities allows Luxembourg issuers to opt for the full dematerialization of shares. The EGM of ArcelorMittal shareholders held on May 10, 2017 authorized and empowered the Board of Directors to give effect to such dematerialization and to determine its effective date, following which new shares in the Company may only be issued in dematerialized form (the “Effective Date”). Notice of the compulsory dematerialization will be given in accordance with Article 6.9 (i) of the Company’s Articles of Association. As from the Effective Date, shareholders would be required to hold their shares in a securities account at a bank or other financial intermediary, which would in turn hold the shares via an account with a securities depository such as Clearstream or Euroclear. Dematerialized securities would be solely represented by account entries with the securities depositary and would therefore exist only in electronic form. It would then no longer be possible for shareholders to hold shares through a direct, nominative registration in the Company’s register of shareholders as is currently the case. As of December 31, 2021, notice of the Effective Date has not been given.
Issuance of shares
The issuance of shares by ArcelorMittal requires either an amendment of the Articles of Association approved by an EGM or a decision of the Board of Directors that is within the limits of the authorized share capital set out in the Articles of Association. In the latter case, the Board of Directors may determine the conditions for the issuance of shares, including the consideration (cash or in kind) payable for such shares.
The EGM may not validly deliberate unless at least half of the share capital is present or represented upon the first call. If the quorum is not met, the meeting may be reconvened as described in “–General“General meeting of shareholders” below. The second meeting will be held regardless of the proportion of
share capital represented. At both meetings, resolutions, in order to be adopted, must be carried by at least two-thirds of the votes cast.
Following the mandatory conversion on January 15, 2016 of outstanding NotesArticle 5.1 of the Company’s $2.25 billion 6% Mandatorily Convertible Subordinated Notes due 2016, the Company’s issued share capital increased by €570 million from €6,883 million to €7,453 million represented by 1,803,359,338 shares without nominal value.
On February 5, 2016,Articles of Association of the Company announced its intentionwas amended to increase its capital through a rights issue with shareholders benefiting from non-statutory preferential subscription rights on terms to be determined by the Company. At its meeting on February 3, 2016, the Board of Directors resolved among others and subject to approval by an EGM, to authorize the issue of up to 30,000,000,000 new ordinary shares, to cancel the statutory preferential subscription rights of the existing shareholders and to authorize the granting of preferential subscription rights to existing shareholders on terms to be determined based on market practice and conditions (the “equity offering”).
The EGM of ArcelorMittal shareholders, held on March 10, 2016, approved the two resolutions on its agenda:
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• | to reduce the share capital of the Company without distribution to shareholders, in order to reduce the par value of the shares in the Company to an amount of 10 euro cents per share and
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• | to increase the Company’s authorized share capital including the authorization to limit or cancel the shareholders’ preferential subscription rights.
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The above authorization expires five years from the date of publication of the EGM minutes in the Official Luxembourg Gazette Mémorial C, which occurred on March 23, 2016. This authorization may be renewed from time to time by an EGM for periods not to exceed five years each.
Following such approval, the Company’s share capital decreased on March 10, 2016 from €7,453 million to €180 million represented by 1,803,359,338 ordinary shares without nominal value. The Company’s authorized share capital, includingreflect the issued share capital amountedincrease described above in "Shareholders and markets–Share capital". Such amendment to €3,200 million represented by 31,995,857,213 ordinary shares without nominal value.the Articles of Association was filed with the Luxembourg Register of Commerce and Companies on June 8, 2020.
As a result of the Company’s equity offering authorized by the EGMArticles 5.2 and which closed on April 8, 2016 at a price of €2.20 per share, the Company’s issued share capital increased from €180 million to €306 million represented by 3,065,710,869 ordinary shares without nominal value and remained unchanged at December 31, 2016. The Company’s authorized share capital, including the issued share capital, amounted to €337 million represented by 3,372,281,956 ordinary shares without nominal value.
The EGM of ArcelorMittal shareholders held on May 10, 2017 approved a reverse stock split and an increase of the Company’s authorized share capital from €337 million to €345 million. Following this approval, on May 22, 2017 ArcelorMittal completed the consolidation of every three existing shares in ArcelorMittal without nominal value into one share without nominal value. As a result, the authorized share capital increased from €337 million represented by 3,372,281,956 ordinary shares without nominal value to €345 million represented by 1,151,576,921 ordinary shares without nominal value. There was no change in the issued share capital of ArcelorMittal but the aggregate number of shares issued and fully paid up decreased from 3,065,710,869 to 1,021,903,623.
Articles 4, 5, 7, 8, 9, 11, 13, 14 and 155.5 of the Articles of Association of the Company have been amended to reflect the recent changesauthorized share capital increase described above in Luxembourg law."Shareholders and markets–Share capital". Such amendments to the Articles of Association were filed with the Luxembourg Register of Commerce and Companies on May 18, 2017.June 17, 2020.
The EGM of ArcelorMittal shareholders held on May 16, 2018 approved the change of the currency of the share capital of the Company from euro into U.S. dollar (the “Change of Currency”) based on the EUR/USD exchange rate of 1.1883 published by the European Central Bank at about 4 pm CET on May 15, 2018, the day preceding the EGM. As a result, the issued share capital amounts to $364 million represented by 1,021,903,623 ordinary shares fully paid without nominal value. The Company’s authorized share capital, including the issued share capital, amounts to $411 million represented by 1,151,576,921 ordinary shares without nominal value.
Articles 5.1, 5.2 and the second paragraph of article 17 of the Articles of Association of the Company have been amended to reflect the Change of Currency.Such amendments to the Articles of Association were filed with the Luxembourg Register of Commerce and Companies on May 31, 2018.
Preemptive rights
Unless limited or cancelledcanceled by the Board of Directors as described below or by an EGM, holders of ArcelorMittal shares have a pro rata preemptive right to subscribe for newly issued shares, except for shares issued for consideration other than cash (i.e., in kind).
The Articles of Association provide that preemptive rights may be limited or cancelledcanceled by the Board of Directors in the event of an increase in the Company’s issued share capital until the date being five years from the date of publication viain the online platform called Luxembourg legal gazette (Recueil électronique des sociétés et associationsassociations) (“RESA”) which replaced as of June 1, 2016 the Luxembourg official legal gazette, the Mémorial, Recueil des Sociétés et Associations,of the relevant meeting minutes, which publication occurred on May 18, 2017June 17, 2020 with respect to the minutes of the EGM held on May 10, 2017.June 13, 2020. This power of the Board of Directors may from time to time be renewed by an EGM for subsequent periods not to exceed five years each.
Repurchase of shares
ArcelorMittal is prohibited by Luxembourg law from subscribing for its own shares. ArcelorMittal may, however, repurchase its own shares or have another person repurchase shares on its behalf, subject to certain conditions, including:
•a prior authorization of the general meeting of shareholders setting out the terms and conditions of the proposed repurchase, including the maximum number of shares to be repurchased, the duration of the period for which the authorization is given (which may not exceed five years) and the minimum and maximum consideration per share;
•the repurchase may not reduce the net assets of ArcelorMittal on a non-consolidated basis to a level below the aggregate of the issued share capital and the reserves that ArcelorMittal must maintain pursuant to Luxembourg law or its Articles of Association;
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•Management report | a prior authorization of the general meeting of shareholders setting out the terms and conditions of the proposed repurchase, including the maximum number of shares to be repurchased, the duration of the period for which the authorization is given (which may not exceed five years) and the minimum and maximum consideration per share;
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• | the repurchase may not reduce the net assets of ArcelorMittal on a non-consolidated basis to a level below the aggregate of the issued share capital and the reserves that ArcelorMittal must maintain pursuant to Luxembourg law or its Articles of Association;
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• | only fully paid-up shares may be repurchased. At December 31, 2018,
•only fully paid-up shares may be repurchased. At December 31, 2021, all of ArcelorMittal’s issued ordinary shares were fully paid-up; and |
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• | the acquisition offer is made on the same terms and conditions to all the shareholders who are in the same position, it being noted however that listed companies may repurchase their own shares on the stock exchange without an acquisition offer having to be made to the shareholders.
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•the acquisition offer is made on the same terms and conditions to all the shareholders who are in the same position, it being noted however that listed companies may repurchase their own shares on the stock exchange without an acquisition offer having to be made to the shareholders.
In addition, Luxembourg law allows the Board of Directors to approve the repurchase of ArcelorMittal shares without the prior approval of the general meeting of shareholders if necessary to prevent serious and imminent harm to ArcelorMittal. In such a case, the next general meeting of shareholders must be informed by the Board of Directors of the reasons for and the purpose of the acquisitions made, the number and nominal values, or in the absence thereof, the accounting par value of the shares acquired, the proportion of the issued share capital that they represent, and the consideration paid for them.
The annual general meeting of shareholders held on May 5, 2015June 8, 2021 (the “General Meeting”) decided (a) to cancel with effect as of the date of the General Meeting the authorization granted to the Board of Directors by the general meeting of shareholders held on May 11, 2010June 13, 2020 with respect to the share buy-back program (the "Authorization"), and (b) to authorize, effective immediately after the General Meeting, the Board of Directors, with the option to delegate to the corporate bodies of the other companies in the ArcelorMittal group in accordance with the Luxembourg law of August 10, 1915 on commercial companies, as amended (the “Law”), to acquire and sell shares in the Company in accordance with the Law and any other applicable laws and regulations, including but not limited to entering into off-market and over-the-counter transactions and to acquire shares in the Company through derivative financial instruments.
Any acquisitions, disposals, exchanges, contributions or transfers of shares by the Company or other companies in the ArcelorMittal group must be in accordance with Luxembourg laws transposing Directive 2003/6/EC regarding insider dealing and market manipulation as repealed and replaced by Regulation (EU) No. 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse and(the "MAR Regulation"), Commission Delegated Regulation (EU) No. 2016/1052 of March 8, 2016 with regard to regulatory technical standards for the conditions applicable to buy-back programs and stabilization measures.measures and Luxembourg law of December 23, 2016 on market abuse implementing the MAR Regulation .
Such transactions may be carried out at any time, including during a tender offer period, subject to applicable laws and regulations including Section 10(b) and Section 9(a)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated under the Exchange Act.
The authorizationAuthorization is valid for a perioduntil the end of five years, i.e., until the annual general meeting of shareholders to be held in May 2020,2022 (the "2022 AGM") or until the date of its renewal by a resolution of the general meeting of shareholders if such renewal date is prior to the expiration of the five-year period.2022 AGM.
The maximum number of shares that may be acquired isunder the maximum allowed by the Luxembourg law of 10 August 1915 on commercial companies in such manner that the accounting par value of the Company’s shares held by the Company doAuthorization may not in any event exceed 10%15% of the Company’s issued share capital. The maximum number of own shares that the Company may hold at any time directly or indirectly may not have the effect of reducing its net assets (“actif net”) below the amount mentioned in paragraphs 1 and 2 of Article 461-2 of the Law. The purchase price per share to be paid shall not represent more thanexceed 110% of the trading priceaverage of the shares onfinal listing prices of the New York Stock Exchange30 trading days preceding the three trading days prior to each date of repurchase, and shall not be less than one euro cent. The final listing prices are those on the Euronext markets where the Company is listed or the Luxembourg Stock Exchange, or the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia, depending on the market on which the purchases are made, and no less than one cent.made. For off-market transactions, the maximum purchase price shall be 110% of the reference price on the Euronext markets where the Company is listed. The reference price will be deemed to be the average of the final listing prices per share on the relevant stock exchangethese markets during 30 consecutive days on which the relevant stock exchange isthese markets are open for trading preceding the three trading days prior to the date of purchase. In the event of a share capital increase by incorporation of reserves or issue premiums and the free allotment of shares as well as in the event of the division or regrouping of the shares, the purchase price indicated above shall be adjusted by a multiplying coefficient equal to the ratio between the number of shares comprising the issued share capital prior to the transaction and such number following the transaction. The total amount allocated for the Company’s share repurchase program may not in any event exceed the amount of the Company’s then available equity.
Capital reduction
The Articles of Association provide that the issued share capital of ArcelorMittal may be reduced subject to the approval of at least two-thirds of the votes cast at an extraordinary general meeting of shareholders where, at first call, at least 50% of the issued share capital is required to be represented, with no quorum being required at a reconvened meeting.
The extraordinary general meeting of shareholders held on June 8, 2021 decided to authorize the Board of Directors, for a period of three years (i) to cancel all the shares repurchased by the Company under its share buyback programs up to a maximum of 165 million shares and to consequently reduce the issued share capital of the Company and the authorized share capital of the Company by an amount corresponding to the product of the number of treasury shares cancelled multiplied by thirty-six US dollar cents (USD 0.36), being the par value of the shares in the Company - and (ii) to consequentially amend articles 5.1
and 5.2 of the articles of association of the Company to reflect the above cancellations and reductions of the issued and authorized share capital of the Company, (iii) to reduce or cancel the relevant reserves constituted under applicable law in relation thereto and (iv) to instruct and delegate power to and authorize the Board of Directors or its delegate(s) to implement the cancellation of the number of treasury shares determined by the Board of Directors and the corresponding reduction of share capital and related matters in one or more installments as deemed fit by the Board of Directors, to cause the share capital reductions and cancellations of the treasury shares and the consequential amendment of the Articles to be recorded by way of one or more notarial deeds, and generally to take any steps, actions or formalities as appropriate or useful to implement this decision of the extraordinary general meeting.
Please refer to the section on “Shareholder and markets - Share capital” for the details on the latest share capital reductions.
General meeting of shareholders
The shareholders’ rights law of May 24, 2011, which transposes into Luxembourg law Directive 2007/36/EC of the European Parliament and of the Council of July 11, 2007 on(on the exercise of certain rights of shareholders in listed companiescompanies) of July 14, 2007 came into force on July 1, 2011 was amended by the law of August 1, 2019 which entered into force on August 1, 2019 amending the law of May 24, 2011 on the exercise of certain rights of shareholders and transposing Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 (the “Shareholder’s“Shareholders' Rights Law”). and includes provisions relating to general meetings of shareholders, as discussed below.
General meetings of shareholders are convened by the publication of a notice at least 30 days before the meeting date in a Luxembourg newspaper, via the online platform called Recueil électronique des sociétés et associations (“RESA”), and by way of press release sent to the major news agencies. Ordinary general meetings are not subject to any minimum shareholder participation level. Extraordinary general meetings, however, are subject to a minimum quorum of 50% of the share capital. In the event the 50% quorum is not met upon the first call, the meeting may be reconvened by way of convening notice published in the same manner as the first notice, at least 17 days before the meeting date. No quorum is required upon the second call.
Shareholders whose share ownership is directly registered in the shareholders’ register of the Company must receive the convening notice by regular mail, unless they have accepted to receive it through other means (i.e., electronically). In addition, all materials relating to a general meeting of shareholders must be made available on the website of ArcelorMittal from the first date of publication of the convening notice.
The Shareholders’ Rights Law abolished the blocking period and introduced the record date system into Luxembourg law. As set out in the Articles of Association, the record date applicable to ArcelorMittal is the 14th14th day at midnight before the general meeting date. Only the votes of shareholders who are shareholders of the Company on the record date will be taken into account, regardless of whether they remain shareholders on the general meeting date. Shareholders who intend to participate in the general meeting must notify the Company at the latest on the date indicated in the convening notice of their intention to participate (by proxy or in person).
Ordinary general meetings of shareholders. At an ordinary general meeting of shareholders there is no quorum requirement and resolutions are adopted by a simple majority, irrespective of the number of shares represented. Ordinary general meetings deliberate on any matter that does not require the convening of an extraordinary general meeting.
Based on an amendment voted by the extraordinary general meeting of shareholders on May 10, 2017, the Articles of Association provide that the annual general meeting of shareholders is held each year within six months from the end of the previous financial year at the Company’s registered office or at any other place in the Grand Duchy of Luxembourg as determined by the Board of Directors and indicated in the convening notice.
Extraordinary general meetings of shareholdersshareholders.. An extraordinary general meeting must be convened to deliberate on the following types of matters:
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• | an increase or decrease of the authorized or issued share capital,
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• | a limitation or exclusion of existing shareholders’ preemptive rights,
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• | the acquisition by any person of 25% or more of the issued share capital of ArcelorMittal,
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• | approving a merger or similar transaction such as a spin-off, and
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• | any transaction or matter requiring an amendment of the Articles of Association.
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•an increase or decrease of the authorized or issued share capital,
•a limitation or exclusion of existing shareholders’ preemptive rights,
•the acquisition by any person of 25% or more of the issued share capital of ArcelorMittal,
•approving a merger or similar transaction such as a spin-off, and
•any transaction or matter requiring an amendment of the Articles of Association.
The extraordinary general meeting must reach a quorum of shares present or represented at the meeting of 50% of the share capital in order to validly deliberate. If this quorum is not reached, the meeting may be reconvened and the second meeting will not be subject to any quorum requirement. In order to be adopted by the extraordinary general meeting (on the first or the second call), any resolution submitted must be approved by at least two-thirds of the votes cast except for certain limited matters where the Articles of Association require a higher majority (see “—Amendment of the Articles of Association”).
Votes cast do not include votes attaching to shares with respect to which the shareholder has not taken part in the vote, has abstained or has returned a blank or invalid vote.
In addition, Luxembourg law requires the Board of Directors to convene a general meeting of shareholders if shareholders representing in the aggregate 10% of the issued share capital so require in writing with an indication of the requested agenda. In this case, the general meeting of shareholders must be held within one month of the request. If the requested general meeting of shareholders is not so convened, the relevant shareholder or group of shareholders may petition the competent court in Luxembourg to have a court appointee convene the general meeting.
Shareholder participation at general meetings
The Board of Directors may decide to arrange for shareholders to be able to participate in the general meeting by electronic means by way, among others, of (i) real-time transmission to the public of the general meeting, (ii) two-way communication enabling shareholders to address the general meeting from a remote location, or (iii) a mechanism allowing duly identified shareholders to cast their votes before or during the general meeting without the need for them to appoint a proxyholder who would be physically present at the meeting.
A shareholder may act at any general meeting of shareholders by appointing another person (who need not be a shareholder) as his or her attorney by means of a written proxy using the form made available on the website of the Company. The completed and signed proxy must be sent to the Company in accordance with the instructions set out in the convening notice.
The Board of Directors may also decide to allow shareholders to vote by correspondence by means of a form providing for a positive or negative vote or an abstention on each agenda item. The conditions for voting by correspondence are set out in the Articles of Association and in the convening notice.
Shareholders representing in the aggregate 5% of the issued share capital may also request that additional items be added to the agenda of a general meeting and may draft alternative resolutions to be submitted to the general meeting regarding existing agenda items. The request must be made in writing and sent either to the electronic address or to the Company’s postal address set out in the convening notice.
The Shareholders’ Rights Law provides that a company’s articles of association may allow shareholders to ask questions prior to the general meeting which will be answered by management during the general meeting’s questions and answers session prior to the vote on the agenda items. Although the Articles of Association do not specifically address this point, shareholders may ask questions in writing ahead of a general
meeting, which are taken into account in preparing the general meeting’s questions and answers session. With regard to the June 8, 2021 general meetings, shareholders were expressly encouraged to send questions and comments to the Company in advance by writing to a dedicated e-mail address indicated in the convening notice and were also provided the opportunity for a virtual Q&A session.
Given the COVID-19 outbreak - and related limitation on travel and large gatherings - the Board of Directors decided to hold the June 8, 2021 general meetings without a physical presence, as permitted by Luxembourg law. In view thereof, arrangements were made to provide the shareholders the opportunity to vote electronically, and by proxy voting as set out in the convening notice.
Identification of shareholders
Voting and information rights
The voting and information rights of ArcelorMittal’s shareholders have been further expanded since the entry into force ofPursuant to the Shareholders’ Rights Law, on July 1, 2011.listed companies now have the ability to identify their shareholders and ultimately improve communication between them and their shareholders. Intermediaries, including those in third countries, are required to provide the Company with information to enable the identification of shareholders. Intermediaries in-scope of the Shareholders' Rights Law are investment firms, credit institutions and central securities depositories which provide share safekeeping or administration of securities accounts or maintenance services to shareholders or other persons. Third country in-scope intermediaries are those which provide these services to shareholders or other intermediaries with respect to shares in the Company and are located outside of the European Union.
Voting and information rights
There are no restrictions on the rights of Luxembourg or non-Luxembourg residents to vote ArcelorMittal shares. Each share entitles the shareholder to attend a general meeting of shareholders in person or by proxy, to address the general meeting of shareholders and to vote. Each share entitles the holder to one vote at the general meeting of shareholders. There is no minimum shareholding (beyond owning a single share or representing the owner of a single share) required to be able to attend or vote at a general meeting of shareholders.
The Boardvoting and information rights of Directors may also decide to allowArcelorMittal’s shareholders to vote by correspondence by means of a form providing for a positive or negative vote or an abstention on each agenda item. The conditions for voting by correspondence are set out inhave been further expanded since the Articles of Association and in the convening notice.
The Board of Directors may decide to arrange for shareholders to be able to participate in the general meeting by electronic means by way, among others, of (i) real-time transmission to the publicentry into force of the general meeting, (ii) two-way communication enabling shareholders to address the general meeting from a remote location, or (iii) a mechanism allowing duly identified shareholders to cast their votes before or during the general meeting without the need for them to appoint a proxyholder who would be physically present at the meeting.
A shareholder may act at any general meeting of shareholders by appointing another person (who need not be a shareholder) as his or her attorney by means of a written proxy using the form made available on the website of the Company. The completed and signed proxy must be sent to the Company in accordance with the instructions set out in the convening notice.
General meetings of shareholders are convened by the publication of a notice at least 30 days before the meeting date in a Luxembourg newspaper, via the RESA, and by way of press release sent to the major news agencies. Ordinary general meetings are not subject to any minimum shareholder participation level. Extraordinary general meetings, however, are subject to a minimum quorum of 50% of the share capital. In the event the 50% quorum is not met upon the first call, the meeting may be reconvened by way of convening notice published in the same manner as the first notice, at least 17 days before the meeting date. No quorum is required upon the second call.
Shareholders whose share ownership is directly registered in the shareholders’ register of the Company must receive the convening notice by regular mail, unless they have accepted to receive it through other means (i.e., electronically). In addition, all materials relating to a general meeting of shareholders must be made available on the website of ArcelorMittal from the first date of publication of the convening notice.
Based on an amendment voted by the extraordinary general meeting of shareholders on May 10, 2017, the Articles of Association provide that the annual general meeting of shareholders is held each year within six months from the end of the previous financial year at the Company’s registered office or at any other place in the Grand Duchy of Luxembourg as determined by the Board of Directors and indicated in the convening notice.
Luxembourg law requires the Board of Directors to convene a general meeting of shareholders if shareholders representing in the aggregate 10% of the issued share capital so require in writing with an indication of the requested agenda. In this case, the general meeting of shareholders must be held within one month of the request. If the requested general meeting of shareholders is not so convened, the relevant shareholder or group of shareholders may petition the competent court in Luxembourg to have a court appointee convene the general meeting.
Shareholders representing in the aggregate 5% of the issued share capital may also request that additional items be added to the agenda of a general meeting and may draft alternative resolutions to be submitted to the general meeting regarding existing agenda items. The request must be made in writing and sent either to the electronic address or to the Company’s postal address set out in the convening notice.
The Shareholders’ Rights Law provides that a company’s articles of association may allow shareholders to ask questions prior to the general meeting which will be answered by management during the general meeting’s questions and answers session prior to the vote on the agenda items. Although the Articles of Association do not specifically address this point, shareholders may ask questions in writing ahead of a general meeting, which are taken into account in preparing the general meeting’s questions and answers session. With regard to the May 9, 2018 general meeting, shareholders were expressly encouraged to send questions and comments to the Company in advance by writing to a dedicated e-mail address indicated in the convening notice.Law.
Election and removal of directors.
Members of the Board of Directors are elected by simple majority of the represented shareholders at an ordinary general meeting of shareholders. Directors are elected for a period ending on a date determined at the time of their appointment. The directors of ArcelorMittal are elected for three-year terms.terms in staggered intervals. Any director may be removed with or
without cause by a simple majority vote at any general meeting of shareholders.
(a) a director’s power to vote on a proposal, arrangement or contract in which the director is materially interested;
If a Director has directly or indirectly a financial interest in a transaction that is submitted to the Board of Directors for approval and this interest conflicts with that of ArcelorMittal (other than transactions which are ordinary business operations and are entered into under normal conditions), the Director must advise the Board of Directors of the existence and nature of the conflict and cause a record of his/her statement to be included in the minutes of the meeting. In addition, the Director may not take part in the discussions on and may not vote on the relevant transaction and he or she shall not be counted for the purposes of whether the quorum is present, in which case the Board of Directors may validly deliberate if at least the majority of the non-conflicted directors are present or represented. At the next following general meeting of shareholders of ArcelorMittal, before any other resolution is put to a vote, a special report will be made by the Board of Directors to the shareholders’ meeting on any such transaction.
If a material transaction with a related party involves a Director, that Director may not participate in the approval of such transaction.
(b) the directors’ power, in the absence of an independent quorum, to vote compensation to themselves or any members of their body;
The remuneration of the Directors is determined each year by the annual general meeting of shareholders subject to Article 17 of the Articles of Association. The annual shareholders meeting of the Company decides on the directors’ remuneration. The Executive Chairman & CEO is not remunerated for his membership on the Board of Directors. The remuneration of the Executive Chairman & CEO is determined by the Board’s ARCGSARCG Committee, which consists solely of independent directors. For more information, see “Item 6.B—Directors, senior management“Management and employees—Compensation”.
Pursuant to the Shareholders’ Rights Law, the shareholders must be informed in detail of the remuneration of the members of the Company's Board of Directors and its CEO and the company's remuneration policy. Companies must prepare a management remuneration policy describing all components, criteria, methods and modalities applied to determine the fixed and variable remuneration of such persons. Such remuneration policy must contribute to the Company' business strategy and long-term interests. It must be resubmitted to an advisory vote at the general meeting of shareholders for approval each time there is a significant change thereto and at least every four years. In addition, companies must prepare a remuneration report for the annual general meeting on the remuneration and
benefits granted to directors, and such remuneration report is required to be submitted for an advisory vote at the general meeting of shareholders each year.
(c) borrowing powers exercisable by the directors and how such borrowing powers can be varied;
Any transaction between ArcelorMittal or a subsidiary of ArcelorMittal and a Director (or an affiliate of a Director) must be conducted on arm’s length terms and, if material, must obtain the approval of the Independent Directors.
(d) retirement or non-retirement of directors under an age limit requirement
There is no retirement or non-retirement of directors under an age limit requirement. However, on October 30, 2012, the Board of Directors adopted a policy that places limitations on the terms of independent directors as well as the number of directorships Directors may hold in order to align the Company’s corporate governance practices with best practices in this area. The policy provides that an independent director may not serve on the Board of Directors for more than 12 consecutive years, although the Board of Directors may, by way of exception to this rule, make an affirmative determination, on a case-by-case basis, that he or she may continue to serve beyond the 12 years rule if the Board of Directors considers it to be in the best interest of the Company based on the contribution of the Director involved and the balance between the knowledge, skills, experience and need for renewal of the Board.
(e) number of shares, if any, required for director’s qualification.
Article 8.2 of the Articles of Association states that the members of the Board of Directors do not have to be shareholders in the Company. However, the Board of Directors introduced on April 27, 2015October 30, 2012 (as amended on November 7, 2017) a policy that requires members of the Board of Directors to hold 10,0004,000 shares in the Company (15,000(6,000 for the Lead Independent Director). For more information, see “Item 6.C—Directors, senior management“Management and employees—Board practices/corporateCorporate governance—Specific characteristics of the director role”.
ArcelorMittal’s Articles of Association provide that the Significant Shareholder is entitled to nominate a number of candidates for election by the shareholders to the Board of Directors in proportion to its shareholding. The Significant Shareholder has not exercised this right to date.
Amendment of the Articles of Association
Any amendments to the Articles of Association must be approved by an extraordinary general meeting of shareholders held in the presence of a Luxembourg notary, followed by the publications required by Luxembourg law.
In order to be adopted, amendments of the Articles of Association relating to the size and the requisite minimum
number of independent and non-executive directors of the Board of Directors, the composition of the Audit & Risk Committee, and the nomination rights to the Board of Directors of the Significant Shareholder require a majority of votes representing two-thirds of the voting rights attached to the shares in ArcelorMittal. The same majority rule would apply to amendments of the provisions of the Articles of Association that set out the foregoing rule.
Annual accounts
Each year before submission to the annual ordinary general meeting of shareholders, the Board of Directors approves the stand-alone audited annual accounts for ArcelorMittal, the parent company of the ArcelorMittal group as well as the consolidated annual accounts of the ArcelorMittal group, each of which are prepared in accordance with IFRS. The Board of Directors also approves the management reports on each of the stand-alone audited annual accounts and the consolidated annual accounts, and in respect of each of these sets of accounts a report must be issued by the independent auditors.
The stand-alone audited annual accounts, the consolidated annual accounts, the management reports and the auditor’s reports will be available on request from the Company and on the Company’s website from the date of publication of the convening notice for the annual ordinary general meeting of shareholders.
The stand-alone audited annual accounts and the consolidated annual accounts, after their approval by the annual ordinary general meeting of shareholders, are filed with the Luxembourg Register of Commerce and Companies.
Dividends
Except for shares held in treasury by the Company, each ArcelorMittal share is entitled to participate equally in dividends if and when declared out of funds legally available for such purposes. The Articles of Association provide that the annual ordinary general meeting of shareholders may declare a dividend and that the Board of Directors may declare interim dividends within the limits set by Luxembourg law.
Declared and unpaid dividends held by ArcelorMittal for the account of its shareholders do not bear interest. Under Luxembourg law, claims for dividends lapse in favor of ArcelorMittal five years after the date on which the dividends have been declared.
Merger and division
A merger whereby the Luxembourg company being acquired transfers to an existing or newly incorporated Luxembourg company all of its assets and liabilities in exchange for the issuance to the shareholders of the company being acquired of shares in the acquiring company, and a division whereby a
company (the company being divided) transfers all its assets and liabilities to two or more existing or newly incorporated companies in exchange for the issuance of shares in the beneficiary companies to the shareholders of the company being divided or to such company, and certain similar restructurings must be approved by an extraordinary general meeting of shareholders of the relevant companies held in the presence of a notary. These transactions require the approval of at least two-thirds of the votes cast at a general meeting of shareholders of each of the companies where at least 50% of the share capital is represented upon first call, with no such quorum being required at a reconvened meeting.
Liquidation
In the event of the liquidation, dissolution or winding-up of ArcelorMittal, the assets remaining after allowing for the payment of all liabilities will be paid out to the shareholders pro rata to their respective shareholdings. The decision to liquidate, dissolve or wind-up the Company requires the approval of at least two-thirds of the votes cast at a general meeting of shareholders where at first call at least 50% of the share capital is represented, with no quorum being required at a reconvened meeting. Irrespective of whether the liquidation is subject to a vote at the first or a subsequent extraordinary general meeting of shareholders, it requires the approval of at least two-thirds of the votes cast at the extraordinary general meeting of shareholders.
Mandatory bid—squeeze-out right—sell-out right
Mandatory bid. The Luxembourg law of May 19, 2006 implementing Directive 2004/25/EC of the European Parliament and the Council of April 21, 2004 on takeover bids, ( theas amended from time to time (the “Takeover Law”), provides that, if a person acting alone or in concert acquires securities of ArcelorMittal which, when added to any existing holdings of ArcelorMittal securities, give such person voting rights representing at least one third of all of the voting rights attached to the issued shares in ArcelorMittal, this person is obliged to make an offer for the remaining shares in ArcelorMittal. In a mandatory bid situation the “fair price” is in principle considered to be the highest price paid by the offeror or a person acting in concert with the offeror for the securities during the 12–month period preceding the mandatory bid.
ArcelorMittal’s Articles of Association provide that any person who acquires shares giving them 25% or more of the total voting rights of ArcelorMittal must make or cause to be made, in each country where ArcelorMittal’s securities are admitted to trading on a regulated or other market and in each of the countries in which ArcelorMittal has made a public offering of its shares, an unconditional public offer of acquisition for cash to all shareholders for all of their shares and also to all holders of securities giving access to capital or linked to capital or whose rights are dependent on the profits of ArcelorMittal. The price
offered must be fair and equitable and must be based on a report drawn up by a leading international financial institution or other internationally recognized expert.nominated by the Company.
Squeeze-out right. The Takeover Law provides that, when an offer (mandatory or voluntary) is made to all of the holders of voting securities of ArcelorMittal and if after such offer the offeror holds at least 95% of the securities carrying voting rights and 95% of the voting rights, the offeror may require the holders of the remaining securities to sell those securities (of the same class) to the offeror. The price offered for such securities must be a fair price. The price offered in a voluntary offer would be consideredpresumed a fair price in the squeeze-out proceedings if the offeror acquired at least 90% of the ArcelorMittal shares carrying voting rights that were the subject of the offer. The price paid in a mandatory offer is deemedpresumed a fair price. The consideration p. The Takeover Law provides that, when an offer (mandatory or voluntary) is made to all of the holders of voting securities of ArcelorMittal and after such offer the offeror holds at least 95% of the securities carrying voting rights and 95% of the voting rights, the offeror may require the holders of the remaining securities to sell those securities (of the same class) to the offeror. The price offered for such securities must be a fair price. The price offered in a voluntary offer would be considered a fair price in the squeeze-out proceedings if the offeror acquired at least 90% of the ArcelorMittal shares carrying voting rights that were the subject of the offer. The price paid in a mandatory offer is deemed a fair price. The consideration paid in the squee
aid in the squeeze-out proceedings must take the same form as the consideration offered in the offer or consist solely of cash. Moreover, an all-cash option must be offered to the remaining ArcelorMittal shareholders. Finally, the right to initiate squeeze-out proceedings must be exercised within three months following the expiration of the offer. ze-out proceedings must take the same form as the consideration offered in the offer or consist solely of cash. Moreover, an all-cash option must be offered to the remaining ArcelorMittal shareholders. Finally, the right to initiate squeeze-out proceedings must be exercised within three months following the expiration of the offer.
Sell-out right. The Takeover Law provides that, when an offer (mandatory or voluntary) is made to all of the holders of voting securities of ArcelorMittal and if after such offer the offeror holds securities carrying more than 90% of the voting rights, the remaining security holders may require that the offeror purchase the remaining securities of the same class. The price offered in a voluntary offer would be consideredpresumed “fair” in the sell-out proceedings if the offeror acquired at least 90% of the ArcelorMittal shares carrying voting rights and which were the subject of the offer. The price paid in a mandatory offer is deemedpresumed to be a fair price. The consideration paid in the sell-out proceedings must take the same form as the consideration offered in the offerof cash or consist solely of cash.liquid securities. Moreover, an all-cash option must be offered to the remaining ArcelorMittal shareholders. Finally, the right to initiate sell-out proceedings must be exercised within three months following the expiration of the offer.
Disclosure of significant ownership in ArcelorMittal shares
Holders of ArcelorMittal shares and derivatives or other financial instruments linked to ArcelorMittal shares may be subject to the notification obligations of the Luxembourg law of January 11, 2008, as last amended by the law dated May 10, 2016,February 27, 2018, on transparency requirements regarding information about issuers whose securities are admitted to trading on a regulated market (the “Transparency Law”). The following description summarizes these obligations. ArcelorMittal shareholders are advised to consult with their own legal advisers to determine whether the notification obligations apply to them.
The Transparency Law provides that, if a person acquires or disposes of a shareholding in ArcelorMittal, and if following the acquisition or disposal the proportion of voting rights held by the person reaches, exceeds or falls below one of the thresholds of 5%, 10%, 15%, 20%, 25%, one-third, 50% or two-thirds of the total voting rights existing when the situation giving rise to a declaration occurs, the relevant person must simultaneously notify ArcelorMittal and the CSSF (the Luxembourg securities regulator) of the proportion of voting rights held by it further to such event within four Luxembourg Stock Exchange trading days of the day of execution of the transaction triggering the threshold crossing.
A person must also notify ArcelorMittal of the proportion of his or her voting rights if that proportion reaches, exceeds or falls below the above mentionedabove-mentioned thresholds as a result of events changing the breakdown of voting rights.
The above notification obligations also apply to persons who directly or indirectly hold financial instruments linked to ArcelorMittal shares. Pursuant to article 12 a. of the Transparency Law, persons who hold ArcelorMittal shares and financial instruments linked to ArcelorMittal Sharesshares must aggregate their holding.
ArcelorMittal’s Articles of Association also provide that the above disclosure obligations also apply to:
•any acquisition or disposal of shares resulting in the threshold of 2.5% of voting rights in ArcelorMittal being crossed upwards or downwards,
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• | any acquisition or disposal of shares resulting in the threshold of 2.5% of voting rights in ArcelorMittal being crossed upwards or downwards,
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• | any acquisition or disposal of shares resulting in the threshold of 3.0% of voting rights in ArcelorMittal being crossed upwards or downwards, and
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• | with respect to any shareholder holding at least 3.0% of the voting rights in ArcelorMittal, to any acquisition or disposal of shares resulting in successive thresholds of 1.0% of voting rights being crossed upwards or downwards.
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•any acquisition or disposal of shares resulting in the threshold of 3.0% of voting rights in ArcelorMittal being crossed upwards or downwards, and
•with respect to any shareholder holding at least 3.0% of the voting rights in ArcelorMittal, to any acquisition or disposal of shares resulting in successive thresholds of 1.0% of voting rights being crossed upwards or downwards.
Pursuant to the Articles of Association, any person who acquires shares giving him or her 5% or more or a multiple of 5% or more of the voting rights must inform ArcelorMittal within 10 Luxembourg Stock Exchange trading days following the date on which the threshold was crossed by registered letter with return receipt requested as to whether he or she intends to acquire or dispose of shares in ArcelorMittal within the next 12 months or intends to seek to obtain control over ArcelorMittal or to appoint a member to ArcelorMittal’s Board of Directors.
The sanction of suspension of voting rights automatically applies, subject to limited exceptions set out in the Transparency Law as amended from time to time, to any shareholder (or group of
shareholders) who has (or have) crossed the thresholds set out in article 7 of the Articles of Association and articles 8 to 15 of the Luxembourg law of 11 January 2008 on the transparency requirements regarding issuers of securities (the “Transparency Law”)Transparency Law but have not notified the Company accordingly. The sanction of suspension of voting rights will apply until such time as the notification has been properly made by the relevant shareholder(s).
For the purposes of calculating the percentage of a shareholder’s voting rights in ArcelorMittal, the following are taken into account:
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• | voting rights held by a third party with whom that person or entity has concluded an agreement and which obliges them to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards ArcelorMittal;
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• | voting rights held by a third party under an agreement concluded with that person or entity providing for the temporary transfer for consideration of the voting rights in question;
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• | voting rights attaching to shares pledged as collateral with that person or entity, provided the person or entity controls the voting rights and declares its intention to exercise them;
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• | voting rights attaching to shares in which a person or entity holds a life interest;
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• | voting rights which are held or may be exercised within the meaning of the four foregoing points by an undertaking controlled by that person or entity;
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• | voting rights attaching to shares deposited with that person or entity which the person or entity may exercise at its discretion in the absence of specific instructions from the shareholders;
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• | voting rights held by a third party in its own name on behalf of that person or entity; and
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• | voting rights which that person or entity may exercise as a proxy where the person or entity may exercise the voting rights in its sole discretion.
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•voting rights held by a third party with whom that person or entity has concluded an agreement and which obliges them to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards ArcelorMittal;
•voting rights held by a third party under an agreement concluded with that person or entity providing for the temporary transfer for consideration of the voting rights in question;
•voting rights attaching to shares pledged as collateral with that person or entity, provided the person or entity controls the voting rights and declares its intention to exercise them;
•voting rights attaching to shares in which a person or entity holds a life interest;
•voting rights which are held or may be exercised within the meaning of the four foregoing points by an undertaking controlled by that person or entity;
•voting rights attaching to shares deposited with that person or entity which the person or entity may exercise at its discretion in the absence of specific instructions from the shareholders;
•voting rights held by a third party in its own name on behalf of that person or entity; and
•voting rights which that person or entity may exercise as a proxy where the person or entity may exercise the voting rights in its sole discretion.
In addition, the Articles of Association provide that, for the purposes of calculating a person’s voting rights in ArcelorMittal, the voting rights attached to shares underlying any other financial instruments owned by that person (such as convertible notes) must be taken into account for purposes of the calculation described above.
Disclosure of insider dealing transactions
Members of the Board of Directors and the members of the CEOExecutive Office, Executive Officers and other executives
fulfilling senior management responsibilities within ArcelorMittal and falling with the definition of “Persons Discharging Senior Managerial Responsibilities” set out below and persons closely associated with them must disclose to the CSSF and to ArcelorMittal all transactions relating to shares or debt instruments of ArcelorMittal or derivatives or other financial instruments linked to any shares or debt instruments of ArcelorMittal (together the “Financial Instruments”) conducted by them or for their account.
Such notifications shall be made promptly and not later than three business days after the date of the transaction.
“Persons Discharging Senior Managerial Responsibilities” within ArcelorMittal are the members of the Board of Directors, and the CEOExecutive Office, the Executive Officers, and other executives occupying a high level management position with regular access to non-public material information relating, directly or indirectly, to ArcelorMittal and have the authority to make management decisions about the future development of the Company and its business strategy (see “Item 6.A—Directors,“Directors, senior management and employees— Directors and senior management" for a description of senior management). Persons closely associated with them include their respective family members.
Both information on trading in Financial Instruments by “Persons Discharging Senior Managerial Responsibilities” and ArcelorMittal’s Insider Dealing Regulations are available on www.arcelormittal.com under “Investors—Corporate Governance—Share Transactions by Management”. For more information, see “Item 6.A—Directors,“Directors, senior management and employees—Directors and senior management”.
In 2018, nine2021, forty-one notifications were received by ArcelorMittal from such persons and filed with the CSSF.
Related Party Transactions
The Shareholders’ Rights Law provides that a company is now required to publicly disclose material transactions (excluding "transactions taking place as part of the company's ordinary activity and concluded under normal market conditions") with related parties no later than at the time of conclusion of the transaction. The same requirement applies to material transactions concluded between related parties of a company and subsidiaries of such company. The Board of Directors must approve material transactions of the Company with related parties. A transaction with a related party is material if (i) its publication and divulgation may have a significant impact on the economic decisions of shareholders and (ii) it may create a risk for the company and its shareholders which are not related parties, including minority shareholders. In the determination of whether a transaction is material both the nature of the transaction and the position of the related party must be taken into account.
Publication of regulated information
Since January 2009, disclosure to the public of “regulated information” (within the meaning of the Luxembourg Transparency Law) concerning ArcelorMittal has been made by publishing the information through the centralized regulated information filing and storage system managed by the Luxembourg Stock Exchange and accessible in English and French on www.bourse.lu, in addition to the publication by ArcelorMittal of the information by way of press release. All news and press releases issued by the Company are available on www.arcelormittal.com in the “News and Media” section.
Limitation of directors’ liability/indemnification of Directors and the members of the CEOExecutive Office
The Articles of Association provide that ArcelorMittal will, to the broadest extent permitted by Luxembourg law, indemnify every director and member of the CEOExecutive Office as well as every former director or member of the CEOExecutive Office for fees, costs and expenses reasonably incurred in the defense or resolution (including a settlement) of all legal actions or proceedings, whether civil, criminal or administrative, he or she has been involved in his or her role as former or current director or member of the CEOExecutive Office.
The right to indemnification does not exist in the case of gross negligence, fraud, fraudulent inducement, dishonesty or for a criminal offense, or if it is ultimately determined that the director or members of the CEOExecutive Office has not acted honestly, in good faith and with the reasonable belief that he or she was acting in the best interests of ArcelorMittal.
The Company also maintains liability insurance for its directors and officers, including insurance against liabilities arising under the U.S. Securities Act of 1933, as amended, and the U.S. Securities Exchange Act of 1934, as amended.
C. Material contracts
The following are material contracts, not entered into in the ordinary course of business, to which ArcelorMittal has been a party during the past two years.
ArcelorMittal Equity Incentive Plan, Performance Share Unit Plan and Special Grant
For a description of such plans, please refer to “Item 6B—Directors, senior management“Management and employees—Compensation.”
Memorandum of Understanding
Mr. Lakshmi Mittal, Mrs. Usha Mittal, Lumen Investments S.à r.l., Nuavam Investments S.à r.l. (together, the “MoU Group”) and the Company are parties to a Memorandum of Understanding (“MoU”), dated June 25, 2006, to combine Mittal Steel and Arcelor in order to create the world’s leading steel company. (Lumen Investments S.à r.l. and Nuavam Investments S.à r.l. became parties following the assumption of the obligations of original parties to the MoU that have since ceased to hold Company shares). In April 2008, the Board of Directors approved resolutions amending certain provisions of the MoU in order to adapt it to the Company’s needs in the post-merger and post-integration phase, as described under “Item 6.C.—Directors, senior management“Management and employees—Board practices/corporateCorporate governance—Operation—Lead Independent Director”.
On the basis of the MoU, Arcelor’s Board of Directors recommended Mittal Steel’s offer for Arcelor, and the parties to the MoU agreed to certain corporate governance and other matters relating to the combined ArcelorMittal group. Certain provisions of the MoU relating to corporate governance were incorporated into the Articles of Association of ArcelorMittal at the extraordinary general meeting of the shareholders on November 5, 2007.
Certain additional provisions of the MoU expired effective August 1, 2009 and on August 1, 2011. ArcelorMittal’s corporate governance rules will continue to reflect, subject to those provisions of the MoU that have been incorporated into the Articles of Association, the best standards of corporate governance for comparable companies and to conform with the corporate governance aspects of the NYSE listing standards applicable to non-U.S. companies and Ten Principles of Corporate Governance of the Luxembourg Stock Exchange.
The following summarizes the main provisions of the MoU that remain in effect or were in effect in 2018.2021.
Standstill
Standstill
The MoU Group agreed not to acquire, directly or indirectly, ownership or control of an amount of shares in the capital stock of the Company exceeding the percentage of shares in the Company that it will own or control following completion of the Offer (as defined in the MoU) for Arcelor and any subsequent offer or compulsory buy-out, except with the prior written consent of a majority of the independent directors on the Company’s Board of Directors. Any shares acquired in violation of this restriction will be deprived of voting rights and shall be promptly sold by the MoU Group. Notwithstanding the above, if (and whenever) the MoU Group holds, directly and indirectly, less than 45% of the then-issued Company shares, the MoU Group may purchase (in the open market or otherwise) Company shares up to such 45% limit. In addition, the MoU Group is also permitted to own and vote shares in excess of the
threshold mentioned in the immediately preceding paragraph or the 45% limit mentioned above, if such ownership results from (1) subscription for shares or rights in proportion to its existing shareholding in the Company where other shareholders have not exercised the entirety of their rights or (2) any passive crossing of this threshold resulting from a reduction of the number of Company shares (e.g., through self-tender offers or share buy-backs) if, in respect of (2) only, the decisions to implement such measures were taken at a shareholders’ meeting in which the MoU Group did not vote or by the Company’s Board of Directors with a majority of independent directors voting in favor.
Once the MoU Group exceeds the threshold mentioned in the first paragraph of this “Standstill” subsection or the 45% limit, as the case may be, as a consequence of any corporate event set forth in (1) or (2) above, it shall not be permitted to increase the percentage of shares it owns or controls in any way except as a result of subsequent occurrences of the corporate events described in (1) or (2) above, or with the prior written consent of a majority of the independent directors on the Company’s Board of Directors.
If subsequently the MoU Group sells down below the threshold mentioned in the first paragraph of this “Standstill” subsection or the 45% limit, as the case may be, it shall not be permitted to exceed the threshold mentioned in the first paragraph of this “Standstill” subsection or the 45% limit, as the case may be, other than as a result of any corporate event set out in (1) or (2) above or with the prior written consent of a majority of the independent directors.
Finally, the MoU Group is permitted to own and vote shares in excess of the threshold mentioned in the first paragraph of this “Standstill” subsection or the 45% limit mentioned above if it acquires the excess shares in the context of a takeover bid by a third party and (1) a majority of the independent directors of the Company’s Board of Directors consents in writing to such acquisition by the MoU Group or (2) the MoU Group acquires such shares in an offer for all of the shares of the Company.
Non-compete
For so long as the MoU Group holds and controls at least 15% of the outstanding shares of the Company or has representatives on the Company’s Board of Directors or CEOExecutive Office, the MoU Group and its affiliates will not be permitted to invest in, or carry on, any business competing with the Company, except for PT ISPAT Indo.
D. Exchange controls and other limitations affecting security holders
There are no legislative or other legal provisions currently in force in Luxembourg or arising under ArcelorMittal’s Articles of Association that restrict the payment of dividends to holders of ArcelorMittal shares not resident in Luxembourg, except for regulations restricting the remittance of dividends and other payments in compliance with United Nations and EU sanctions. There are no limitations, either under the laws of Luxembourg or in the Articles of Association, on the right of non-Luxembourg nationals to hold or vote ArcelorMittal shares.
Luxembourg takeover law disclosure E. The following disclosure is provided based on article 11 of the Luxembourg law of May 19, 2006 transposing Directive 2004/25/EC of the European Parliament and the Council of April 21, 2004 on takeover bids (the “Takeover Law”). The Articles of Association are available on www.arcelormittal.com, under Investors, Corporate Governance, Current Articles of Association.
With regard to articles 11 (1) (a) and (c) of the Takeover Law, the Company has issued a single category of shares (ordinary shares), and the Company’s shareholding structure showing each shareholder owning 2.5% or more of the Company’s share capital is available elsewhere in this report and on www.arcelormittal.com under Investors, Corporate Governance, Shareholding Structure, where the shareholding structure chart is updated monthly.
With regard to article 11(1) (b) of the Takeover Law, the ordinary shares issued by the Company are listed on various stock exchanges including NYSE and are freely transferable.
With regard to article 11(1) (d) of the Takeover Law, each ordinary share of the Company gives right to one vote, as set out in article 13.6 of the Articles of Association, and there are no special control rights attaching to the shares. Article 8 of the Articles of Association provides that the Mittal Shareholder (Mr Lakshmi N. Mittal, Mrs Usha Mittal or any of their heirs or successors acting directly or indirectly and/or the trust or trusts of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and/or their heirs or successors are the beneficiaries, hold or control ArcelorMittal shares or any other entity controlled, directly or indirectly, by either of them) may, at its discretion, exercise the right of proportional representation and nominate candidates for appointment to the Board of Directors (defined as “Mittal Shareholder Nominees”). The Mittal Shareholder has not, to date, exercised that right.
Articles 11(1) (e) and (f) of the Takeover Law are not applicable to the Company. However, the sanction of suspension of voting rights automatically applies, subject to limited exceptions set out in the Transparency Law as amended from time to time (as
defined below), to any shareholder (or group of shareholders) who has (or have) crossed the thresholds set out in article 7 of the Articles of Association and articles 8 to 15 of the Luxembourg law of January 11, 2008 on the transparency requirements regarding issuers of securities (the “Transparency Law”) but have not notified the Company accordingly. The sanction of suspension of voting rights will apply until such time as the notification has been properly made by the relevant shareholder(s).
Article 11(1) (g) of the Takeover Law is not applicable to the Company.
With regard to article 11(1) (h) of the Takeover Law, the Articles of Association provide that the directors are elected at the annual general meeting of shareholders for a term that may not exceed three years, and may be re-elected. The rules governing amendments to the Articles of Association are described elsewhere in this report and are set out in article 19 of the Articles of Association.
With regard to article 11(1) (i) of the Takeover Law, the annual general meeting of shareholders ("AGM") held on June 8, 2021 granted the Board of Directors a new share buy-back authorization whereby the Board of Directors may authorize the acquisition or sale of Company shares including, but not limited to, entering into off-market and over-the-counter transactions and the acquisition of shares through derivative financial instruments. Any acquisitions, disposals, exchanges, contributions or transfers of shares by the Company or other companies in the ArcelorMittal group must be in accordance with the Luxembourg law of December 23, 2016 on market abuse, Regulation (EU) No. 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse and Commission Delegated Regulation (EU) No. 2016/1052 of March 8, 2016 with regard to regulatory technical standards for the conditions applicable to buy-back programs and stabilization measures and may be carried out by all means, on or off-market, including by a public offer to buy-back shares, or by the use of derivatives or option strategies. The fraction of the capital acquired or transferred in the form of a block of shares may amount to the entire program. Such transactions may be carried out at any time, including during a tender offer period, in accordance with applicable laws and regulations, including Section 10(b) and Section 9(a)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated under the Exchange Act. The authorization is valid for a period of five years, i.e., until the annual general meeting of shareholders to be held in 2022, or until the date of its renewal by a resolution of the general meeting of shareholders if such renewal date is prior to the 2022 AGM. Details relating to the repurchase of shares, as approved by the June 8, 2021 AGM can be found under "—Memorandum and Articles of Association - Repurchase of shares".
Articles 11(1) (j) and (k) of the Takeover Law are not applicable to the Company.
Taxation
United States taxation
The following discussion is a summary of the material U.S. federal income tax consequences that are likely to be relevant to U.S. Holders (as defined below) in respect of the ownership and disposition of ArcelorMittal common shares (hereinafter the “ArcelorMittal shares”) that are held as capital assets (such as for investment purposes). This summary does not purport to address all material tax consequences that may be relevant to a particular U.S. Holder. This summary also does not take into account the specific circumstances of particular investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities
holdings, regulated investment companies, real estate investment trusts, partnerships and other pass-through entities, investors liable for the U.S. alternative minimum tax, investors that own or are treated as owning 10% or more of the total combined voting power or value of ArcelorMittal’s shares, investors that hold ArcelorMittal shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction, and U.S. Holders (as defined below) whose functional currency is not the U.S. dollar) may be subject to special tax rules. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations issued thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (“IRS”), all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) or to differing interpretations.
This summary does not address any aspects of U.S. federal tax law other than income taxation, or any state, local, or non-U.S. tax considerations that may be applicable to investors, or the Medicare contribution tax applicable to net investment income of certain non-corporate U.S. Holders. Investors are urged to consult their tax advisors regarding the U.S. federal, state, local and other tax consequences of acquiring, owning and disposing of ArcelorMittal shares.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of ArcelorMittal shares that is, for U.S. federal income tax purposes:
•an individual citizen or resident of the United States;
•a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof, or the District of Columbia; or
•any other person that is subject to U.S. federal income tax on a net income basis in respect of the ArcelorMittal shares.
The U.S. federal income tax consequences of a partner in a partnership holding ArcelorMittal shares generally will depend on the status of the partner and the activities of the partnership. The Company recommends that partners in such a partnership consult their own tax advisors.
Except where specifically described below, this discussion assumes that ArcelorMittal is not a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. See “—Passive foreign investment company ("PFIC") status”. This summary does not address any aspects of U.S. federal tax law other than income taxation, or any state, local, or non-U.S. tax considerations that may be applicable to investors. Additionally, this summary does not apply to an investor that is not a U.S. Holder or that holds ArcelorMittal shares other than as a capital asset. Investors are urged to consult their tax advisors regarding the U.S. federal, state, local and other tax consequences of acquiring, owning and disposing of ArcelorMittal shares.
(a)(a) Taxation of distributions
Cash distributions made by ArcelorMittal in respect of ArcelorMittal shares will constitute a taxable dividend when such distribution is actually or constructively received, to the extent such distribution is paid out of the current or accumulated earnings and profits of ArcelorMittal (as determined under U.S. federal income tax principles). The amount of any distribution will include the amount of any applicable Luxembourg withholding tax. To the extent the amount of any distribution received by a U.S. Holder in respect of ArcelorMittal shares exceeds the current or accumulated earnings and profits of ArcelorMittal, the distribution (1) will be treated as a non-taxable return of the U.S. Holder’s adjusted tax basis in those ArcelorMittal shares and (2) thereafter will be treated as U.S.-source capital gain. Because ArcelorMittal does not maintain calculations of earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. Distributions of additional ArcelorMittal shares that are made to U.S. Holders with respect to their ArcelorMittal shares, and that are part of a pro rata distribution to all ArcelorMittal shareholders, generally will not be subject to U.S. federal income tax.tax unless the U.S. Holder has the right to receive cash or property instead, in which case the U.S. Holder will be treated as if it received cash equal to the fair market value of the distribution.
The U.S. dollar amount of a taxable dividend generally will be included in the gross income of a U.S. Holder as ordinary income derived from sources outside the United States for U.S. foreign tax credit purposes and generally will be passive category income for purposes of the foreign tax credit limitation. Dividends paid in euro will be included in a U.S. Holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividend is received; a recipient of such dividends that converts such euro to dollars upon receipt generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. Fluctuations in the U.S. dollar-euro exchange rate between the date that U.S. Holders receive a dividend and the date that they receive any
related refund of Luxembourg withholding tax may give rise to foreign currency gain or loss. Such gain or loss will generally be treated as ordinary income or loss for U.S. tax purposes. Dividends paid by ArcelorMittal will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from U.S. corporations.
Subject to certain exceptions for short-term or hedged positions, taxable dividends received by certain non-corporate U.S. Holders (including individuals) with respect to the ArcelorMittal shares will be subject to U.S. federal income taxation at rates that are lower than the rates applicable to ordinary income if the dividends represent “qualified dividend income”. Dividends
paid on the ArcelorMittal shares will be treated as qualified dividend income if ArcelorMittal is not a PFIC in the year in which the dividend was paid or in the year prior thereto. As discussed further below, ArcelorMittal believes that it was not a PFIC for U.S. federal income tax purposes with respect to its 20182020 and 2021 taxable year,years, and ArcelorMittal does not anticipate being a PFIC for its 20192022 taxable year. See “—Passive foreign investment company ("PFIC") status”.
U.S. Holders of ArcelorMittal shares should consult their own tax advisors regarding the availability of the reduced rate of U.S. federal income tax on dividends in light of their own particular circumstances.
Subject to the limitations and conditions provided in the Code and the applicable U.S. Treasury Regulations, a U.S. Holder of ArcelorMittal shares may be able to claim a foreign tax credit against its U.S. federal income tax liability in respect of any Luxembourg income taxes withheld at the appropriate rate applicable to the U.S. Holder from a dividend paid by ArcelorMittal to such U.S. Holder and paid to the Luxembourg government. Alternatively, the U.S. Holder may deduct such Luxembourg income taxes from its U.S. federal taxable income, provided that the U.S. Holder elects to deduct rather than credit all foreign income taxes for the relevant taxable year. The rules with respect to foreign tax credits are complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
(b) Taxation of sales, exchanges, or other dispositions of ArcelorMittal shares
Sales or other taxable dispositions by U.S. Holders of ArcelorMittal shares generally will give rise to gain or loss equal to the difference between the amount realized on the disposition and the U.S. Holder’s tax basis in such ArcelorMittal shares.shares, as determined in U.S. dollar. A U.S. Holder generally will have an initial tax basis in each ArcelorMittal share equal to its U.S. dollar cost to the U.S. Holder.
In general, gain or loss recognized on the sale or exchange of ArcelorMittal shares will be capital gain or loss and, if the U.S. Holder’s holding period for such ArcelorMittal shares exceeds one year, will be long-term capital gain or loss. Certain U.S. Holders, including individuals, are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deduction of capital losses against ordinary income is subject to limitations under the Code.
Passive foreign investment company (“PFIC”) status
Special U.S. federal income tax rules apply to U.S. Holders owning stock of a PFIC. ArcelorMittal believes that it currently is not a PFIC for U.S. federal income tax purposes, and ArcelorMittal does not expect to become a PFIC in the future. This conclusion is based upon an annual analysis of its financial position and an interpretation of the PFIC provisions that ArcelorMittal believes is correct. No assurances can be made, however, that the applicable tax law or relevant factual circumstances will not change in a manner that affects the determination of ArcelorMittal’s PFIC status. If, contrary to the foregoing, ArcelorMittal were classified as a PFIC, a U.S. Holder of ArcelorMittal shares would be subject to an increased tax liability upon the gain realized on a sale or other disposition of ArcelorMittal shares or upon the receipt of certain distributions treated as “excess distributions”. Any gain realized would not be treated as a capital gain but would be treated as if the U.S. Holder had realized its gain and certain “excess distributions”, as applicable, ratably over its holding period for ArcelorMittal shares and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, if ArcelorMittal were a PFIC and its shares constitute “marketable stock”, a U.S. Holder may elect to be taxed annually on a mark-to-market basis with respect to its ArcelorMittal shares and mitigate the adverse tax consequences. U.S. Holders should consult their tax advisors as to the availability and consequences of a mark-to-market election with respect to their shares of ArcelorMittal.
Foreign Financial Asset Reporting.Reporting
Certain U.S. Holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer that are not held in accounts maintained by financial institutions. The understatement of income attributable to “specified foreign financial assets” in excess of U.S.$5,000 extends the statute of limitations with respect to the tax return to six years after the return was filed. U.S. Holders who fail to
report the required information could be subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisers regarding the possible application of these rules, including the application of the rules to their particular circumstances.
Backup withholding and information reporting
The payment of proceeds received upon the sale, exchange or redemption of ArcelorMittal shares by U.S. Holders within the United States (or through certain U.S.-related financial intermediaries), and dividends on ArcelorMittal shares paid to U.S. Holders in the United States (or through certain U.S.-related financial intermediaries), will be subject to information reporting and may be subject to backup withholding unless the U.S. Holder (1) is an exempt recipient, and establishes that exemption if required or (2) in the case of backup withholding, provides an IRS Form W-9 (or an acceptable substitute form) that contains the U.S. Holder’s taxpayer identification number and that certifies that no loss of exemption from backup withholding has occurred.
Backup withholding is not an additional tax. The amount of backup withholding imposed on a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability, if any, or as a refund, so long as the required information is properly furnished to the IRS. Holders that are not U.S. Holders may need to comply with certification procedures to establish their non-U.S. status in order to avoid information reporting and backup withholding tax requirements.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT ABOVE IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY. EACH INVESTOR IN ARCELORMITTAL ORDINARY SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF ARCELORMITTAL SHARES BASED ON THE INVESTOR’S PARTICULAR CIRCUMSTANCES.
Luxembourg taxation
The following is a summary addressing certain material Luxembourg tax consequences that are likely to be relevant to holders of shares in respect of the ownership and disposition of shares in ArcelorMittal.
This summary does not purport to address all material tax considerations that may be relevant to a holder or prospective holder of ArcelorMittal shares. This summary also does not take into account the specific circumstances of particular investors some of which may be subject to special tax rules, including dealers in securities, financial institutions, insurance companies, investment funds, and of current or prior holders (directly or indirectly) of five percent or more of the shares of ArcelorMittal.funds.
This summary is based on the laws, regulations and applicable tax treaties as in effect on the date hereof in Luxembourg, all of which are subject to change, possibly with retroactive effect. Holders of ArcelorMittal shares should consult their own tax advisers as to the particular tax consequences, under the tax laws of the country of which they are residents for tax purposes of the ownership or disposition of ArcelorMittal shares.
This summary does not address the terms of employee stock options or other incentive plans implemented by ArcelorMittal and its subsidiaries and does not purport to provide the holders of stock subscription options or other comparable instruments (including shares acquired under employee share ownership programs) with a description of the possible tax and social security implications for them, nor to determine under which conditions these options or other instruments are or may become exercisable. These holders are therefore urged to consult their own tax advisers as to the potential tax and social security implications of an exercise of their options or other instruments.
As used herein, a “Luxembourg individual” means an individual resident in Luxembourg who is subject to personal income tax (impôt sur le revenu) on his or her worldwide income from Luxembourg or foreign sources, and a “Luxembourg company” means a company or another entity resident in Luxembourg subject to corporate income tax (impôt sur le revenu des collectivités) on its worldwide income from Luxembourg or foreign sources. For the purposes of this summary, Luxembourg individuals and Luxembourg companies are collectively referred to as “Luxembourg Holders”. A “non-Luxembourg Holder” means any investor in ArcelorMittal shares other than a Luxembourg Holder.
(a) Luxembourg withholding tax on dividends paid on ArcelorMittal shares
Dividends distributed by ArcelorMittal will in principle be subject to Luxembourg withholding tax at the rate of 15%.
Luxembourg resident corporate holders
No dividend withholding tax applies on dividends paid by ArcelorMittal to a Luxembourg company (that is, a fully taxable entity within the meaning of Article 159 of the Luxembourg Income Tax Law) holding shares (or a Luxembourg permanent establishment/representative of a qualifying foreign entity to which the shares are attributable), which meets the qualifying participation test (that is, a shareholding in ArcelorMittal of at least 10% or having an acquisition cost of at least EUR
1.2 million held or committed to be held for a minimum one year holding period, per Article 147 of the Luxembourg Income Tax Law). If such exemption from dividend withholding tax does not apply, a Luxembourg company may be entitled to a tax credit.
Luxembourg resident individual holders
Luxembourg withholding tax on dividends paid by ArcelorMittal to a Luxembourg resident individual holder may entitle such Luxembourg Holder to a tax credit for the tax withheld.
Non-Luxembourg Holders
Non-Luxembourg Holders of ArcelorMittal shares who have held a shareholding in ArcelorMittal representing at least 10% of ArcelorMittal’s share capital (or shares with an acquisition cost of at least EUR 1.2 million) for an uninterrupted period of at least 12 months (or where held for a shorter period, where the holder takes the commitment to hold the qualifying shareholding for such period) may benefit from an exemption from the dividend withholding tax if they are: (i) entities which fall within the scope of Article 2 of the European Council Directive 2011/96/EU, as amended (the “EU Parent-Subsidiary Directive”) and which are not excluded to benefit from the EU Parent-Subsidiary Directive under its mandatory general anti-avoidance rule (“GAAR”) in each case as implemented in Luxembourg, or (ii) corporates subject to a tax comparable to Luxembourg corporate income tax and which are resident of a country having concluded a double tax avoidance treaty with Luxembourg, or (iii) corporates subject to a tax comparable to Luxembourg corporate income tax and which are resident in a State being part of the European Economic Area (EEA) other than a Member State of the European Union, or (iv) corporates resident in Switzerland subject to corporate income tax in Switzerland without benefiting from an exemption.
Non-Luxembourg Holders of ArcelorMittal shares who are tax resident in a country having a double tax avoidance treaty with Luxembourg may claim for a reduced withholding tax rate or a withholding tax relief under the conditions and subject to the limitations set forth in the relevant treaty.
(b) Luxembourg income tax on dividends paid on ArcelorMittal shares and capital gains
Luxembourg resident individual holders
For Luxembourg individuals, income in the form of dividends or capital gains derived from ArcelorMittal shares will normally be subject to individual income tax at the applicable progressive rate with a current top effective marginal rate of 45.78% including the unemployment fund contribution at the maximum rate of 9%. Such dividends may benefit from the 50% exemption set forth in Article 115(15a) of the Luxembourg Income Tax Law, subject to fulfillment of the conditions set out therein. Capital gains will only be taxable if they are realized on a sale of ArcelorMittal shares, which takes place within the first six months following their acquisition, or if the relevant holder (alone or together with his/her spouse or registered partner and his/her underage children), directly or indirectly, holds or has held more than 10% of the ArcelorMittal shares at any time during the past five years.
Luxembourg resident corporate holders
For Luxembourg companies, which do not benefit from a special tax regime, income in the form of dividends or capital gains derived from ArcelorMittal shares will be subject to corporate income tax and municipal business tax. The combined rate for these two taxes (including an unemployment fund contribution of 7%) for Luxembourg companies with registered office in Luxembourg City is 26.01%24.94% in 2018.2021. Such dividends may benefit either from the 50% exemption set forth in Article 115(15a) of the Luxembourg Income Tax Law or from the full exemption set forth in Article 166 of the Luxembourg Income Tax Law, subject in each case to fulfillment of the respective conditions set out therein. Capital gains realized on the sale of ArcelorMittal shares may benefit from the full exemption provided for by the Grand Ducal Decree of December 21, 2001, as amended, subject to fulfillment of the conditions set out therein.
Non-Luxembourg Holders
An individual or corporate non-Luxembourg Holder of ArcelorMittal shares who/which realizes a gain on disposal thereof (and who/which does not have a permanent establishment in Luxembourg to which the ArcelorMittal shares would be attributable) will only be subject to Luxembourg taxation on capital gains arising upon disposal of such shares if such holder has (if an individual, alone or together with his or her spouse or registered partner and underage children) directly or indirectly held more than 10% of the capital of ArcelorMittal, at any time during the past five years, and either (1) such holder has been a
resident of Luxembourg for tax purposes for at least 15 years and has become a non-resident within the last five years preceding the realization of the gain, subject to any applicable tax treaty, or (2) the disposal of ArcelorMittal shares occurs within six months from their acquisition, subject to any applicable tax treaty.
A corporate non-Luxembourg Holder, which has a permanent establishment or a permanent representative in Luxembourg to which ArcelorMittal shares would be attributable, will bear corporate income tax and municipal business tax on dividends received and/or a gain realized on a disposal of such shares under the same conditions as are applicable to a Luxembourg resident corporate holder, as described above.
(c) Other taxes
Net wealth tax
Luxembourg net wealth tax will not be levied on a Luxembourg Holder unless:
•the Luxembourg Holder is a legal entity subject to net wealth tax in Luxembourg; or
•ArcelorMittal shares are attributable to an enterprise or part thereof which is carried on through a permanent
establishment or a permanent representative in Luxembourg of a non-resident entity.
Net wealth tax is levied annually at a digressive rate depending on the amount of the net wealth of the above holders, as determined for net wealth tax purposes (i.e. 0.5% on an amount up to EUR 500 million and 0.05% on the amount of taxable net wealth exceeding EUR 500 million).
ArcelorMittal shares may be exempt from net wealth tax subject to the conditions set forth by Article 60 of the Law of October 16, 1934 on the valuation of assets (Bewertungsgesetz), as amended.
Estate and gift tax
Luxembourg inheritance tax may be levied on the transfer of ArcelorMittal shares upon the death of a Luxembourg individual.
Luxembourg gift tax will be levied in the event that a gift of ArcelorMittal shares is made pursuant to a notarial deed signed before a Luxembourg notary.
Other Luxembourg tax considerations
No registration tax will be payable by a holder of shares upon the issue, subscription or acquisition of shares in ArcelorMittal or upon the disposal of shares by sale or exchange.
F. Dividends and paying agents
The paying agent for shareholders who hold shares listed on the NYSE is Citibank and the paying agent for shareholders who hold shares listed on Euronext Amsterdam, Euronext Paris, Luxembourg Stock Exchange and Spanish Stock Exchanges is BNP Paribas Securities Services. For more information see, “Item 8.A—Financial Information—Consolidated statements and other financial information—Dividend distributions.”
G. Statements by experts
Please refer to “Item 4.D—Information on the Company—Property, plant and equipment—Reserves (iron ore and coal),” and Item 19.
H. Documents on display
A copyEvaluation of any or all of the documents deemed to be incorporated in this report by reference, unless such documents have been modified or superseded as specified herein, may be obtained by sending a request to: company.secretary@arcelormittal.com or at ArcelorMittal’s registered office as set out in “Item 4.A—Information on the Company—History and development of the Company—Other information” of this annual report.
I. Subsidiary information
Not applicable.
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ITEM 11. | QUANTITATIVE AND QUALITATIVE
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ArcelorMittal is exposed to a number of different market risks arising from its normal business activities. Market risk is the possibility that changes in raw materials prices, foreign currency exchange rates, interest rates, base metal prices (zinc, nickel, aluminum and tin) and energy prices (oil, natural gas and power) will adversely affect the value of ArcelorMittal’s financial assets, liabilities or expected future cash flows.
The fair value information presented below is based on the information available to management as of the date of the consolidated statements of financial position. Although ArcelorMittal is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of this annual report since that date, and therefore, the current estimates of fair value may differ significantly from the amounts presented. The estimated fair values of certain financial instruments have been determined using available market information or other valuation methodologies that require considerable judgment in interpreting market data and developing estimates.
See note 6 to ArcelorMittal’s consolidated financial statements for quantitative information about risks relating to financial instruments, including financial instruments entered into pursuant to the Company’s risk management policies.
Risk management
ArcelorMittal has implemented strict policiesdisclosure controls and procedures to manage and monitor financial market risks. Organizationally, supervisory functions are separated from operational functions, with proper segregation of duties. Financial market activities are overseen by the President and CFO, the Corporate Finance and Tax Committee and the CEO Office.
All financial market risks are managed in accordance with the Treasury and Financial Risk Management Policy. These risks are managed centrally through Group Treasury by a group specializing in foreign exchange, interest rate, commodity, internal and external funding and cash and liquidity management.
All financial market hedges are governed by ArcelorMittal’s Treasury and Financial Risk Management Policy, which includes a delegated authority and approval framework, sets the boundaries for all hedge activities and dictates the required approvals for all Treasury activities. Hedging activity and limits are monitored on an ongoing basis. ArcelorMittal enters into transactions with numerous counterparties, mainly banks and financial institutions, as well as brokers, major energy producers and consumers.
As part of its financial risk management activities, ArcelorMittal uses derivative instruments to manage its exposure to changes in interest rates, foreign exchange rates and commodities prices. These instruments are principally interest rate, currency and commodity swaps, spots and forwards. ArcelorMittal may also use futures and options contracts.
Counterparty risk
ArcelorMittal has established detailed counterparty limits to mitigate the risk of default by its counterparties. The limits restrict the exposure ArcelorMittal may have to any single counterparty. Counterparty limits are calculated taking into account a range of factors that govern the approval of all counterparties. The factors include an assessment of the counterparty’s financial soundness and its ratings by the major rating agencies, which must be of a high quality. Counterparty limits are monitored on a periodic basis.
All counterparties and their respective limits require the prior approval of the Corporate Finance and Tax Committee. Standard agreements, such as those published by the International Swaps and Derivatives Association, Inc. (ISDA) are negotiated with all ArcelorMittal trading counterparties.
Currency exposure
ArcelorMittal seeks to manage each of its entities’ exposure to its operating currency. For currency exposure generated by activities, the conversion and hedging of revenues and costs in foreign currencies is typically performed using currency transactions on the spot market and forward market. For some of its business segments, ArcelorMittal hedges future cash flows.
Because a substantial portion of ArcelorMittal’s assets, liabilities, sales and earnings are denominated in currencies other than the U.S. dollar (its reporting currency), ArcelorMittal has exposure to fluctuations in the values of these currencies relative to the U.S. dollar. These currency fluctuations, especially the fluctuation of the value of the U.S. dollar relative to the euro, the Canadian dollar, Brazilian real, South African rand, Argentine peso, Kazakh tenge and Ukrainian hryvnia, as well as fluctuations in the currencies of the other countries in which ArcelorMittal has significant operations and/or sales, could have a material impact on its results of operations.
ArcelorMittal faces transaction risk, where its businesses generate sales in one currency but incur costs relating to that revenue in a different currency. For example, ArcelorMittal’s non-U.S. subsidiaries may purchase raw materials, including iron ore and coking coal, in U.S. dollars, but may sell finished steel products in other currencies. Consequently, an appreciation of the U.S. dollar will increase the cost of raw materials, thereby negatively impacting the Company’s operating margins, unless the Company is able to pass along the higher cost in the form of higher selling prices.
ArcelorMittal faces foreign currency translation risk, which arises when ArcelorMittal translates the financial statements of its subsidiaries, denominated in currencies other than the U.S. dollar for inclusion in ArcelorMittal’s consolidated financial statements.
The tables below illustrate the impact of an appreciation and a depreciation of the U.S. dollar of 10% against the euro, on the conversion of the net debt of ArcelorMittal into U.S. dollars as of December 31, 2018 and December 31, 2017. The impact on net debt denominated in a currency different than the euro, is computed based on historical data of how such currency would move against the U.S. dollar when the U.S. dollar appreciates/depreciates 10% against the euro. A positive sign means an increase in the net debt.
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| Currency | | Impact on net debt translation of a 10% appreciation of the
U.S. dollar against the euro | | Impact on net debt translation of a 10% depreciation of the
U.S. dollar against the euro |
| In 2018 | | in $ equivalent
(in millions) | | in $ equivalent
(in millions) |
| Argentine peso | | 7 | | (23) |
| Canadian dollar | | (9) | | 10 |
| Euro | | (564) | | 564 |
| Indian rupee | | 33 | | (42) |
| South African rand | | 25 | | (38) |
| Swiss franc | | (12) | | 14 |
| Other | | 10 | | (8) |
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| | | | |
| Currency | | Impact on net debt translation of a 10% appreciation of the
U.S. dollar against the euro | | Impact on net debt translation of a 10% depreciation of the
U.S. dollar against the euro |
| In 2017 | | in $ equivalent
(in millions) | | in $ equivalent
(in millions) |
| Argentine peso | | (6) | | 5 |
| Bosnia and Herzegovina convertible mark | | 2 | | (3) |
| Chinese renminbi | | (8) | | 9 |
| Euro | | (597) | | 597 |
| Moroccan dirham | | 3 | | (4) |
| Swiss franc | | (6) | | 7 |
| Other | | 2 | | (1) |
Derivative instruments
ArcelorMittal uses derivative instruments to manage its exposure to movements in interest rates, foreign exchange rates and commodity prices. Changes in the fair value of derivative instruments are recognized in the consolidated statements of operations or in equity according to nature and effectiveness of the hedge.
Derivatives used are non-exchange-traded derivatives such as over-the-counter swaps, options and forward contracts.
For the Company’s tabular presentation of information related to its market risk sensitive instruments, please see note 6 to the consolidated financial statements.
Interest rate sensitivity
Cash balances, which are primarily composed of euros and U.S. dollars, are managed according to the short term (up to one year) guidelines established by senior management on the basis of a daily interest rate benchmark, primarily through short-term currency swaps, without modifying the currency exposure.
Interest rate risk on debt
ArcelorMittal’s policy consists of incurring debt at fixed and floating interest rates, primarily in U.S. dollars and euros according to general corporate needs. Interest rate and currency swaps are utilized to manage the currency and/or interest rate exposure of the debt.
For the Company’s tabular presentation of the fair values of its short and long term debt, please see note 6 to the consolidated financial statements.
Commodity price risk
ArcelorMittal utilizes a number of exchange-traded commodities in the steel-making process. In certain instances, ArcelorMittal is the leading consumer worldwide of certain commodities. In some businesses and in certain situations, ArcelorMittal is able to pass this exposure on to its customers. The residual exposures are managed as appropriate.
Financial instruments related to commodities (base metals, energy, freight and emission rights) are utilized to manage ArcelorMittal’s exposure to price fluctuations.
Hedges in the form of swaps and options are utilized to manage the exposure to commodity price fluctuations.
For the Company’s tabular presentation of information related to its market risk sensitive instruments, please see note 6 to the consolidated financial statements.
In respect of non-exchange traded commodities, ArcelorMittal is exposed to volatility in the prices of raw materials such as iron ore (which is generally correlated with steel prices with a time lag) and coking coal. This exposure is almost entirely managed through long-term contracts, however some hedging of iron ore exposures is made through derivative contracts. For a more detailed discussion of ArcelorMittal’s iron ore and coking coal purchases, see “Item 5—Operating and financial review and prospects—Key factors affecting results of operation—Raw materials”.
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ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
A. Debt securities
Not applicable.
B. Warrants and rights
Not applicable.
C. Other securities
Not applicable.
D. American depositary shares
The Company does not have any American Depositary Receipts. As described under “Item 10.B—Additional information—Memorandum and Articles of Association—Form and transfer of shares”, the Company maintains a New York share register with Citibank, N.A. for its shares that trade on the NYSE. As of December 31, 2018, 57,620,574 shares (or approximately 5.64% of ArcelorMittal’s total issued shares) were ArcelorMittal New York Registry Shares. Holders of ArcelorMittal New York Registry Shares do not pay fees to Citibank as a general matter, but do incur costs of up to $5 per 100 shares for transactions that require canceling or issuing New York Registry Shares, such as cross-border trades where New York Registry Shares are cancelled in exchange for shares held in ArcelorMittal’s European register, or vice-versa. Subject to certain conditions, Citibank reimburses the Company on an annual basis for expenses incurred by the Company in relation to the ongoing maintenance of the New York share facility (e.g., investor relations expenses, NYSE listing fees, etc.). In 2018, Citibank paid the Company $600,000 in respect of reimbursements of expenses incurred by the Company in 2018.
PART II
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ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
None.
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ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
None.
Disclosure controls and procedures
Management maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. ArcelorMittal’s controls and procedures are designed to provide reasonable assurance of achieving their objectives.
Management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2018.2021. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 20182021 so as to provide reasonable assurance that (1) information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and (2) that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Management’s Annual Reportreport on Internal Control Over Financial Reportinginternal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of ArcelorMittal;
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• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of ArcelorMittal;
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• | provide reasonable assurance that transactions are recorded, as necessary, to permit preparation of financial statements in accordance with IFRS; |
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• | provide reasonable assurance that receipts and expenditures of ArcelorMittal are made in accordance with authorizations of ArcelorMittal's management and directors; and
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| • | provide reasonable assurance that unauthorized acquisition, use or disposition of ArcelorMittal’s assets that could have a material effect on the financial statements would be prevented or detected on a timely basis.provide reasonable assurance that receipts and expenditures of ArcelorMittal are made in accordance with authorizations of ArcelorMittal's management and directors; and
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•provide reasonable assurance that unauthorized acquisition, use or disposition of ArcelorMittal’s assets that could have a material effect on the financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s financial statements would be prevented or detected. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of internal control over financial reporting as of December 31, 20182021 based upon the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that ArcelorMittal’s internal control over financial reporting was effective as of December 31, 2018.2021.
On November 1, 2018, ArcelorMittal completed the acquisition of Ilva S.p.A. and certain of its subsidiaries ("Ilva"). Management acknowledges that it is responsible for establishing and maintaining a system of internal controls over financial reporting for Ilva. ArcelorMittal is in the process of integrating Ilva and accordingly a number of processes and controls will be changed. In accordance with SEC staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, ArcelorMittal excluded Ilva from its assessment of the effectiveness of internal controls over financial reporting as of December 31, 2018. Ilva represents 3% of the Company’s total assets as of December 31, 2018 and less than 1% of the Company’s sales and consolidated net income for the year ended December 31, 2018. The transaction has not materially affected nor is expected to materially affect ArcelorMittal's internal control over financial reporting. The Company expects its internal control system to be fully implemented at Ilva in 2019 and, accordingly, to evaluate it for effectiveness at that time.
The effectiveness of management’s internal control over financial reporting as of December 31, 20182021 has been audited by the Company’s independent registered public accounting firm, Deloitte Audit S.à r.l., (Firm Id- 1287), and their report as of February 22, 2019March 11, 2022 below expresses an unqualified opinion on the Company’s internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the year endingended December 31, 20182021 that have materially affected or are reasonably likely to have materially affected the Company’s internal control over financial reporting.
Change in certifying accountant
On February 9, 2021, following a tender process to appoint an external auditor for the period beginning January 1, 2022, the Audit and Risk Committee recommended to the Board that it propose to the AGM to take place on May 4, 2022 (the "2022 AGM") the appointment of Ernst & Young S.A. (“EY”) as the new external auditor of ArcelorMittal for the financial year 2022, and on that date the Board resolved to make such proposal, which appointment would become effective upon ratification at the 2022 AGM. Accordingly, the Company’s audit relationship with Deloitte Audit S.à r.l. (“Deloitte”) would cease on the date of the 2022 AGM. In respect of fiscal years 2021 and 2020, Deloitte did not issue a report on the consolidated financial statements of ArcelorMittal that contained an adverse opinion or a disclaimer of opinion, and the relevant Deloitte auditor’s reports in respect of such consolidated financial statements were not qualified or modified as to uncertainty, audit scope or accounting principles. During fiscal years 2020 and 2021, there has not been any disagreement with Deloitte over any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to Deloitte’s satisfaction would have caused Deloitte to make reference to the subject matter of the disagreement in connection with its auditor’s reports, or any reportable event as described in Item 16F(a)(1)(v) of Form 20-F.
ArcelorMittal has provided Deloitte with a copy of the foregoing disclosure and has requested that they furnish the Company with a letter addressed to the US Securities and Exchange Commission stating whether it agrees with such disclosure and, if not, stating the respects in which it does not agree. A copy of
Deloitte’s letter dated March 11, 2022, in which they stated that they agree with with certain parts of such disclosure and have no basis to agree or disagree with other parts, is filed as an exhibit to this annual report on Form 20-F.
During fiscal years 2020 and 2021 and through March 11, 2022, the Company did not consult with EY regarding: (i) the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of the Company; or (ii) any matter that was either the subject of a disagreement
or reportable event as discussed in Item 16F(a)(1) of Form 20-F. EY’s proposed appointment will be presented for shareholder vote at the 2022 AGM. ArcelorMittal has requested that EY review the foregoing disclosure and has provided it with the opportunity to furnish the Company with a letter addressed to the US Securities and Exchange Commission containing any new information, clarification of the Company’s expression of its views or the respects in which it does not agree with such disclosure.
| | | | | |
| Report of Independent Registered Public Accounting Firm 240 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of ArcelorMittal
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of ArcelorMittal and subsidiaries (the “Company”) as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2018,2021, of the Company and our report dated February 22, 2019,March 11, 2022, expressed an unqualified opinion on those consolidated financial statements.
As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Ilva S.p.A. and certain of its subsidiaries ("Ilva"), which was acquired on November 1, 2018 and whose financial statements constitute 3% of total assets and less than 1% of sales and net income (including non-controlling interests) of the consolidated financial statement amounts as of and for the year ended December 31, 2018. Accordingly, our audit did not include the internal control over financial reporting at Ilva.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Reportreport on Internal Controlinternal control over Financial Reporting.financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte Audit S.à r.l.
Luxembourg, Grand Duchy of Luxembourg
February 22, 2019
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ITEM 16A.241 | AUDIT & RISK COMMITTEE FINANCIAL EXPERTManagement report |
Mrs. Karyn Ovelmen is the Chairman of the Audit & Risk Committee. Mrs. Ovelmen is an “Audit & Risk committee financial expert” as defined by the SEC regulations for Item 16A of Form 20-F.
Mrs. OvelmenPrincipal accountant fees and each of the other members of the Audit & Risk Committee are “independent directors” as defined under the NYSE listing standards.services
Please see “Item 6.A—Directors, senior management and employees—Directors and senior management—–Board of Directors” for Mrs. Ovelmen's experience.
ArcelorMittal has adopted a “Code of Business Conduct” applicable to all directors and to senior management, including the Company’s Chief Executive Officer and Chief Financial Officer, and employees of ArcelorMittal. The Code has been disseminated through company-wide communications and is posted on ArcelorMittal’s website at www.arcelormittal.com.
ArcelorMittal intends to disclose any amendment to or waiver from the Code of Business Conduct applicable to any of ArcelorMittal’s directors, its Chief Executive Officer, Chief Financial Officer or any other person who is an executive officer of ArcelorMittal on ArcelorMittal’s website at www.arcelormittal.com.
For more information refer to “Item 6.C—Directors, senior management and employees—Board practices/Corporate governance—Ethics and conflicts of interest”.
| |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Deloitte Audit S.à r.l. acted as the principal independent registered public accounting firm for ArcelorMittal for the fiscal years ended December 31, 20182021 and 2017.2020. Set forth below is a breakdown of fees for services rendered in 20182021 and 2017.2020.
Audit FeesFees.. Audit fees in 20182021 and 20172020 included $26.7$25.8 million and $23.6$25.6 million, respectively, for the audits of financial statements, and $0.5$0.3 million and $0.2$0.4 million in 20182021 and 2017,2020, respectively, for regulatory filings.
Audit-Related FeesFees.. Audit-related fees in 20182021 and 20172020 were $0.9$0.5 million and $1.0$0.7 million, respectively. Audit-related fees primarily include fees for employee benefit plan audits.agreed upon procedures for various transactions or reports.
Tax FeesFees. . Fees relating to tax planning, advice and compliance in 20182021 and 20172020 were $0.4$0.2 million and $0.4$0.2 million, respectively.
All Other FeesFees. . Fees in 20182021 and 20172020 for all other services were $0.2$0.05 million and $0.2$0.01 million, respectively. All other fees relate to services not included in the first three categories.
The Audit & Risk Committee has reviewed and approved all of the audit, audit-related, tax and other services provided by the principal independent registered public accounting firm in 20182021 within its scope, prior to commencement of the engagements. None of the services provided in 20182021 were approved under the de minimis exception allowed under the Exchange Act.
The Audit & Risk Committee pre-approves all permissible non-audit service engagements rendered by the principal independent registered public accounting firm. The Audit & Risk Committee has delegated pre-approval powers on a case-by-case basis to the Audit & Risk Committee Chairman, for instances where the Committee is not in session and the pre-approvedpreapproved services are reviewed in the subsequent Committee meeting.
In making its recommendation to appoint Deloitte Audit S.à r.l. as our principal independent registered public accounting firm for the fiscal year ended December 31, 2018, the Audit & Risk Committee has considered whether the services provided are compatible with maintaining Deloitte Audit S.à r.l. independence and has determined that such services do not interfere with Deloitte Audit S.à r.l. independence.
| | | | | |
ITEM 16D.Management report | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES242 |
None.
Glossary - definitions, terminology and principal subsidiaries Definitions and terminology
Unless indicated otherwise, or the context otherwise requires, references herein to “ArcelorMittal”, “we”, “us”, “our”, “ArcelorMittal Group”, “Group” and the “Company” or similar terms are to ArcelorMittal S.A. consolidated with its subsidiaries. References to “ArcelorMittal S.A.”, “ArcelorMittal parent” or “parent of ArcelorMittal” are to ArcelorMittal S.A., formerly known as Mittal Steel Company N.V. (“Mittal Steel”), having its registered office at 24-26, Boulevard d’Avranches, L-1160 Luxembourg, Grand Duchy of Luxembourg. ArcelorMittal’s principal operating subsidiaries, categorized by reporting segment and location, are listed below.
For the purposes of this annual report, the names of the following ArcelorMittal subsidiaries as abbreviated below are used where applicable.
| | | | | | | | | | | | | | |
ITEM 16E.Name of Subsidiary | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | Abbreviation | | Country |
| NAFTA | | | | |
| ArcelorMittal Dofasco G.P. | | ArcelorMittal Dofasco | | Canada |
| ArcelorMittal México S.A. de C.V. | | ArcelorMittal Mexico | | Mexico |
| | | | |
| ArcelorMittal Long Products Canada G.P. | | ArcelorMittal Long Products Canada | | Canada |
| | | | |
| Brazil and neighboring countries ("Brazil") | | | | |
| ArcelorMittal Brasil S.A. | | ArcelorMittal Brasil | | Brazil |
| Acindar Industria Argentina de Aceros S.A. | | Acindar | | Argentina |
| | | | |
| Europe | | | | |
| ArcelorMittal France S.A.S. | | ArcelorMittal France | | France |
| ArcelorMittal Belgium N.V. | | ArcelorMittal Belgium | | Belgium |
| ArcelorMittal España S.A. | | ArcelorMittal España | | Spain |
| ArcelorMittal Flat Carbon Europe S.A. | | AMFCE | | Luxembourg |
| ArcelorMittal Poland S.A. | | ArcelorMittal Poland | | Poland |
| ArcelorMittal Eisenhüttenstadt GmbH | | ArcelorMittal Eisenhüttenstadt | | Germany |
| ArcelorMittal Bremen GmbH | | ArcelorMittal Bremen | | Germany |
| ArcelorMittal Méditerranée S.A.S. | | ArcelorMittal Méditerranée | | France |
| ArcelorMittal Belval & Differdange S.A. | | ArcelorMittal Belval & Differdange | | Luxembourg |
| ArcelorMittal Hamburg GmbH | | ArcelorMittal Hamburg | | Germany |
| ArcelorMittal Duisburg GmbH | | ArcelorMittal Duisburg | | Germany |
| ArcelorMittal International Luxembourg S.A. | | ArcelorMittal International Luxembourg | | Luxembourg |
| | | | |
| | | | |
2018Africa and Commonwealth of Independent States ("ACIS") | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)(2)
|
January 1 - January 31 | - | - | - | - |
February 1 - February 28 | - | - | - | - |
March 1 - March 31 | 7,000,000(1)
| $32.36 | 7,000,000(1)
| -(1)
|
April 1 - April 30 | - | - | - | - |
May 1 - May 31 | - | - | - | - |
June 1 - June 30 | - | - | - | - |
July 1 - July 31 | - | - | - | - |
August 1 - August 31 | - | - | - | - |
September 1 - September 30 | - | - | - | - |
October 1 - October 31 | - | - | - | - |
November 1 - November 30 | - | - | - | - |
December 1 - December 31 | - | - | - | - |
(1) In accordance with the authorization provided by the annual general meeting of shareholders of May 5, 2015 as described in “Item 10.B—Additional Information—Memorandum and Articles of Association”, on March 13, 2018, ArcelorMittal announced a share buyback program with the intent to acquire shares intended to meet the Company’s obligations arising from share option programs, or other allocations of shares, to employees or to members of management including the CEO Office of ArcelorMittal or group companies. ArcelorMittal announced its intent to repurchase an aggregate maximum amount of US$280,000,000 in accordance with the resolution of the annual general meeting of shareholders held on May 5, 2015 and applicable market abuse regulations for a maximum of 7,000,000 shares to be acquired during the period from March 13, 2018 to May 5, 2020. On March 28, 2018, ArcelorMittal announced the completion of its share buyback program on March 26, 2018. Following this share buy-back program, the Company may still buy back shares up to approximately 9.3% of its issued share capital as of December 31, 2018. See “Item 4.A—Information on the Company—History and development of the Company—Recent Developments.” about the 2019 Program.
(2) As described in “Item 10.B—Additional Information—Memorandum and Articles of Association”, the maximum number of shares that may be acquired is the maximum allowed by the Luxembourg law of 10 August 1915 on commercial companies in such manner that the accounting par value of the Company’s shares held by the Company do not in any event exceed 10% of the Company’s issued share capital. The maximum number of own shares that the Company may hold at any time directly or indirectly may not have the effect of reducing its net assets (“actif net”) below the amount mentioned in paragraphs 1 and 2 of Article 461-272-1 of the Grand-Ducal Regulation coordinating the amended law of 10 August 1915 on commercial companies Law.
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ITEM 16F.ArcelorMittal South Africa Ltd. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | ArcelorMittal South Africa | | South Africa |
Not applicable.
| JSC ArcelorMittal Temirtau | | ArcelorMittal Temirtau | | Kazakhstan |
| PJSC ArcelorMittal Kryvyi Rih | | ArcelorMittal Kryvyi Rih | | Ukraine |
| | | | |
ITEM 16G.Mining | CORPORATE GOVERNANCE |
There are no significant differences between the corporate governance practices of ArcelorMittal and those required of a U.S. domestic issuer under the Listed Company Manual of the New York Stock Exchange.
| | |
ITEM 16H.ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure Canada G.P. | MINE SAFETY DISCLOSURE | ArcelorMittal Mines and Infrastructure Canada ("AMMC") | | Canada |
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 16.1 to this annual report on Form 20-F.
PART III
| ArcelorMittal Liberia Ltd. | | ArcelorMittal Liberia | | Liberia |
| | | | |
ITEM 17. | FINANCIAL STATEMENTS |
The Company has responded to Item 18 in lieu of responding to this Item.
| | |
ITEM 18. | FINANCIAL STATEMENTS |
Reference is made to pages F-1 to F-134.
In addition, unless indicated otherwise, or the context otherwise requires, references in this annual report to abbreviations or terms shown below have the following definitions: | | | | | | | | | | | | | | |
| ARS | Argentine Peso, the official currency of Argentina
| | INR | Indian rupee, the official currency of India |
| Articles of Association | the amended and restated articles of association of ArcelorMittal, dated January 17, 2022 filed as Exhibit 1.1 hereto | | Iron pellets | agglomerated ultra-fine iron ore particles of a size and quality suitable for use in steel-making processes |
| AUD$ or AUD | Australian dollars, the official currency of Australia | | Kilometers | measures of distance are stated in kilometers, each of which equals approximately 0.62 miles, or 1000 in meters, each of which equals approximately 3.28 feet |
| Brownfield project | the expansion of an existing operation | | KZT | the Kazakhstani tenge, the official currency of Kazakhstan |
| C$ or CAD | Canadian dollars, the official currency of Canada | | Metallurgical coal | a broader term than coking coal that includes all coals used in steelmaking, such as coal used for the pulverized coal injection (“PCI”) process |
| Executive Office | the Executive Chairman, Mr. Lakshmi N. Mittal and Chief Executive Officer, Mr. Aditya Mittal | | PLN | Polish złoty, the offcial currency of Poland |
| CIS | the countries of the Commonwealth of Independent States | | Production capacity | the annual production capacity of plant and equipment based on existing technical parameters as estimated by management |
| CNY | Chinese yuan, the official currency of China | | Ps or MXN | the Mexican peso, the official currency of the United Mexican States |
| Coking coal | coal that, by virtue of its coking properties, is used in the manufacture of coke, which is used in the steelmaking process | | Real, reais or R$ | Brazilian reais, the official currency of Brazil |
| Crude steel | the first solid steel product upon solidification of liquid steel, including ingots from conventional mills and semis (e.g., slab, billet and blooms) from continuous casters | | ROM | run of mine - mined iron ore or coal to be fed to a preparation and/or concentration process |
| Downstream | finishing operations: flat products - the process after the production of hot-rolled coil/plates, and long products - the process after the production of blooms/billets (including production of bars, wire rods, SBQ, etc.) | | Sales | include shipping and handling fees and costs billed to a customer in a sales transaction |
| DMTU or dmtu | dry metric tonne unit | | SBQ | special bar quality steel, a high-quality long product |
| DRI | direct reduced iron, a metallic iron formed by removing oxygen from iron ore without the formation of, or passage through, a smelting phase. DRI can be used as feedstock for steel production | | Significant Shareholder | a trust (HSBC Trustee (C.I.) Limited, as trustee), of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries |
| Energy coal | coal used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steam or thermal coal | | UAH | Ukrainian hryvnia, the official currency of Ukraine |
| Euro, euros, EUR or € | the official currency of the European Union (“EU”) member states participating in the European Monetary Union | | US$, $, dollars, USD or U.S. dollar | United States dollar, the official currency of the United States |
| Sinter | a metallic input used in the blast furnace steel-making process, which aggregates fines, binder and other materials into a coherent mass by heating without melting | | Upstream | operations that precede downstream steel-making, coking coal, coke, sinter, DRI, blast furnace, basic oxygen furnace (“BOF”), electric arc furnace (“EAF”), casters & hot rolling/plate mill |
| Spanish Stock Exchanges | the stock exchanges of Madrid, Barcelona, Bilbao and Valencia | | Wet recoverable | a quantity of iron ore or coal recovered after the material from the mine has gone through a preparation and/or concentration process excluding drying |
| Steel products | finished and semi-finished steel products, and exclude raw materials (including those described under “upstream” below), direct reduced iron (“DRI”), hot metal, coke, etc. | | ZAR | South African rand, the official currency of the Republic of South Africa |
| Tons, net tons or ST | short tons are used in measurements involving steel products as well as crude steel, iron ore, iron ore pellets, DRI, hot metal, coke, coal, pig iron and scrap (a short ton is equal to 907.2 kilograms or 2,000 pounds) | | Metric Tonnes or MT | metric tonnes and are used in measurements involving steel products, as well as crude steel, iron ore, iron ore pellets, DRI, hot metal, coke, coal, pig iron and scrap (a metric tonne is equal to 1,000 kilograms or 2,204.62 pounds) |
| | | | | | | | | | | | | | |
| Executive Officers | those executives of the Company who are supporting the Executive Office and jointly with the Executive Office represent the senior management of the Company | | Probable mineral reserve | is the economically mineable part of an indicated and, in some cases, a measured mineral resource. |
| EAF | Electric arc furnaces are used to produce steel from
scrap melted using electricity, in contrast to the cast
iron sector (blast furnace – converter) where it is
produced from iron ore. | | Mineral resource | is a concentration or occurrence of material of economic interest in or on the Earth's crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of all mineralization drilled or sampled. |
| GMB | the Group Management Board, the former senior management body which was replaced by the CEO Office subsequently renamed Executive Office. The Executive Office, supported by seven Executive Officers, makes up the Company’s senior management | | Measured mineral resource | is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. The level of geological certainty associated with a measured mineral resource is sufficient to allow a qualified person to apply modifying factors, in sufficient detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Because a measured mineral resource has a higher level of confidence than the level of confidence of either an indicated mineral resource or an inferred mineral resource, a measured mineral resource may be converted to a proven mineral reserve or to a probable mineral reserve. |
| Greenfield project | the development of a new project | | Indicated mineral resource | is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of adequate geological evidence and sampling. The level of geological certainty associated with an indicated mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Because an indicated mineral resource has a lower level of confidence than the level of confidence of a measured mineral resource, an indicated mineral resource may only be converted to a probable mineral reserve. |
| Green steel | steel products subject to auditor verified certification of the CO2 savings achieved | | Inferred mineral resource | is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. The level of geological uncertainty associated with an inferred mineral resource is too high to apply relevant technical and economic factors likely to influence the prospects of economic extraction in a manner useful for evaluation of economic viability. Because an inferred mineral resource has the lowest level of geological confidence of all mineral resources, which prevents the application of the modifying factors in a manner useful for evaluation of economic viability, an inferred mineral resource may not be considered when assessing the economic viability of a mining project, and may not be converted to a mineral reserve. |
| Mineral reserve | is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted. | | | |
| Proven mineral reserve | is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource. | | | |
EXHIBITS
EXHIBIT INDEX
| | | | | |
| Exhibit | Description |
| Number |
| |
Exhibit | Description |
Number |
| |
| 1.1 | Amended and Restated Articles of Association of ArcelorMittal dated May 16, 2018 andJanuary 17, 2022 available at Exhibit 1.1.
|
| 2.1 | The total amount of long-term debt securities authorized under any instrument does not exceed 10% of the total assets of ArcelorMittal and its subsidiaries on a consolidated basis. ArcelorMittal hereby agrees to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of long-term debt of ArcelorMittal or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. |
| 2.2 | Description of ArcelorMittal securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 2.2) |
| 4.1* | Shareholder’s agreement dated as of August 13, 1997 among Ispat International N.V., LNM Holdings S.L. (renamed Ispat International Investments S.L.) and Mr. Lakshmi N. Mittal (filed as Exhibit 4.3 to Mittal Steel Company N.V.’s annual report on Form 20-F for the year ended December 31, 2004 (File No. 001-14666), and incorporated by reference herein) and available at: http://www.sec.gov/Archives/edgar/data/1041989/000095012305003893/y07225exv4w3.txt. |
| 4.2* | |
4.3* | |
4.4*4.3* | |
4.5* | Supplemental Terms for 2013-2014 Restricted Share Units and Performance Share Units Plan to the ArcelorMittal Equity Incentive Plan effective May 8, 2013 (filed as Exhibit 4.6 to the annual report on Form 20-F filed on February 25, 2014 (File No. 001-35788) and incorporated by reference herein) and available at: 4.4*http://www.sec.gov/Archives/edgar/data/1243429/000124342914000002/exhibit46.htm. |
4.6* | |
4.7* | Supplemental Terms for 2014-2015 Restricted Share Units and Performance Share Units Plan to the ArcelorMittal Equity Incentive Plan effective May 8, 2014 (filed as Exhibit 4.8 to ArcelorMittal’s annual report on Form 20-F for the year ended December 31, 2014 (File No. 001-35788), and incorporated by reference herein) and available at: http://www.sec.gov/Archives/edgar/data/1243429/000124342915000002/Exhibit48.htm. |
|
| |
4.8* | |
4.9* | |
4.10* | |
4.11* | |
4.12*4.6* | |
4.134.7* | |
4.144.8* | |
| 4.9* | |
| 4.10* | |
| 4.11* | |
| 4.12* | |
| 4.13 | Supplemental Terms for 2021-2022 Group Management Board Performance Share Units Plan effective June 08, 2021 and filed as Exhibit 4.13 |
| 4.14 | Supplemental Terms for 2021-2022 Restricted Share Units and Performance Share Units effective June 08, 2021 and filed as Exhibit 4.14 |
| 4.15 | Restricted Share Units and Performance Share Units Plan effective June 08, 2021 and filed as Exhibit 4.15 |
| 8.1 | |
| 12.1 | Certifications of ArcelorMittal’s Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act and available at Exhibit 12.112.1.. |
| 13.1 | Certifications of ArcelorMittal’s Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code and available at Exhibit 13.113.1.. |
| 15.1 | |
| | | | | |
| 15.2 | Consent of Gustavson AssociatesMining consents for ArcelorMittal Mining Canada G.P. and available at Exhibit 15.2. |
| 15.3 | Consent of SRK Consulting (UK) Limited -Mining consents for Baffinland and available at Exhibit 15.3 |
| 15.4 | |
| 15.5 | |
| 15.6 | |
| 15.7 | |
15.415.8 | Consent of SRK Consulting (UK) Limited -Mining consent for Kazakhstan coal and available at: Exhibit 15.4. |
15.5 | |
15.615.9 | Consent of SRK Consultores do Brasil Ltda.Mining consent for Liberia and available at Exhibit 15.615.9. |
16.115.10 | Mine SafetyMining consents for Mexico (excluding Peña Colorada) and Health Administration Safety Data available at Exhibit 16.115.10. |
101.INS15.11 | |
| 15.12 | |
| 15.13 | Mining consents for Ukraine iron ore operations and available at Exhibit 15.13 |
| 15.14 | |
| 101.INS | XBRL Instance Document
- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | XBRL Taxonomy Extension Schema Document
|
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document
|
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document
|
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| | |
| ARCELORMITTAL |
|
ARCELORMITTAL |
|
| /s/ Henk Scheffer |
| Henk Scheffer |
| Company Secretary |
Date: February 22, 2019March 11, 2022
ARCELORMITTAL AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 2018 and 2017 and
for each of the three years in the period ended December 31, 2018
INDEX
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| 249 Report of Independent Registered Public Accounting Firm | |
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Consolidated Statements of Operations | |
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Consolidated Statements of Other Comprehensive Income | |
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Consolidated Statements of Financial Position | |
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Consolidated Statements of Changes in Equity | |
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Consolidated Statements of Cash Flows | |
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Notes to Consolidated Financial Statements | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholdersand the Board of Directors of ArcelorMittal
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of ArcelorMittal and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, other comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the Company'sCompany’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2019,March 11, 2022, expressed an unqualified opinion on the Company'sCompany’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwill and Property, Plant and Equipment – Refer to Note 5.3 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment at the group of cash-generating units (“GCGU”) level, and property, plant and equipment (“PP&E”) as part of the relevant cash-generating unit (“CGU”), involves a comparison of the recoverable amount of each GCGU or CGU to its carrying amount. Recoverable amount is defined as the higher of fair value less costs of disposal and the value-in-use for each GCGU or CGU. The Company primarily used value-in-use to determine the recoverable amounts for each GCGU or CGU, which required management to make significant assumptions related to estimates of future cash flows.
The goodwill balance as of December 31, 2021 was $3,931 million. There was no impairment of goodwill recorded for the year ended December 31, 2021.
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| Report of Independent Registered Public Accounting Firm 250 |
The PP&E balance of the Company as of December 31, 2021 was $30,075 million. There was no impairment of PP&E recorded for the year ended December 31, 2021. In connection with the Company’s annual test for impairment of goodwill and PP&E, the Company reversed impairment charges which had been recognized in prior years relating to PP&E in the Europe segment amounting to $218 million for the year ended December 31, 2021.
Key assumptions that had a significant impact on the Company’s estimate of the recoverable amounts of the relevant GCGUs and CGUs included volume of shipments, selling prices and the discount rate. Changes in these assumptions could have a significant impact on the recoverable amount of a GCGU or CGU.
In developing the estimates of future cash flows of its GCGUs and CGUs, the Company considered its exposure to certain climate-related risks which could affect the recoverable amount of a GCGU or CGU. Where there is a legal obligation of carbon neutrality, such as in Europe and Canada, estimates of future cash flows include the decarbonization capital expenditures deemed necessary to maintain the level of economic benefit expected to arise from related assets in their current condition. For the remaining jurisdictions, where there is not a legal obligation of carbon neutrality, risk premiums in the discount rates utilized to determine the present value of estimated future cash flows have been increased for decarbonization related uncertainties.
Given the significant judgments made by management to estimate the recoverable amounts of the relevant GCGUs and CGUs, performing audit procedures to evaluate the reasonableness of management’s estimates related to volume of shipments, selling prices, and discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to volume of shipments, selling price and discount rate used by management to estimate future cash flows of the GCGUs and CGUs included the following, among others:
•We tested the effectiveness of internal controls over management’s valuation methodology and assumptions used, and estimates of future cash flows, including controls over the determination of the recoverable amount of the GCGUs and CGUs.
•We evaluated management’s ability to reasonably estimate future cash flows by comparing actual results to management’s historical forecasts.
•We evaluated the reasonableness of management’s estimates of future cash flows considering historical operating results, current macroeconomic conditions, the consistency of estimates of future cash flows with available external third party data, the consistency of the estimates of future cash flows to disclosures, internal and external communications of management and the Board of Directors, and holding discussions with relevant personnel.
•We evaluated the effects of climate-related matters, including current legislation and regulations related to carbon emissions as well as the Company’s ongoing initiatives to transition to a lower-carbon operations, including expected required investments and risk premiums, when assessing the reasonability of management’s cash flow projections.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:
◦Evaluating the reasonableness of the methodology used and underlying source information used in the Company’s calculation of the discount rate.
◦Testing the mathematical accuracy of the calculation.
◦Developing an independent range of estimates and comparing the discount rate selected by management to our range.
•We evaluated the impact of any changes in management’s cash flow forecasts from October 1, 2021, the annual measurement date for testing impairment of goodwill, to December 31, 2021.
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| 251 Report of Independent Registered Public Accounting Firm |
Deferred Tax Assets - Refer to Note 10.4 to the Consolidated Financial Statements
Critical Audit Matter Description
ArcelorMittal S.A. (parent company) has deferred tax assets primarily related to tax losses and other tax benefits carried forward. Under current tax law in Luxembourg, tax losses accumulated before January 1, 2017, do not expire and are recoverable against future taxable income. The valuation of deferred tax assets requires management to make significant estimates related to the future taxable income to be derived from entities within the Luxembourg tax integration and, as a result, the amounts of deferred tax assets expected to be realized by ArcelorMittal S.A. The assessment of the likelihood of future taxable profits being available, and specifically the length of the forecast periods utilized, requires significant management judgment.
The deferred tax asset balance as of December 31, 2021, was $8,147 million, which is primarily related to the Luxembourg tax integration. Given the complexity of management’s valuation process, auditing management’s estimates of future taxable income and the determination of whether it is probable that the deferred tax assets will be realized involved a high degree of auditor judgment and an increased extent of effort, including the need to involve our tax specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to estimates of future taxable income and determination of whether it is probable that the deferred tax assets will be realized by ArcelorMittal S.A. included the following, among others:
•We tested the effectiveness of internal controls over management’s valuation of deferred tax assets, including the controls over the assessment of the likelihood of future taxable profits being available and the length of the forecast periods.
•With the assistance of our tax specialists knowledgeable in Luxembourg-specific and international tax planning matters, we evaluated whether management’s estimates of future taxable income were consistent with available evidence related to management’s assessment of the likelihood of future taxable profits being available and the length of the forecast periods.
•We evaluated management’s ability to estimate future taxable income by comparing actual results to management’s historical forecasts and considered the results in evaluating the current year estimated future taxable income.
•We evaluated management’s proposed tax planning strategies, potential tax implications of material current year or future planned transactions (acquisitions, divestitures, finance, and shareholding restructuring) and the related impact on management’s determination of the forecast periods and amounts of deferred tax assets recognized.
/s/ Deloitte Audit S.à r.l.
Luxembourg, Grand Duchy of Luxembourg
February 22, 2019March 11, 2022
We have served as the Company'sCompany’s auditor since 2007.
ARCELORMITTAL AND SUBSIDIARIES
Consolidated Statements of Operations
(millions of U.S. dollars, except share and per share data)
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| | | | | | | | | | |
| | | | Year Ended December 31, |
| | Notes | | 2018 |
| 2017 |
| 2016 |
| Sales | 4.1 and 11.1 | | 76,033 |
| | 68,679 |
| | 56,791 |
|
| (including 8,259, 7,503 and 5,634 of sales to related parties for 2018, 2017 and 2016, respectively) | | | | | | | |
| Cost of sales | 4.2 and 11.2 | | 67,025 |
| | 60,876 |
| | 50,428 |
|
| (including 1,116, 1,033 and 1,390 of purchases from related parties for 2018, 2017 and 2016, respectively) | | | | | | | |
| Gross margin | | | 9,008 |
| | 7,803 |
| | 6,363 |
|
| Selling, general and administrative expenses | | | 2,469 |
| | 2,369 |
| | 2,202 |
|
| Operating income | | | 6,539 |
| | 5,434 |
| | 4,161 |
|
| Income from investments in associates, joint ventures and other investments | 2.6 | | 652 |
| | 448 |
| | 615 |
|
| Financing costs - net | 6.2 | | (2,210 | ) | | (875 | ) | | (2,056 | ) |
| Income before taxes | | | 4,981 |
| | 5,007 |
| | 2,720 |
|
| Income tax (benefit) / expense | 9.1 | | (349 | ) | | 432 |
| | 986 |
|
| Net income (including non-controlling interests) | | | 5,330 |
| | 4,575 |
| | 1,734 |
|
| | | | | | | | |
| | | | | | | | |
| Net income attributable to equity holders of the parent | | | 5,149 |
| | 4,568 |
| | 1,779 |
|
| Net income / (loss) attributable to non-controlling interests | | | 181 |
| | 7 |
| | (45 | ) |
| Net income (including non-controlling interests) | | | 5,330 |
| | 4,575 |
| | 1,734 |
|
|
| | | | | | | | | | |
| | | | Year Ended December 31, |
| | | | 2018 |
| 2017 |
| 2016 |
Earnings per common share (in U.S. dollars) 1 | | | | | | | |
| Basic | | | 5.07 |
| | 4.48 |
| | 1.87 |
|
| Diluted | | | 5.04 |
| | 4.46 |
| | 1.86 |
|
| Weighted average common shares outstanding (in millions) | 10.3 | | | | | | |
| Basic | | | 1,015 |
| | 1,020 |
| | 953 |
|
| Diluted | | | 1,021 |
| | 1,024 |
| | 955 |
|
| | | | | | | | |
1 252 Consolidated financial statements | | |
Following the completionArcelorMittal and Subsidiaries | | |
Consolidated Statements of the Company’s share consolidationOperations | |
(millions of each three existing shares into one share without nominal value on May 22, 2017, the earnings (loss) per commonU.S. dollar, except share and corresponding basicper share data) | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| Notes | | 2021 | | 2020 | | 2019 |
| Sales | 4.1 and 12.1 | | 76,571 | | | 53,270 | | | 70,615 | |
| (including 10,519, 5,142 and 7,442 of sales to related parties for 2021, 2020 and 2019, respectively) | | | | | | | |
| Cost of sales | 4.2 and 12.2 | | 57,337 | | | 49,138 | | | 68,887 | |
| (including 1,873, 1,151 and 1,092 of purchases from related parties for 2021, 2020 and 2019, respectively) | | | | | | | |
| Gross margin | | | 19,234 | | | 4,132 | | | 1,728 | |
| Selling, general and administrative expenses | | | 2,258 | | | 2,022 | | | 2,355 | |
| Operating income (loss) | | | 16,976 | | | 2,110 | | | (627) | |
| Income from investments in associates, joint ventures and other investments | 2.6 | | 2,204 | | | 234 | | | 347 | |
| Financing costs - net | 6.2 | | (1,155) | | | (1,256) | | | (1,652) | |
| Income (loss) before taxes | | | 18,025 | | | 1,088 | | | (1,932) | |
| Income tax expense | 10.1 | | 2,460 | | | 1,666 | | | 459 | |
| Net income (loss) (including non-controlling interests) | | | 15,565 | | | (578) | | | (2,391) | |
| Net income (loss) attributable to equity holders of the parent | | | 14,956 | | | (733) | | | (2,454) | |
| Net income attributable to non-controlling interests | | | 609 | | | 155 | | | 63 | |
| Net income (loss) (including non-controlling interests) | | | 15,565 | | | (578) | | | (2,391) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| | | 2021 | | 2020 | | 2019 |
| Earning (loss) per common share (in U.S. dollar) | | | | | | | |
| Basic | | | 13.53 | | | (0.64) | | | (2.42) | |
| Diluted | | | 13.49 | | | (0.64) | | | (2.42) | |
| Weighted average common shares outstanding (in millions) | 11.3 | | | | | | |
| Basic | | | 1,105 | | | 1,140 | | | 1,013 | |
| Diluted | | | 1,108 | | | 1,140 | | | 1,013 | |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | | | |
| | Consolidated financial statements 253 |
ArcelorMittal and diluted weighted average common shares outstanding for prior periods has been recast in accordance with IFRS. Please refer to note 10 for more information.Subsidiaries | | |
| Consolidated Statements of Other Comprehensive Income | | |
| (millions of U.S. dollar, except share and per share data) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) (including non-controlling interests) | | | 15,565 | | | | | (578) | | | | | (2,391) | |
| Items that can be recycled to the consolidated statements of operations | | | | | | | | | | | |
| Derivative financial instruments: | | | | | | | | | | | |
| Gain arising during the period | 2,921 | | | | | 52 | | | | | 354 | | | |
| Reclassification adjustments for gain included in the consolidated statements of operations and financial position (basis adjustments) | (384) | | | | | (119) | | | | | (1,004) | | | |
| 2,537 | | | | | (67) | | | | | (650) | | | |
| Exchange differences arising on translation of foreign operations: | | | | | | | | | | | |
| (Loss) gain arising during the period | (960) | | | | | (1,388) | | | | | 177 | | | |
| Reclassification adjustments for loss (gain) included in the consolidated statements of operations | 105 | | | | | — | | | | | (105) | | | |
| (855) | | | | | (1,388) | | | | | 72 | | | |
| Share of other comprehensive income (loss) related to associates and joint ventures | | | | | | | | | | | |
| Gain (loss) arising during the period | 509 | | | | | 98 | | | | | (82) | | | |
| Reclassification adjustments for (gain) loss included in the consolidated statements of operations and financial position (basis adjustments) | (266) | | | | | — | | | | | 10 | | | |
| 243 | | | | | 98 | | | | | (72) | | | |
| Income tax (expense) benefit related to components of other comprehensive income (loss) that can be recycled to the consolidated statements of operations | (705) | | | | | 363 | | | | | 279 | | | |
| Items that cannot be recycled to the consolidated statements of operations | | | | | | | | | | | |
| Investments in equity instruments at FVOCI: | | | | | | | | | | | |
| Gain arising during the period | 764 | | | | | 486 | | | | | 28 | | | |
| Share of other comprehensive (loss) gain related to associates and joint ventures | (2) | | | | | 16 | | | | | 10 | | | |
| 762 | | | | | 502 | | | | | 38 | | | |
| Employee benefits - Recognized actuarial gains (losses) | 636 | | | | | (333) | | | | | (259) | | | |
| Share of other comprehensive income (loss) related to associates and joint ventures | 21 | | | | | (14) | | | | | — | | | |
| Income tax (expense) benefit related to components of other comprehensive income (loss) that cannot be recycled to the consolidated statements of operations | (313) | | | | | 13 | | | | | (32) | | | |
| Total other comprehensive income (loss) | 2,326 | | | | | (826) | | | | | (624) | | | |
| Total other comprehensive income (loss) attributable to: | | | | | | | | | | | |
| Equity holders of the parent | 2,365 | | | | | (781) | | | | | (666) | | | |
| Non-controlling interests | (39) | | | | | (45) | | | | | 42 | | | |
| | | 2,326 | | | | | (826) | | | | | (624) | |
| Total comprehensive income (loss) | | | 17,891 | | | | | (1,404) | | | | | (3,015) | |
| Total comprehensive income (loss) attributable to: | | | | | | | | | | | |
| Equity holders of the parent | | | 17,321 | | | | | (1,514) | | | | | (3,120) | |
| Non-controlling interests | | | 570 | | | | | 110 | | | | | 105 | |
| Total comprehensive income (loss) | | | 17,891 | | | | | (1,404) | | | | | (3,015) | |
| | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | | | |
| 254 Consolidated financial statements | | |
| ArcelorMittal and Subsidiaries | | |
| Consolidated Statements of Financial Position | |
| (millions of U.S. dollar, except share and per share data) | | |
| | | | | | | | | | | | | | | | | |
| | | December 31, |
| Notes | | 2021 | | 2020 |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | 6.1.3 | | 4,215 | | | 5,600 | |
| Restricted cash and other restricted funds | 6.1.3 | | 156 | | | 363 | |
| Trade accounts receivable and other (including 1,084 and 269 from related parties at December 31, 2021 and 2020, respectively) | 4.3 and 12.1 | | 5,143 | | | 3,072 | |
| Inventories | 4.4 | | | 19,858 | | | 12,328 | |
| Prepaid expenses and other current assets | 4.5 | | | 5,567 | | | 2,281 | |
| Assets held for sale | 2.3.2 | | — | | | 4,329 | |
| Total current assets | | | 34,939 | | | 27,973 | |
| Non-current assets: | | | | | |
| Goodwill and intangible assets | 5.1 and 5.3 | | 4,425 | | | 4,312 | |
| Property, plant and equipment and biological assets | 5.2, 5.3 and 7 | | 30,075 | | | 30,622 | |
| Investments in associates and joint ventures | 2.4 | | | 10,319 | | | 6,817 | |
| Other investments | 2.5 | | | 1,146 | | | 2,980 | |
| Deferred tax assets | 10.4 | | | 8,147 | | | 7,866 | |
| Other assets | 4.6 | | | 1,461 | | | 1,482 | |
| Total non-current assets | | | 55,573 | | | 54,079 | |
| Total assets | | | 90,512 | | | 82,052 | |
| | | | | |
| LIABILITIES AND EQUITY | | | | | |
| Current liabilities: | | | | | |
| Short-term debt and current portion of long-term debt | 6.1.2.1 and 7 | | 1,913 | | | 2,507 | |
| Trade accounts payable and other (including 431 and 272 to related parties at December 31, 2021 and 2020, respectively) | 4.7 and 12.2 | | 15,093 | | | 11,525 | |
| Short-term provisions | 9.1 | | 1,064 | | | 935 | |
| Accrued expenses and other liabilities | 4.8 | | | 4,831 | | | 4,197 | |
| Income tax liabilities | | | 1,266 | | | 464 | |
| Liabilities held for sale | 2.3.2 | | — | | | 3,039 | |
| Total current liabilities | | | 24,167 | | | 22,667 | |
| Non-current liabilities: | | | | | |
| Long-term debt, net of current portion | 6.1.2.2 and 7 | | 6,488 | | | 9,815 | |
| Deferred tax liabilities | 10.4 | | | 2,369 | | | 1,832 | |
| Deferred employee benefits | 8.2 | | | 3,772 | | | 4,656 | |
| Long-term provisions | 9.1 | | | 1,498 | | | 1,697 | |
| Other long-term obligations | 9.2 | | 874 | | | 1,148 | |
| Total non-current liabilities | | | 15,001 | | | 19,148 | |
| Total liabilities | | | 39,168 | | | 41,815 | |
| | | | | |
| Contingencies and commitments | 9.3 and 9.4 | | | | |
| Equity: | 11 | | | | | |
| Common shares (no par value, 1,241,418,599 and 1,361,418,599 shares authorized, 982,809,772 and 1,102,809,772 shares issued, and 910,893,202 and 1,080,734,413 shares outstanding at December 31, 2021 and 2020, respectively) | | | 350 | | | 393 | |
| Treasury shares (71,916,570 and 22,075,359 common shares at December 31, 2021 and 2020, respectively, at cost) | | | (2,186) | | | (538) | |
| Additional paid-in capital | | | 31,803 | | | 35,247 | |
| Mandatorily convertible notes | 11.2 | | 509 | | | 840 | |
| Retained earnings | | | 36,702 | | | 22,097 | |
| Reserves | | | (18,072) | | | (19,759) | |
| Equity attributable to the equity holders of the parent | | | 49,106 | | | 38,280 | |
| Non-controlling interests | | | 2,238 | | | 1,957 | |
| Total equity | | | 51,344 | | | 40,237 | |
| Total liabilities and equity | | | 90,512 | | | 82,052 | |
The accompanying notes are an integral part of these consolidated financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Consolidated Statements of Other Comprehensive Income
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Net income (including non-controlling interests) | | | 5,330 |
| | | | 4,575 |
| | | | 1,734 |
|
| Items that can be recycled to the consolidated statements of operations | | | | | | | | | | | |
| Available-for-sale-investments: | | | | | | | | | | | |
| Gain arising during the period | — |
| | | | 497 |
| | | | 333 |
| | |
| Reclassification adjustments for loss (gain) included in the consolidated statements of operations | — |
| | | | — |
| | | | (74 | ) | | |
| | — |
| | | | 497 |
| | | | 259 |
| | |
| Derivative financial instruments: | | | | | | | | | | | |
| Gain (loss) arising during the period | 755 |
| | | | (340 | ) | | | | 40 |
| | |
| Reclassification adjustments for loss (gain) included in the consolidated statements of operations | 353 |
| | | | 28 |
| | | | (14 | ) | | |
| | 1,108 |
| | | | (312 | ) | | | | 26 |
| | |
| Exchange differences arising on translation of foreign operations: | | | | | | | | | | | |
| (Loss) gain arising during the period | (1,996 | ) | | | | 2,025 |
| | | | (398 | ) | | |
| Reclassification adjustments for gain included in the consolidated statements of operations | (15 | ) | | | | (21 | ) | | | | (13 | ) | | |
| | (2,011 | ) | | | | 2,004 |
| | | | (411 | ) | | |
| Share of other comprehensive income (loss) related to associates and joint ventures | | | | | | | | | | | |
| (Loss) gain arising during the period | (239 | ) | | | | 341 |
| | | | (79 | ) | | |
| Reclassification adjustments for (gain) loss included in the consolidated statements of operations | (123 | ) | | | | 217 |
| | | | 86 |
| | |
| | (362 | ) | | | | 558 |
| | | | 7 |
| | |
| Income tax benefit (expense) related to components of other comprehensive income (loss) that can be recycled to the consolidated statements of operations | (274 | ) | | | | 167 |
| | | | (26 | ) | | |
| | | | | | | | | | | | |
| Items that cannot be recycled to the consolidated statements of operations | | | | | | | | | | | |
| | | | | | | | | | | | |
| Investments in equity instruments at FVOCI: | |
| | | | | | | | | |
| Loss arising during the period | (603 | ) | | | | — |
| | | | — |
| | |
| Share of other comprehensive loss related to associates and joint ventures | (5 | ) | | | | — |
| | | | — |
| | |
| (608 | ) | | | | — |
| | | | — |
| | |
| Employee benefits - Recognized actuarial gains | 344 |
| | | | 1,098 |
| | | | 9 |
| | |
| Share of other comprehensive income (loss) related to associates and joint ventures | — |
| | | | 29 |
| | | | (24 | ) | | |
| Income tax benefit related to components of other comprehensive income that cannot be recycled to the consolidated statements of operations | 228 |
| | | | 42 |
| | | | 1 |
| | |
| Total other comprehensive (loss) income | (1,575 | ) | | | | 4,083 |
| | | | (159 | ) | | |
| Total other comprehensive (loss) income attributable to: | | | | | | | | | | | |
| Equity holders of the parent | (1,478 | ) | | | | 4,037 |
| | | | (186 | ) | | |
| Non-controlling interests | (97 | ) | | | | 46 |
| | | | 27 |
| | |
| | | | (1,575 | ) | | | | 4,083 |
| | | | (159 | ) |
| Total comprehensive income | | | 3,755 |
| | | | 8,658 |
| | | | 1,575 |
|
| Total comprehensive income attributable to: | | | | | | | | | | | |
| Equity holders of the parent | | | 3,671 |
| | | | 8,605 |
| | | | 1,593 |
|
| Non-controlling interests | | | 84 |
| | | | 53 |
| | | | (18 | ) |
| Total comprehensive income | | | 3,755 |
| | | | 8,658 |
| | | | 1,575 |
|
| | | | | | | | |
| 255 Consolidated financial statements | | |
| ArcelorMittal and Subsidiaries | | |
| Consolidated Statements of Changes in Equity | | |
| (millions of U.S. dollar, except share and per share data) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Reserves | | | | | | |
| | | | | | | | | | | | | Items that can be recycled to the Consolidated Statements of Operations | | Items that cannot be recycled to the Consolidated Statements of Operations | | | | | | |
| Shares1 | | Share Capital | | Treasury Shares | | Mandatorily Convertible Notes | | Additional Paid-in Capital | | Retained Earnings | | Foreign
Currency
Translation
Adjustments | | Unrealized Gains (Losses) on Derivative Financial Instruments relating to CFH | | Unrealized Gains (Losses) on Investments in Equity Instruments at FVOCI | | Recognized actuarial (losses) gains | | Equity attributable to the equity holders of the parent | | Non-controlling interests | | Total
Equity |
| Balance at December 31, 2018 | 1,014 | | | 364 | | | (569) | | | — | | | 34,894 | | | 25,611 | | | (16,116) | | | 639 | | | 212 | | | (2,949) | | | 42,086 | | | 2,022 | | | 44,108 | |
| Net (loss) income (including non-controlling interests) | — | | | — | | | — | | | — | | | — | | | (2,454) | | | — | | | — | | | — | | | — | | | (2,454) | | | 63 | | | (2,391) | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | — | | | (9) | | | (404) | | | 38 | | | (291) | | | (666) | | | 42 | | | (624) | |
| Total comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | (2,454) | | | (9) | | | (404) | | | 38 | | | (291) | | | (3,120) | | | 105 | | | (3,015) | |
| Recognition of share-based payments (note 8.3) | 2 | | | — | | | 57 | | | — | | | (68) | | | — | | | — | | | — | | | — | | | — | | | (11) | | | — | | | (11) | |
| Dividend (notes 11.4 and 11.5) | — | | | — | | | — | | | — | | | — | | | (203) | | | — | | | — | | | — | | | — | | | (203) | | | (154) | | | (357) | |
| Share buyback (note 11.1) | (4) | | | — | | | (90) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (90) | | | — | | | (90) | |
Sharing of cash flow hedge (gain) from INR/USD hedging
programs related to AMNS India (note 2.4.1) | — | | | — | | | — | | | — | | | — | | | (141) | | | — | | | — | | | — | | | — | | | (141) | | | — | | | (141) | |
Transfer of fair value reserve of equity instruments designated
at FVOCI (note 2.5) | — | | | — | | | — | | | — | | | — | | | 70 | | | — | | | — | | | (70) | | | — | | | — | | | — | | | — | |
| Other movements | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (11) | | | (11) | |
| Balance at December 31, 2019 | 1,012 | | | 364 | | | (602) | | | — | | | 34,826 | | | 22,883 | | | (16,125) | | | 235 | | | 180 | | | (3,240) | | | 38,521 | | | 1,962 | | | 40,483 | |
| Net (loss) income (including non-controlling interests) | — | | | — | | | — | | | — | | | — | | | (733) | | | — | | | — | | | — | | | — | | | (733) | | | 155 | | | (578) | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | — | | | (928) | | | (6) | | | 431 | | | (278) | | | (781) | | | (45) | | | (826) | |
| Total comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | (733) | | | (928) | | | (6) | | | 431 | | | (278) | | | (1,514) | | | 110 | | | (1,404) | |
| Offering of common shares (note 11.1) | 81 | | | 29 | | | — | | | — | | | 711 | | | — | | | — | | | — | | | — | | | — | | | 740 | | | — | | | 740 | |
| Mandatorily convertible notes (note 11.2) | 23 | | | — | | | 549 | | | 840 | | | (305) | | | (28) | | | — | | | — | | | — | | | — | | | 1,056 | | | — | | | 1,056 | |
| Recognition of share-based payments (note 8.3) | 1 | | | — | | | 15 | | | — | | | 15 | | | — | | | — | | | — | | | — | | | — | | | 30 | | | — | | | 30 | |
| Dividend (notes 11.4 and 11.5) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (162) | | | (162) | |
| Share buyback (note 11.1) | (36) | | | — | | | (500) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (500) | | | — | | | (500) | |
Transfer of fair value reserve of equity instruments designated
at FVOCI (note 2.5) | — | | | — | | | — | | | — | | | — | | | 28 | | | — | | | — | | | (28) | | | — | | | — | | | — | | | — | |
| Mandatorily convertible bonds extension (note 11.2) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 53 | | | 53 | |
| Other movements | — | | | — | | | — | | | — | | | — | | | (53) | | | — | | | — | | | — | | | — | | | (53) | | | (6) | | | (59) | |
| Balance at December 31, 2020 | 1,081 | | | 393 | | | (538) | | | 840 | | | 35,247 | | | 22,097 | | | (17,053) | | | 229 | | | 583 | | | (3,518) | | | 38,280 | | | 1,957 | | | 40,237 | |
| Net income (including non-controlling interests) | — | | | — | | | — | | | — | | | — | | | 14,956 | | | — | | | — | | | — | | | — | | | 14,956 | | | 609 | | | 15,565 | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | — | | | (1,191) | | | 2,461 | | | 594 | | | 501 | | | 2,365 | | | (39) | | | 2,326 | |
| Total comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | 14,956 | | | (1,191) | | | 2,461 | | | 594 | | | 501 | | | 17,321 | | | 570 | | | 17,891 | |
| Cancellation of shares (note 11.1) | — | | | (43) | | | 3,493 | | | — | | | (3,450) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Recognition of share-based payments (note 8.3) | 1 | | | — | | | 29 | | | — | | | 6 | | | — | | | — | | | — | | | — | | | — | | | 35 | | | — | | | 35 | |
| Mandatorily convertible notes (note 11.2) | — | | | — | | | — | | | (331) | | | — | | | (589) | | | — | | | — | | | — | | | — | | | (920) | | | — | | | (920) | |
| Share buyback (note 11.1) | (171) | | | — | | | (5,170) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,170) | | | — | | | (5,170) | |
| Dividend (notes 11.4 and 11.5) | — | | | — | | | — | | | — | | | — | | | (312) | | | — | | | — | | | — | | | — | | | (312) | | | (289) | | | (601) | |
| Put option NSI (note 11.5.2) | — | | | — | | | — | | | — | | | — | | | (119) | | | — | | | — | | | — | | | — | | | (119) | | | — | | | (119) | |
| Divestment of Cleveland-Cliffs shares (note 2.5) | — | | | — | | | — | | | — | | | — | | | 678 | | | — | | | — | | | (678) | | | — | | | — | | | — | | | — | |
| Other movements | — | | | — | | | — | | | — | | | — | | | (9) | | | — | | | — | | | — | | | — | | | (9) | | | — | | | (9) | |
| Balance at December 31, 2021 | 911 | | | 350 | | | (2,186) | | | 509 | | | 31,803 | | | 36,702 | | | (18,244) | | | 2,690 | | | 499 | | | (3,017) | | | 49,106 | | | 2,238 | | | 51,344 | |
1. Amounts are in millions of shares (treasury shares are excluded).The accompanying notes are an integral part of these consolidated financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Consolidated Statements of Financial Position
(millions of U.S. dollars, except share data)
|
| | | | | | | |
| | | | December 31, |
| | Notes | | 2018 | | 2017 |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | 6.1.3 | | 2,172 |
| | 2,574 |
|
| Restricted cash | 6.1.3 | | 182 |
| | 212 |
|
| Trade accounts receivable and other (including 366 and 406 from related parties at December 31, 2018 and 2017, respectively) | 4.3 and 11.1 | | 4,432 |
| | 3,863 |
|
| Inventories | 4.4 | | 20,744 |
| | 17,986 |
|
| Prepaid expenses and other current assets | 4.5 | | 2,834 |
| | 1,931 |
|
| Assets held for sale | 2.3.2 | | 2,111 |
| | 179 |
|
| Total current assets | | | 32,475 |
| | 26,745 |
|
| Non-current assets: | | | | | |
| Goodwill and intangible assets | 5.1 | | 5,728 |
| | 5,737 |
|
| Property, plant and equipment and biological assets | 5.2 | | 35,638 |
| | 36,971 |
|
| Investments in associates and joint ventures | 2.4 | | 4,906 |
| | 5,084 |
|
| Other investments | 2.5 | | 855 |
| | 1,471 |
|
| Deferred tax assets | 9.4 | | 8,287 |
| | 7,055 |
|
Other assets
| 4.6 | | 3,360 |
| | 2,234 |
|
| Total non-current assets | | | 58,774 |
| | 58,552 |
|
| Total assets | | | 91,249 |
| | 85,297 |
|
| | | | | | |
| LIABILITIES AND EQUITY | | | | | |
| Current liabilities: | | | | | |
| Short-term debt and current portion of long-term debt | 6.1.2.1 | | 3,167 |
| | 2,785 |
|
| Trade accounts payable and other (including 201 and 260 to related parties at December 31, 2018 and 2017, respectively) | 4.7 and 11.2 | | 13,981 |
| | 13,428 |
|
| Short-term provisions | 8.1 | | 539 |
| | 410 |
|
| Accrued expenses and other liabilities | 4.8 | | 4,709 |
| | 4,505 |
|
| Income tax liabilities | | | 238 |
| | 232 |
|
| Liabilities held for sale | 2.3.2 | | 821 |
| | 50 |
|
| Total current liabilities | | | 23,455 |
| | 21,410 |
|
| Non-current liabilities: | | | | | |
| Long-term debt, net of current portion | 6.1.2.2 | | 9,316 |
| | 10,143 |
|
| Deferred tax liabilities | 9.4 | | 2,374 |
| | 2,684 |
|
| Deferred employee benefits | 7.2 | | 6,982 |
| | 7,630 |
|
| Long-term provisions | 8.1 | | 1,995 |
| | 1,612 |
|
| Other long-term obligations | 8.2 | | 3,019 |
| | 963 |
|
| Total non-current liabilities | | | 23,686 |
| | 23,032 |
|
| Total liabilities | | | 47,141 |
| | 44,442 |
|
| | | | | | |
| Contingencies and commitments | 8.3 and 8.4 | | | | |
| | | | | | |
| Equity: | 10 | | | | |
| Common shares (no par value, 1,151,576,921 and 1,151,576,921 shares authorized, 1,021,903,623 and 1,021,903,623 shares issued, and 1,013,568,258 and 1,019,916,787 shares outstanding at December 31, 2018 and 2017, respectively) | | | 364 |
| | 401 |
|
| Treasury shares (8,335,365 and 1,986,836 common shares at December 31, 2018 and 2017, respectively, at cost) | | | (569 | ) | | (362 | ) |
| Additional paid-in capital | | | 34,894 |
| | 34,848 |
|
| Retained earnings | | | 25,611 |
| | 20,635 |
|
| Reserves | | | (18,214 | ) | | (16,733 | ) |
| Equity attributable to the equity holders of the parent | | | 42,086 |
| | 38,789 |
|
| Non-controlling interests | | | 2,022 |
| | 2,066 |
|
| Total equity | | | 44,108 |
| | 40,855 |
|
| Total liabilities and equity | | | 91,249 |
| | 85,297 |
|
| | | | | | | | |
| 256 Consolidated financial statements | | |
| ArcelorMittal and Subsidiaries | | |
| Consolidated Statements of Cash Flows | |
| (millions of U.S. dollar, except share and per share data) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, | | | |
| Notes | | 2021 | | 2020 | | 2019 | | | |
| Operating activities: | | | | | | | | | | |
| Net income (loss) (including non-controlling interests) | | | 15,565 | | | (578) | | | (2,391) | | | | |
| Adjustments to reconcile net income (loss) to net cash provided by operations: | | | | | | | | | | |
| Depreciation and amortization | 5.1 and 5.2 | | 2,523 | | | 2,960 | | | 3,067 | | | | |
| Net Impairment (reversal) charges | 5.3 | | (218) | | | (133) | | | 1,927 | | | | |
| | | | | | | | | | |
| Interest expense | 6.2 | | 357 | | | 477 | | | 695 | | | | |
| Interest income | 6.2 | | (79) | | | (56) | | | (88) | | | | |
| Income tax expense | 10.1 | | 2,460 | | | 1,666 | | | 459 | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net gain on disposal of subsidiaries | 2.3.1 | | (104) | | | (1,460) | | | (101) | | | | |
| Income from investments in associates, joint ventures and other investments | 2.6 | | (2,204) | | | (234) | | | (347) | | | | |
| | | | | | | | | | |
| Provision on pensions and OPEB | 8.2 | | 147 | | | 430 | | | 435 | | | | |
| Change in fair value adjustment on call option on mandatory convertible bonds and pellet purchase agreement | 6.2 | | 44 | | | 143 | | | 320 | | | | |
| | | | | | | | | | |
| Unrealized foreign exchange effects | | | (154) | | | 321 | | | 7 | | | | |
| Write-downs of inventories to net realizable value, provisions and other non-cash operating expenses net | 4.4 | | 1,313 | | | 597 | | | 818 | | | | |
| Changes in assets and liabilities that provided (required) cash, net of acquisitions and disposals: | | | | | | | | | | |
| Trade accounts receivable and other | 4.1 | | (2,535) | | | (76) | | | 964 | | | | |
| Inventories | 4.4 | | (8,654) | | | 1,786 | | | 2,469 | | | | |
| Trade accounts payable and other | 4.7 | | 4,780 | | | (214) | | | (1,236) | | | | |
| Interest paid | | | (479) | | | (604) | | | (723) | | | | |
| Interest received | | | 73 | | | 69 | | | 118 | | | | |
| Income taxes paid | | | (2,128) | | | (705) | | | (484) | | | | |
| Dividends received from associates, joint ventures and other investments | | | 261 | | | 189 | | | 370 | | | | |
| Cash contributions to plan assets and benefits paid for pensions and OPEB | 8.2 | | (268) | | | (332) | | | (348) | | | | |
| VAT and other amounts (paid) received to/from public authorities | | | (123) | | | 400 | | | 196 | | | | |
| Other working capital and provisions movements | | | (672) | | | (564) | | | (110) | | | | |
| Net cash provided by operating activities | | | 9,905 | | | 4,082 | | | 6,017 | | | | |
| Investing activities: | | | | | | | | | | |
| Purchase of property, plant and equipment and intangibles | | | (3,008) | | | (2,439) | | | (3,572) | | | | |
| Disposals of net assets of subsidiaries, net of cash disposed of 4, 7 and 38 in 2021, 2020 and 2019, respectively | 2.3.1 | | (4) | | | 497 | | | 514 | | | | |
| Acquisitions of net assets of subsidiaries, net of cash acquired of 10, nil and 3 in 2021, 2020 and 2019, respectively | 2.2.4 | | (25) | | | — | | | (46) | | | | |
| | | | | | | | | | |
| Lease installments and capital expenditure refund relating to ArcelorMittal Italia acquisition | | | (14) | | | (139) | | | (200) | | | | |
| Acquisition of AMNS India | 2.4.1 | | — | | | — | | | (755) | | | | |
| Acquisition of Uttam Galva and KSS Petron debt | 4.6 | | — | | | — | | | (83) | | | | |
| Cash collateral for the TSR receivables retained in ArcelorMittal USA after disposal | 6.1.3 | | 260 | | | (260) | | | — | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Disposal of common and preferred Cleveland-Cliffs shares | 2.5 | | 2,680 | | | — | | | — | | | | |
| (Acquisitions) disposals of financial assets | 2.5 | | (80) | | | 59 | | | 196 | | | | |
| Other investing activities net | | | (149) | | | 271 | | | 122 | | | | |
| Net cash used in investing activities | | | (340) | | | (2,011) | | | (3,824) | | | | |
| Financing activities: | | | | | | | | | | |
| (Payments) proceeds from mandatorily convertible subordinated notes | 11.2 | | (1,196) | | | 1,237 | | | — | | | | |
| | | | | | | | | | |
| Payments from put and call option on shares | 2.3.2 | | — | | | (135) | | | — | | | | |
| Proceeds from short-term debt | 6.1.3 | | 287 | | | 430 | | | 600 | | | | |
| Proceeds from long-term debt | 6.1.3 | | 147 | | | 323 | | | 5,772 | | | | |
| Payments of short-term debt | 6.1.3 | | (1,664) | | | (1,503) | | | (1,811) | | | | |
| Payments of long-term debt | 6.1.3 | | (2,332) | | | (1,645) | | | (3,299) | | | | |
| Equity offering | 11.1 | | — | | | 740 | | | — | | | | |
| Share buyback | 11.1 | | (5,170) | | | (500) | | | (90) | | | | |
| Dividends paid (includes 260, 181 and 129 of dividends paid to non-controlling shareholders in 2021, 2020 and 2019, respectively) | | | (572) | | | (181) | | | (332) | | | | |
| Repayment of cash pooling liability to Acciaierie d'Italia | 2.3.1 | | (199) | | | — | | | — | | | | |
| Payment of principal portion of lease liabilities and other financing activities | 6.1.3 | | (199) | | | (264) | | | (326) | | | | |
| Net cash (used in) provided by financing activities | | | (10,898) | | | (1,498) | | | 514 | | | | |
| Net (decrease) increase in cash and cash equivalents | | | (1,333) | | | 573 | | | 2,707 | | | | |
| Effect of exchange rate changes on cash | | | (55) | | | 163 | | | (22) | | | | |
| Cash and cash equivalents: | | | | | | | | | | |
| At the beginning of the year | | | 5,600 | | | 4,867 | | | 2,172 | | | | |
| Reclassification of the period-end cash and cash equivalents from (to) held for sale | 2.3 | | 3 | | | (3) | | | 10 | | | | |
| At the end of the year | | | 4,215 | | | 5,600 | | | 4,867 | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(millions of U.S. dollars, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
| Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Items that can be recycled to the Consolidated Statements of Operations |
| Items that cannot be recycled to the Consolidated Statements of Operations |
|
|
|
|
|
|
| Shares1 |
| Share capital |
| Treasury Shares |
| Mandatorily convertible notes |
| Additional Paid-in Capital |
| Retained Earnings |
| Foreign
Currency
Translation
Adjustments |
| Unrealized Gains (Losses) on Derivative Financial Instruments |
| Unrealized Gains (Losses) on Investments in Equity Instruments at FVOCI |
| Recognized actuarial (losses) gains |
| Equity attributable to the equity holders of the parent |
| Non-controlling interests |
| Total
Equity |
| Balance at December 31, 2015 | 553 |
|
| 10,011 |
|
| (377 | ) |
| 1,800 |
|
| 20,294 |
|
| 13,902 |
|
| (15,793 | ) |
| 114 |
|
| 51 |
|
| (4,730 | ) |
| 25,272 |
|
| 2,298 |
|
| 27,570 |
|
| Net income (including non-controlling interests) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,779 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,779 |
|
| (45 | ) |
| 1,734 |
|
| Other comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| |
|
| (471 | ) |
| 28 |
|
| 271 |
|
| (14 | ) |
| (186 | ) |
| 27 |
|
| (159 | ) |
| Total comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,779 |
|
| (471 | ) |
| 28 |
|
| 271 |
|
| (14 | ) |
| 1,593 |
|
| (18 | ) |
| 1,575 |
|
| Equity offering (note 10.1) | 421 |
|
| 144 |
|
| — |
|
| — |
|
| 2,971 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,115 |
|
| — |
|
| 3,115 |
|
| Reduction of the share capital par value (note 10.1) | — |
|
| (10,376 | ) |
| — |
|
| — |
|
| 10,376 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Conversion of the mandatorily convertible notes (note 10.2) | 46 |
|
| 622 |
|
| — |
|
| (1,800 | ) |
| 1,178 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Recognition of share-based payments (note 7.3) | — |
|
| — |
|
| 6 |
|
| — |
|
| 7 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 13 |
|
| — |
|
| 13 |
|
| Dividend (note 10.4) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (63 | ) |
| (63 | ) |
| Equity offering in ArcelorMittal South Africa ("AMSA") (note 10.5.2) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 437 |
|
| (301 | ) |
| — |
|
| — |
|
| — |
|
| 136 |
|
| (80 | ) |
| 56 |
|
| Equity share option plan in AMSA (note 10.5.2) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (36 | ) |
| 21 |
|
| — |
|
| — |
|
| — |
|
| (15 | ) |
| 15 |
|
| — |
|
| AMSA B-BBEE transaction (note 10.5.2) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 44 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 44 |
|
| 19 |
|
| 63 |
|
| Other movements | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (77 | ) |
| — |
|
| — |
|
| — |
|
| 54 |
|
| (23 | ) |
| 19 |
|
| (4 | ) |
| Balance at December 31, 2016 | 1,020 |
|
| 401 |
|
| (371 | ) |
| — |
|
| 34,826 |
|
| 16,049 |
|
| (16,544 | ) |
| 142 |
|
| 322 |
|
| (4,690 | ) |
| 30,135 |
|
| 2,190 |
|
| 32,325 |
|
| Net income (including non-controlling interests) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,568 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,568 |
|
| 7 |
|
| 4,575 |
|
| Other comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,602 |
|
| (235 | ) |
| 501 |
|
| 1,169 |
|
| 4,037 |
|
| 46 |
|
| 4,083 |
|
| Total comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,568 |
|
| 2,602 |
|
| (235 | ) |
| 501 |
|
| 1,169 |
|
| 8,605 |
|
| 53 |
|
| 8,658 |
|
| Recognition of share-based payments (note 7.3) | — |
|
| — |
|
| 9 |
|
| — |
|
| 22 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 31 |
|
| — |
|
| 31 |
|
| Dividend (note 10.4) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (145 | ) |
| (145 | ) |
| Acquisition of Sumaré (note 2.2.4) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 48 |
|
| 48 |
|
| Mandatory convertible bonds extension (note 10.2) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (83 | ) |
| (83 | ) |
| Other movements | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18 |
|
| 3 |
|
| 21 |
|
| Balance at December 31, 2017 | 1,020 |
|
| 401 |
|
| (362 | ) |
| — |
|
| 34,848 |
|
| 20,635 |
|
| (13,942 | ) |
| (93 | ) |
| 823 |
|
| (3,521 | ) |
| 38,789 |
|
| 2,066 |
|
| 40,855 |
|
| Net income (including non-controlling interests) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,149 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,149 |
|
| 181 |
|
| 5,330 |
|
| Other comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,174 | ) |
| 732 |
|
| (608 | ) |
| 572 |
|
| (1,478 | ) |
| (97 | ) |
| (1,575 | ) |
| Total comprehensive income (loss) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,149 |
|
| (2,174 | ) |
| 732 |
|
| (608 | ) |
| 572 |
|
| 3,671 |
|
| 84 |
|
| 3,755 |
|
| Recognition of share-based payments (note 7.3) | — |
|
| — |
|
| 19 |
|
| — |
|
| 9 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 28 |
|
| — |
|
| 28 |
|
| Dividend (note 10.4) | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (101 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| (101 | ) |
| (115 | ) |
| (216 | ) |
| Share buyback (note 10.1) | (7 | ) |
| — |
|
| (226 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (226 | ) |
| — |
|
| (226 | ) |
| Change in share capital currency (note 10.1) | — |
|
| (37 | ) |
| — |
|
| — |
|
| 37 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Acquisition of non-controlling interests (note 10.5) | — |
| | — |
| | — |
| | — |
| | — |
| | (55 | ) | | — |
| | — |
| | — |
| | — |
| | (55 | ) | | (13 | ) | | (68 | ) |
| Other movements | 1 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (17 | ) |
| — |
|
| — |
|
| (3 | ) |
| — |
|
| (20 | ) |
| — |
|
| (20 | ) |
| Balance at December 31, 2018 | 1,014 |
|
| 364 |
|
| (569 | ) |
| — |
|
| 34,894 |
|
| 25,611 |
|
| (16,116 | ) |
| 639 |
|
| 212 |
|
| (2,949 | ) |
| 42,086 |
|
| 2,022 |
|
| 44,108 |
|
| |
1.Consolidated financial statements 257 |
Amounts are in (millions of shares (treasury shares are excluded). On May 22, 2017, ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into oneU.S. dollar, except share without nominal value. As a result of this reverse stock split, the number of outstanding shares decreased from 3,058 to 1,020 and all prior periods have been recast in accordance with IFRS. Please refer to note 10 for further information.per share data) |
The accompanying notes are an integral part of these consolidated financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(millions of U.S. dollars, except share and per share data) |
| | | | | | | | | | |
| | | | Year Ended December 31, |
| | Notes | | 2018 | | 2017 | | 2016 |
| Operating activities: | | | | | | | |
| Net income (including non-controlling interests) | | | 5,330 |
| | 4,575 |
| | 1,734 |
|
| Adjustments to reconcile net income to net cash provided by operations: | | | | | | | |
| Depreciation and amortization | 5.1 and 5.2 | | 2,799 |
| | 2,768 |
| | 2,721 |
|
| Impairment | 5.2 and 5.3 | | 994 |
| | 206 |
| | 205 |
|
| Bargain purchase gain | 2.2.4 |
| (209 | ) |
| — |
|
| — |
|
| Interest expense | 6.2 | | 687 |
| | 879 |
| | 1,172 |
|
| Interest income | 6.2 | | (72 | ) | | (56 | ) | | (58 | ) |
| Income tax (benefit)/ expense | 9.1 | | (349 | ) | | 432 |
| | 986 |
|
| Remeasurement loss (gain) relating to US deferred employee benefits | 7.2 | | 15 |
| | — |
| | (832 | ) |
| Net gain on disposal of subsidiaries | 2.3.1 | | (16 | ) | | (18 | ) | | (23 | ) |
| Income from investments in associates, joint ventures and other investments | 2.6 | | (652 | ) | | (448 | ) | | (615 | ) |
| Provision on pensions and OPEB | 7.2 | | 463 |
| | 555 |
| | 439 |
|
| Change in fair value adjustment on call option on mandatory convertible bonds and pellet purchase agreement | 6.2 | | 572 |
| | (578 | ) | | (138 | ) |
| Unrealized foreign exchange effects | | | 152 |
| | (541 | ) | | 486 |
|
| Write-downs (reversal) of inventories to net realizable value, provisions and other non-cash operating expenses net | 4.4 | | 789 |
| | 781 |
| | (201 | ) |
| Changes in assets and liabilities that provided (required) cash, net of acquisitions: | | | | | | | |
| Trade accounts receivable | | | (646 | ) | | (620 | ) | | (373 | ) |
| Inventories | 4.4 | | (4,652 | ) | | (2,347 | ) | | (2,055 | ) |
| Trade accounts payable and other | 4.7 | | 914 |
| | 1,094 |
| | 1,405 |
|
| Interest paid | | | (749 | ) | | (947 | ) | | (1,354 | ) |
| Interest received | | | 67 |
| | 57 |
| | 60 |
|
| Income taxes paid | | | (629 | ) | | (506 | ) | | (296 | ) |
| Dividends received from associates, joint ventures and other investments | | | 360 |
| | 232 |
| | 176 |
|
| Cash contributions to plan assets and benefits paid for pensions and OPEB | 7.2 | | (472 | ) | | (496 | ) | | (395 | ) |
| VAT and other amounts received (paid) from/to public authorities | | | (544 | ) | | (177 | ) | | 46 |
|
| Other working capital and provisions movements | | | 44 |
| | (282 | ) | | (382 | ) |
| Net cash provided by operating activities | | | 4,196 |
| | 4,563 |
| | 2,708 |
|
| Investing activities: | | | | | | | |
| Purchase of property, plant and equipment and intangibles | | | (3,305 | ) | | (2,819 | ) | | (2,444 | ) |
| Disposals of net assets of subsidiaries, net of cash disposed of 1, 13 and nil in 2018, 2017 and 2016, respectively | 2.3.1 | | 65 |
| | 6 |
| | 185 |
|
| Acquisitions of net assets of subsidiaries, net of cash acquired of 13, 617 and 63 in 2018, 2017 and 2016, respectively | 2.2.4 | | (39 | ) | | 16 |
| | 7 |
|
| Acquisition of Uttam Galva and KSS Petron debt | 4.6 | | (1,001 | ) | | — |
| | — |
|
| Disposals of associates and joint ventures | 2.4.1 and 2.5 | | 220 |
| | — |
| | 1,017 |
|
| Disposals of financial assets | 2.6 | | 44 |
| | 44 |
| | 165 |
|
| Other investing activities net | | | 257 |
| | (77 | ) | | (73 | ) |
| Net cash used in investing activities | | | (3,759 | ) | | (2,830 | ) | | (1,143 | ) |
| Financing activities: | | | | | | | |
| (Acquisition)/ Disposal of non-controlling interests | 10.5.2 | | (68 | ) | | — |
| | 56 |
|
Proceeds from put and call option on shares
| 2.2.4 | | 115 |
| | — |
| | — |
|
| Proceeds from short-term debt | 6.1.3 | | 2,319 |
| | 1,859 |
| | 1,516 |
|
| Proceeds from long-term debt | 6.1.3 | | 1,138 |
| | 1,407 |
| | 110 |
|
| Payments of short-term debt | 6.1.3 | | (2,871 | ) | | (2,102 | ) | | (2,721 | ) |
| Payments of long-term debt | 6.1.3 | | (798 | ) | | (2,691 | ) | | (4,912 | ) |
| Equity offering | 10.1 | | — |
| | — |
| | 3,115 |
|
| Share buyback | 10.1 | | (226 | ) | | — |
| | — |
|
| Dividends paid (includes 119, 141 and 61 of dividends paid to non-controlling shareholders in 2018, 2017 and 2016, respectively) | | | (220 | ) | | (141 | ) | | (61 | ) |
| Other financing activities net | 6.1.3 | | (78 | ) | | (63 | ) | | (29 | ) |
| Net cash used in financing activities | | | (689 | ) | | (1,731 | ) | | (2,926 | ) |
| Net increase (decrease) in cash and cash equivalents | | | (252 | ) | | 2 |
| | (1,361 | ) |
| Effect of exchange rate changes on cash | | | (140 | ) | | 58 |
| | (127 | ) |
| Cash and cash equivalents: | | | | | | | |
| At the beginning of the year | | | 2,574 |
| | 2,501 |
| | 4,002 |
|
| Reclassification of the period-end cash and cash equivalents from (to) held for sale | 2.3 | | (10 | ) | | 13 |
| | (13 | ) |
| At the end of the year | | | 2,172 |
| | 2,574 |
| | 2,501 |
|
The accompanying notes are an integral part of these consolidated financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
SUMMARY OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| | | | |
NoteNOTE 1: Accounting principlesACCOUNTING PRINCIPLES |
| 1.1 | Basis of presentation |
| 1.2 | Use of judgment and estimates |
| 1.3 | Accounting standards applied |
NoteNOTE 2: Scope of consolidationSCOPE OF CONSOLIDATION |
| 2.1 | Basis of consolidation |
| 2.2 | Investments in subsidiaries |
| 2.3 | Divestments and assets held for sale |
| 2.4 | Investments in associates and joint arrangements |
| 2.5 | Other investments |
| 2.6 | Income (loss) from investments in associates, joint ventures and other investments |
NoteNOTE 3: Segment reportingSEGMENT REPORTING |
| 3.1 | Reportable segments |
| 3.2 | Geographical information |
| 3.3 | Sales by type of products |
Note 4: Operating data3.4 | Disaggregated revenue |
4.1 | RevenueNOTE 4: OPERATING DATA |
4.24.1 | Revenue |
| 4.2 | Cost of sales |
| 4.3 | Trade accounts receivable and other |
| 4.4 | Inventories |
| 4.5 | Prepaid expenses and other current assets |
| 4.6 | Other assets |
| 4.7 | Trade accounts payable and other |
| 4.8 | Accrued expenses and other liabilities |
NoteNOTE 5: Goodwill, intangible and tangible assetsGOODWILL, INTANGIBLE AND TANGIBLE ASSETS |
| 5.1 | Goodwill and intangible assets |
| 5.2 | Property, plant and equipment and biological assets |
| 5.3 | Impairment of intangible assets, including goodwill, and tangible assets |
NoteNOTE 6: Financing and financial instrumentsFINANCING AND FINANCIAL INSTRUMENTS |
| 6.1 | Financial assets and liabilities |
| 6.2 | Financing costs - net |
| 6.3 | Risk management policy |
NoteNOTE 7: Personnel expenses and deferred employee benefitsLEASES |
7.1NOTE 8: PERSONNEL EXPENSES AND DEFERRED EMPLOYEE BENEFITS |
| 8.1 | Employees and key management personnel |
7.28.2 | Deferred employee benefits |
7.38.3 | Share-based payments |
Note 8: Provisions, contingencies and commitmentsNOTE 9: PROVISIONS, CONTINGENCIES AND COMMITMENTS |
8.19.1 | Provisions overview |
8.29.2 | Other long-term obligations |
8.39.3 | EnvironmentalContingent liabilities asset retirement obligations and legal proceedings |
8.49.4 | Commitments |
Note 9: Income taxesNOTE 10: INCOME TAXES |
9.110.1 | Income tax expense (benefit) |
9.210.2 | Income tax recorded directly in equity and/or other comprehensive income |
9.310.3 | Uncertain tax positions |
9.410.4 | Deferred tax assets and liabilities |
9.510.5 | Tax losses, tax credits and other tax benefits carried forward |
Note 10: EquityNOTE 11: EQUITY |
10.111.1 | Share details |
10.211.2 | Equity instruments and hybrid instruments |
10.311.3 | Earnings per common share |
10.411.4 | Dividends |
10.511.5 | Non-controlling interests |
Note 11: Related partiesNOTE 12: RELATED PARTIES |
11.112.1 | Sales and trade receivables |
11.212.2 | Purchases and trade payables |
11.312.3 | Other transactions with related parties |
Note 12: Subsequent eventNOTE 13: SUBSEQUENT EVENTS |
|
| | |
258 Consolidated financial statements |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
NOTE 1: ACCOUNTING PRINCIPLES
ArcelorMittal (“ArcelorMittal” or the “Company”), together with its subsidiaries, owns and operates steel manufacturing and mining facilities in Europe, North and South America, Asia and Africa. Collectively, these subsidiaries and facilities are referred to in the consolidated financial statements as the “operating subsidiaries”. These consolidated financial statements were authorized for issuance on February 22, 2019March 11, 2022 by the Company’s Board of Directors.
1.1Basis of presentation
The consolidated financial statements have been prepared on a historical cost basis, except for equity instruments and certain trade receivables at fair value through other comprehensive income ("FVOCI"), financial assets at fair value through profit or loss ("FVTPL"), derivative financial instruments, biological assets and certain assets and liabilities held for sale, which are measured at fair value less cost to sell, inventories, which are measured at the lower of net realizable value or cost, and the financial statements of the Company’s Venezuelan tubular production facilities Industrias Unicon CA (“Unicon”) and the Company's Argentinian operation Acindar Industria Argentina de Aceros S.A. ("Acindar"), for which hyperinflationary accounting is applied (see note 2.2.2). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and are presented in U.S. dollarsdollar with all amounts rounded to the nearest million, except for share and per share data.
As from April 1, 2021, ArcelorMittal implemented changes to its organizational structure whereby primary responsibility for captive mining operations whose output is mainly consumed by their respective steel segments has been transferred to such segments. The Mining segment retains primary responsibility for the operation of the seaborne oriented operations at ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure Canada G.P. ("AMMC") and ArcelorMittal Liberia Limited, and continues to provide technical support to all mining operations within the Company. Accordingly, the Company modified the structure of its segment information in order to reflect changes in its approach to managing its operations and segment disclosures have been recast to reflect this new segmentation in conformity with IFRS. Only the seaborne-oriented operations of AMMC and ArcelorMittal Liberia Limited are reported within the Mining segment. The results of all other mines are henceforth accounted for within the steel segment that they primarily supply.
1.2Use of judgment and estimates
The preparation of consolidated financial statements in conformity with IFRS recognition and measurement principles
and, in particular, making the critical accounting judgments requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates on an ongoing basis using currently available information. Changes in facts and circumstances or obtaining new information or more experience may result in revised estimates, and actual results could differ from those estimates.
The following summary provides further information about the Company’s critical accounting policies under which significant judgments, estimates and assumptions are made. It should be read in conjunction with the notes mentioned in the summary:
•Deferred tax assets (note 10.4): The Company assesses the recoverability of deferred tax assets based on future taxable income projections, which are inherently uncertain and may be subject to changes over time. Judgment is required to assess the impact of such changes on the measurement of these assets and the time frame for their utilization. In addition, the Company applies judgment to recognize income tax liabilities when they are probable and can be reasonably estimated depending on the interpretation, which may be uncertain, of applicable tax laws and regulations. ArcelorMittal periodically reviews its estimates to reflect changes in facts and circumstances.
| |
• | Deferred tax assets (note 9.4): The Company assesses the recoverability of deferred tax assets based on future taxable income projections, which are inherently uncertain and may•Provisions for pensions and other post-employment benefits (note 8.2): Benefit obligations and plan assets can be subject to significant volatility, in particular due to changes over time. Judgment is required to assess the impact of such changes on the measurement of these assets and the time frame for their utilization. In addition, the Company applies judgment to recognize income tax liabilities when they are probable and can be reasonably estimated depending on the interpretation, which may be uncertain, of applicable tax laws and regulations. ArcelorMittal periodically reviews its estimates to reflect changes in market conditions and actuarial assumptions. Such assumptions differ by plan, take local conditions into account and include discount rates, expected rates of compensation increases, health care cost trend rates, mortality and retirement rates. They are determined following a formal process involving the Company's expertise and independent actuaries. Assumptions are reviewed annually and adjusted following actuarial and experience changes. •Provisions (note 9): Provisions, which result from legal or constructive obligations arising as a result of past events, are recognized based on the Company's, and in certain instances, third-party's best estimate of costs when the obligation arises. They are reviewed periodically to take into consideration changes in laws and regulations and underlying facts and circumstances. • |
| |
• | Provisions for pensions and other post-employment benefits (note 7.2): Benefit obligations and plan assets can be subject to significant volatility, in particular due to changes in market conditions and actuarial assumptions. Such assumptions differ by plan, take local conditions into account and include discount rates, expected rates of compensation increases, health care cost trend rates, mortality and retirement rates. They are determined following a formal process involving the Company's expertise and independent actuaries. Assumptions are reviewed annually and adjusted following actuarial and experience changes.
|
| |
• | Provisions (note 8): Provisions, which result from legal or constructive obligations arising as a result of past events, are recognized based on the Company's, and in certain instances, third-party's best estimate of costs when the obligation arises. They are reviewed periodically to take into consideration changes in laws and regulations and underlying facts and circumstances.
|
Impairment of tangible and intangible assets, including goodwill (note 5.3): In the framework of the determination of the recoverable amount of assets, the estimates, judgments and assumptions applied for the value in use calculations relate primarily to growth rates, expected
| | |
| 259 Consolidated financial statements |
changes to average selling prices, shipments and direct costs.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Assumptions for average selling prices and shipments are based on historical experience and expectations of future changes in the market. Discount rates are reviewed annually. In the context of its announced decarbonization strategy with the aim to be carbon neutral or comply with the legal obligation of carbon neutrality in certain jurisdictions by 2050, the Company applied estimates and judgments for related capital expenditures, operating costs and carbon emission cost on the basis of historical experience and expectations of future changes.
•Business combinations (note 2.2.3): Assets acquired and liabilities assumed as part of a business combination are recorded at their acquisition-date fair values. Similarly, consideration including consideration receivable and contingent consideration is measured at fair value. Determining the fair value of identifiable assets and liabilities requires the use of valuation techniques which may include judgment and estimates and which may affect the allocation of the amount of consideration paid to the assets and liabilities acquired and goodwill or gain from a bargain purchase recorded as part of the business combination.
•Financial instruments (note 6.1.5) and financial amounts receivable (note 4.6): Certain of the Company's financial instruments are classified as Level 3 as they include unobservable inputs. In particular, the Company uses estimates to compute unobservable historical volatility based on movements of stock market prices for the fair valuation of the call option on the 1,000 mandatory convertible bonds.
•Mineral reserve and resource estimates (note 5.2): Proven iron ore and coal reserves are those quantities whose recoverability can be determined with reasonable certainty from a given date forward and under existing government regulations, economic and operating conditions; probable reserves have a lower degree of assurance but high enough to assume continuity between points of observation. Mineral resource estimates constitute the part of a mineral deposit that have the potential to be economically and legally extracted or produced at the time of the resource determination. The potential for economic viability is established through qualitative evaluation of relevant technical and economic factors likely to influence the prospect of economic extraction. A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical
and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling, and reasonably assumed but not verified geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Estimates of mineral reserves and resources and the estimates of mine life have been prepared by ArcelorMittal experienced engineers and geologists and detailed independent verifications of the methods and procedures are conducted on a regular basis by external consultants. Reserves and resources are updated annually and calculated using a reference price duly adjusted for quality, ore content, logistics and other considerations. In order to estimate reserves and resources, estimates are required for a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves and resources requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. Because the economic assumptions used to estimate reserves and resources change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves and resources may change from period to period.
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• | Business combinations (note 2.2.4): Assets acquired and liabilities assumed as part of a business combination are recorded at their acquisition-date fair values. Similarly, consideration including consideration receivable and contingent consideration is measured at fair value. Determining the fair value of identifiable assets and liabilities requires the use of valuation techniques which may include judgment and estimates and which may affect the allocation of the amount of consideration paid to the assets and liabilities acquired and goodwill or gain from a bargain purchase recorded as part of the business combination.
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| Consolidated financial statements 260 |
• | Financial instruments (note 6.1.5)(millions of U.S. dollar, except share and financial amounts receivable (note 4.6): Certain of the Company's financial instruments are classified as Level 3 as they include unobservable inputs. In particular, the Company uses estimates to compute unobservable historical volatility based on movements of stock market prices for the fair valuation of the call option on the 1,000 mandatory convertible bonds and unobservable inputs such as discounted cash flow model for the fair valuation of financial amounts receivable relating to Uttam Galva and KSS Petron.per share data)
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• | 1.3 Accounting standards applied Mining reserve estimates (note 5.2): Proven iron ore and coal reserves are those quantities whose recoverability can be determined with reasonable certainty from a given date forward and under existing government regulations, economic and operating conditions; probable reserves have a lower degree of assurance but high enough to assume continuity between points of observation. Their estimates and the estimates of mine lives have been prepared by ArcelorMittal experienced engineers and geologists and detailed independent verifications of the methods and procedures are conducted on a regular basis by external consultants. Reserves are updated annually and calculated using a 3-year average reference price duly adjusted for quality, ore content, logistics and other considerations. In order to estimate reserves, estimates are required for a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period.
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1.3 | Accounting standards applied
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1.3.1Adoption of new IFRS standards, amendments and interpretations applicable from January 1, 20182021
On January 1, 2018,2021, the Company adopted the following standardsamendments which have an impact on the disclosures in the consolidated financial statements of the Company:
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• | IFRS 9 “Financial Instruments” issued on July 24, 2014, which replaces IAS 39 and modifies substantially the classification and measurement of financial instruments. The final version of the standard contains requirements in the following areas:
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• | Classification and measurement: Financial assets are classified and measured by reference to the business model within which they are held and their contractual cash flow characteristics. Financial liabilities are classified in a similar manner to IAS 39, however there are differences in the requirements regarding the recognition of an entity's own credit risk for financial liabilities designated as FVTPL.
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• | Impairment: The standard introduces an 'expected credit loss' model replacing the current incurred loss model for the measurement of the impairment of financial assets; it is therefore no longer necessary for a credit event to have occurred before a credit loss is recognized.
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• | Hedge accounting: The standard introduces a new hedge accounting model that is designed to more closely align with how entities undertake risk management activities when hedging financial and non-financial risk exposures, which may result in the increased application of hedge accounting.
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Derecognition: The requirements for derecognition of financial assets and liabilities are carried forward from IAS 39. Accordingly, the Company has applied the requirements of IFRS 9 to instruments that have not been derecognized at January 1, 2018 and has not applied the requirements to instruments that have already been
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
derecognized at January 1, 2018. Comparative amounts in relation to instruments that have not been derecognized at January 1, 2018 have been recast where appropriate.
The classification, measurement and impairment requirements of IFRS 9 have been applied retrospectively while hedge accounting requirements have been applied prospectively. The adoption of IFRS 9 did not result in a material impact on the consolidated financial statements of the Company. Unrealized gains and losses from investments in equity instruments at FVOCI are no longer recycled to the consolidated statement of operations upon disposal. Furthermore, trade receivables subject to programs for sales without recourse (see note 4.3) have changed from loans and receivables measured at amortized cost to fair value through other comprehensive income. Additional required disclosures are presented in note 6. As permitted by the transition provisions of IFRS 9, the Company has not restated comparatives.
IFRS 15 “Revenue from Contracts with Customers” issued on May 28, 2014, which provides a unified five-step model for determining the timing, measurement and recognition of revenue. The focus of the new standard is to recognize revenue as performance obligations are met rather than based on the transfer of risks and rewards. IFRS 15 includes a comprehensive set of disclosure requirements including qualitative and quantitative information about contracts with customers to understand the nature, amount, timing and uncertainty of revenue. The standard supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. On April 12, 2016, the IASB issued amendments to IFRS 15 which clarify how to identify a performance obligation, determine whether a company is a principal or an agent. The Company’s revenue is predominantly derived from the single performance obligation to transfer steel and mining products under arrangements in which the transfer of risks and rewards of ownership and the fulfillment of the Company’s performance obligation occur at the same time. As part of the adoption process, the Company established revised processes and controls and assessed its performance obligations underlying the revenue recognition, estimation of variable considerations including rebates, methods for estimating warranties, customized products and principal versus agent considerations. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.Company:
•Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 published by the IASB on August 27, 2020 as Phase 2 of the Interest Rate Benchmark Reform. The additionalamendments complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the reform.
The amendments in this final phase relate to:
◦changes to contractual cash flows—a company will not have to derecognize or adjust the carrying amount of financial instruments for changes required disclosures are presented in note 3.4 and 4.1.by the reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate;
On◦hedge accounting—a company will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge meets other hedge accounting criteria; and
◦disclosures—a company will be required to disclose information about new risks arising from the reform and how it manages the transition to alternative benchmark rates.
•Amendments to IFRS 4 "Insurance contracts" published by the IASB on June 25, 2020 which provide an extension of the temporary exemption from applying IFRS 9 until January 1, 2018,2023 in order to align with the effective date of IFRS 17 "Insurance Contracts".
In addition, on April 1, 2021, the Company adopted "Covid-19-Related Rent Concessions beyond June 30, 2021 (Amendment to IFRS 16)" published by the following amendments whichIASB on March 31, 2021 that extends, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. This amendment did not have anya material impact on the consolidated financial statements of the Company:
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• | Amendments to IFRS 2 “Share-based Payment” issued on June 20, 2016, which clarify the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; the treatment of share-based payment transactions with a net settlement feature for withholding tax obligations; and the treatment of a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.
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Amendments to IFRS 4 “Insurance Contracts” issued on September 12, 2016, which propose two approaches (an overlay approach and a deferral approach) in order to address temporary volatility in reported results arising from the timing difference between the implementation of IFRS 9 and IFRS 17 "Insurance Contracts" that will replace IFRS 4. These amendments to IFRS 4 supplement existing options in the standard that can already be used to address the temporary volatility.
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• | IFRIC 22 “Foreign Currency Transactions and Advance Consideration” issued on December 8, 2016. This interpretation provides guidance about which exchange rate to use in reporting foreign currency transactions (such as revenue transactions) when payment is made or received in advance.
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1.3.2 New IFRS standards,, amendments and interpretations applicable from 20192022 onward
On January 13, 2016, the IASB issued IFRS 16 “Leases” which will replace IAS 17 “Leases”. This new standard specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. This standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted if IFRS 15 "Revenue from Contracts with Customers" has also been applied. At December 31, 2018 and 2017, the Company has non-cancellable operating lease commitments on an undiscounted basis of 1,869 and 1,311, respectively (see note 8.4). A review and assessment of the Company's lease arrangements indicates that most of these arrangements will meet the definition of a lease under IFRS 16. The Company will apply the modified retrospective transition approach with right-of-use
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
assets measured at an amount equal to the lease liability recognized at January 1, 2019. In addition, it will apply the practical expedient to grandfather the definition of a lease on transition and accordingly apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. Hence, the Company will recognize a right-of-use asset and corresponding liability in respect of the net present value of these leases unless they qualify for short-term leases or relate to low-value assets upon the application of IFRS 16.
As at December 31, 2018 the above mentioned operating lease commitments of 1,869 includes undiscounted amounts of 20 for short-term leases and 58 of leases of low-value assets that will remain being recognized on a straight-line basis as expenses in profit and loss. For the remaining undiscounted operating lease commitments of 1,791 (of which 29 relating to entities presented as held for sale), the Company expects to recognize on January 1, 2019 additional lease liabilities (discounted at the incremental borrowing rates at that date) and right-of-use assets for an amount of 1.1 billion.
On May 18, 2017, the IASB issued IFRS 17 "Insurance "Insurance Contracts", which is designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. IFRS 17 supersedes IFRS 4 "Insurance Contracts" and related interpretations and isinterpretations. On June 25, 2020, the IASB issued amendments to IFRS 17, including a deferral of the effective fordate to periods beginning on or after January 1, 2021,2023 and should be applied retrospectively unless impracticable, with earlier adoption permitted if both IFRS 15 "Revenue from Contracts with Customers" and IFRS 9 "Financial Instruments" have also been applied. The Company does not expect that the adoption of this interpretation will have a material impact to its consolidated financial statements.
On June 7, 2017,January 23, 2020, the IASB issued IFRIC 23 “Uncertainty over Income Tax Treatments”. This interpretation addressesnarrow-scope amendments to IAS 1 to clarify how to classify debt and other liabilities as current or non-current. The amendments aim to promote consistency in applying the determinationrequirements by helping companies determine whether, in the statement of taxable profit (tax loss), tax bases, unused tax losses, unused tax creditsfinancial position, debt and tax rates when there is uncertainty over income tax treatments under IAS 12. This interpretation is effectiveother liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for annual periods beginning on or after January 1, 2019, with early application permitted. The Company does not expect that the adoption of this interpretation will havedebt a material impact to its consolidated financial statements.
company might settle by converting it into equity. On October 12, 2017,July 15, 2020, the IASB issued an amendment to IFRS 9 in respect of prepayment features with negative compensation, which amendspostponed the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortized cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. This amendment is effective for annual periods beginning on or after January 1, 2019, with early application permitted. The Company does not expect that the adoption of this interpretation will have a material impact to its consolidated financial statements.
Also, on October 12, 2017, the IASB issued an amendment to IAS 28 “Investments in Associates and Joint Ventures” in relation to long-term interests in associates and joint ventures. The amendment clarifies that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form partdate of the net investment in the associate or joint venture but to which the equity method is not applied. This amendment is effective for annual periods beginning on or after January 1, 2019, with early application permitted.amendments. The Company does not expect that the adoption of this amendment will have a material impact to its consolidated financial statements.
On December 12, 2017 the IASB issued Annual Improvements 2015–2017 to make amendments to the following standards:
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• | IFRS 3 "Business Combinations" clarifies that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business.
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• | IFRS 11 "Joint Arrangements" clarifies that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
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• | IAS 12 "Income Taxes" clarifies that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
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IAS 23 "Borrowing Costs" clarifies that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
These amendments are effective for annual periods beginning on or after January 1, 2019,2023 and are to be applied retrospectively, with early applicationadoption permitted. On February 12, 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2. The amendments are intended to help preparers in deciding which accounting policies to disclose in their financial statements and gives further clarity on the materiality assessment of accounting policies. The amendments are effective for annual periods beginning on or after January 1, 2023 and are to be applied prospectively, with early adoption permitted.
On May 14, 2020, the IASB issued the following narrow-scope amendments :
•Amendments to IFRS 3 "Business Combinations" updated the reference to the Conceptual Framework for financial reporting, without changing the accounting requirements for business combinations. The amendments are to be applied prospectively.
•Amendments to IAS 16 "Property, Plant and Equipment" prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and
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| Consolidated financial statements 261 |
| (millions of U.S. dollars, except share and per share data) |
condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items and related cost in profit or loss. The amendments are to be applied retrospectively,
•Amendments to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" clarify that the cost of fulfilling a contract comprises the costs a company includes when assessing whether a contract will be loss-making are costs that relate directly to the contract. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling the contract. The amendments are to be applied prospectively.
•Minor amendments as part of the Annual Improvements 2018-2020 to:
•IFRS 1 "First-time Adoption of International Financial Reporting Standards" related to cumulative translation differences for a subsidiary as a first time user.
•IFRS 9 "Financial Instruments" related to which fees an entity includes when it applies the ‘10 per cent’ test in assessing whether to derecognize a financial liability.
▪IFRS 16 "Leases" removing the reimbursement of leasehold improvements by the lessor from illustrative example 13 in order to resolve any potential confusion regarding the treatment of lease incentives and
▪IAS 41 "Agriculture" removing the requirement for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique to ensure consistency with the requirements in IFRS 13.
The minor amendments are to be applied prospectively, with early adoption permitted. The minor amendments and the narrow-scope amendments are effective for annual periods beginning on or after January 1, 2022.
On February 12, 2021, the IASB also issued amendments to IAS 8. The amendments clarify the distinction between a change in accounting policies and a change in accounting estimates. The amendments are effective for annual periods beginning on or after January 1, 2023 and changes in accounting policies or accounting estimates on or after the start of that period with early adoption permitted. Changes in accounting policies are to be applied retrospectively while changes in accounting estimates are to be applied prospectively.
On May 7, 2021, the IASB issued amendments to IAS 12 "Income Taxes" for deferred taxes related to assets and
liabilities arising from a single transaction. The amendments clarify how to account for deferred tax on transactions such as leases and decommissioning obligations. The amendments are effective for annual periods beginning on or after January 1, 2023 with early adoption permitted. The amendments are to be applied retrospectively.
The Company does not expect that the adoption of these amendments will have a material impact to its consolidated financial statements.
On February 7, 2018, the IASB issued amendments to IAS 19 “Employee benefits” which clarify that current service cost and net interest after a remeasurement resulting from a plan amendment, curtailment or settlement should be determined using the assumptions applied for the remeasurement. In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. These amendments are effective for annual periods beginning on or after January 1, 2019, with early application permitted. The Company does not expect that the adoption of these amendments will have a material impact to its consolidated financial statements.
On March 29, 2018, the IASB published its revised 'Conceptual Framework for Financial Reporting', which includes revised definitions of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure. The Company does not expect that the adoption of this amendment, which are effective for annual periods beginning on or after January 1, 2020, will have a material impact to its consolidated financial statements.
On October 22, 2018, the IASB issued amendments to IFRS 3 'Business Combinations', which includes the definition of a business aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The Company does not expect that the adoption of these amendments, which are effective for annual periods beginning on or after January 1, 2020, will have a material impact to its consolidated financial statements.
On October 31, 2018, the IASB issued amendments to IAS 1 'Presentation of Financial Statements' and IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' to clarify the definition of ‘material’ and to align the definition used in the Conceptual Framework and the standards themselves. The Company does not expect that the adoption of these amendments, which are effective for annual periods beginning on or after January 1, 2020, will have a material impact to its consolidated financial statements.
The Company does not plan to early adopt the new accounting standards amendments and interpretations.amendments.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
NOTE 2: SCOPE OF CONSOLIDATION
2.1 Basis of consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries and its interests in associated companies and joint arrangements. Subsidiaries are consolidated from the date the Company obtains control (ordinarily the date of acquisition) until the date control ceases. The Company controls an entity when the Company is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Associated companiesAssociates are those companies over which the Company has the ability to exercise significant influence on the financial and operating policy decisions, which it does not control. Generally, significant influence is presumed to exist when the Company holds more than 20% of the voting rights. Joint arrangements, which include joint ventures and joint operations, are those over whose activities the Company has joint control, typically under a contractual arrangement. In joint ventures, ArcelorMittal exercises joint control and has rights to the net assets of the arrangement. The investment is accounted for under the equity method and therefore recognized at cost at the date of acquisition and subsequently adjusted for ArcelorMittal’s share in undistributed earnings or losses since acquisition, less any impairment incurred. Any excess of the cost of the acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities, and contingent liabilities of the associate or joint venture recognized at the date of acquisition is considered as goodwill. The goodwill, if any, is included in the carrying amount of the investment and is evaluated for impairment as part of the investment. The consolidated statements of operations include the Company’s share of the profit or loss of associates and joint ventures from the date that significant influence or joint control commences until the date significant influence or joint control ceases, adjusted for any impairment losses. Adjustments to the carrying amount may also be necessary for changes in the Company’s proportionate interest in the investee arising from changes in the investee’s equity that have not been recognized in the investee’s profit or loss. The
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| 262 Consolidated financial statements |
Company’s share of those changes is recognized directly in the relevant reserve within equity.
The Company assesses the recoverability of its investments accounted for under the equity method whenever there is an indication of impairment. In determining the value in use of its investments, the Company estimates its share in the present value of the projected future cash flows expected to be generated by operations of associates and joint ventures. The amount of any impairment is included in income (loss) from investments in associates, joint ventures and other investments in the consolidated statements of operations (see also note 2.6).
For investments in joint operations, in which ArcelorMittal exercises joint control and has rights to the assets and obligations for the liabilities relating to the arrangement, the Company recognizes its assets, liabilities and transactions, including its share of those incurred jointly.
Investments in other entities, over which the Company and/or its operating subsidiaries do not have the ability to exercise significant influence, are accounted for as investments in equity instruments at FVOCI with any resulting gain or loss, net of related tax effect, recognized in the consolidated statements of
other comprehensive income. Realized gains and losses from the sale of investments in equity instruments at FVOCI are reclassified from other comprehensive income to retained earnings within equity upon disposal.
While there are certain limitations on the Company’s operating and financial flexibility arising from the restrictive and financial covenants of the Company’s principal credit facilities described in note 6.1.2, there are no significant restrictions resulting from borrowing agreements or regulatory requirements on the ability of consolidated subsidiaries, associates and jointly controlled entities to transfer funds to the parent in the form of cash dividends to pay commitments as they come due.
Intercompany balances and transactions, including income, expenses and dividends, are eliminated in the consolidated financial statements. Gains and losses resulting from intercompany transactions are also eliminated.
Non-controlling interests represent the portion of profit or loss and net assets not held by the Company and are presented separately in the consolidated statements of operations, in the consolidated statements of other comprehensive income and within equity in the consolidated statements of financial position.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
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| Consolidated financial statements 263 |
| (millions of U.S. dollars, except share and per share data) |
2.2 Investments in subsidiaries
2.2.1 List of subsidiaries
The table below provides a list of the Company’s principal operating subsidiaries at December 31, 2018.2021. Unless otherwise stated, the subsidiaries listed below have share capital consisting solely of ordinary shares or voting interests in the case of partnerships, which are held directly or indirectly by the Company and the proportion of ownership interests held equals to the voting rights held by the Company. The country of incorporation corresponds to their principal place of operations.
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| Name of Subsidiary | | Country | | % of Ownership | |
| NAFTA | | | | | |
| ArcelorMittal Dofasco G.P. | | Canada | | 100.00% | |
| ArcelorMittal México S.A. de C.V. | | Mexico | | 100.00% | |
ArcelorMittal USA LLC | | United States | | 100.00% | |
| ArcelorMittal Long Products Canada G.P. | | Canada | | 100.00% | |
| Brazil and neighboring countries ("Brazil") | | | | | |
| ArcelorMittal Brasil S.A. | | Brazil | | 97.01% | 1
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| Acindar Industria Argentina de Aceros S.A. ("Acindar") | | Argentina | | 100.00% | |
| Europe | | | | | |
ArcelorMittal Atlantique et LorraineFrance S.A.S. | | France | | 100.00% | |
| ArcelorMittal Belgium N.V. | | Belgium | | 100.00% | |
| ArcelorMittal España S.A. | | Spain | | 99.85% | |
| ArcelorMittal Flat Carbon Europe S.A. | | Luxembourg | | 100.00% | |
ArcelorMittal Galati S.A. | | Romania | | 99.70% | 2
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| ArcelorMittal Poland S.A. | | Poland | | 100.00% | |
| ArcelorMittal Eisenhüttenstadt GmbH | | Germany | | 100.00% | |
| ArcelorMittal Bremen GmbH | | Germany | | 100.00% | |
| ArcelorMittal Méditerranée S.A.S. | | France | | 100.00% | |
| ArcelorMittal Belval & Differdange S.A. | | Luxembourg | | 100.00% | |
| ArcelorMittal Hamburg GmbH | | Germany | | 100.00% | |
ArcelorMittal Ostrava a.s. | | Czech Republic | | 100.00% | 2
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| ArcelorMittal Duisburg GmbH | | Germany | | 100.00% | |
| ArcelorMittal International Luxembourg S.A. | | Luxembourg | | 100.00% | |
ArcelorMittal Italia S.p.A. | | Italy | | 94.45% | 3
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| Africa and Commonwealth of Independent States ("ACIS") | | | | | |
| ArcelorMittal South Africa Ltd. ("AMSA") | | South Africa | | 69.22% |
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| JSC ArcelorMittal Temirtau | | Kazakhstan | | 100.00% | |
| PJSC ArcelorMittal Kryvyi Rih ("AM Kryvyi Rih") | | Ukraine | | 95.13% | |
Mining | | | | | |
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| Mining | | | | |
ArcelorMittal Mining Canada G.P. and ArcelorMittal Infrastructure Canada G.P.("AMMIC") (AMMC) | | Canada | | 85.00% | |
| ArcelorMittal Liberia Ltd | | Liberia | | 85.00% | |
JSC ArcelorMittal Temirtau | | Kazakhstan | | 100.00% | |
PJSC ArcelorMittal Kryvyi Rih | | Ukraine | | 95.13% | |
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1. | On April 1, 2018, ArcelorMittal Brasil issued preferred shares to Votorantim S.A. representing a 2.99% ownership interest. See note 2.2.4.
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ArcelorMittal Galati S.A. and ArcelorMittal Ostrava a.s. are classified held for sale as of December 31, 2018. See note 2.3.2.
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3. | On November 1, 2018, ArcelorMittal completed the acquisition of Ilva S.p.A. subsequently renamed ArcelorMittal Italia S.p.A. See note 2.2.4.
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ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
2.2.2 Translation of financial statements denominated in foreign currency
The functional currency of ArcelorMittal S.A. is the U.S. dollar. The functional currency of each of the principal operating subsidiaries is the local currency, except for ArcelorMittal México, AMMICAMMC and ArcelorMittal International Luxembourg, whose functional currency is the U.S. dollar and ArcelorMittal Poland, ArcelorMittal Ostrava and ArcelorMittal Galati, whose functional currency is the euro.
Transactions in currencies other than the functional currency of a subsidiary are recorded at the rates of exchange prevailing at the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are remeasured at the rates of exchange prevailing on the date of the consolidated statements of financial position and the related translation gains
and losses are reported within financing costs in the consolidated statements of operations. Non-monetary items that are carried at cost are translated using the rate of exchange prevailing at the date of the transaction. Non-monetary items that are carried at fair value are translated using the exchange rate prevailing when the fair value was determined and the related translation gains and losses are reported in the consolidated statements of comprehensive income.
Upon consolidation, the results of operations of ArcelorMittal’s subsidiaries, associates and joint arrangements whose functional currency is other than the U.S. dollar are translated into U.S. dollarsdollar at the monthly average exchange rates and assets and liabilities are translated at the year-end exchange
| | |
| 264 Consolidated financial statements |
rates. Translation adjustments are recognized directly in other comprehensive income and are included in net income (including non-controlling interests) only upon sale or liquidation of the underlying foreign subsidiary, associate or joint arrangement.
As ofSince July 1, 2018, Argentina has been considered a highly inflationary country and therefore the financial statements of the Company's long production facilities Acindar Industria Argentina de Aceros S.A. ("Acindar") in Argentina, using a historical cost approach, are adjusted prospectively to reflect the changes in the general purchasing power of the local currency before being translated into U.S. dollarsdollar at the year end exchange rate. The Company used an estimated general price index (Consumer Price Index "IPC") of 47.9%which changed by 50.3% and 36.1% for the year ended December 31, 20182021 and 2020, respectively, for this purpose. As a result of the inflation-related adjustments on non-monetary items, a gain of 4533 and 30 was recognized in net financing costs for the year ended December 31, 2018. 2021 and 2020, respectively.
Since 2010 Venezuela has been considered a hyperinflationary economy and therefore the financial statements of Unicon are adjusted to reflect the changes in the general purchasing power of the local currency before being translated into U.S. dollars.dollar. The Company used estimated general price indices of 213,605%which changed by 686%, 2,056%2,667% and 534%12,922% for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively, for this purpose. As a result of the inflation-related adjustments on non-monetary items, losses of 6, 31 and 8 were recognized in net financing costs for the years ended December 31, 2018, 2017 and 2016, respectively.
Effective January 1, 2016, the Company applied the DICOM rate to translate its Venezuelan operations. As a result of this change, ArcelorMittal’s net equity in Unicon decreased from 628 to 43 at January 1, 2016. The DICOM rate was originally set at 206 bolivars per U.S. dollar on March 10, 2016, before falling to 674 bolivars per U.S. dollar at December 31, 2016. The DICOM rate continued to weaken during 2017 to 3,345 bolivars per U.S. dollar on August 31, 2017, when the Venezuelan government temporarily suspended the sale of U.S. dollars through its DICOM auction system. On February 5, 2018, the Venezuelan government reopened the auction at the new DICOM rate of 30,987 bolivars per euro (25,000 bolivars per U.S. dollar). On August 20, 2018, the Venezuelan government launched the new bolivar soberano currency, with one bolivar soberano worth 100,000 previous bolivars.
The Company continued to translate its Unicon's operations at the DICOM rate. At December 31, 2018, ArcelorMittal’s net investment in Unicon was 8. The foreign exchange controls in Venezuela may limit the ability to repatriate earnings and ArcelorMittal’s Venezuelan operations’ ability to remit dividends and pay intercompany balances at any official exchange rate or at all.
2.2.3 Business combinations
Business combinations are accounted for using the acquisition method as of the acquisition date, which is the date on which control is transferred to ArcelorMittal. The Company controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The Company measures goodwill at the acquisition date as the total of the fair value of consideration transferred, plus the proportionate amount of any non-controlling interest, plus the fair value of any previously held equity interest in the acquiree, if any, less the net recognized amount (generally at fair value) of the identifiable assets acquired and liabilities assumed.
In a business combination in which the fair value of the identifiable net assets acquired exceeds the cost of the acquired business, the Company reassesses the fair value of the assets acquired and liabilities assumed. If, after reassessment, ArcelorMittal’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess (bargain purchase) is recognized immediately as a reduction of cost of sales in the consolidated statements of operations.
Any contingent consideration payable is recognized at fair value at the acquisition date and any costs directly attributable to the business combination are expensed as incurred.
2.2.4 Acquisitions
Ilva
On November 1, 2018, ArcelorMittal19, 2021, the Company completed the acquisition of Ilva S.p.A. and certain of its subsidiariesCondesa Tubos, S.L. ("Ilva") following the signature on June 28, 2017 of a lease agreement with an obligation to purchase between the Italian Government and AM InvestCo Italy S.r.l. ("AM InvestCo"Condesa"), a consortium formed by ArcelorMittal and Intesa San Paolo S.p.A. ("ISP") with respective interests of 94.45% and 5.55% .The completionjoint venture in which it already held a 33% interest, through the acquisition of the acquisition followed ArcelorMittal's notification to the European Commissionremaining 67% stake from a pool of AM InvestCo's proposedbanks for total consideration of €31 million (25 net of cash acquired of 10). The acquisition of Ilva on September 21, 2017 and the submission of commitments on October 19, 2017. The European Commission initiated a Phase II review of AM InvestCo’s proposed acquisition of Ilva on November 8, 2017 and approved the transaction on May 7, 2018 subject to the fulfillment of divestment commitments (see note 2.3.2) and the exit of Marcegaglia from AM InvestCo (Marcegaglia held initially a 15% interest in AM InvestCo) completed on November 9, 2018 (see note 10.5.2).
Ilva is Europe’s largest single steel site and only integrated steelmaker in Italy with its main production facility based in Taranto. Ilva also has significant steel finishing capacity in Taranto, Novi Ligure and Genova. As a result of the lease agreement, the assets and liabilities subject to the transaction are leased by subsidiaries of AM InvestCo, including ArcelorMittal Italia S.p.A., which combines the sites of Taranto, Novi Ligure and Genova. The nominal purchase price amounts to €1.8 billion (2.1 billion) subject to certain adjustments including working capital adjustment, with annual leasing costs of €180 million (206) to be paid in quarterly installments resulting in a present value of 1,540 at acquisition date. The total consideration includes a 54 liability corresponding to environmental capital expenditures already completed by Ilva and which will be refunded by ArcelorMittal to Ilva. In September 2018, Ilva's trade unions ratified a labour agreement following which ArcelorMittal committed to initially hire 10,700 workers based on their existing contractual terms of employment. In addition, between 2023 and 2025, the Company has committed to hire any workers who remain under Ilva’s extraordinary administration. Ilva’s business units are initially leased with rental payments qualifying as down payments against the purchase price and are part ofCondesa strengthened ArcelorMittal's tubular operations within the Europe reportable segment. The lease period is for a minimumCompany completed its measurement of four years followed by a subsequent purchase obligation. The Company accounted for this transaction as a business combination as it obtained control of the business subject to the lease.
ISP's interest is subject to put and call option arrangements exercisable by ArcelorMittal and ISP between November 1, 2020 and November 1, 2025 and between November 1, 2021 and November 1, 2025, respectively. The Company determined that it has a present ownership interest in the shares subject to the put option. Accordingly, it recognized at acquisition date a 122 financial liability measured at the present value of the redemption amount.
Following the recent closing of the transaction, the acquisition-date fair value of the identifiable assets and liabilities of Ilva has been determined on a provisional basis, in particular with respect toCondesa. It recognized 92, 39 and 10 of current assets, property, plant and equipment environmental provisions, indemnification asset, tax implications and working capital balances at closing date. The Company expects to complete its accounting during the first half of 2019. ArcelorMittal recognized provisions of 517 in connection with environmental remediation obligations. As the latter will be funded with funds seized by the Italian Government from the former shareholder, the Company recognized an indemnification asset for the same amount, of which 365 classified asother non-current assets. Current assets, include trade receivables of 439 with gross contract amounts receivable of 503respectively, and contractual cash flows not expected to be collected of 64. Intangible assets include 201 relating to CO2 emission rights held by Ilva at acquisition date (the Company also recognized liabilities of 158 relating to estimated emissions for the first 10 months of 2018) and favorable land lease contracts for 76. ArcelorMittal recognized a 20924 bargain purchase gain in cost of sales mainly as a
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
result of the preliminary €0.4 billion (0.5 billion) working capital reduction while the total fair value of net assets acquired remained substantially drivenArcelorMittal's industrial expertise was considered by the economic obsolescence applied to property, plant and equipment.other previous shareholders. Revenue and net loss of Ilva since acquisition date were 398 and (49), respectively. The Company recognized acquisition-related costs of 25 in selling, general and administrative expenses. The agreement includes industrial capital expenditure commitments of approximately €1.3 billion (1.4 billion) over a seven-year period focused on blast furnaces, steel shops and finishing lines and environmental capital expenditure commitments of approximately €0.8 billion (0.9 billion).
Votorantim
On April 1, 2018, ArcelorMittal completed the acquisition of Votorantim Siderurgia (subsequently renamed ArcelorMittal Sul Fluminense "AMSF"), Votorantim S.A.'s long steel business in Brazil pursuant to which Votorantim Siderurgia became a wholly-owned subsidiary of ArcelorMittal Brasil. The combination of ArcelorMittal Brasil's long steel business and AMSF aims to create cost, logistical and operational synergies. The combined operations include ArcelorMittal Brasil’s production sites at Monlevade, Juiz de Fora and Piracicaba, and AMSF’s production sites at Barra Mansa, Resende and its 50% interest in the joint venture Sitrel in Três Lagoas. On February 7, 2018, the Brazilian antitrust authority CADE approved the transaction, conditioned to the fulfillment of divestment commitments by ArcelorMittal Brasil (see note 2.3).
The acquisition was completed through the issuance of preferred shares to Votorantim S.A. representing a 2.99% interest in ArcelorMittal Brasil. Pursuant to the shareholders' agreement, such preferred shares are subject to put and call option arrangements exercisable by Votorantim S.A. and ArcelorMittal Brasil between July 1, 2019 and December 31, 2022 and between January 1, 2023 and December 31, 2024, respectively. The Company determined that it has a present ownership interest in the preferred shares subject to the put option. Accordingly, it recognized at acquisition date a 328 financial liability at amortized cost and measured at the present value of the redemption amount. Following the recent closing of the transaction, the acquisition-date fair value of the identifiable assets and liabilities of AMSF has been determined on a provisional basis as of December 31, 2018, in particular with respect to unfavorable contracts and contingent liabilities. Other non-current assets include an 83 indemnification asset towards Votorantim S.A. relating to contingent liabilities of 85 and an 82 investment in Sitrel. Other liabilities include unfavorable contracts for 293 and borrowings of 211. Current assets include cash and receivables for 13 and 141, respectively (including trade receivable of 92 with gross contractual amounts of 108 and contractual cash flows not expected to be collected of 16). The Company expects to complete its accounting during the first quarter of 2019. Revenue and net loss of AMSF since acquisition date were 285 and (108),1, respectively. The Company recognized acquisition-related costs of 8 in selling, general and administrative expenses.
Revenue and net income attributable to the equity holders of the parent of the Company, for the year ended December 31, 20182021 were 79,19276,799 and 4,80114,981, respectively, as though the acquisition date for Ilva and Votorantimof Condesa had been as of January 1, 2018.
Other2021.
On December 21, 2017,June 4, 2019, the Company acquired from Alcatel Lucentcompleted the reinsurance company Electro-Re S.A.acquisition of Münker Metallprofile GmbH ("Münker") for total consideration of €246€48 million (290; cash inflow was 35(54) of which €44 million (46 net of cash acquired of 325).
On June 21, 2017, as a result of the extension of the partnership between ArcelorMittal and Bekaert Group ("Bekaert") in the steel cord business in Brazil, the Company completed the acquisition from Bekaert of a 55.5% controlling interest in Bekaert Sumaré Ltda. subsequently renamed ArcelorMittal Bekaert Sumaré Ltda. ("Sumaré"), which subsequently merged into Belgo-Mineira Bekaert Artefatos de Arames Ltda. a manufacturer of metal ropes for automotive tires located in the municipality of Sumaré/SP, Brazil. The Company agreed to pay total cash consideration of €56 million (63; 49, net of cash acquired of 14) of which €52 million (58) settled on3) was paid at closing date and €4 million (5) to be paid subsequentlypayable contingent upon conclusioncertain criteria. The acquisition of certainMünker will strengthen ArcelorMittal Downstream Solutions' construction business restructuring measures by Bekaert. Sumaré is partwithin the Europe segment. The Company completed its measurement of the Brazil reportable segment.acquisition-date fair value of the identifiable assets and liabilities of Münker in the second half of 2019. It recognized 6 of goodwill and 34, 11 and 22 of property, plant and equipment, intangible assets and current assets, respectively, following the final measurement. Revenue and net income from acquisition date until December 31, 2019 were 45 and 2, respectively.
On May 18, 2017,Revenue and net loss attributable to the equity holders of the parent of the Company, acquired from Crédit Agricole Assurancesfor the reinsurance company Crédit Agricole Reinsurance S.A. for considerationyear ended December 31, 2019 were 70,646 and 2,454, respectively, as though the acquisition date of €186 million (208; cash inflow was 20, netMünker had been as of cash acquired of 228). On January 18, 2017, the Company acquired from Parfinada B.V. the reinsurance company Artzare S.A. for total consideration of €43 million (45; cash inflow was 5, net of cash acquired of 50). The reinsurance company is incorporated in Luxembourg and operates through a series of reinsurance agreements with the Company’s subsidiaries. 1, 2019.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 265 Consolidated financial statements |
On December 21, 2016, ArcelorMittal acquired from Skanska Financial Services AB the reinsurance company SCEM Reinsurance S.A. (“SCEM”) for total consideration of €54 million (56; cash inflow was 7, net of cash acquired of 63).
The Company concluded that the acquisitions of Electro-Re S.A., SCEM, Artzare S.A. and Crédit Agricole Reinsurance S.A. were not business combinations mainly as the transactions did not include the acquisition of any strategic management processes, operational processes and resource management processes.
The table below summarizes the estimatedfinal acquisition-date fair value of the assets acquired and liabilities assumed in respect of Ilva, AMSFCondesa in 2021 and SumaréMünker in 2018 and 2017: |
| | | | | | | | |
| | 2018 | | 2017 |
| | AMSF | | Ilva | | Sumaré |
| Current assets | 262 |
| | 1,273 |
| | 50 |
|
| Property, plant and equipment | 600 |
| | 1,026 |
| | 69 |
|
| Intangible assets | 19 |
| | 300 |
| | 21 |
|
| Other non-current assets | 252 |
| | 375 |
| | 7 |
|
| Total assets acquired | 1,133 |
| | 2,974 |
| | 147 |
|
| Deferred tax liabilities | (45 | ) | | — |
| | (23 | ) |
| Other liabilities | (784 | ) | | (1,225 | ) | | (29 | ) |
| Total liabilities acquired | (829 | ) | | (1,225 | ) | | (52 | ) |
| Net assets acquired | 304 |
| | 1,749 |
| | 95 |
|
| Non-controlling interests | — |
| | — |
| | (48 | ) |
| Consideration paid, net | — |
| | 52 |
| | 44 |
|
| Consideration payable | 328 |
| | 1,488 |
| | 5 |
|
| Goodwill/(bargain purchase gain) | 24 |
| | (209 | ) | | 2 |
|
| | | | | | | | | | | |
| | | |
| 2021 | 2019 | |
| Condesa | Münker | |
| Current assets | 92 | | 22 | | |
| Property, plant and equipment | 39 | | 34 | | |
| Intangible assets | — | | 11 | | |
| Other non-current assets | 10 | | — | | |
| Total assets | 141 | | 67 | | |
| Deferred tax liabilities | — | | (8) | | |
| Other liabilities | (84) | | (14) | | |
| Total liabilities | (84) | | (22) | | |
| Net assets acquired | 57 | | 45 | | |
| Consideration paid, net | 25 | | 46 | | |
| Consideration payable | — | | 5 | | |
| Fair value of previously held interest at acquisition date | 11 | | — | | |
| Remeasurement gain relating to the equity interest previously held | (3) | | — | | |
| Goodwill/(bargain purchase gain) | (24) | | 6 | | |
2.3 Divestments and assets held for sale
Non-current assets and disposal groups that are classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. The non-current asset, or disposal group, is classified as held for sale only when the sale is highly probable and is available for immediate sale in its present condition and is marketed for sale at a price that is reasonable in relation to its current fair value. Assets held for sale are presented separately in the consolidated statements of financial position and are not depreciated. Gains (losses) on disposal of subsidiaries are recognized in cost of sales, whereas gains (losses) on disposal of investments accounted for under the equity method are recognized in income (loss) from investments in associates, joint ventures and other investments.
2.3.1. Divestments
Divestments in 2021
On March 4, 2020, ArcelorMittal executed an amendment (the “Amendment Agreement”) to the original lease agreement with the Ilva Commissioners with a conditional obligation to purchase the former Ilva business units ("ArcelorMittal Italia") in an extraordinary administration insolvency procedure. The Amendment Agreement outlined the terms for a significant equity investment by an Italian state-sponsored entity, thereby
forming the basis for an important new partnership between ArcelorMittal and the Italian government, with the investment agreement to be executed by November 30, 2020. The Amendment Agreement also provided for a 50% reduction in the quarterly rental payments payable by ArcelorMittal, with the balance being due upon closing of the purchase obligation. On December 10, 2020, the Company entered into an investment agreement with Invitalia - Agenzia nazionale per l'attrazione degli investimenti e lo sviluppo d'impresa S.P.A (“Invitalia”), the party designated by the Italian government to be the government-sponsored investor as contemplated in the Amendment Agreement, in order to create a partnership between Invitalia and the Company to support the completion of the purchase obligation.
On December 14, 2020, ISP exercised its put option for €111 million (135) to sell its share in ArcelorMittal Italia to the Company and the liability it had recognized upon acquisition of ArcelorMittal Italia was derecognized.
The investment agreement includes 2 capital increases:
2.3.1 Divestments•The first investment of €400 million (476) which was completed on April 14, 2021 provided Invitalia with 50% voting and governance rights and therefore joint control over AM InvestCo with a 38% shareholding;
Divestments•The second investment of up to €680 million is payable on closing of the purchase obligation, which is subject to the satisfaction of various conditions precedent by May 2022, at which point Invitalia’s shareholding in 2018ArcelorMittal Italia is expected to reach 60%. ArcelorMittal may need to invest up to €70 million, to the extent necessary to retain a 40% shareholding and joint control over the company.
Subsequently to April 14, 2021, Acciaierie d'Italia Holding (formerly AM InvestCo) operates independently and as such has its own funding plans. Its main operating subsidiary ArcelorMittal Italia was renamed Acciaierie d'Italia. As a result of loss of control, the Company derecognized assets (including 199 of cash pooling receivable from the Company and subsequently settled) and liabilities of 4,639 and 3,873, respectively, and accounted for its 62% interest in the joint venture under the equity method at its fair value of 1,205. The Company recognized in cost of sales a gain of 104 including the reclassification from other comprehensive income to the consolidated statements of operations of foreign exchange translation losses and other for 283. The fair value
| | |
| Consolidated financial statements 266 |
| (millions of U.S. dollar, except share and per share data) |
measurement was determined using a discounted cash flow model and Level 3 unobservable inputs.
Divestment in 2020
On February 28, 2018, ArcelorMittalDecember 9, 2020, the Company completed the sale of Go100% of the shares of ArcelorMittal USA, ArcelorMittal Princeton and ArcelorMittal Monessen, their subsidiaries and certain other subsidiaries as well as the joint operations of Hibbing Taconite Mines, Double G Coatings and I/N Tek and the joint venture I/N Kote, together the “ ArcelorMittal USA Divestment Business” to Cleveland-Cliffs Inc. (“Cleveland-Cliffs”) for a combination of cash and shares. ArcelorMittal retained certain intellectual property assets and office space.
In addition, Nippon Steel Frýdek MístekCorporation ("Frýdek Místek"NSC"), forthe co-shareholder of I/N Tek and I/N Kote simultaneously exited from such entities, which were transferred in full to Cleveland-Cliffs.
The consideration of 49 (net of transaction fees of 21 and estimated working capital adjustment of 50) was 2,219 and included:
•Cash of 509 (497 net of 7 cash disposed of 1)and 5 transaction fees paid);
•78,186,671 common shares of which 10 remained outstandingCleveland-Cliffs with value of 1,020 and representing a 16% stake in Cleveland-Cliffs; and
•583,273 non-voting preferred shares redeemable, at December 31, 2018. Frýdek Místek was partCleveland-Cliff's option, for 58,327,300 of its common shares with a value of 761 or an equivalent amount in cash.
Following the settlement of the Europe segment. The fair value measurement was determined usingfinal working capital adjustment during the contract price, a Level 3 unobservable input.second quarter of 2021, the total consideration decreased by 4 to 2,215.
On February 7, 2018, the Brazilian Antitrust Authority (CADE) approved the acquisition of Votorantim subject to divestment commitments (see note 2.2.4). Accordingly, in May 2018, ArcelorMittal Brasil disposed of its two production sites Cariacica and Itaúna as well as some wire drawing equipment in Brazil (the “Votorantim remedies”), which were partIn addition, Cleveland-Cliffs assumed certain liabilities of the Brazil reportable segment. Prior to the disposal, the Company recorded an impairment charge in costArcelorMittal USA Divestment Business, including pensions and other post-employment benefit liabilities net of sales of 86 to adjust thepension fund assets with a carrying amount of the disposal group to the sale proceeds3.2 billion in ArcelorMittal's consolidated statement of 84 (net of cash disposed of 1) of which 58 remained outstanding
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
as of December 31, 2018.financial position upon disposal. The fair value measurement of these Votorantim remedies was determined using the contract price, a Level 3 unobservable input.
Divestments in 2017
On December 15, 2017, ArcelorMittal completed the sale of its 100% shareholding in ArcelorMittal Georgetown Inc. ("Georgetown"), a wire rod mill in Georgetown in the United States for total cash consideration of 19 and the resultresulting net gain on disposal was 18.1,460. The fair value measurement of Georgetown, whichArcelorMittal USA Divestment Business was part of the NAFTA reportable segment,segment. Immediately prior to classification as held for sale as of September 30, 2020, the Company assessed whether there was determinedan indication that the impairment loss recognized in 2019 may have decreased. The Company calculated the fair value less cost of disposal using the contract price,a market approach with market multiples derived from comparable transactions, a Level 3 unobservable input.
On March 13, 2017, ArcelorMittal and the management of ArcelorMittal Tailored Blanks Americas (“AMTBA”), comprising the Company’s tailored blanks operations in Canada, Mexico and the United States, entered into As a joint venture agreement following whichresult, the Company recognized an investment of 65 in AMTBA accounted for under the equity method. AMTBA was part of the NAFTA reportable segment and was classified as held for sale at December 31, 2016.
On February 10, 2017, ArcelorMittal completed the sale of certain ArcelorMittal Downstream Solutions entities in the Europe segment following its commitment to sell such operations in December 2015. The Company recorded an impairment charge of 18reversed 660, in cost of sales, in 2015.of impairment charges of property, plant and equipment previously recognized. The assets and liabilities subjectCompany allocated 672 of the NAFTA segment goodwill to the sale were classified as held for sale at December 31, 2016. The fair value measurement of these operations, which were partdisposal group based on
the relative values of the Europe reportable segment, was determined usingoperations disposed of and the contract price, a Level 3 unobservable input.portion of the group of cash-generating units retained.
Divestments in 20162019
On September 30, 2016, ArcelorMittal completed the sale of its wholly owned subsidiary ArcelorMittal Zaragoza in Spain to Megasa Siderúrgica S.L. for total consideration of €80 million (89). Prior to the disposal, the Company recorded an impairment charge of 49 (of which 2 related to allocated goodwill) in cost of sales to write the net carrying amount down to the net proceeds from the sale. The fair value measurement of ArcelorMittal Zaragoza was determined using the contract price, a Level 3 unobservable input. ArcelorMittal Zaragoza was part of the Europe reportable segment.Italia remedies
On August 7, 2016, ArcelorMittal completed the sale of the Company’s 49% interest in its associates ArcelorMittal Algérie and ArcelorMittal Tebessa and its 70% interest in its subsidiary ArcelorMittal Pipes and Tubes Algeria, which was announced on October 7, 2015 as part of an outline agreement for restructuring the shareholding of its Algerian activities. As part of the agreement, ArcelorMittal transferred such interests to IMETAL, an Algerian state-owned entity. ArcelorMittal Pipes and Tubes Algeria and ArcelorMittal Algérie were part of the ACIS reportable segment while ArcelorMittal Tebessa was part of the Mining reportable segment.
On April 4, 2016, ArcelorMittal completed the sale of the LaPlace and Vinton Long Carbon facilities in the United States. The total consideration was 96 and the result on disposal was nil. In 2015, the Company recorded an impairment charge of 231 (of which 13 relating to allocated goodwill) in cost of sales to write the carrying amount of the LaPlace, Steelton and Vinton facilities down to the expected net proceeds from the sale. The fair value measurement of the Long Carbon facilities in the United States was determined using the contract price, a Level 3 unobservable input. These facilities were part of the NAFTA reportable segment. The assets and liabilities of the Steelton facility remained classified as held for sale at December 31, 2017 and 2016 (see note 2.3.2).
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The table below summarizes the significant divestments: |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| | Frýdek Místek | | Votorantim remedies | | AMTBA | | Downstream Solutions Europe | | Georgetown | | ArcelorMittal Zaragoza | | ArcelorMittal Tubular Products Algeria | | LaPlace and Vinton
Long Carbon facilities |
| Cash and cash equivalents | — |
| | — |
| | 13 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Other current assets | 48 |
| | 40 |
| | 46 |
| | 38 |
| | — |
| | 53 |
| | 15 |
| | 118 |
|
| Property, plant and equipment | 35 |
| | 48 |
| | 55 |
| | 2 |
| | 4 |
| | 74 |
| | 2 |
| | 13 |
|
| Other assets | — |
| | — |
| | 10 |
| | 17 |
| | — |
| | — |
| | — |
| | 7 |
|
| Total assets | 83 |
| | 88 |
| | 124 |
| | 57 |
| | 4 |
| | 127 |
| | 17 |
| | 138 |
|
| Current liabilities | 31 |
| | 4 |
| | 52 |
| | 18 |
| | 1 |
| | 38 |
| | 16 |
| | 33 |
|
| Other long-term liabilities | 4 |
| | — |
| | 7 |
| | 12 |
| | 2 |
| | — |
| | 12 |
| | 9 |
|
| Total liabilities | 35 |
| | 4 |
| | 59 |
| | 30 |
| | 3 |
| | 38 |
| | 28 |
| | 42 |
|
| Total net assets/(liabilities) | 48 |
| | 84 |
| | 65 |
| | 27 |
| | 1 |
| | 89 |
| | (11 | ) | | 96 |
|
| % of net assets sold | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| Total net assets/(liabilities) disposed of | 48 |
| | 84 |
| | 65 |
| | 27 |
| | 1 |
| | 89 |
| | (11 | ) | | 96 |
|
| Cash consideration | 39 |
| | 26 |
| | 65 |
| | 6 |
| | 19 |
| | 89 |
| | — |
| | 96 |
|
| Consideration receivable | 10 |
| | 58 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Reclassification of foreign exchange translation difference | 15 |
| | — |
| | — |
| | 21 |
| | — |
| | 8 |
| | 4 |
| | — |
|
| Gain on disposal | 16 |
| | — |
| | — |
| | — |
| | 18 |
| | 8 |
| | 15 |
| | — |
|
2.3.2 Assets held for sale
On May 7, 2018, the European CommissionEC approved the acquisition of Ilva (see note 2.2.4)(renamed "ArcelorMittal Italia"). As part of the approval, ArcelorMittal agreed to divest certain of its European assets (“IlvaArcelorMittal Italia remedies”) which arewere part of the Europe reportable segment.
The IlvaArcelorMittal Italia remedies are comprised ofincluded the following three3 divestment packages.
The Dudelange and Liège divestment package iswas composed of ArcelorMittal Dudelange and certain finishing facilities of ArcelorMittal Liège in Belgium including the hot dipped galvanizing lines 4 and 5 in Flémalle, hot-rolled pickling, cold rolling and tin packaging lines in Tilleur of ArcelorMittal Liège in Belgium. Tilleur.
The Galati divestment package iswas mainly composed of the integrated steel making site of ArcelorMittal Galati S.A., ArcelorMittal Tubular Products Galati SRL, both in Romania, ArcelorMittal Skopje AD in North Macedonia and ArcelorMittal Piombino S.p.A. in Italy, the Company’s only galvanizing steel plant in Italy.
The Ostrava divestment package iswas mainly composed of the integrated steel making site of ArcelorMittal Ostrava a.s. and its subsidiaries,subsidiary, ArcelorMittal Tubular Products Ostrava a.s.
On October 12, 2018 and November 2, 2018,June 30, 2019, ArcelorMittal received two binding offers fromcompleted the sale of the ArcelorMittal Italia remedies to Liberty House Group ("Liberty"). The total consideration which consisted of amounts payable upon closing and deferred consideration in part contingent upon certain criteria, net of €110 million (125) deposited in escrow was €740 million (842) subject to customary closing adjustments. Of this total amount, €610 million (694) was received on June 28, 2019. The escrow which was subsequently drawn was to be used by Liberty for certain capital expenditure projects to satisfy commitments given in the acquisitionEC approval process.
During 2019, prior to the completion of the combined Ostrava and Galati divestment package and the Dudelange and Liège divestment package, respectively. The European Commission is currently reviewing revised offers from Liberty submitted by the Company on January 23, 2019. Transaction closing is conditional on EU approval and the conclusion of information consultations with local and European Works Councils.
At December 31, 2018, the carrying amount of assets and liabilities subject to the Ilva remedies was classified as held for sale. Based on the offers received,disposal, the Company recorded an impairment charge (see note 5.3) in cost of sales of 888497 to adjust the carrying amount of the disposal group to the expected sale proceeds.proceeds of 692 including a cash consideration of 518 (694, net of cash disposed of 34, the escrow deposit of 125 and proceeds of 17 paid to a joint venture of the Company) and 174 of deferred consideration (of which 161 was outstanding as of December 31, 2019 following subsequent receipt of a portion of the consideration receivable) recognized at present value and fair value of contingent consideration. The Company also assigned receivables of 404 mainly comprised of cash pooling balances to Liberty. The fair value measurement of ArcelorMittal
| | |
| 267 Consolidated financial statements |
Italia remedies was determined using the contract price, a Level 3 unobservable input, which was revised in the first half of 2019.
Global Chartering
On December 31, 2019, ArcelorMittal completed the sale of a 50% controlling interest in Global Chartering Ltd. ("Global Chartering") to DryLog Ltd. ("DryLog") for total deferred consideration of 6. The resulting net gain on disposal was 29 including the reclassification from other comprehensive income to the consolidated statements of operations of 33 foreign exchange translation gains. In connection with the disposal, the Company derecognized right-of-use assets and lease liabilities of 390 and 400, respectively.
Global Chartering is a Mauritius-based shipping company that handles shipping for a portion of the Company's raw materials through the chartering of vessels on a short- to long-term basis. Global Chartering's fleet includes owned and leased Capesize, Panamax and Supramax vessels on a medium- to long-term
charter. Simultaneously, ArcelorMittal entered into a joint venture agreement with DryLog to operate jointly the Global Chartering fleet and certain other vessels chartered from DryLog. Accordingly, the Company's remaining 50% interest in Global Chartering is accounted for under the equity method. The fair value measurement was determined using the selling price, a Level 3 unobservable input. The Company expects to complete the disposalAt inception of the divestment packages duringjoint venture, certain of Global Chartering's lease terms were unfavorable compared to market rates and therefore the first halfCompany agreed to indemnify the joint venture for operating losses that could potentially arise within an agreed time frame if market rates do not improve and recognized accordingly in cost of 2019.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Acciaierie d'Italia | | ArcelorMittal USA Divestment Business | | Global Chartering Limited | | ArcelorMittal Italia remedies |
| Cash and cash equivalents | 4 | | | 7 | | | — | | | — | |
| Other current assets | 2,446 | | | 2,105 | | | 14 | | | 1,386 | |
| Intangible assets | 17 | | | 12 | | | — | | | — | |
| Property, plant and equipment | 1,875 | | | 3,341 | | | 517 | | | 178 | |
| Other assets | 297 | | | 166 | | | 21 | | | 11 | |
| Total assets | 4,639 | | | 5,631 | | | 552 | | | 1,575 | |
| Current liabilities | 2,204 | | | 1,604 | | | 229 | | | 1,046 | |
| Other long-term liabilities | 1,669 | | | 3,938 | | | 311 | | | 241 | |
| Total liabilities | 3,873 | | | 5,542 | | | 540 | | | 1,287 | |
| Total net assets | 766 | | | 89 | | | 12 | | | 288 | |
| Assigned receivables | — | | | — | | | — | | | 404 | |
| % of net assets sold | 100 | % | | 100 | % | | 50 | % | | 100 | % |
| Total net assets disposed of | 766 | | | 89 | | | 6 | | | 692 | |
| ArcelorMittal retained interest 62% | 1,205 | | | — | | | — | | | — | |
| Goodwill allocation | (52) | | | (672) | | | — | | | — | |
| Consideration | — | | | 2,219 | | | (4) | | | 518 | |
| Consideration receivable | — | | | — | | | 6 | | | 174 | |
| Reclassification of foreign exchange and other | (283) | | | 2 | | | 33 | | | 72 | |
| Gain on disposal/derecognition | 104 | | | 1,460 | | | 29 | | | 72 | |
In addition,
2.3.2 Assets held for sale
As described in note 2.3.1, the carrying amount of assets and liabilities of the Steelton facility in the United States remainedAcciaierie d'Italia was classified as held for sale atas of December 31, 2018 (see note 2.3.1).2020 and until the Company lost control on
April 14, 2021. ArcelorMittal Italia was part of the Europe reportable segment. The fair value of the assets and liabilities classified as held for sale were in line with their carrying value.
| | |
| Consolidated financial statements 268 |
| (millions of U.S. dollar, except share and per share data) |
The fair value measurement was determined using the contract price and a discounted cash flow model, both Level 3 unobservable inputs.
In addition, in the context of the Company's divestment process with respect to its plate operations in the Europe reportable segment, the carrying amount of such assets and liabilities was classified as held for sale as of December 31, 2020. The Company recorded an impairment charge in cost of sales of 331. On June 17, 2021, the Company announced the discontinuation of its divestment process with respect to its plate operations in the Europe reportable segment following final offers received and a strategic review of growth opportunities as
a producer of heavy plates with the lowest CO2 footprint in the industry and as a supplier of special plates needed for the energy transition in several of its end markets. Accordingly, the Company discontinued the classification of assets and liabilities of this business and measured the recoverable amount on the basis of a value-in-use calculation which was the lower amount when compared to the carrying amount before the classification as held for sale adjusted for any depreciation or amortization that would have been recognized. The measurement based on the recoverable amount did not result in any adjustment to assets and liabilities reclassified from held for sale.
The table below provides the details for the entities classified as held for sale as at December 31, 2017, which have been disposed during 2018 are disclosed in note 2.3.1.
The tables below provide details of the2020. There were no assets and liabilitiesclassified as held for sale after elimination of intra-group balances in the consolidated statements of financial position:at December 31, 2021.
| | | | | | | | | | | | | | |
| | December 31, 2020 |
| | ArcelorMittal Italia and plate operations in Europe | | | | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | 3 | | | | | |
| Trade accounts receivable, prepaid expenses and other current assets | | 635 | | | | | |
| Inventories | | 1,446 | | | | | |
| Total Current Assets | | 2,084 | | | | | |
| Non-current Assets: | | | | | | |
| Property, plant and equipment | | 1,843 | | | | | |
| Other assets | | 402 | | | | | |
| Total Non-current Assets | | 2,245 | | | | | |
| Total Assets | | 4,329 | | | | | |
| | | | | | |
| Current Liabilities: | | | | | | |
| Trade accounts payables, accrued expenses and other liabilities | | 1,236 | | | | | |
| Total Current Liabilities | | 1,236 | | | | | |
| Non-current Liabilities: | | | | | | |
| Long-term debt | | 21 | | | | | |
| Other long-term liabilities | | 1,782 | | | | | |
| Total Non-current Liabilities | | 1,803 | | | | | |
| Total Liabilities | | 3,039 | | | | | |
|
| | | | | | | | | |
| | | December 31, 2018 |
| | | Ilva remedies | | Steelton | | Total |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | 10 |
| | — |
| | 10 |
|
| Trade accounts receivable, prepaid expenses and other current assets | | 291 |
| | 28 |
| | 319 |
|
| Inventories | | 1,011 |
| | 23 |
| | 1,034 |
|
| Total Current Assets | | 1,312 |
| | 51 |
| | 1,363 |
|
| Non-current Assets: | | | | | | — |
|
| Property, plant and equipment | | 638 |
| | 78 |
| | 716 |
|
| Other assets | | 32 |
| | — |
| | 32 |
|
| Total Non-current Assets | | 670 |
| | 78 |
| | 748 |
|
| Total Assets | | 1,982 |
| | 129 |
| | 2,111 |
|
| | | | | | |
|
| Current Liabilities: | | | | | |
|
| Trade accounts payables, accrued expenses and other liabilities | | 542 |
| | 21 |
| | 563 |
|
| Total Current Liabilities | | 542 |
| | 21 |
| | 563 |
|
| Non-current Liabilities: | | | | | |
|
| Long-term debt | | 77 |
| | — |
| | 77 |
|
| Other long-term liabilities | | 164 |
| | 17 |
| | 181 |
|
| Total Non-current Liabilities | | 241 |
| | 17 |
| | 258 |
|
| Total Liabilities | | 783 |
| | 38 |
| | 821 |
|
| | |
| 269 Consolidated financial statements |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The tables below provide details of the assets and liabilities held for sale after elimination of intra-group balances in the consolidated statements of financial position:
|
| | | | | | | | |
| | December 31, 2017 |
| | Frýdek Místek | | Steelton | | Total |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Trade accounts receivable and other | — |
| | 23 |
| | 23 |
|
| Inventories | 25 |
| | 21 |
| | 46 |
|
| Total current assets | 25 |
| | 44 |
| | 69 |
|
| Non-current assets: | | | | | |
| Property, plant and equipment | 34 |
| | 76 |
| | 110 |
|
| Total non-current assets | 34 |
| | 76 |
| | 110 |
|
| Total assets | 59 |
| | 120 |
| | 179 |
|
| | | | | | |
| LIABILITIES | | | | | |
| Current liabilities: | | | | | |
| Trade accounts payable and other | 5 |
| | 17 |
| | 22 |
|
| Accrued expenses and other liabilities | 2 |
| | 5 |
| | 7 |
|
| Total current liabilities | 7 |
| | 22 |
| | 29 |
|
| Non-current liabilities: | | | | | |
| Long-term provisions | 4 |
| | 17 |
| | 21 |
|
| Total non-current liabilities | 4 |
| | 17 |
| | 21 |
|
| Total liabilities | 11 |
| | 39 |
| | 50 |
|
2.4 Investments in associates and joint arrangements
The carrying amounts of the Company’s investments accounted for under the equity method were as follows: |
| | | | | |
| | December 31, |
| Category | 2018 | | 2017 |
| Joint ventures | 1,011 |
| | 1,249 |
|
| Associates | 2,871 |
| | 2,854 |
|
Individually immaterial joint ventures and associates1 | 1,024 |
| | 981 |
|
| Total | 4,906 |
| | 5,084 |
|
| |
1. | Individually immaterial joint ventures and associates represent in aggregate less than 20% of the total carrying amount of investments in joint ventures and associates at December 31, 2018 and 2017, and none of them have a carrying value exceeding 100 at December 31, 2018 and 2017.
|
| | | | | | | | | | | |
| December 31, |
| Category | 2021 | | 2020 |
| Joint ventures | 6,087 | | | 3,006 | |
| Associates | 2,985 | | | 2,847 | |
Individually immaterial joint ventures and associates1 | 1,247 | | | 964 | |
| Total | 10,319 | | | 6,817 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
2.4.1 Joint ventures
The following tables summarize the latest available financial information and reconcile it to the carrying value of each of the Company’s material joint ventures, as well as the income statement of the Company’s material joint ventures: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| Joint Ventures | | AMNS India | | Acciaierie d'Italia | | Calvert | | | | VAMA | | Tameh | | Borçelik | | Al Jubail | | Total |
| | | | | | | | | | | | | | | | | | |
Place of incorporation and operation 1 | | India | | Italy | | United States | | | | China | | Poland | | Turkey | | Saudi Arabia | | |
| Principal Activity | | Integrated flat steel producer 5,6 | | Integrated flat steel producer 7 | | Automotive steel finishing8 | | | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel 2,3,4 | | Production and sale seamless line pipes and tubes 9 | | |
| Ownership and voting rights at December 31, 2021 | | 60.00 | % | | 62.00 | % | | 50.00 | % | | | | 50.00 | % | | 50.00 | % | | 50.00 | % | | 29.23 | % | | |
| Current assets | | 5,536 | | | 3,643 | | | 2,334 | | | | | 293 | | | 356 | | | 983 | | | 573 | | | 13,718 | |
| of which cash and cash equivalents | | 1,285 | | | 92 | | | 256 | | | | | 56 | | | 62 | | | 155 | | | 88 | | | 1,994 | |
| Non-current assets | | 6,260 | | | 2,669 | | | 1,418 | | | | | 679 | | | 497 | | | 243 | | | 1,197 | | | 12,963 | |
| Current liabilities | | 764 | | | 3,313 | | | 1,162 | | | | | 466 | | | 376 | | | 723 | | | 533 | | | 7,337 | |
| of which trade and other payables and provisions | | 620 | | | 2,840 | | | 202 | | | | | 272 | | | 330 | | | 581 | | | 120 | | | 4,965 | |
| Non-current liabilities | | 5,770 | | | 1,365 | | | 790 | | | | | 8 | | | 169 | | | 56 | | | 640 | | | 8,798 | |
| of which trade and other payables and provisions | | 331 | | | 1,342 | | | — | | | | | — | | | 24 | | | 44 | | | 45 | | | 1,786 | |
| Net assets | | 5,262 | | | 1,634 | | | 1,800 | | | | | 498 | | | 308 | | | 447 | | | 597 | | | 10,546 | |
| Company's share of net assets | | 3,157 | | | 1,013 | | | 900 | | | | | 249 | | | 154 | | | 224 | | | 175 | | | 5,872 | |
| Adjustments for differences in accounting policies and other | | 148 | | | 146 | | | (34) | | | | | — | | | — | | | (29) | | | (16) | | | 215 | |
| Carrying amount in the statements of financial position | | 3,305 | | | 1,159 | | | 866 | | | | | 249 | | | 154 | | | 195 | | | 159 | | | 6,087 | |
| Revenue | | 7,226 | | | 3,291 | | | 4,808 | | | | | 1,452 | | | 721 | | | 1,791 | | | 334 | | | 19,623 | |
| Depreciation and amortization | | (378) | | | (119) | | | (65) | | | | | (34) | | | (34) | | | (24) | | | (42) | | | (696) | |
| Interest income | | 53 | | | — | | | — | | | | | 3 | | | — | | | 1 | | | — | | | 57 | |
| Interest expense | | (139) | | | (12) | | | (28) | | | | | (7) | | | (6) | | | (18) | | | (27) | | | (237) | |
| Income tax benefit (expense) | | (71) | | | 211 | | | — | | | | | (12) | | | (4) | | | (65) | | | — | | | 59 | |
| Income (loss) from continuing operations | | 1,436 | | | 393 | | | 861 | | | | | 95 | | | 18 | | | 105 | | | (85) | | | 2,823 | |
| Other comprehensive income (loss) | | 818 | | | — | | | 9 | | | | | — | | | 8 | | | 9 | | | — | | | 844 | |
| Total comprehensive income (loss) | | 2,254 | | | 393 | | | 870 | | | | | 95 | | | 26 | | | 114 | | | (85) | | | 3,667 | |
| Cash dividends received by the Company | | — | | | — | | | 50 | | | | | — | | | 10 | | | 13 | | | — | | | 73 | |
1.The country of incorporation corresponds to the country of operation except for Tameh whose country of operation is also the Czech Republic.
2.Ownership interest in Borçelik was 45.33% and 50.00% based on issued shares and outstanding shares, respectively, at December 31, 2021; voting interest was 48.01% at December 31, 2021.
|
| | | | | | | | | | | | | | | |
| | | December 31, 2018 |
| Joint Ventures | | Calvert | | VAMA | | Tameh | | Borçelik | | Total |
Place of incorporation and operation 1 | | United States | | China | | Poland | | Turkey | | |
| Principal Activity | | Automotive steel finishing | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel 2,3,4 | | |
| Ownership and voting rights at December 31, 2018 | | 50.00% | | 50.00% | | 50.00% | | 50.00% | | |
| Current assets | | 1,490 |
| | 329 |
| | 205 |
| | 519 |
| | 2,543 |
|
| of which cash and cash equivalents | | 76 |
| | 85 |
| | 90 |
| | 67 |
| | 318 |
|
| Non-current assets | | 1,282 |
| | 688 |
| | 540 |
| | 282 |
| | 2,792 |
|
| Current liabilities | | 824 |
| | 491 |
| | 208 |
| | 398 |
| | 1,921 |
|
| of which trade and other payables and provisions | | 173 |
| | 180 |
| | 176 |
| | 263 |
| | 792 |
|
| Non-current liabilities | | 853 |
| | 217 |
| | 226 |
| | 49 |
| | 1,345 |
|
| of which trade and other payables and provisions | | — |
| | — |
| | 22 |
| | — |
| | 22 |
|
| Net assets | | 1,095 |
| | 309 |
| | 311 |
| | 354 |
| | 2,069 |
|
| Company's share of net assets | | 548 |
| | 156 |
| | 156 |
| | 177 |
| | 1,037 |
|
| Adjustments for differences in accounting policies and other | | 6 |
| | — |
| | — |
| | (32 | ) | | (26 | ) |
| Carrying amount in the statements of financial position | | 554 |
| | 156 |
| | 156 |
| | 145 |
| | 1,011 |
|
| Revenue | | 3,295 |
| | 625 |
| | 467 |
| | 1,328 |
| | 5,715 |
|
| Depreciation and amortization | | (62 | ) | | (32 | ) | | (31 | ) | | (22 | ) | | (147 | ) |
| Interest income | | 1 |
| | 1 |
| | — |
| | 2 |
| | 4 |
|
| Interest expense | | (40 | ) | | (26 | ) | | (4 | ) | | (20 | ) | | (90 | ) |
| Income tax benefit (expense) | | — |
| | (1 | ) | | (8 | ) | | (18 | ) | | (27 | ) |
| Profit or loss from continuing operations | | 312 |
| | 5 |
| | 30 |
| | 6 |
| | 353 |
|
| Other comprehensive income (loss) | | — |
| | — |
| | 3 |
| | 1 |
| | 4 |
|
| Total comprehensive income (loss) | | 312 |
| | 5 |
| | 33 |
| | 7 |
| | 357 |
|
| Cash dividends received by the Company | | 48 |
| | — |
| | 4 |
| | 34 |
| | 86 |
|
| | |
1.Consolidated financial statements 270 |
The country(millions of incorporation corresponds to the country of operationU.S. dollar, except for Tameh whose country of operation is also the Czech Republic.share and per share data)
|
3.The non-current liabilities include 39 deferred tax liability.
4.Adjustment in Borçelik relates primarily to differences in accounting policies regarding revaluation of fixed assets.
5.Adjustments in AMNS India correspond primarily to transaction costs incurred to set up the joint venture and the fair value of the guarantee of the joint venture's debt (see note 9.4).
6.Includes AMNS Luxembourg, AMNS India and intermediate holding entities.
7.Includes Acciaierie d'Italia summarized statement of financial position as of December 31, 2021 adjusted for the fair value adjustments at divestment date (see note 2.3.1). The summarized statement of comprehensive income presents results of Acciaierie d'Italia for the period from April 14, 2021 to December 31, 2021.
8.Adjustments in Calvert primarily relate to differences in accounting policies regarding inventory valuation.
9.The summarized statement of comprehensive income presents results for full year 2021 including Jubail Energy Services Company ("JESCO") results after July 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Joint Ventures | | AMNS India | | Calvert | | | | VAMA | | Tameh | | Borçelik | | Total |
Place of incorporation and operation 1 | | India | | United States | | | | China | | Poland | | Turkey | | |
| Principal Activity | | Integrated flat steel producer 5,6 | | Automotive steel finishing | | | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel 2,3,4 | | |
| Ownership and voting rights at December 31, 2020 | | 60.00 | % | | 50.00 | % | | | | 50.00 | % | | 50.00 | % | | 50.00 | % | | |
| Current assets | | 3,528 | | | 1,236 | | | | | 252 | | | 175 | | | 510 | | | 5,701 | |
| of which cash and cash equivalents | | 1,137 | | | 53 | | | | | 77 | | | 43 | | | 82 | | | 1,392 | |
| Non-current assets | | 5,745 | | | 1,261 | | | | | 669 | | | 570 | | | 257 | | | 8,502 | |
| Current liabilities | | 657 | | | 805 | | | | | 511 | | | 180 | | | 283 | | | 2,436 | |
| of which trade and other payables and provisions | | 524 | | | 138 | | | | | 232 | | | 132 | | | 271 | | | 1,297 | |
| Non-current liabilities | | 5,604 | | | 662 | | | | | 23 | | | 226 | | | 127 | | | 6,642 | |
| of which trade and other payables and provisions | | 67 | | | — | | | | | — | | | 26 | | | 47 | | | 140 | |
| Net assets | | 3,012 | | | 1,030 | | | | | 387 | | | 339 | | | 357 | | | 5,125 | |
| Company's share of net assets | | 1,807 | | | 515 | | | | | 194 | | | 170 | | | 179 | | | 2,865 | |
| Adjustments for differences in accounting policies and other | | 149 | | | 24 | | | | | — | | | — | | | (32) | | | 141 | |
| Carrying amount in the statements of financial position | | 1,956 | | | 539 | | | | | 194 | | | 170 | | | 147 | | | 3,006 | |
| Revenue | | 3,992 | | | 2,693 | | | | | 1,001 | | | 420 | | | 1,055 | | | 9,161 | |
| Depreciation and amortization | | (371) | | | (61) | | | | | (41) | | | (48) | | | (24) | | | (545) | |
| Interest income | | 43 | | | — | | | | | 1 | | | — | | | 1 | | | 45 | |
| Interest expense | | (135) | | | (33) | | | | | (16) | | | (8) | | | (12) | | | (204) | |
| Income tax benefit (expense) | | 318 | | | — | | | | | (6) | | | (2) | | | (17) | | | 293 | |
| Income / (loss) from continuing operations | | 472 | | | 9 | | | | | 47 | | | 7 | | | 29 | | | 564 | |
| | | | | | | | | | | | | | |
| Other comprehensive income (loss) | | (98) | | | — | | | | | — | | | 6 | | | (4) | | | (96) | |
| Total comprehensive income (loss) | | 374 | | | 9 | | | | | 47 | | | 13 | | | 25 | | | 468 | |
| Cash dividends received by the Company | | — | | | 58 | | | | | — | | | — | | | 9 | | | 67 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
1.The country of incorporation corresponds to the country of operation except for Tameh whose country of operation is also the Czech Republic.
2.Ownership interest in Borçelik was 45.33% and 50.00% based on issued shares and outstanding shares, respectively, at December 31, 2020; voting interest was 48.01% at December 31, 2020.
3.The non-current liabilities include 39 deferred tax liability.
4.Adjustment in Borçelik relates primarily to differences in accounting policies regarding revaluation of fixed assets.
5.Adjustments in AMNS India correspond primarily to transaction costs incurred to set up the joint venture and the fair value of the guarantee of the joint venture's debt (see note 9.4).
6.Includes AMNS Luxembourg, AMNS India and intermediate holding entities.
| | |
2. | Ownership interest in Borçelik was 45.33% and 50.00% based on issued shares and outstanding shares, respectively, at December 31, 2018; voting interest was 48.01% at December 31, 2018.
271 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | December 31, 2019 |
| Joint Ventures | | AMNS India | | Calvert | | | | VAMA | | Tameh | | Borçelik | | Total |
Place of incorporation and operation1 | | India | | United States | | | | China | | Poland | | Turkey | | |
| Principal Activity | | Flat carbon steel manufacture 5,6 | | Automotive steel finishing | | | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel 2,3,4 | | |
| Ownership and voting rights at December 31, 2019 | | 60.00 | % | | 50.00 | % | | | | 50.00 | % | | 50.00 | % | | 50.00 | % | | |
| Current assets | | 2,318 | | | 1,604 | | | | | 313 | | | 171 | | | 508 | | | 4,914 | |
| of which cash and cash equivalents | | 444 | | | 62 | | | | | 81 | | | 75 | | | 106 | | | 768 | |
| Non-current assets | | 6,295 | | | 1,282 | | | | | 637 | | | 580 | | | 267 | | | 9,061 | |
| Current liabilities | | 5,922 | | | 984 | | | | | 485 | | | 183 | | | 378 | | | 7,952 | |
| of which trade and other payables and provisions | | 670 | | | 144 | | | | | 226 | | | 139 | | | 274 | | | 1,453 | |
| Non-current liabilities | | 189 | | | 764 | | | | | 147 | | | 244 | | | 49 | | | 1,393 | |
| of which trade and other payables and provisions | | 46 | | | — | | | | | — | | | 26 | | | 49 | | | 121 | |
| Net assets | | 2,502 | | | 1,138 | | | | | 318 | | | 324 | | | 348 | | | 4,630 | |
| Company's share of net assets | | 1,501 | | | 569 | | | | | 159 | | | 162 | | | 174 | | | 2,565 | |
| Adjustments for differences in accounting policies and other | | 48 | | | 6 | | | | | — | | | — | | | (33) | | | 21 | |
| Carrying amount in the statements of financial position | | 1,549 | | | 575 | | | | | 159 | | | 162 | | | 141 | | | 2,586 | |
| Revenue | | — | | | 3,504 | | | | | 772 | | | 499 | | | 1,141 | | | 5,916 | |
| Depreciation and amortization | | — | | | (63) | | | | | (31) | | | (37) | | | (24) | | | (155) | |
| Interest income | | 2 | | | 2 | | | | | 1 | | | — | | | 1 | | | 6 | |
| Interest expense | | (10) | | | (48) | | | | | (23) | | | (7) | | | (19) | | | (107) | |
| Income tax benefit (expense) | | (83) | | | — | | | | | (22) | | | (7) | | | (10) | | | (122) | |
| Income / (loss) from continuing operations | | (116) | | | 156 | | | | | 10 | | | 28 | | | 19 | | | 97 | |
| Total comprehensive income (loss) | | (116) | | | 156 | | | | | 10 | | | 28 | | | 19 | | | 97 | |
| Cash dividends received by the Company | | — | | | 57 | | | | | — | | | 9 | | | 12 | | | 78 | |
1.The country of incorporation corresponds to the country of operation except for Tameh whose country of operation is also the Czech Republic.
2.Ownership interest in Borçelik was 45.33% and 50.00% based on issued shares and outstanding shares, respectively, at December 31, 2019; voting interest was 48.01% at December 31, 2019.
3.The non-current liabilities include 42 deferred tax liability.
4.Adjustment in Borçelik relates primarily to differences in accounting policies regarding revaluation of fixed assets.
5.Adjustments in AMNS India correspond primarily to transaction costs incurred to set up the joint venture.
6.Includes AMNS Luxembourg, AMNS India and intermediate holding entities.
AMNS India
On December 11, 2019, following the unconditional approval received by the Indian Supreme Court of ArcelorMittal's acquisition plan ("the Resolution Plan") for Essar Steel India Limited ("ESIL"), subsequently renamed AMNS India Limited ("AMNS India"), on November 15, 2019, ArcelorMittal and Nippon Steel Corporation ("NSC"), Japan’s largest steel producer and the third largest steel producer in the world, created a joint venture to own and operate AMNS India with ArcelorMittal holding a 60% interest and NSC holding 40% in accordance with the second amended joint venture formation agreement signed as of December 8, 2019. Through the agreement, both ArcelorMittal and NSC are guaranteed equal board representation and participation in all significant financial
and operating decisions. The group has therefore determined that it does not control the entity, even though it holds 60% of the voting rights. ArcelorMittal and NSC contributed their respective initial equity funding of 1,362 and 891 into AMNS Luxembourg Holding S.A. ("AMNS Luxembourg"), the parent company of the joint venture. ArcelorMittal's 60% interest is accounted for under the equity method. ArcelorMittal also transferred 360 cash proceeds (of which 293 was recognized in 2019), including through a 193 equity contribution, into the joint venture following hedging programs entered into to hedge the volatility between the Indian Rupee and the U.S. dollar in relation to the acquisition of AMNS India. The total cash proceeds included 353 designated as cash flow hedge gains and the Company reflected in retained earnings NSC's 40%
| | |
3.Consolidated financial statements 272 |
The non-current liabilities include 43 deferred tax liability.(millions of U.S. dollar, except share and per share data) |
entitlement in the amount of 141 in accordance with the final joint venture formation agreement.
On December 16, 2019, AMNS Luxembourg completed the acquisition of AMNS India. ArcelorMittal and NSC financed the joint venture for the acquisition of AMNS India through a combination of partnership equity of 2,253 and debt of 3,679 including2,204 drawn by the joint venture under the 7 billion term facility agreement (see note 6.1.2) and 1,475 shareholder loan from NSC. The joint venture accounted for the acquisition of AMNS India as a business combination. The joint venture completed its purchase price accounting during 2020.
AMNS India is an integrated flat steel producer, and the largest steel company in western India. AMNS India’s main steel manufacturing facility is located at Hazira, Gujarat in western India. It also has:
–2 iron ore beneficiation plants close to the mines in Kirandul and Dabuna, with slurry pipelines that then transport the beneficiated iron ore slurry to the pellet plants in the Kirandul-Vizag and Dabuna-Paradeep systems;
–a downstream facility in Pune (including a pickling line, a cold rolling mill, a galvanizing mill, a color coating mill and a batch annealing plant); and
–6 service centers in the industrial clusters of Hazira, Indore, Bahadurgarh, Chennai, Kolkata and Pune. It has a complete range of flat rolled steel products, including value added products, and significant iron ore pellet capacity with 2 main pellet plant systems in Kirandul-Vizag and Dabuna-Paradeep, which have the potential for expansion. Its facilities are located close to ports with deep draft for movement of raw materials and finished goods.
The Resolution Plan which was approved for the acquisition of AMNS India included an upfront payment of 6.0 billion towards AMNS India’s debt resolution, with a further 1.1 billion of capital injection into AMNS India to support operational improvements, increase production levels and deliver enhanced levels of profitability. The Company provided a 0.6 billion performance guarantee in connection with the execution of the Resolution Plan, which terminated on December 31, 2019. In addition, the Resolution Plan includes a capital expenditure plan of 2.6 billion to be implemented in 2 stages over six years.
On December 19, 2019, in the context of the creation of the AMNS India joint venture, the Company transferred to the joint venture the payments it had been required to make in 2018 and 2019 to the financial creditors of Uttam Galva Steels Ltd. in order that the Resolution Plan would be eligible for consideration by ESIL's Committee of Creditors. ArcelorMittal
and NSC financed such payments through a combination of equity contributions into the joint venture of 173 and 115, respectively, and debt of 597 including 367 drawn by the joint venture under the 7 billion term facility agreement and a 230 shareholder loan from NSC. The joint venture used such proceeds to repay the loan granted by ArcelorMittal for an amount of 680 on December 31, 2019. On June 2, 2021, Uttam Galva's Committee of Creditors approved the resolution plan submitted by AMNS India. The resolution plan has been submitted for approval to the National Company Law Tribunal ("NCLT").
On February 13, 2020 and pursuant to the follow-on funding requirement in accordance with the second amended joint venture formation agreement, AMNS Luxembourg completed an additional equity injection into AMNS India of 840 mainly through an additional 475 drawn under the 7 billion term facility agreement and a 325 shareholder loan from NSC.
On March 16, 2020, AMNS Luxembourg entered into a 5.1 billion ten-year term loan agreement with various Japanese banks which is guaranteed by ArcelorMittal and NSC in proportion to their interests in the joint venture.The proceeds of the loan were used on March 27, 2020 to refinance in full the amounts borrowed by the Company in connection with the acquisition of AMNS India, including the amounts borrowed under the 7 billion bridge term facilities agreement guaranteed by ArcelorMittal.
AMNS India also made acquisitions of certain ancillary assets. On July 23, 2020, AMNS India commenced mining operations at the Thakurani iron ore mine in Keonjhar district of Odisha following an auction process facilitated by the state government in February 2020. On July 7, 2020, AMNS India acquired Odisha Slurry Pipeline infrastructure Limited ("OSPIL") for a net consideration of 245 which secured an important infrastructure asset for raw material supply to the Paraddep pellet plant and Hazira steel plant. In January 2021, AMNS India acquired a captive power plant at Paradeep in Odisha and in September 2021, AMNS India also commenced mining operations at its Ghoraburhani-Sagasahi iron ore block in Odisha.
In September, 2021, AMNS India commissioned a 6 million tonnes per annum pellet plant at the port city of Paradeep in Odisha. The plant doubled production capacity at AMNS India’s Paradeep complex to 12 million tonnes, and AMNS India’s total pelletization capacity increased to 20 million tonnes per annum.
Acciaierie d'Italia
On April 14, 2021, pursuant to the investment agreement signed on December 10, 2020 forming a public-private partnership
| | |
4. | Adjustment in Borçelik relates primarily to differences in accounting policies regarding revaluation of fixed assets.
273 Consolidated financial statements |
ARCELORMITTAL AND SUBSIDIARIESbetween Invitalia and ArcelorMittal and providing Invitalia joint control rights, ArcelorMittal recorded its 62% interest at its fair value of 1,205 (see 2.3.1.) at the initial recognition of Acciaierie d'Italia as equity method investment.
Notes
Acciaierie d'Italia is the leading steel producer in Italy and produces high-quality and sustainable steel to Consolidated Financial Statementsbe used in a range of vital industry sectors across the domestic steel market such as construction, energy, automotive, home appliances, packaging and transport and for international export. Acciaierie d'Italia has operations across various structurally linked operating sites including Europe’s biggest single-site integrated steel facility in Taranto and rolling mills in Genova and Novi Ligure. Genova is also an important hub in terms of intermodal logistics.
(millions of U.S. dollars, except share and per share data)
VAMA
|
| | | | | | | | | | | | | | | | | | |
| | | December 31, 2017 |
| Joint Ventures | | Calvert | | Macsteel | | VAMA | | Tameh | | Borçelik | | Total |
Place of incorporation and operation1 | | United States | | Netherlands | | China | | Poland | | Turkey | | |
| Principal Activity | | Automotive steel finishing | | Steel trading and shipping | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel2, 3 | | |
| Ownership and voting rights at December 31, 2017 | | 50.00% | | 50.00% | | 49.00% | | 50.00% | | 45.33% | | |
| Current assets | | 1,135 |
| | 739 |
| | 283 |
| | 158 |
| | 519 |
| | 2,834 |
|
| of which cash and cash equivalents | | 13 |
| | 95 |
| | 71 |
| | 57 |
| | 7 |
| | 243 |
|
| Non-current assets | | 1,303 |
| | 389 |
| | 754 |
| | 476 |
| | 296 |
| | 3,218 |
|
| Current liabilities | | 612 |
| | 404 |
| | 449 |
| | 132 |
| | 357 |
| | 1,954 |
|
| of which trade and other payables and provisions | | 118 |
| | 235 |
| | 190 |
| | 118 |
| | 244 |
| | 905 |
|
| Non-current liabilities | | 947 |
| | 43 |
| | 277 |
| | 189 |
| | 46 |
| | 1,502 |
|
| of which trade and other payables and provisions | | — |
| | 3 |
| | — |
| | 20 |
| | — |
| | 23 |
|
| Net assets | | 879 |
| | 681 |
| | 311 |
| | 313 |
| | 412 |
| | 2,596 |
|
| Company's share of net assets | | 440 |
| | 341 |
| | 152 |
| | 156 |
| | 187 |
| | 1,276 |
|
| Adjustments for differences in accounting policies and other | | 6 |
| | (3 | ) | | — |
| | — |
| | (30 | ) | | (27 | ) |
| Carrying amount in the statements of financial position | | 446 |
| | 338 |
| | 152 |
| | 156 |
| | 157 |
| | 1,249 |
|
| Revenue | | 2,870 |
| | 2,775 |
| | 489 |
| | 330 |
| | 1,234 |
| | 7,698 |
|
| Depreciation and amortization | | (62 | ) | | (1 | ) | | (30 | ) | | (27 | ) | | (22 | ) | | (142 | ) |
| Interest income | | — |
| | 14 |
| | 1 |
| | — |
| | 1 |
| | 16 |
|
| Interest expense | | (35 | ) | | (10 | ) | | (28 | ) | | 4 |
| | (12 | ) | | (81 | ) |
| Income tax benefit (expense) | | — |
| | (5 | ) | | — |
| | (7 | ) | | (20 | ) | | (32 | ) |
| Profit or loss from continuing operations | | 270 |
| | 31 |
| | 5 |
| | 42 |
| | 65 |
| | 413 |
|
| Other comprehensive income (loss) | | — |
| | 2 |
| | — |
| | (1 | ) | | (1 | ) | | — |
|
| Total comprehensive income (loss) | | 270 |
| | 33 |
| | 5 |
| | 41 |
| | 64 |
| | 413 |
|
| Cash dividends received by the Company | | 20 |
| | — |
| | — |
| | 4 |
| | 30 |
| | 54 |
|
| |
1. | The country of incorporation corresponds to the country of operation except for Tameh whose country of operation is also the Czech Republic and Macsteel whose countries of operation are mainly the United States, the United Arab Emirates and China.
|
| |
2. | The non-current liabilities include 40 deferred tax liability.
|
| |
3. | Adjustment in Borçelik relates primarily to differences in accounting policies regarding revaluation of fixed assets.
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 |
| Joint Ventures | | Calvert | | Macsteel | | Baffinland | | VAMA | | Tameh | | Borçelik | | Total |
Place of incorporation and operation1 | | United States | | Netherlands | | Canada | | China | | Poland | | Turkey | | |
| Principal Activity | | Automotive steel finishing | | Steel trading and shipping | | Extraction of iron ore2 | | Automotive steel finishing | | Energy production and supply | | Manufacturing and sale of steel | | |
| Ownership and voting rights at December 31, 2016 | | 50.00% | | 50.00% | | 44.54% | | 49.00% | | 50.00% | | 45.33% | | |
| Revenue | | 2,358 |
| | 2,353 |
| | 116 |
| | 335 |
| | 254 |
| | 845 |
| | 6,261 |
| Depreciation and amortization | | (59) |
| | (1) |
| | (3) |
| | (30) |
| | (20) |
| | (20) |
| | (133) |
| Interest income | | — |
| | 12 |
| | — |
| | 1 |
| | — |
| | 1 |
| | 14 |
| Interest expense | | (31) |
| | (9) |
| | (20) |
| | (28) |
| | (1) |
| | (7) |
| | (96) |
| Income tax benefit (expense) | | — |
| | (4) |
| | (26) |
| | 18 |
| | (10) |
| | (28) |
| | (50) |
| Profit or loss from continuing operations | | 148 |
| | 15 |
| | (43) |
| | (58) |
| | 29 |
| | 75 |
| | 166 |
| Other comprehensive income (loss) | | — |
| | 10 |
| | — |
| | — |
| | 3 |
| | — |
| | 13 |
| Total comprehensive income (loss) | | 148 |
| | 25 |
| | (43) |
| | (58) |
| | 32 |
| | 75 |
| | 179 |
| Cash dividends received by the Company | | 19 |
| | — |
| | — |
| | — |
| | 6 |
| | 16 |
| | 41 |
| |
1. | The country of incorporation corresponds to the country of operation except for Tameh whose country of operation is also the Czech Republic and Macsteel whose countries of operation are mainly the United States, the United Arab Emirates and China.
|
| |
2. | During 2017, ArcelorMittal lost joint control but maintained significant influence over Baffinland and as such the investment was reclassified to an associate (refer to note 2.4.2) |
Macsteel
On May 28, 2018, ArcelorMittal announced the sale of its 50% shareholding in Macsteel International Holdings B.V. (“Macsteel”), a joint venture between Macsteel Holdings Luxembourg S.à r.l. and ArcelorMittal South Africa, which provided the Company with an international network of traders and trading channels including the shipping of steel. The Company recorded a 132 impairment to adjust the carrying amount of the investment to the expected sale proceeds partially offset by a 142 gain following the recycling upon closing of the sale on October 31, 2018 of accumulated foreign exchange translation gains from other comprehensive income to income (loss) from investments in associates, joint ventures and other investments. The fair value measurement was determined using the contract price, a Level 3 unobservable input.
VAMA
Valin ArcelorMittal Automotive Steel (“VAMA”) is a joint venture between ArcelorMittal and Hunan Valin which produces steel for high-end applications in the automobile industry. VAMA supplies international automakers and first-tier suppliers as well as Chinese car manufacturers and their supplier networks.
Calvert
AM/NS Calvert ("Calvert"), a joint venture between the Company and Nippon Steel & Sumitomo Metal Corporation ("NSSMC"),NSC, is a steel processing plant in Calvert, Alabama, United States. Calvert had a 6-year agreement to purchase 2 million tonnes of slabs annually from ThyssenKrupp Steel USA ("TK CSA"), an integrated steel mill complex located in Rio de Janeiro, Brazil, using a market-based price formula. TK CSA had an option to extend the agreement for an additional 3 years on terms that are more favorable to the joint venture, as compared with the initial 6-year period. In December 2017 and in connection with the acquisition of TK CSA by Ternium S.A., the agreement was amended to (i) extend the term of the agreement to December 31, 2020, (ii) make a corresponding reduction in the annual slab purchase obligation so that the aggregate slab purchase obligation over the full term of the agreement remained the same and (iii) eliminate TK CSA’s extension option. The remaining slabs for Calvert's operations are sourced from ArcelorMittal plants in the United States, Brazil and Mexico.Mexico and from Cleveland-Cliffs , which following its acquisition of ArcelorMittal USA entered on December 9, 2020 into a new five year agreement with Calvert (with an automatic three year
extension unless either party provides notice of intent to terminate) for 1.5 million tonnes annually for the initial term and 0.55 million tonnes annually under the extension and which can be reduced with a six month notice. ArcelorMittal is principally responsible for marketing the product on behalf of the joint venture. Calvert serves the automotive, construction, pipe and tube, service center and appliance/ HVAC industries.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Tameh
Tameh is a joint venture between ArcelorMittal and Tauron Group including four4 energy production facilities located in Poland and the Czech Republic. Tameh’s objective is to ensure energy supply to the Company’s steel plants in these countriesPoland and external customers in the Czech Republic as well as the utilization of steel plant gases for energy production processes.
Borçelik
Borçelik Çelik Sanayii Ticaret Anonim Şirketi ("Borçelik"), incorporated and located in Turkey, is a joint venture between ArcelorMittal and Borusan Holding involved in the manufacturing and sale of cold-rolled and galvanized flat steel products.
Al Jubail
ArcelorMittal Tubular Products Al Jubail ("Al Jubail") is a state of the art seamless tube mill in Saudi Arabia designed and built to serve the fast growing energy producing markets of Saudi Arabia, the Middle East, North Africa and beyond.
Al Jubail is a joint venture in which the Company owns a 29.23% interest. On July 31, 2021, Al Jubail completed the acquisition of Jubail Energy Services Company ("JESCO"), a leading producer of carbon steel seamless pipes in Saudi Arabia.
The Company had outstanding shareholder loans given to Al Jubail for 109 as of December 31, 2020 and 2019. In connection with the shareholding reorganization and completion of the acquisition of JESCO, the Company converted its remaining 109 of shareholders loans and 21 of other receivables into equity and made an additional 50 cash injection to partially finance the acquisition. Following the share conversion and capital injections by ArcelorMittal, the Company's shareholding in Al Jubail was diluted from 40.80% to 29.23%.
| | |
| Consolidated financial statements 274 |
| (millions of U.S. dollar, except share and per share data) |
2.4.2 Associates
The following table summarizes the financial information and reconciles it to the carrying amount of each of the Company’s material associates, as well as the income statement of the Company’s material associates:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | | | | | |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Baffinland 6 | | Total | | | | | | |
| Financial statements reporting date | | June 30, 2021 | | September 30, 2021 | | September 30, 2021 | | December 31, 2021 | | | | | | | | |
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | | Canada | | | | | | | | |
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing 3 | | Steel manufacturing 4 | | Extraction of iron ore 5 | | | | | | | | |
| Ownership and voting rights at December 31, 2021 | | 37.00 | % | | 33.43 | % | | 35.00 | % | | 25.23 | % | | | | | | | | |
| Current assets | | 4,636 | | | 1,364 | | | 2,840 | | | 479 | | | 9,319 | | | | | | | |
| Non-current assets | | 2,978 | | | 2,668 | | | 1,797 | | | 10,790 | | | 18,233 | | | | | | | |
| Current liabilities | | 3,571 | | | 472 | | | 1,568 | | | 477 | | | 6,088 | | | | | | | |
| Non-current liabilities | | 533 | | | 1,107 | | | 716 | | | 3,365 | | | 5,721 | | | | | | | |
| Non-controlling interests | | 88 | | | 103 | | | 415 | | | — | | | 606 | | | | | | | |
| Net assets attributable to equity holders of the parent | | 3,422 | | | 2,350 | | | 1,938 | | | 7,427 | | | 15,137 | | | | | | | |
| Company's share of net assets | | 1,266 | | | 786 | | | 678 | | | 1,874 | | | 4,604 | | | | | | | |
| Adjustments for differences in accounting policies and other | | — | | | 55 | | | (47) | | | (1,488) | | | (1,480) | | | | | | | |
Other adjustments2 | | 66 | | | (191) | | | (14) | | | — | | | (139) | | | | | | | |
| Carrying amount in the statements of financial position | | 1,332 | | | 650 | | | 617 | | | 386 | | | 2,985 | | | | | | | |
| Revenue | | 3,863 | | | 2,011 | | | 4,465 | | | 676 | | | 11,015 | | | | | | | |
| | | | | | | | | | | | | | | | |
| Income / (loss) from continuing operations | | 250 | | | (44) | | | 197 | | | (45) | | | 358 | | | | | | | |
| Other comprehensive income (loss) | | — | | | 7 | | | 33 | | | — | | | 40 | | | | | | | |
| Total comprehensive income (loss) | | 250 | | | (37) | | | 230 | | | (45) | | | 398 | | | | | | | |
| Cash dividends received by the Company | | 36 | | | — | | | 17 | | | — | | | 53 | | | | | | | |
1.The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China.
2.Other adjustments correspond to the difference between the carrying amount at December 31, 2021 and the net assets situation corresponding to the latest financial statements ArcelorMittal is permitted to disclose translated with closing rates as of the reporting dates described in the table above. For the year ended December 31, 2020, the Company recognized a 211 impairment loss with respect to its investment in DHS.
3.The amount for DHS Group includes an adjustment to align the German GAAP financial information with the Company’s accounting policies and is mainly linked to property, plant and equipment, inventory and pension.
4.Adjustments in Gonvarri Steel Industries primarily relate to differences in accounting policies regarding revaluation of fixed assets.
5.Adjustments in Baffinland primarily relate to differences in accounting policies regarding revaluation of fixed assets and locally recognized goodwill. In September 2020, following a legal reorganization that was not a business combination for the Company, its share of provisional fair value remeasurement of 1.5 billion was not recognized in the carrying amount of Baffinland.
6.Following a legal reorganization in September 2020, the Company holds an indirect interest in Baffinland through Nunavut Iron Ore Inc.
|
| | | | | | | | | | | | | | | |
| | | December 31, 2018 |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Baffinland | | Total |
| Financial statements reporting date | | June 30, 2018 | | September 30, 2018 | | September 30, 2018 | | December 31, 2018 | | |
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | | Canada | | |
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing 3 | | Steel manufacturing 4 | | Extraction of iron ore 5 | | |
| Ownership and voting rights at December 31, 2018 | | 37.02% | | 33.43% | | 35.00% | | 28.76% | | |
| Current assets | | 2,516 |
| | 1,528 |
| | 2,183 |
| | 390 |
| | 6,617 |
|
| Non-current assets | | 1,443 |
| | 3,062 |
| | 1,526 |
| | 1,949 |
| | 7,980 |
|
| Current liabilities | | 1,426 |
| | 480 |
| | 1,134 |
| | 399 |
| | 3,439 |
|
| Non-current liabilities | | 35 |
| | 1,005 |
| | 677 |
| | 694 |
| | 2,411 |
|
| Non-controlling interests | | 45 |
| | 136 |
| | 219 |
| | — |
| | 400 |
|
| Net assets attributable to equity holders of the parent | | 2,453 |
| | 2,969 |
| | 1,679 |
| | 1,246 |
| | 8,347 |
|
| Company's share of net assets | | 908 |
| | 992 |
| | 588 |
| | 358 |
| | 2,846 |
|
| Adjustments for differences in accounting policies and other | | — |
| | 27 |
| | (52 | ) | | 22 |
| | (3 | ) |
Other adjustments2 | | 44 |
| | (4 | ) | | (12 | ) | | — |
| | 28 |
|
| Carrying amount in the statements of financial position | | 952 |
| | 1,015 |
| | 524 |
| | 380 |
| | 2,871 |
|
| Revenue | | 3,370 |
| | 1,959 |
| | 3,544 |
| | 320 |
| | 9,193 |
|
| Profit or loss from continuing operations | | 474 |
| | 20 |
| | 60 |
| | (98 | ) | | 456 |
|
| Other comprehensive income (loss) | | — |
| | 5 |
| | (37 | ) | | — |
| | (32 | ) |
| Total comprehensive income (loss) | | 474 |
| | 25 |
| | 23 |
| | (98 | ) | | 424 |
|
| Cash dividends received by the Company | �� | 92 |
| | 5 |
| | 16 |
| | — |
| | 113 |
|
| | |
1. | The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China.
275 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Baffinland6 | | Total |
| Financial statements reporting date | | June 30, 2020 | | September 30, 2020 | | September 30, 2020 | | December 31, 2020 | | |
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | | Canada | | |
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing 3 | | Steel manufacturing 4 | | Extraction of iron ore 5 | | |
| Ownership and voting rights at December 31, 2020 | | 37.02 | % | | 33.43 | % | | 35.00 | % | | 25.23 | % | | |
| Current assets | | 3,611 | | | 1,330 | | | 2,233 | | | 538 | | | 7,712 | |
| Non-current assets | | 2,507 | | | 2,810 | | | 1,675 | | | 8,295 | | | 15,287 | |
| Current liabilities | | 2,780 | | | 364 | | | 1,087 | | | 479 | | | 4,710 | |
| Non-current liabilities | | 454 | | | 1,165 | | | 772 | | | 1,050 | | | 3,441 | |
| Non-controlling interests | | 46 | | | 112 | | | 288 | | | 1 | | | 447 | |
| Net assets attributable to equity holders of the parent | | 2,838 | | | 2,499 | | | 1,761 | | | 7,303 | | | 14,401 | |
| Company's share of net assets | | 1,050 | | | 835 | | | 616 | | | 1,843 | | | 4,344 | |
| Adjustments for differences in accounting policies and other | | — | | | 38 | | | (49) | | | (1,456) | | | (1,467) | |
Other adjustments2 | | 112 | | | (201) | | | 59 | | | — | | | (30) | |
| Carrying amount in the statements of financial position | | 1,162 | | | 672 | | | 626 | | | 387 | | | 2,847 | |
| Revenue | | 2,420 | | | 1,428 | | | 3,065 | | | 772 | | | 7,685 | |
| | | | | | | | | | |
| Income / (loss) from continuing operations | | 112 | | | (244) | | | 86 | | | 73 | | | 27 | |
| Other comprehensive income (loss) | | 16 | | | (5) | | | (67) | | | — | | | (56) | |
| Total comprehensive income (loss) | | 128 | | | (249) | | | 19 | | | 73 | | | (29) | |
| Cash dividends received by the Company | | 28 | | | — | | | 15 | | | — | | | 43 | |
1.The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China.
2.Other adjustments correspond to the difference between the carrying amount at December 31, 2020 and the net assets situation corresponding to the latest financial statements ArcelorMittal is permitted to disclose as of the reporting dates described in the table above. For the year ended December 31, 2020, the Company recognized a 211 impairment loss with respect to its investment in DHS.
3.The amount for DHS Group includes an adjustment to align the German GAAP financial information with the Company’s accounting policies and is mainly linked to property, plant and equipment, inventory and pension.
4.Adjustments in Gonvarri Steel Industries primarily relate to differences in accounting policies regarding revaluation of fixed assets.
5.Adjustments in Baffinland primarily relate to differences in accounting policies regarding revaluation of fixed assets and locally recognized goodwill. In September 2020, following a legal reorganization that was not a business combination for the Company, its share of provisional fair value remeasurement of 1.5 billion was not recognized in the carrying amount of Baffinland.
6.Following a legal reorganization in September 2020, the Company holds an indirect interest in Baffinland through Nunavut Iron Ore Inc. The summarized statement of comprehensive income presents full year result for Baffinland (direct owner and operator of Mary River project).
| | |
2. | Other adjustments correspond to the difference between the carrying amount at December 31, 2018 and the net assets situation corresponding to the latestConsolidated financial statements ArcelorMittal is permitted to disclose as of the reporting dates described in the table above.
|
| 276 |
3. | The amount for DHS Group includes an adjustment to align the German GAAP financial information with the Company’s accounting policies(millions of U.S. dollar, except share and is mainly linked to property, plant and equipment, inventory and pension.per share data)
|
| |
4. | Adjustments in Gonvarri Steel Industries primarily relate to differences in accounting policies regarding revaluation of fixed assets.
|
| |
5. | Adjustments in Baffinland primarily relate to differences in accounting policies regarding revaluation of fixed assets and locally recognized goodwill.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2019 |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Baffinland | | Total |
| Financial statements reporting date | | June 30, 2019 | | September 30, 2019 | | September 30, 2019 | | December 31, 2019 | | |
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | | Canada | | |
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing 3 | | Steel manufacturing 4 | | Extraction of iron ore 5 | | |
| Ownership and voting rights at December 31, 2019 | | 37.02 | % | | 33.43 | % | | 35.00 | % | | 25.70 | % | | |
| Current assets | | 2,920 | | | 1,385 | | | 2,062 | | | 479 | | | 6,846 | |
| Non-current assets | | 1,797 | | | 2,794 | | | 1,628 | | | 2,403 | | | 8,622 | |
| Current liabilities | | 1,837 | | | 402 | | | 1,038 | | | 663 | | | 3,940 | |
| Non-current liabilities | | 150 | | | 979 | | | 795 | | | 891 | | | 2,815 | |
| Non-controlling interests | | 44 | | | 122 | | | 218 | | | — | | | 384 | |
| Net assets attributable to equity holders of the parent | | 2,686 | | | 2,676 | | | 1,639 | | | 1,328 | | | 8,329 | |
| Company's share of net assets | | 994 | | | 895 | | | 574 | | | 341 | | | 2,804 | |
| Adjustments for differences in accounting policies and other | | — | | | 43 | | | (49) | | | 7 | | | 1 | |
Other adjustments2 | | 5 | | | 27 | | | 22 | | | — | | | 54 | |
| Carrying amount in the statements of financial position | | 999 | | | 965 | | | 547 | | | 348 | | | 2,859 | |
| Revenue | | 3,102 | | | 1,795 | | | 3,724 | | | 454 | | | 9,075 | |
| | | | | | | | | | |
| Income / (loss) from continuing operations | | 249 | | | (116) | | | 82 | | | (72) | | | 143 | |
| Other comprehensive income (loss) | | — | | | 8 | | | (7) | | | — | | | 1 | |
| Total comprehensive income (loss) | | 249 | | | (108) | | | 75 | | | (72) | | | 144 | |
| Cash dividends received by the Company | | 57 | | | — | | | 13 | | | — | | | 70 | |
ARCELORMITTAL AND SUBSIDIARIES1.The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China.
Notes2.Other adjustments correspond to Consolidated Financial Statements
(millionsthe difference between the carrying amount at December 31, 2019 and the net assets situation corresponding to the latest financial statements ArcelorMittal is permitted to disclose as of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | |
| | | December 31, 2017 |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Baffinland | | Total |
| Financial statements reporting date | | June 30, 2017 | | September 30, 2017 | | September 30, 2017 | | December 31, 2017 | | |
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | | Canada | | |
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing3 | | Steel manufacturing4 | | Extraction of iron ore5 | | |
| Ownership and voting rights at December 31, 2017 | | 39.02% | | 33.43% | | 35.00% | | 31.07% | | |
| Current assets | | 1,737 |
| | 1,699 |
| | 1,967 |
| | 355 |
| | 5,758 |
|
| Non-current assets | | 1,336 |
| | 3,096 |
| | 1,372 |
| | 1,698 |
| | 7,502 |
|
| Current liabilities | | 1,261 |
| | 555 |
| | 889 |
| | 302 |
| | 3,007 |
|
| Non-current liabilities | | 119 |
| | 1,121 |
| | 446 |
| | 531 |
| | 2,217 |
|
| Non-controlling interests | | 23 |
| | 136 |
| | 220 |
| | — |
| | 379 |
|
| Net assets attributable to equity holders of the parent | | 1,670 |
| | 2,983 |
| | 1,784 |
| | 1,220 |
| | 7,657 |
|
| Company's share of net assets | | 652 |
| | 997 |
| | 624 |
| | 379 |
| | 2,652 |
|
| Adjustments for differences in accounting policies and other | | — |
| | 32 |
| | (54 | ) | | 23 |
| | 1 |
|
Other adjustments2 | | 183 |
| | 22 |
| | (4 | ) | | — |
| | 201 |
|
| Carrying amount in the statements of financial position | | 835 |
| | 1,051 |
| | 566 |
| | 402 |
| | 2,854 |
|
| Revenue | | 2,944 |
| | 1,773 |
| | 2,862 |
| | 341 |
| | 7,920 |
|
| Profit or loss from continuing operations | | 275 |
| | (4 | ) | | 122 |
| | (20 | ) | | 373 |
|
| Other comprehensive income (loss) | | (1 | ) | | (5 | ) | | (9 | ) | | — |
| | (15 | ) |
| Total comprehensive income (loss) | | 274 |
| | (9 | ) | | 113 |
| | (20 | ) | | 358 |
|
| Cash dividends received by the Company | | 49 |
| | — |
| | 18 |
| | — |
| | 67 |
|
| |
1. | The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China. |
| |
2. | Other adjustments correspond to the difference between the carrying amount at December 31, 2017 and the net assets situation corresponding to the latest financial statements ArcelorMittal is permitted to disclose.
|
| |
3. | The amount for DHS Group includes an adjustment to align the German GAAP financial information with the Company’s accounting policies, and is mainly linked to property, plant and equipment, inventory and pension.
|
| |
4. | Adjustments in Gonvarri Steel Industries primarily relate to differences in accounting policies regarding revaluation of fixed assets.
|
| |
5. | Adjustments in Baffinland primarily relate to differences in accounting policies regarding revaluation of fixed assets and locally recognized goodwill.
|
|
| | | | | | | | | | | | |
| | | December 31, 2016 |
| Associates | | China Oriental | | DHS Group | | Gonvarri Steel Industries | | Total |
| Financial statements reporting date | | June 30, 2016 | | September 30, 2016 | | September 30, 2016 | |
|
Place of incorporation and operation1 | | Bermuda | | Germany | | Spain | |
|
| Principal Activity | | Iron and steel manufacturing | | Steel manufacturing | | Steel manufacturing | |
|
| Ownership and voting rights at December 31, 2016 | | 46.99% | | 33.43% | | 35.00% | | |
| Revenue | | 1,751 |
| | 1,396 |
| | 2,258 |
| | 5,405 |
|
| Profit or loss from continuing operations | | 83 |
| | (96 | ) | | 145 |
| | 132 |
|
| Other comprehensive income (loss) | | — |
| | (3 | ) | | 4 |
| | 1 |
|
| Total comprehensive income (loss) | | 83 |
| | (99 | ) | | 149 |
| | 133 |
|
| Cash dividends received by the Company | | — |
| | — |
| | 16 |
| | 16 |
|
| |
1. | The country of incorporation corresponds to the country of operation except for China Oriental whose country of operation is China.
|
ARCELORMITTAL AND SUBSIDIARIESthe reporting dates described in the table above.
Notes3.The amount for DHS Group includes an adjustment to Consolidated Financial Statementsalign the German GAAP financial information with the Company’s accounting policies, and is mainly linked to property, plant and equipment, inventory and pension.
(millions4.Adjustments in Gonvarri Steel Industries primarily relate to differences in accounting policies regarding revaluation of U.S. dollars, except sharefixed assets.
5.Adjustments in Baffinland primarily relate to differences in accounting policies regarding revaluation of fixed assets and per share data)
locally recognized goodwill.
China Oriental
China Oriental Group Company Limited (“China Oriental”) is a Chinese integrated iron and steel company listed on the Hong Kong Stock Exchange (“HKEx”). On January 27, 2017, in order to restore the minimum free float requirement,.The China Oriental issued 586,284,000 new shares resultingGroup has manufacturing plants in a decreaseHebei Province and Guangdong Province of the Company’s interest from 46.99% to 39.02%. As a result, ArcelorMittal recorded a loss of 67 upon dilution partially offset by a gain of 23 following the recycling of accumulated foreign exchange translation gains from other comprehensive income to income from investments in associates, joint ventures and other investments. The tradingPeople’s Republic of China Oriental’s shares, which had been suspended since April 29, 2014, resumed on February 1, 2017.
In January 2018,(the “PRC”) and sells mainly to customers located in the PRC. The China Oriental issued 192 million new shares to fulfill its obligations under its share-based compensation plans. As a result, ArcelorMittal’s interestGroup also carries out property development business which is mainly in China Oriental decreased to 37.02%. ArcelorMittal recorded a loss of 20 upon dilution partially offset by a gain of 8 following the recycling of accumulated foreign exchange translation gains in income from investments in associates, joint ventures and other investments.PRC.
DHS Group
DHS - Dillinger Hütte Saarstahl AG (“DHS Group”), incorporated and located in Germany, is a leading producer of heavy steel plates, cast slag pots and semi-finished products, such as pressings, pressure vessel heads and shell sections in Europe. The DHS Group also includes a further rolling mill operated by Dillinger France in Dunkirk (France). As of December 31, 2020,
as a result of lower cash flow projections resulting from weaker market conditions partially linked to the COVID-19 pandemic, the Company identified an impairment trigger with respect to its investment in DHS and recognized accordingly a 211 impairment charge. The Company calculated the fair value of its investment in DHS using a discounted cash flow model (using a discount rate of 7.24%), a level 3 unobservable input.
Gonvarri Steel Industries
Holding Gonvarri SL (“Gonvarri Steel Industries”) is dedicated to the processing of steel. The entity is a European leader in steel service centers and renewable energy components, with strong presence in Europe and Latin America.
Baffinland
Baffinland Iron Mines Corporation ("Baffinland") owns the Mary River project, which has direct shipping, high grade iron ore on Baffin Island in Nunavut (Canada). During 2017, ArcelorMittal's 2019 the Company's
| | |
| 277 Consolidated financial statements |
shareholding in Baffinland decreased from 44.54%28.76% to 31.07%25.70%, following capital calls exclusively fulfilled by Nunavut Iron Ore (''NIO''Inc. ("NIO"), the initial other shareholder, and the conversion of preferred shares held by NIO into equity. As a result ArcelorMittalshareholder. The Company recognized a losslosses in 2019 on dilution of 224 including the recycling of accumulated foreign exchange translation losses of 52 loss12 in income (loss) from investments in associates, joint ventures and other investments.
During 2018, ArcelorMittal’s2020, ArcelorMittal's shareholding in Baffinland slightly decreased from 31.07%25.70% to 28.76%25.23% following capital calls exclusively fulfilled by NIO. In September 2020, the corporate structure was reorganized whereby NIO became the parent company of Baffinland, and ArcelorMittal together with The Energy and Minerals Group ("EMG") became shareholders of NIO with ArcelorMittal's share in NIO and thus Baffinland unchanged at 25.23%.
NIO accounted for the acquisition of Baffinland as a business combination and the acquisition-date fair value of assets and liabilities was provisional at December 31, 2020. This legal reorganization was not a business combination for the Company which accordingly did not recognize its share of the fair value measurement in the carrying amount of Baffinland.
2.4.3 Other associates and joint ventures that are not individually material
The Company has interests in a number of other joint ventures and associates, none of which are regarded as individually material. The following table summarizes the financial information of all individually immaterial joint ventures and associates that are accounted for using the equity method: |
| | | | | | | | | | | | | | |
| | | December 31, 2018 | | December 31, 2017 |
| | | Associates | | Joint Ventures | | Total | | Associates | | Joint Ventures | | Total |
| Carrying amount of interests in associates and joint ventures | | 310 | | 714 | | 1,024 |
| | 337 | | 644 | | 981 |
|
| Share of: | | | | | | | | | | | | |
| Income (loss) from continuing operations | | 8 | | 80 | | 88 |
| | 16 | | 23 | | 39 |
|
| Other comprehensive income (loss) | | (5) | | 2 | | (3 | ) | | — | | 10 | | 10 |
|
| Total comprehensive income (loss) | | 3 | | 82 | | 85 |
| | 16 | | 33 | | 49 |
|
In 2018, the Company’s share of net losses reduced the carrying amount of its 40.80% interest in the joint venture ArcelorMittal Tubular Products Jubail (“Al Jubail”) to nil. Furthermore, the Company granted shareholder loans to Al Jubail for 140 and 140 as of December 31, 2018 and 2017, respectively. During 2018, the Company’s share of net losses reduced the carrying amount of its investment in Al Jubail to nil and 9 were recognized against the Company's shareholder loans in Al Jubail reducing the total carrying amount to 131 at December 31, 2018 as compared to 152 at December 31, 2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| | Associates | | Joint Ventures | | Total | | Associates | | Joint Ventures | | Total |
| Carrying amount of interests in associates and joint ventures | | 383 | | | 864 | | | 1,247 | | | 328 | | | 636 | | | 964 | |
| Share of: | | | | | | | | | | | | |
| Income from continuing operations | | 77 | | | 386 | | | 463 | | | 15 | | | 33 | | | 48 | |
| Other comprehensive income (loss) | | (4) | | | — | | | (4) | | | (8) | | | (20) | | | (28) | |
| Total comprehensive income | | 73 | | | 386 | | | 459 | | | 7 | | | 13 | | | 20 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
2.4.4 Impairment of associates and joint ventures
For the year ended December 31, 2020, the Company recognized a 211 impairment loss with respect to its investment in DHS. For the years ended December 31, 20182020 and 2017,2019, the Company identified an impairment indicator with respect to its investment and shareholder loans in Al Jubail. Accordingly, it performed a value in use calculation and concluded the carrying amount of the investment and shareholder loans was recoverable. For the remaining investments, the Company concluded there were no impairment triggers.
For the year ended December 31, 2016, the Company recorded an impairment charge of 14 of its shareholder loan to Kalagadi Manganese (Proprietary) Ltd ("Kalagadi Manganese"). The Company sold its 50% interest in this joint venture with Kalahari Resource (Proprietary) Ltd that is engaged in exploring, mining, ore processing and smelting manganese in the Kalahari Basin in South Africa in 2017. In addition, the Company recorded an impairment charge of 14 of its 28.24% interest in Comvex, a deep sea harbor facility on the Black Sea in Romania. For the remaining investments, the Company concluded there were no impairment triggers.
For the year ended December 31, 2016, the Company’s unrecognized share of accumulated losses in Kalagadi Manganese was 9.
The Company is not aware of any material contingent liabilities related to associates and joint ventures for which it is severally liable for all or part of the liabilities of the associates, nor are there any contingent liabilities incurred jointly with other investors. See note 8.49.4 for disclosure of commitments related to associates and joint ventures.
2.4.5 Investments in joint operations
The Company had investments in the following joint operations as of December 31, 20182021 and 2017:2020:
Peña Colorada
Peña Colorada is an iron ore mine located in Mexico in which ArcelorMittal holds a 50.00% interest. Peña Colorada operates an open pit mine as well as concentrating facility and two-line pelletizing facility.
Hibbing Taconite Mines
The Hibbing Taconite Mines in which the Company holdsheld a 62.31% interest are iron ore mines located in the USA and operations consist of open pit mining, crushing, concentrating and pelletizing. The Company assumed the managing partner role of Hibbing Taconite company in August 2019 following the resignation of Cleveland-Cliffs without changes in the ownership group.
I/N Tek
I/N Tek in which the Company holdsheld a 60.00% interest operates a cold-rolling mill in the United States.
Double G CoatingsCoating
ArcelorMittal holdsheld a 50.00% interest in Double G Coating, a hot dip galvanizing and Galvalume facility in the United States.
On December 9, 2020, the Company completed the sale of its interests in Hibbing Taconite Mines, I/N Tek and Peña Colorada areDouble G Coating to Cleveland-Cliffs as part of the Mining segment; otherArcelorMittal USA Divestment Business (note 2.3.1).
All joint operations arewere part of NAFTA.the NAFTA segment.
| | |
| Consolidated financial statements 278 |
| (millions of U.S. dollar, except share and per share data) |
2.5 Other investments
Other investments include those investments in equity instruments for which the Company does not have significant influence. Following the adoption of IFRS 9 as of January 1, 2018, theThe Company irrevocably elected to present the changes in fair value of such equity instruments, which are not held for trading, in other comprehensive income, (see detailbecause these investments are held as long-term strategic investments that are not expected to be sold in note 6.1.
ARCELORMITTAL AND SUBSIDIARIES
Notesthe short to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
1).medium-term. Other investments include the following: |
| | | | | |
| | December 31, |
| 2018 | | 20171
|
| Erdemir | 577 |
| | — |
|
| Stalprodukt S.A. | 101 |
| | — |
|
| Gerdau | 115 |
| | — |
|
| Other investments | 62 |
| | — |
|
| Investments in equity instruments at FVOCI | 855 |
| | — |
|
| Erdemir | — |
| | 1,118 |
|
| Stalprodukt S.A. | — |
| | 171 |
|
| Gerdau | — |
| | 112 |
|
| Other investments | — |
| | 43 |
|
| Available-for-sale securities (at fair value) | — |
| | 1,444 |
|
| Investments in equity instruments at cost | — |
| | 27 |
|
| Total | 855 |
| | 1,471 |
|
1. Following the adoption of IFRS 9, available-for-sale investments are classified as investments in equity instruments at FVOCI as of January 1, 2018. | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Erdemir | 885 | | | 850 | |
| ArcelorMittal XCarb | 83 | | | — | |
| Stalprodukt S.A. | 77 | | | 96 | |
| | | |
| Cleveland-Cliffs | — | | | 1,988 | |
| Others | 101 | | | 46 | |
| Investments in equity instruments at FVOCI | 1,146 | | | 2,980 | |
The Company’s significant investments in equity instruments at FVOCI at December 31, 20182021 and 2017 are2020 were the following:
Ereĝli Demir ve Çelik Fabrikalari T.A.S. (“Erdemir”)
ErdermirErdemir is the leading steel producer in Turkey and produces plates, hot and cold rolled, tin chromium and zinc coated flat steel and supplies basic inputs to automotive, white goods, pipes and tubes, rolling, manufacturing, electrics-electronics, mechanical engineering, energy, heating equipment, shipbuilding, defense and packaging industries. Unrealized gains (losses)recognized in other comprehensive income were 437 and 386 for the year ended December 31, 2021 and 2020, respectively.
Cleveland-Cliffs
Cleveland-Cliffs was historically the largest and oldest independent iron ore mining company in the United States and it became the largest flat-rolled steel company and largest iron ore pellet producer in North America in 2020 after the acquisition of AK Steel and ArcelorMittal USA Divestment Business. It is vertically integrated from mining through iron making, steelmaking, rolling, finishing and downstream with hot and cold stamping of steel parts and components. As part of the consideration for the sale of ArcelorMittal USA Divestment Business to Cleveland-Cliffs as described in note 2.3.1, on December 9, 2020, ArcelorMittal received 78,186,671 common shares with a value of 1,020 and representing a 16% stake in Cleveland-Cliffs and 583,273 non-voting preferred shares with a value of 761. The non-voting preferred shares are redeemable at Cleveland-Cliff’s option for 58,327,300 of its common shares or an equivalent amount in cash. Unrealized gains recognized in other comprehensive income were 127119 for the common shares and 65888 preferred shares for the year ended December 31, 20182020.
On February 9, 2021 and 2017, respectively.June 18, 2021, ArcelorMittal completed the sale of 40 million and 38.2 million common shares in Cleveland-Cliffs, respectively, as part of a combined primary and secondary public offering of Cleveland-Cliffs shares for total net proceeds of 1,377. The accumulated gain of 357 (267 net of tax) recognized in other comprehensive income was transferred to retained earnings. On July 28, 2021, Cleveland-Cliffs redeemed the preferred shares and following the completion of the review of the redemption notice, ArcelorMittal received 1,303. The accumulated gain of 543 (411 net of tax) recognized in other comprehensive income was transferred to retained earnings.
ArcelorMittal’s XCarb™ innovation fund
ArcelorMittal has launched an innovation fund which will invest up to 100 annually in groundbreaking companies developing pioneering or breakthrough technologies which will accelerate the steel industry's transition to carbon neutral steelmaking.
During 2021 the Company has invested 80 through its XCarb innovation fund of which 50 in equity instruments at FVOCI. Unrealized gains recognized in other comprehensive income were 33 for the year ended December 31, 2021.
Stalprodukt S.A.
Stalprodukt S.A. is a leading manufacturer and exporter of highly processed steel products based in Poland.
Following the sale of 729,643 shares including the subsequent capital reduction of Stalprodukt S.A. during the first six months of 2016, for total cash consideration of 46, ArcelorMittal’s ownership interest and voting rights in Stalprodukt S.A. decreased from 28.47% to 21.20% and from 28.26% to 11.61%, respectively.
As of December 31, 2018 and 2017, the fair value of ArcelorMittal’s stake in Stalprodukt S.A. was 101 and 171, respectively. Unrealized gains(losses) recognized in other comprehensive income were 11(12) and 77 (1) for the year ended December 31, 20182021 and 2017,2020, respectively.
GerdauIn 2019 and 2020 the Company sold in aggregate its remaining 3.4 million and 1.8 million shares, respectively, in Powercell Sweden AB, a leading developer and producer of fuel cell and fuel cell systems with high-power density for the automotive, marine and stationary segments, for total consideration of 36 and 59, respectively. The accumulated gain recognized in other comprehensive income of 19 and 28, respectively, was transferred to retained earnings.
On July 16, 2019, the Company sold its 30 million shares, representing a 2.6% stake of preferred shares in Gerdau, is the largest Brazil based producer of long steel in the Americas, for 116 in line with Company's ongoing efforts to optimize and is headquartered in Brazil. Unrealized gainsunlock value from its asset portfolio that no longer coincides with the Company's investment strategy. The accumulated gain recognized in other comprehensive income were 48 and 42 for the year ended December 31, 2018 and 2017, respectively.of 51 was transferred to retained earnings.
Unconsolidated structured entities
ArcelorMittalGlobal Chartering has operating lease arrangements for two2 vessels (Panamax Bulk Carriers) involving structured entities whose main purpose is to hold legal title of the two2 vessels and to lease them to the Company.Global Chartering. Such entities are wholly-owned and controlled by a financial institution and are funded through
| | |
| 279 Consolidated financial statements |
equity instruments by the financial institution. Operating leaseLease arrangements began for one vessel in 2013 and for the second vessel in 2014.
The aforesaid operating leases have been agreed On December 31, 2019, following the sale of a 50% controlling interest in Global Chartering to DryLog (see note 2.3.1), the Company's remaining 50% interest in Global Chartering is accounted for a 12 year period, during whichunder the Company is obliged to payequity method and therefore ArcelorMittal no longer has any involvement with the structured entities minimum fees equivalent to approximately 4 per year and per vessel. In addition, ArcelorMittal holds cal
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
l options to buy each of the two vessels from the structured entities at pre-determined dates and prices as presented in the table below. The structured entities hold put options enabling them to sell each of the vessels at the end of the lease terms at 6 each to the Company. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Call option strike prices |
| Exercise dates | at the 60th month | | at the 72nd month | | at the 84th month | | at the 96th month | | at the 108th month | | at the 120th month | | at the 132nd month | | at the 144th month |
Amounts per vessel 1 | | | | | | | | | | | | | | | |
| First vessel | 29 |
| | 27 |
| | 26 |
| | 24 |
| | 22 |
| | 20 |
| | 17 |
| | 14 |
|
| Second vessel | 31 |
| | 30 |
| | 28 |
| | 27 |
| | 26 |
| | 24 |
| | 20 |
| | 14 |
|
1. If the actual fair value of each vessel is higher than the strike price at each of the exercise dates, ArcelorMittal is obliged to share 50% of the gain with the structured entities.
In addition, pursuant to these arrangements, the Company had a receivable (classified as “Other assets”) of 22 and 26 atsince December 31, 2018 and 2017, respectively, which does not bear interest, is forgiven upon default and will be repaid by the structured entities quarterly in arrears throughout the lease term. The outstanding balance will be used to offset payment of any interim call options, if exercised.2019.
2.6 Income (loss) from investments in associates, joint ventures and other investments
Income (loss) from investments in associates, joint ventures and other investments consisted of the following: |
| | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Share in net earnings of equity-accounted companies | 567 |
| | 537 |
| | 207 |
|
| Impairment charges | (132 | ) | | (26 | ) | | (28 | ) |
| Gain (loss) on disposal | 126 |
| | (117 | ) | | 377 |
|
| Dividend income | 91 |
| | 54 |
| | 59 |
|
| Total | 652 |
| | 448 |
| | 615 |
|
For the year ended December 31, 2018, impairment charges include 132 relating to Macsteel in connection with the sale completed on October 31, 2018 (see note 2.4.1). | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Share in net earnings of equity-accounted companies | 2,091 | | | 430 | | | 252 | |
| Impairment charges | — | | | (211) | | | — | |
| Gain (loss) on disposal | 16 | | | — | | | (4) | |
| Dividend income | 97 | | | 15 | | | 99 | |
| Total | 2,204 | | | 234 | | | 347 | |
For the year ended December 31, 2017, impairment charges include 17 and 9 relating2021, the gain on disposal corresponded to the write downgain on dilution of receivables from associates and joint ventures.the Company's interest in Al Jubail (see note 2.4.1).
For the year ended December 31, 2016,2020, impairment charges include 14 and 14 relatingof 211 related to Kalagadi Manganese and Comvex, respectivelyDHS where the carrying value of the investment exceeded its fair value (see note 2.4.4)2.4.2).
For the year ended December 31, 2018, gain (loss)2019, the loss on disposal included mainly a 142 gain fromcorresponded to the recycling of the currency translation reserve following the sale of Macsteel and a 12 loss on the dilution of the Company's interest from 39.02% to 37.02% in China Oriental (see note 2.4).
For the year ended December 31, 2017, gain (loss) on disposal includes a gain of 133 (the cash settlement occurs through three annual installments of 44 of which one is outstanding as of December 31, 2018) on the disposal of the Company's 21% shareholding in Empire Iron Mining Partnership ("EIMP"), a loss of 44 on dilution of the Company's share in China Oriental (see note 2.4), a loss of 22 on dilution of the Company's interest in Baffinland (see note 2.4), a loss of 187 as a result of the reclassification of the accumulated foreign exchange translation losses from other comprehensive income to the statements of operations following the completion of the sale of the Company's 50% shareholding in Kalagadi Manganese to Kgalagadi Alloys (Proprietary) Ltd on August 25, 2017. As per sales agreement signed on October 21, 2016, ArcelorMittal received a contingent consideration to be paid during the life of the mine, which is capped at 150 and contingent upon the financial performance of the mine and cash flow availability.2.4.2).
For the year ended December 31, 2016, gain (loss) on disposal mainly includes a gain of 329 relating to the disposal of Gestamp (see note 2.4), a loss of 26 relating to the disposal of Stalprodukt S.A. shares (see note 2.5) and a gain of 74 following
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
the sale of its 10.08% interest in Hunan Valin to a private equity fund. The Company transferred the Hunan Valin shares and simultaneously received the full proceeds of 165 (RMB1,103 million) on September 14, 2016.
NOTE 3: SEGMENT REPORTING
3.1 Reportable segments
As from April 1, 2021, ArcelorMittal implemented changes to its organizational structure whereby primary responsibility for captive mining operations whose output is mainly consumed by their respective steel segments has been transferred to such segments. The Mining segment retains primary responsibility for the operation of the seaborne oriented operations at AMMC and ArcelorMittal Liberia Limited, and continues to provide technical support to all mining operations within the Company. Accordingly, the Company modified the structure of its segment information in order to reflect changes in its approach to managing its operations and segment disclosures have been recast to reflect this new segmentation in conformity with IFRS. Only the seaborne-oriented operations of AMMC and ArcelorMittal Liberia Limited are reported within the Mining segment. The results of all other mines are henceforth
accounted for within the steel segment that they primarily supply.
The Company is organized in five5 operating and reportable segments, which are components engaged in business activities from which they may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company), for which discrete financial information is available and whose operating results are evaluated regularly by the chief operating decision maker “CODM”(“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. AsThe Company's CODM as of January 1, 2016,December 31, 2021 was the Group Management Board “GMB” (ArcelorMittal’s previous CODM) was replaced by the CEOExecutive Office - comprising the CEO,Executive Chairman, Mr. Lakshmi N. Mittal and the President and CFO,CEO, Mr. Aditya Mittal.
These operating segments include the attributable goodwill, intangible assets, property, plant and equipment, and certain equity method investments. They do not include cash and short-term deposits, short-term investments, tax assets and other current financial assets. Attributable liabilities are also those resulting from the normal activities of the segment, excluding tax liabilities and indebtedness but including post retirement obligations where directly attributable to the segment. The treasury function is managed centrally for the Company and is not directly attributable to individual operating segments or geographical areas.
ArcelorMittal’s segments are structured as follows:
•NAFTA represents the flat, long and tubular facilities of the Company located in Canada, Mexico and the United States (on December 9, 2020, the Company divested ArcelorMittal USA see note 2.3.1). NAFTA produces flat products such as slabs, hot-rolled coil, cold-rolled coil, coated steel and plate. These products are sold primarily to customers in the following sectors: automotive, energy, construction, packaging and appliances and via distributors or processors. NAFTA also produces long products such as wire rod, sections, rebar, billets, blooms and wire drawing, and tubular products. The raw material supply of the NAFTA operations includes sourcing from iron ore captive mines in Mexico and iron ore and coal captive mines in the United States (until disposal of ArcelorMittal USA on December 9, 2020 as mentioned above) to supply the steel facilities.
•Brazil includes the flat operations of Brazil, the long and tubular operations of Brazil and neighboring countries including Argentina, Costa Rica and Venezuela. Flat products include slabs, hot-rolled coil, cold-rolled coil and coated steel. Long products consist of wire rod, sections, bar and rebar, billets, blooms and
| | |
• | NAFTA represents the flat, long and tubular facilities of the Company located in North America (Canada, United States and Mexico). NAFTA produces flat products such as slabs, hot-rolled coil, cold-rolled coil, coated steel and plate. These products are sold primarily to customers in the following sectors: automotive, energy, construction, packaging and appliances and via distributors or processors. NAFTA also produces long products such as wire rod, sections, rebar, billets, blooms and wire drawing, and tubular products;
|
| Consolidated financial statements 280 |
• | Brazil includes the flat operations(millions of BrazilU.S. dollar, except share and the long and tubular operations of Brazil and neighboring countries including Argentina, Costa Rica and Venezuela. Flat products include slabs, hot-rolled coil, cold-rolled coil and coated steel. Long products consist of wire rod, sections, bar and rebar, billets, blooms and wire drawing;per share data)
|
| |
• | Europe is the largest flat steel producer in Europe, with operations that range from Spain in the west to Romania in the east, and covering the flat carbon steel product portfolio in all major countries and markets. 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 and packaging sectors. Europe also produces long products consisting of sections, wire rod, rebar, billets, blooms and wire drawing, and tubular products. In addition, it includes Downstream Solutions, primarily an in-house trading and distribution arm of ArcelorMittal. Downstream Solutions also provides value-added and customized steel solutions through further steel processing to meet specific customer requirements;
|
| |
• | ACIS produces a combination of flat, long and tubular products. Its facilities are located in Africa and the Commonwealth of Independent States; and
|
| |
• | Mining comprises all mines owned by ArcelorMittal in the Americas (Canada, United States, Mexico and Brazil), Asia (Kazakhstan), Europe (Ukraine and Bosnia & Herzegovina) and Africa (Liberia). It provides the Company's steel operations with high quality and low-cost iron ore and coal reserves and also sells limited amounts of mineral products to third parties.
|
ARCELORMITTAL AND SUBSIDIARIES•Europe is the largest flat steel producer in Europe, with operations that range from Spain in the west to Romania in the east, and covering the flat carbon steel product portfolio in all major countries and markets. 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 and packaging sectors. Europe also produces long products consisting of sections, wire rod, rebar, billets, blooms and wire drawing, and tubular products. In addition, it includes Downstream Solutions, primarily an in-house trading and distribution arm of ArcelorMittal. Downstream Solutions also provides value-added and customized steel solutions through further steel processing to meet specific customer requirements.
The raw material supply of Europe operations includes sourcing from iron ore captive mines in Bosnia & Herzegovina.
•ACIS produces a combination of flat, long and tubular products. Its steel facilities are located in South Africa, Ukraine and Kazakhstan. The raw material supply of the ACIS operations includes sourcing from iron ore captive mines in Kazakhstan and Ukraine and coal captive mines in Kazakhstan.
Notes•The Mining segment comprises the mines owned by ArcelorMittal in Canada and Liberia. It provides the Company's steel operations with high quality and low-cost iron ore reserves and also sells mineral products to Consolidated Financial Statementsthird parties.
(millions of U.S. dollars, except share and per share data)
The following table summarizes certain financial data for ArcelorMittal’s operations by reportable segments.
| | | | | | | | | | | | | | | | | | | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others 1 | | Elimination | | Total |
| NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others 1 | | Elimination | | Total | |
| Year ended December 31, 2016 |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| Year ended December 31, 2021 | | Year ended December 31, 2021 | |
| Sales to external customers | | Sales to external customers | 12,492 | | | 10,830 | | | 43,200 | | | 8,392 | | | 1,640 | | | 17 | | | — | | | 76,571 | |
Intersegment sales 2 | | Intersegment sales 2 | 38 | | | 2,026 | | | 134 | | | 1,462 | | | 2,405 | | | 17 | | | (6,082) | | | — | |
| Operating income (loss) | | Operating income (loss) | 2,800 | | | 3,798 | | | 5,672 | | | 2,705 | | | 2,371 | | | (228) | | | (142) | | | 16,976 | |
| Depreciation and amortization | | Depreciation and amortization | (325) | | | (228) | | | (1,252) | | | (450) | | | (228) | | | (40) | | | — | | | (2,523) | |
| Impairment reversal | | Impairment reversal | — | | | — | | | 218 | | | — | | | — | | | — | | | — | | | 218 | |
| Capital expenditures | | Capital expenditures | 369 | | | 412 | | | 1,282 | | | 619 | | | 302 | | | 24 | | | — | | | 3,008 | |
| Year ended December 31, 2020 | | Year ended December 31, 2020 | |
| Sales to external customers | 15,769 |
| | 5,526 |
| | 28,999 |
| | 5,675 |
| | 781 |
| | 41 |
| | — |
| | 56,791 |
| Sales to external customers | 13,438 | | | 5,613 | | | 27,989 | | | 5,034 | | | 1,185 | | | 11 | | | — | | | 53,270 | |
Intersegment sales 2 | 37 |
| | 697 |
| | 273 |
| | 210 |
| | 2,333 |
| | 260 |
| | (3,810 | ) | | — |
| Intersegment sales 2 | 230 | | | 723 | | | 82 | | | 703 | | | 1,600 | | | 13 | | | (3,351) | | | — | |
| Operating income (loss) | 2,002 |
| | 614 |
| | 1,270 |
| | 211 |
| | 366 |
| | (208 | ) | | (94 | ) | | 4,161 |
| Operating income (loss) | 1,684 | | | 777 | | | (1,439) | | | 209 | | | 1,247 | | | (268) | | | (100) | | | 2,110 | |
| Depreciation and amortization | (549 | ) | | (258 | ) | | (1,184 | ) | | (311 | ) | | (396 | ) | | (23 | ) | | — |
| | (2,721 | ) | Depreciation and amortization | (537) | | | (228) | | | (1,418) | | | (492) | | | (243) | | | (42) | | | — | | | (2,960) | |
| Impairment | — |
| | — |
| | (49 | ) | | (156 | ) | | — |
| | — |
| | — |
| | (205 | ) | Impairment | 660 | | | — | | | (527) | | | — | | | — | | | — | | | — | | | 133 | |
| Capital expenditures | 445 |
| | 237 |
| | 951 |
| | 397 |
| | 392 |
| | 22 |
| | — |
| | 2,444 |
| Capital expenditures | 527 | | | 217 | | | 1,040 | | | 476 | | | 140 | | | 39 | | | — | | | 2,439 | |
| Year ended December 31, 2017 |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| Year ended December 31, 2019 | | Year ended December 31, 2019 | |
| Sales to external customers | 17,893 |
| | 6,571 |
| | 35,825 |
| | 7,323 |
| | 985 |
| | 82 |
| | — |
| | 68,679 |
| Sales to external customers | 18,590 | | | 6,980 | | | 37,487 | | | 6,506 | | | 981 | | | 71 | | | — | | | 70,615 | |
Intersegment sales 2 | 104 |
| | 1,184 |
| | 383 |
| | 298 |
| | 3,048 |
| | 303 |
| | (5,320 | ) | | — |
| Intersegment sales 2 | 116 | | | 1,186 | | | 234 | | | 491 | | | 1,683 | | | 353 | | | (4,063) | | | — | |
| Operating income (loss) | 1,185 |
| | 697 |
| | 2,359 |
| | 508 |
| | 991 |
| | (288 | ) | | (18 | ) | | 5,434 |
| Operating income (loss) | (1,144) | | | 853 | | | (1,101) | | | 31 | | | 1,026 | | | (285) | | | (7) | | | (627) | |
| Depreciation and amortization | (518 | ) | | (293 | ) | | (1,201 | ) | | (313 | ) | | (416 | ) | | (27 | ) | | — |
| | (2,768 | ) | Depreciation and amortization | (638) | | | (277) | | | (1,261) | | | (499) | | | (237) | | | (155) | | | — | | | (3,067) | |
| | Impairment | — |
| | — |
| | — |
| | (206 | ) | | — |
| | — |
| | — |
| | (206 | ) | Impairment | (1,300) | | | — | | | (525) | | | (102) | | | — | | | — | | | — | | | (1,927) | |
| Capital expenditures | 466 |
| | 263 |
| | 1,143 |
| | 427 |
| | 495 |
| | 25 |
| | — |
| | 2,819 |
| Capital expenditures | 828 | | | 360 | | | 1,355 | | | 673 | | | 185 | | | 171 | | | — | | | 3,572 | |
| Year ended December 31, 2018 |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| Sales to external customers | 20,145 |
| | 7,041 |
| | 40,247 |
| | 7,506 |
| | 1,009 |
| | 85 |
| | — |
| | 76,033 |
| |
Intersegment sales 2 | 187 |
| | 1,670 |
| | 241 |
| | 455 |
| | 3,202 |
| | 307 |
| | (6,062 | ) | | — |
| |
| Operating income (loss) | 1,889 |
| | 1,356 |
| | 1,632 |
| | 1,094 |
| | 860 |
| | (247 | ) | | (45 | ) | | 6,539 |
| |
| Depreciation and amortization | (522 | ) | | (298 | ) | | (1,195 | ) | | (311 | ) | | (418 | ) | | (55 | ) | | — |
| | (2,799 | ) | |
Bargain purchase gain3 | — |
| | — |
| | 209 |
| | — |
| | — |
| | — |
| | — |
| | 209 |
| |
| Impairment | — |
| | (86 | ) | | (908 | ) | | — |
| | — |
| | — |
| | — |
| | (994 | ) | |
| Capital expenditures | 669 |
| | 244 |
| | 1,336 |
| | 534 |
| | 485 |
| | 37 |
| | — |
| | 3,305 |
| |
1.Others include all other operational and non-operational items which are not segmented, such as corporate and shared services, financial activities, and shipping and logistics.
2.Transactions between segments are reported on the same basis of accounting as transactions with third parties except for certain mining products shipped internally and reported on a cost plus basis.parties.
3. See note 2.2.4.
| | |
| 281 Consolidated financial statements |
The reconciliation from operating income to net income (including non-controlling interests) is as follows:
|
| | | | | | | | |
| Year ended December 31, |
| 2018 | | 2017 | | 2016 |
| Operating income | 6,539 |
| | 5,434 |
| | 4,161 |
|
| Income from investments in associates and joint ventures | 652 |
| | 448 |
| | 615 |
|
| Financing costs - net | (2,210 | ) | | (875 | ) | | (2,056 | ) |
| Income before taxes | 4,981 |
| | 5,007 |
| | 2,720 |
|
| Income tax expense (benefit) | (349 | ) | | 432 |
| | 986 |
|
| Net income (including non-controlling interests) | 5,330 |
| | 4,575 |
| | 1,734 |
|
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Operating income/(loss) | 16,976 | | | 2,110 | | | (627) | |
| Income from investments in associates and joint ventures | 2,204 | | | 234 | | | 347 | |
| Financing costs - net | (1,155) | | | (1,256) | | | (1,652) | |
| Income/(loss) before taxes | 18,025 | | | 1,088 | | | (1,932) | |
| Income tax expense | 2,460 | | | 1,666 | | | 459 | |
| Net income/(loss) (including non-controlling interests) | 15,565 | | | (578) | | | (2,391) | |
The Company does not regularly provide a measure of total assets and liabilities for each reportable segment to the CODM.
3.2 Geographical information
Geographical information, by country or region, is separately disclosed and represents ArcelorMittal’s most significant regional markets. Attributed assets are operational assets employed in each region and include items such as pension balances that are specific to a country. Unless otherwise stated in the table heading as a segment disclosure, these disclosures are specific to the country or region stated. They do not include goodwill, deferred tax assets, other investments or receivables and other non-current financial assets. Attributed liabilities are those arising within each region, excluding indebtedness.
Sales (by destination)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Americas | | | | | |
United States 1 | 7,300 | | | 9,991 | | | 15,238 | |
| Brazil | 8,204 | | | 4,396 | | | 5,094 | |
| Canada | 4,282 | | | 2,537 | | | 3,004 | |
| Mexico | 2,356 | | | 1,707 | | | 1,941 | |
| Argentina | 1,440 | | | 679 | | | 814 | |
| | | | | |
| Others | 1,826 | | | 872 | | | 1,195 | |
| Total Americas | 25,408 | | | 20,182 | | | 27,286 | |
| | | | | |
| Europe | | | | | |
| Germany | 6,541 | | | 4,200 | | | 5,694 | |
| Poland | 5,298 | | | 3,231 | | | 3,957 | |
| France | 4,874 | | | 3,115 | | | 4,114 | |
| Spain | 4,187 | | | 2,817 | | | 3,855 | |
Italy3 | 5,426 | | | 3,195 | | | 4,317 | |
| Czech Republic | 1,362 | | | 752 | | | 1,244 | |
| Turkey | 1,508 | | | 1,075 | | | 1,499 | |
| United Kingdom | 1,519 | | | 966 | | | 1,434 | |
| Belgium | 1,847 | | | 1,274 | | | 1,617 | |
| Netherlands | 1,623 | | | 878 | | | 1,142 | |
| Russia | 1,583 | | | 804 | | | 876 | |
| Romania | 443 | | | 335 | | | 720 | |
Ukraine 2 | 948 | | | 515 | | | 540 | |
| Others | 5,025 | | | 3,148 | | | 4,359 | |
| Total Europe | 42,184 | | | 26,305 | | | 35,368 | |
| | | | | |
| Asia & Africa | | | | | |
| South Africa | 2,448 | | | 1,366 | | | 2,260 | |
| Morocco | 689 | | | 492 | | | 583 | |
| Egypt | 85 | | | 103 | | | 309 | |
| Rest of Africa | 1,068 | | | 619 | | | 1,278 | |
| China | 943 | | | 1,622 | | | 676 | |
| Kazakhstan | 747 | | | 425 | | | 470 | |
| South Korea | 608 | | | 331 | | | 380 | |
| India | 142 | | | 142 | | | 95 | |
| Rest of Asia | 2,249 | | | 1,683 | | | 1,910 | |
| Total Asia & Africa | 8,979 | | | 6,783 | | | 7,961 | |
| | | | | |
| Total | 76,571 | | | 53,270 | | | 70,615 | |
1.On December 9, 2020, the Company completed the sale of ArcelorMittal USA. Sales of divested operations were consolidated by ArcelorMittal until December 9, 2020, see note 2.3.1.
2.Ukraine is presented separately in 2021 and 2020, due to the increased contributions. In 2019 Ukraine was included in others. The comparative periods are revised to align with the current presentation.
3.Sales in Italy includes sales from Acciaerie d'Italia until April 14, 2021 (see note 2.3.1).
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 282 |
| (millions of U.S. dollar, except share and per share data) |
Sales (by destination) |
| | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Americas | | | | | |
| United States | 16,271 |
| | 14,367 |
| | 12,284 |
|
| Brazil | 4,982 |
| | 4,149 |
| | 3,506 |
|
| Canada | 3,563 |
| | 3,034 |
| | 2,818 |
|
| Mexico | 1,970 |
| | 2,251 |
| | 1,806 |
|
| Argentina | 960 |
| | 1,230 |
| | 858 |
|
| Others | 1,322 |
| | 1,005 |
| | 935 |
|
| Total Americas | 29,068 |
| | 26,036 |
| | 22,207 |
|
| | | | | | |
| Europe | |
| | |
| | |
|
| Germany | 6,757 |
| | 5,933 |
| | 4,768 |
|
| Poland | 4,518 |
| | 3,746 |
| | 2,997 |
|
| France | 4,431 |
| | 4,051 |
| | 3,655 |
|
| Spain | 4,265 |
| | 3,751 |
| | 3,015 |
|
| Italy | 3,333 |
| | 2,711 |
| | 2,067 |
|
| Czech Republic | 1,782 |
| | 1,400 |
| | 1,107 |
|
| Turkey | 1,683 |
| | 1,937 |
| | 1,789 |
|
| United Kingdom | 1,471 |
| | 1,370 |
| | 1,159 |
|
| Belgium | 1,309 |
| | 1,129 |
| | 929 |
|
| Netherlands | 1,209 |
| | 1,117 |
| | 1,030 |
|
| Russia | 1,144 |
| | 1,204 |
| | 688 |
|
| Romania | 708 |
| | 621 |
| | 526 |
|
| Others | 5,653 |
| | 4,948 |
| | 3,886 |
|
| Total Europe | 38,263 |
| | 33,918 |
| | 27,616 |
|
| | | | | | |
| Asia & Africa | | | | | |
| South Africa | 2,742 |
| | 2,560 |
| | 2,026 |
|
| Morocco | 628 |
| | 596 |
| | 498 |
|
| Egypt | 206 |
| | 310 |
| | 499 |
|
| Rest of Africa | 1,257 |
| | 1,033 |
| | 658 |
|
| China | 608 |
| | 622 |
| | 549 |
|
| Kazakhstan | 496 |
| | 392 |
| | 350 |
|
| South Korea | 365 |
| | 259 |
| | 184 |
|
| India | 92 |
| | 163 |
| | 85 |
|
| Rest of Asia | 2,308 |
| | 2,790 |
| | 2,119 |
|
| Total Asia & Africa | 8,702 |
| | 8,725 |
| | 6,968 |
|
| | | | | | |
| Total | 76,033 |
| | 68,679 |
| | 56,791 |
|
Revenues from external customers attributed to the country of domicile (Luxembourg) were 162, 111185, 114 and 88151 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Non-current assets |
| | | | | |
| | December 31, |
| | 2018 |
| 2017 |
| Americas | |
| |
| Canada | 5,187 |
|
| 5,368 |
|
| Brazil | 4,259 |
|
| 4,466 |
|
| United States | 4,022 |
|
| 4,029 |
|
| Mexico | 1,163 |
|
| 978 |
|
| Argentina | 252 |
|
| 137 |
|
| Venezuela | 10 |
|
| 100 |
|
| Others | 19 |
|
| 20 |
|
| Total Americas | 14,912 |
|
| 15,098 |
|
|
|
|
|
| Europe |
|
|
|
| France | 4,363 |
|
| 4,738 |
|
| Germany | 2,607 |
|
| 2,737 |
|
Belgium3 | 2,526 |
|
| 2,827 |
|
| Poland | 2,356 |
|
| 2,421 |
|
| Ukraine | 2,219 |
|
| 2,077 |
|
| Spain | 1,971 |
|
| 2,035 |
|
Italy2 | 1,365 |
|
| 171 |
|
| Luxembourg | 1,229 |
|
| 1,277 |
|
| Bosnia and Herzegovina | 205 |
|
| 202 |
|
Romania3 | 86 |
|
| 633 |
|
Czech Republic3 | 24 |
|
| 621 |
|
| Others | 235 |
|
| 264 |
|
| Total Europe | 19,186 |
|
| 20,003 |
|
|
|
|
|
| Asia & Africa |
|
|
|
| Kazakhstan | 1,309 |
|
| 1,322 |
|
| South Africa | 625 |
|
| 677 |
|
| Liberia | 148 |
|
| 93 |
|
| Morocco | 93 |
|
| 103 |
|
| Others | 107 |
|
| 119 |
|
| Total Asia & Africa | 2,282 |
|
| 2,314 |
|
|
|
|
|
| Unallocated assets | 22,394 |
|
| 21,137 |
|
| Total | 58,774 |
|
| 58,552 |
|
|
| | | | | |
| | December 31, |
| | 2018 |
| 2017 |
| Americas | |
| |
| Canada | 5,187 |
|
| 5,368 |
|
| Brazil | 4,259 |
|
| 4,466 |
|
| United States | 4,022 |
|
| 4,029 |
|
| Mexico | 1,163 |
|
| 978 |
|
| Argentina | 252 |
|
| 137 |
|
| Venezuela | 10 |
|
| 100 |
|
| Others | 19 |
|
| 20 |
|
| Total Americas | 14,912 |
|
| 15,098 |
|
|
|
|
|
| Europe |
|
|
|
| France | 4,363 |
|
| 4,738 |
|
| Germany | 2,607 |
|
| 2,737 |
|
Belgium3 | 2,526 |
|
| 2,827 |
|
| Poland | 2,356 |
|
| 2,421 |
|
| Ukraine | 2,219 |
|
| 2,077 |
|
| Spain | 1,971 |
|
| 2,035 |
|
Italy2 | 1,365 |
|
| 171 |
|
| Luxembourg | 1,229 |
|
| 1,277 |
|
| Bosnia and Herzegovina | 205 |
|
| 202 |
|
Romania3 | 86 |
|
| 633 |
|
Czech Republic3 | 24 |
|
| 621 |
|
| Others | 235 |
|
| 264 |
|
| Total Europe | 19,186 |
|
| 20,003 |
|
|
|
|
|
| Asia & Africa |
|
|
|
| Kazakhstan | 1,309 |
|
| 1,322 |
|
| South Africa | 625 |
|
| 677 |
|
| Liberia | 148 |
|
| 93 |
|
| Morocco | 93 |
|
| 103 |
|
| Others | 107 |
|
| 119 |
|
| Total Asia & Africa | 2,282 |
|
| 2,314 |
|
|
|
|
|
| Unallocated assets | 22,394 |
|
| 21,137 |
|
| Total | 58,774 |
|
| 58,552 |
|
| | | | December 31, | | December 31, |
| | 2018 |
| 2017 | 2021 | | 2020 |
| Americas | |
| | Americas | | | |
| Canada | 5,187 |
|
| 5,368 |
| Canada | 5,252 | | | 5,213 | |
| Brazil | 4,259 |
|
| 4,466 |
| Brazil | 3,306 | | | 3,330 | |
| United States | 4,022 |
|
| 4,029 |
| |
United States 2 | | United States 2 | 117 | | | 116 | |
| Mexico | 1,163 |
|
| 978 |
| Mexico | 1,550 | | | 1,457 | |
| Argentina | 252 |
|
| 137 |
| Argentina | 342 | | | 249 | |
| Venezuela | 10 |
|
| 100 |
| Venezuela | 31 | | | 17 | |
| Others | 19 |
|
| 20 |
| Others | 17 | | | 18 | |
| Total Americas | 14,912 |
|
| 15,098 |
| Total Americas | 10,615 | | | 10,400 | |
|
|
|
| |
| Europe |
|
|
| Europe | | |
| France | 4,363 |
|
| 4,738 |
| France | 3,754 | | | 4,207 | |
| Germany | 2,607 |
|
| 2,737 |
| Germany | 2,543 | | | 2,789 | |
Belgium3 | 2,526 |
|
| 2,827 |
| |
| Belgium | | Belgium | 2,616 | | | 2,712 | |
| Poland | 2,356 |
|
| 2,421 |
| Poland | 2,312 | | | 2,546 | |
| Ukraine | 2,219 |
|
| 2,077 |
| Ukraine | 2,299 | | | 2,154 | |
| Spain | 1,971 |
|
| 2,035 |
| Spain | 2,153 | | | 2,058 | |
Italy2 | 1,365 |
|
| 171 |
| |
| | Luxembourg | 1,229 |
|
| 1,277 |
| Luxembourg | 1,476 | | | 1,297 | |
| Bosnia and Herzegovina | 205 |
|
| 202 |
| Bosnia and Herzegovina | 168 | | | 189 | |
Romania3 | 86 |
|
| 633 |
| |
Czech Republic3 | 24 |
|
| 621 |
| |
| Romania | | Romania | 24 | | | 56 | |
| Czech Republic | | Czech Republic | 28 | | | 28 | |
| Others | 235 |
|
| 264 |
| Others | 186 | | | 206 | |
| Total Europe | 19,186 |
|
| 20,003 |
| Total Europe | 17,559 | | | 18,242 | |
|
|
|
| |
| Asia & Africa |
|
|
| Asia & Africa | | |
| Kazakhstan | 1,309 |
|
| 1,322 |
| Kazakhstan | 1,449 | | | 1,401 | |
| South Africa | 625 |
|
| 677 |
| South Africa | 511 | | | 528 | |
| Liberia | 148 |
|
| 93 |
| Liberia | 160 | | | 132 | |
| Morocco | 93 |
|
| 103 |
| Morocco | 97 | | | 102 | |
| Others | 107 |
|
| 119 |
| Others | 178 | | | 137 | |
| Total Asia & Africa | 2,282 |
|
| 2,314 |
| Total Asia & Africa | 2,395 | | | 2,300 | |
|
|
|
| |
| Unallocated assets | 22,394 |
|
| 21,137 |
| Unallocated assets | 25,004 | | | 23,137 | |
| Total | 58,774 |
|
| 58,552 |
| Total | 55,573 | | | 54,079 | |
| |
1. | Non-current assets do not include goodwill (as it is not allocated to the individual countries), deferred tax assets, investments in associates and joint ventures, other investments and other non-current financial assets.1.Non-current assets do not include goodwill, deferred tax assets, investments in associates and joint ventures, other investments and other non-current financial assets (as they are not allocated to the individual countries). Such assets are presented under the caption “Unallocated assets”. |
| |
2. | Increase relates mainly to the Ilva acquisition (see note 2.2.4). |
| |
3. | ArcelorMittal Ostrava, ArcelorMittal Galati and certain assets of ArcelorMittal Belgium are classified as held for sale as December 31, 2018 (see note 2.3.2). |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements2.
(millionsOn December 9, 2020, the Company completed the sale of U.S. dollars, except share and per share data)ArcelorMittal USA (see note 2.3.1).
3.3 Sales by type of products
The table below presents sales to external customers by product type. In addition to steel produced by the Company, amounts include material purchased for additional transformation and sold through distribution services. Mining products relate to the Company's own production. Others mainly include non-steel and by-products sales, manufactured and specialty steel products sales, shipping and other services.
| | | | Year ended December 31, | | Year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Flat products | 46,734 |
| | 43,065 |
| | 34,215 |
| Flat products | 41,895 | | | 31,584 | | | 43,633 | |
| Long products | 15,751 |
| | 13,685 |
| | 12,104 |
| Long products | 18,118 | | | 11,117 | | | 13,706 | |
| Tubular products | 2,158 |
| | 1,810 |
| | 1,500 |
| Tubular products | 2,233 | | | 1,343 | | | 2,044 | |
| Mining products | 1,009 |
| | 985 |
| | 781 |
| Mining products | 1,860 | | | 1,451 | | | 1,165 | |
| Others | 10,380 |
| | 9,134 |
| | 8,191 |
| Others | 12,465 | | | 7,775 | | | 10,067 | |
| Total | 76,033 |
| | 68,679 |
| | 56,791 |
| Total | 76,571 | | | 53,270 | | | 70,615 | |
| | |
| 283 Consolidated financial statements |
3.4 Disaggregated revenue
Disaggregated revenue
The tables below summarize the disaggregated revenue recognized from contracts with customers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 12,127 | | | 10,225 | | | 38,302 | | | 7,148 | | | — | | | — | | | 67,802 | |
Non-steel sales 1 | 1 | | | 202 | | | 2,240 | | | 769 | | | 1,607 | | | — | | | 4,819 | |
By-product sales 2 | 132 | | | 111 | | | 943 | | | 171 | | | — | | | — | | | 1,357 | |
Other sales 3 | 232 | | | 292 | | | 1,715 | | | 304 | | | 33 | | | 17 | | | 2,593 | |
| Total | 12,492 | | | 10,830 | | | 43,200 | | | 8,392 | | | 1,640 | | | 17 | | | 76,571 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 12,791 | | | 5,226 | | | 25,437 | | | 4,232 | | | — | | | — | | | 47,686 | |
Non-steel sales 1 | 141 | | | 108 | | | 620 | | | 452 | | | 1,154 | | | — | | | 2,475 | |
By-product sales 2 | 83 | | | 82 | | | 553 | | | 90 | | | — | | | — | | | 808 | |
Other sales 3 | 423 | | | 197 | | | 1,379 | | | 260 | | | 31 | | | 11 | | | 2,301 | |
| Total | 13,438 | | | 5,613 | | | 27,989 | | | 5,034 | | | 1,185 | | | 11 | | | 53,270 | |
|
| | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2018 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 19,372 |
| | 6,582 |
| | 36,603 |
| | 6,748 |
| | — |
| | — |
| | 69,305 |
|
Non-steel sales 1 | 148 |
| | 31 |
| | 882 |
| | 243 |
| | 968 |
| | — |
| | 2,272 |
|
By-product sales 2 | 124 |
| | 115 |
| | 947 |
| | 182 |
| | — |
| | — |
| | 1,368 |
|
Other sales 3 | 501 |
| | 313 |
| | 1,815 |
| | 333 |
| | 41 |
| | 85 |
| | 3,088 |
|
| Total | 20,145 |
| | 7,041 |
| | 40,247 |
| | 7,506 |
| | 1,009 |
| | 85 |
| | 76,033 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 17,210 |
| | 6,128 |
| | 32,676 |
| | 6,661 |
| | — |
| | — |
| | 62,675 |
|
Non-steel sales 1 | 121 |
| | 77 |
| | 817 |
| | 188 |
| | 947 |
| | — |
| | 2,150 |
|
By-product sales 2 | 98 |
| | 89 |
| | 683 |
| | 159 |
| | — |
| | — |
| | 1,029 |
|
Other sales 3 | 464 |
| | 277 |
| | 1,649 |
| | 315 |
| | 38 |
| | 82 |
| | 2,825 |
|
| Total | 17,893 |
| | 6,571 |
| | 35,825 |
| | 7,323 |
| | 985 |
| | 82 |
| | 68,679 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2016 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 15,158 |
| | 5,148 |
| | 26,134 |
| | 5,190 |
| | — |
| | — |
| | 51,630 |
|
Non-steel sales 1 | 84 |
| | 38 |
| | 803 |
| | 160 |
| | 741 |
| | — |
| | 1,826 |
|
By-product sales 2 | 92 |
| | 79 |
| | 568 |
| | 105 |
| | — |
| | — |
| | 844 |
|
Other sales 3 | 435 |
| | 261 |
| | 1,494 |
| | 220 |
| | 40 |
| | 41 |
| | 2,491 |
|
| Total | 15,769 |
| | 5,526 |
| | 28,999 |
| | 5,675 |
| | 781 |
| | 41 |
| | 56,791 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2019 | NAFTA | | Brazil | | Europe | | ACIS | | Mining | | Others | | Total |
| Steel sales | 17,669 | | | 6,467 | | | 33,759 | | | 5,789 | | | — | | | — | | | 63,684 | |
Non-steel sales 1 | 233 | | | 112 | | | 1,130 | | | 254 | | | 945 | | | — | | | 2,674 | |
By-product sales 2 | 114 | | | 93 | | | 816 | | | 135 | | | — | | | — | | | 1,158 | |
Other sales 3 | 574 | | | 308 | | | 1,782 | | | 328 | | | 36 | | | 71 | | | 3,099 | |
| Total | 18,590 | | | 6,980 | | | 37,487 | | | 6,506 | | | 981 | | | 71 | | | 70,615 | |
1.Non-steel sales mainly relate to iron ore, coal, scrap and electricity;electricity.
2.By-product sales mainly relate to slag, waste and coke by-products;by-products.
3.Other sales are mainly comprised of shipping and other services.
NOTE 4: OPERATING DATA
4.1 Revenue
The Company’s revenue is derived from the single performance obligation to transfer primarily steel and mining products under arrangements in which the transfer of control of the products and the fulfillment of the Company’s performance obligation occur at the same time. Revenue from the sale of goods is recognized when the Company has transferred control o
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
f the goods to the buyer and the buyer obtains the benefits from the goods, the potential cash flows and the amount of revenue (the transaction price) can be measured reliably, and it is probable that the Company will collect the consideration to which it is entitled to in exchange for the goods.
Whether the customer has obtained control over the asset depends on when the goods are made available to the carrier or the buyer takes possession of the goods, depending on the delivery terms. For the Company’s steel producing operations,
generally the criteria to recognize revenue has been met when its products are delivered to its customers or to a carrier who will transport the goods to its customers, this is the point in time when the Company has completed its performance obligations. Revenue is measured at the transaction price of the consideration received or receivable, the amount the Company expects to be entitled to.
Additionally, the Company identifies when goods have left its premises, not when the customer receives the goods. Therefore, the Company estimates, based on its historical experience, the amount of goods in-transit when the transfer of control occurs at the destination and defers the revenue recognition.
The Company’s products must meet customer specifications. A certain portion of the Company’s products are returned or have claims filed against the sale because the products contained quality defects or other problems. Claims may be either of the following:
| | |
– | Product Rejection - Product shipped and billed to an end customer that did not meet previously agreed customer specifications. Claims typically result from physical defects in the goods, goods shipped to the wrong location, goods produced with incorrect specifications and goods shipped outside acceptable time parameters.
|
| Consolidated financial statements 284 |
– | Consequential Damages - Damages reported by the customer not directly related to the value(millions of the rejected goods (for example: customer processing cost or mill down time, sampling, storage, sorting, administrative cost, replacement cost, etc.).U.S. dollar, except share and per share data)
|
–Product Rejection - Product shipped and billed to an end customer that did not meet previously agreed customer specifications. Claims typically result from physical defects in the goods, goods shipped to the wrong location, goods produced with incorrect specifications and goods shipped outside acceptable time parameters.
–Consequential Damages - Damages reported by the customer not directly related to the value of the rejected goods (for example: customer processing cost or mill down time, sampling, storage, sorting, administrative cost, replacement cost, etc.).
The Company estimates the variable consideration for such claims using the expected value method and reduces the
amount of revenue recognized.
Warranties:
The warranties and claims arise when the product fails on the criteria mentioned above. Sales‑relatedSales-related warranties associated with the goods cannot be purchased separately and they serve as an assurance that the products sold comply with agreed‑uponagreed specifications. Accordingly, the Company accounts for warranties in accordance with IAS 37 Provisions,"Provisions, Contingent Liabilities and Contingent AssetsAssets" (see note 8)9).
Periodically, the Company enters into volume or other rebate programs where once a certain volume or other conditions are met, it refunds the customer some portion of the amounts previously billed or paid. For such arrangements, the Company only recognizes revenue for the amounts it ultimately expects to realize from the customer. The Company estimates the variable consideration for these programs using the most likely amount method or the expected value method, whichever approach best predicts the amount of the consideration based on the terms of the contract and available information and updates its estimates each reporting period.
The Company’s payment terms range from 30 to 90 days from date of delivery, depending on the market and product sold. The Company has applied the practical expedient in IFRS 15 (C5) (d). In 2018, the Company received 364404 as advances from its customers which are classified as unsatisfied performance obligations and recognized as liabilities in line with IFRS 15. The Company expects 100% of thethese unsatisfied performance obligations as of December 31, 20182021 to be recognized as revenue during 20192022 as the Company’s contracts have an original expected duration of one year or less.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The tables below summarize the movements relating to the Company's trade receivable and other for the years ended December 31, 2018, 20172021, 2020 and 2016.2019
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Trade accounts receivable and other - opening balance | 3,072 | | | 3,569 | | | 4,432 | |
| Performance obligations satisfied | 76,571 | | | 53,270 | | | 70,615 | |
| Payments received | (74,036) | | | (53,194) | | | (71,559) | |
| Impairment of receivables (net of write backs and utilization) | (69) | | | (16) | | | 9 | |
Reclassification of the period-end receivables from /(to) held for sale and recognition (derecognition) of receivables related to business combination and divestments 2 | 182 | | | (724) | | | — | |
| Acquisitions through business combination | — | | | — | | | 4 | |
TSR receivables retained in ArcelorMittal USA divestment 1 | (260) | | | 260 | | | — | |
| Foreign exchange and others | (317) | | | (93) | | | 68 | |
| | | | | |
| Trade accounts receivable and other - closing balance | 5,143 | | | 3,072 | | | 3,569 | |
1. |
| | | | | | | | |
| Year ended December 31, |
| 2018 |
| 2017 |
| 2016 |
| Trade accounts receivable and other - opening balance | 3,863 |
|
| 2,974 |
|
| 2,679 |
|
| Performance obligations satisfied | 76,033 |
|
| 68,679 |
|
| 56,791 |
|
| Payments received | (75,387 | ) |
| (68,059 | ) |
| (56,418 | ) |
| Impairment of receivables (net of write backs) | (8 | ) |
| — |
|
| (16 | ) |
| Reclassification of the period-end receivables to held for sale | (182 | ) | | — |
| | (39 | ) |
| Acquisitions through business combinations | 532 |
| | 33 |
| | — |
|
| Foreign exchange and others | (419 | ) |
| 236 |
|
| (23 | ) |
| Trade accounts receivable and other - closing balance | 4,432 |
|
| 3,863 |
|
| 2,974 |
|
4.2 Cost of sales
Cost of sales includes the following components:
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Materials | 42,737 | | | 34,599 | | | 47,809 | |
| Labor costs | 6,886 | | | 7,690 | | | 9,094 | |
| Logistic expenses | 3,931 | | | 3,474 | | | 4,951 | |
| Depreciation and amortization | 2,523 | | | 2,960 | | | 3,067 | |
| | | | | |
| Net impairment (reversal)/charges (see note 5.3) | (218) | | | (133) | | | 1,927 | |
Gain on AM USA disposal 1 | — | | | (1,460) | | | — | |
| Other | 1,478 | | | 2,008 | | | 2,039 | |
| Total | 57,337 | | | 49,138 | | | 68,887 | |
|
| | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Materials | 46,842 |
| | 42,813 |
| | 34,276 |
|
Labor costs 1 | 9,206 |
| | 8,842 |
| | 7,572 |
|
| Logistic expenses | 4,974 |
| | 4,161 |
| | 3,760 |
|
| Depreciation and amortization | 2,799 |
| | 2,768 |
| | 2,721 |
|
Gain on bargain purchase2 | (209 | ) |
| — |
|
| — |
|
| Impairment | 994 |
| | 206 |
| | 205 |
|
| Other | 2,419 |
| | 2,086 |
| | 1,894 |
|
| Total | 67,025 |
| | 60,876 |
| | 50,428 |
|
| | |
1. | In 2016, labor costs included an 832 gain relating to changes in post-employment benefit plans in the United States (see note 7.2).
285 Consolidated financial statements |
4.3 Trade accounts receivable and other
Trade accounts receivable are initially recorded at their transaction price and do not carry any interest. ArcelorMittal maintains an allowance for lifetime expected credit loss at an amount that it considers to be a reliable estimate of expected credit losses resulting from the inability of its customers to make required payments. In judging the adequacy of the allowance for expected credit losses, ArcelorMittal considers multiple factors including historical bad debt experience, the current and forward looking economic environment and the aging of the receivables. Recoveries of trade receivables previously reserved in the allowance for expected credit losses are recognized as gains in selling, general and administrative expenses.
ArcelorMittal’s policy is to record an allowance for expected lifetime credit losses and a charge in selling, general and administrative expense when a specific account is deemed uncollectible. The Company concluded that a trade receivable is in default when they areit is overdue by more than 180 days. Based on historical experience and analysis, the Company concluded that there is a risk of default as such receivables are generally not recoverable and therefore provided for, unless itthe collectibility can be clearly demonstrated thatdemonstrated. Uninsured trade receivables and the receivable is still collectible.associated allowance are written off when ArcelorMittal has exhausted its recovery efforts and enforcement options. ArcelorMittal considered the continued impact of the COVID-19 pandemic on the economic environment in its risk of default assessment for receivables outstanding less than 180 days. Receivables aged 31 days or older and uninsured trade receivables remain consistent with historical levels and the Company did not identify any expected increased risk of default.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Trade accounts receivable and allowance for lifetime |
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Gross amount | 4,605 |
| | 4,056 |
|
| Allowance for lifetime expected credit losses | (173 | ) | | (193 | ) |
| Total | 4,432 |
| | 3,863 |
|
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Gross amount | 4,605 |
| | 4,056 |
|
| Allowance for lifetime expected credit losses | (173 | ) | | (193 | ) |
| Total | 4,432 |
| | 3,863 |
|
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Gross amount | 4,605 |
| | 4,056 |
|
| Allowance for lifetime expected credit losses | (173 | ) | | (193 | ) |
| Total | 4,432 |
| | 3,863 |
|
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| Gross amount | 5,349 | | | 3,208 | |
| Allowance for lifetime expected credit losses | (206) | | | (136) | |
| Total | 5,143 | | | 3,072 | |
The carrying amount of the trade accounts receivable and other approximates their fair value. Before granting credit to any new customer, ArcelorMittal uses an internally developed credit scoring system to assess the potential customer’s credit quality and to define credit limits by customer. For all significant customers, the credit terms must be approved by the credit committees of each reportable segment. Limits and scoring attributed to customers are reviewed periodically. There are no customers who represent more than 5% of the total balance of trade accounts receivable.
Exposure to credit risk by reportable segment
The maximum exposure to credit risk for trade accounts receivable by reportable segment is as follows:
| | | | December 31, | | December 31, |
| | 2018 | | 2017 | | 2021 | | 2020 |
| NAFTA | 579 |
| | 343 |
| NAFTA | 330 | | | 455 | |
| Brazil | 864 |
| | 857 |
| Brazil | 1,308 | | | 809 | |
| Europe | 2,348 |
| | 2,052 |
| Europe | 2,959 | | | 1,396 | |
| ACIS | 531 |
| | 546 |
| ACIS | 444 | | | 190 | |
| Mining | 110 |
| | 65 |
| Mining | 102 | | | 222 | |
| Total | 4,432 |
| | 3,863 |
| Total | 5,143 | | | 3,072 | |
Aging of trade accounts receivable
| | | | December 31, | | December 31, | | December 31, | | December 31, |
| | 2018 | | 2017 | | 2021 | | 2020 |
| | Gross | | Allowance under lifetime expected credit loss model (IFRS 9) | | Total | | Gross | | Allowance under incurred loss model (IAS 39) | | Total | | Gross | | Allowance | | Total | | Gross | | Allowance | | Total |
| Not past due | 3,377 |
| | (3 | ) | | 3,374 |
| | 3,134 |
| | (4 | ) | | 3,130 |
| Not past due | 4,280 | | | (30) | | | 4,250 | | | 2,699 | | | (13) | | | 2,686 | |
| Overdue 1-30 days | 691 |
| | (3 | ) | | 688 |
| | 538 |
| | (9 | ) | | 529 |
| Overdue 1-30 days | 322 | | | (1) | | | 321 | | | 215 | | | (1) | | | 214 | |
| Overdue 31-60 days | 178 |
| | (1 | ) | | 177 |
| | 106 |
| | (1 | ) | | 105 |
| Overdue 31-60 days | 80 | | | — | | | 80 | | | 49 | | | (1) | | | 48 | |
| Overdue 61-90 days | 97 |
| | (1 | ) | | 96 |
| | 34 |
| | — |
| | 34 |
| Overdue 61-90 days | 121 | | | — | | | 121 | | | 26 | | | — | | | 26 | |
| Overdue 91-180 days | 59 |
| | (4 | ) | | 55 |
| | 46 |
| | (13 | ) | | 33 |
| Overdue 91-180 days | 210 | | | (2) | | | 208 | | | 42 | | | (3) | | | 39 | |
| More than 180 days | 203 |
| | (161 | ) | | 42 |
| | 198 |
| | (166 | ) | | 32 |
| More than 180 days | 336 | | | (173) | | | 163 | | | 177 | | | (118) | | | 59 | |
| Total | 4,605 |
| | (173 | ) | | 4,432 |
| | 4,056 |
| | (193 | ) | | 3,863 |
| Total | 5,349 | | | (206) | | | 5,143 | | | 3,208 | | | (136) | | | 3,072 | |
| | |
| Consolidated financial statements 286 |
| (millions of U.S. dollar, except share and per share data) |
The movements in the allowance are calculated based on lifetime expected credit loss model for 20182021, 2020 and incurred loss model for 2017 and 2016.2019. The allowances in respect of trade accounts receivable during the periods presented isare as follows: |
| | | | | | | | |
| Balance as of December 31, 2015 | | Additions | | Deductions/
Releases | | Foreign exchange and others | | Balance as of December 31, 2016 |
| 170 | | 34 | | (25) | | 5 | | 184 |
| Balance as of December 31, 2016 | | Additions | | Deductions/
Releases | | Foreign exchange and others | | Balance as of December 31, 2017 |
| 184 | | 34 | | (38) | | 13 | | 193 |
| Balance as of December 31, 2017 | | Additions | | Deductions/
Releases | | Foreign exchange and others | | Balance as of December 31, 2018 |
| 193 | | 35 | | (29) | | (26) | | 173 |
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Allowance - opening balance | 136 | | | 129 | | | 173 | |
| Additions | 87 | | | 27 | | | 18 | |
| Write backs / utilization | (18) | | | (11) | | | (27) | |
| Foreign exchange and others | 1 | | | (9) | | | (35) | |
| Allowance - closing balance | 206 | | | 136 | | | 129 | |
The Company has established a number of programs for sales without recourse of trade accounts receivable to various financial institutions (referred to as true sale of receivables (“TSR”)). Through the TSR programs, certain operating subsidiaries
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
of ArcelorMittal surrender the control, risks and benefits associated with the accounts receivable sold; therefore, the amount of receivables sold is recorded as a sale of financial assets and the balances are derecognized from the consolidated statements of financial position at the moment of sale. Upon adoption of IFRS 9 as of January 1, 2018, theThe Company classifiedclassifies trade receivables subject to TSR programs as financial assets that are held to collect or to sell and recognizedrecognizes them at FVOCI.FVOCI (see note 6). The fair value measurement wasis determined based on the invoice amount net of TSR expense payable, a Level 3 unobservable input. The TSR expense is insignificant due to the rate applicable and the short timeframe between the time of sale and the invoice due date. Any loss allowance for these trade receivables is recognized in OCI.
4.4 Inventories
Inventories are carried at the lower of cost or net realizable value. Cost is determined using the average cost method. Costs of production in process and finished goods include the purchase costs of raw materials and conversion costs such as direct labor and an allocation of fixed and variable production overheads. Raw materials and spare parts are valued at cost, inclusive of freight, shipping, handling as well as any other costs incurred in bringing the inventories to their present location and condition. Interest charges, if any, on purchases have been recorded as financing costs. Costs incurred when production levels are abnormally low are capitalized as inventories based on normal capacity with the remaining costs incurred recorded as a component of cost of sales in the consolidated statements of operations.
Net realizable value represents the estimated selling price at which the inventories can be realized in the normal course of business after allowing for the cost of conversion from their
existing state to a finished condition and for the cost of marketing, selling, and distribution. Net realizable value is estimated based on the most reliable evidence available at the time the estimates were made of being the amount that the inventory is expected to realize, taking into account the purpose for which the inventory is held.
Previous write-downs are reversed in case the circumstances that previously caused inventories to be written down below cost no longer exist.
Inventories, net of allowance for slow-moving inventory, excess of cost over net realizable value and obsolescence of 1,1681,023 and 1,2391,079 as of December 31, 20182021 and 2017,2020, respectively, are comprised of the following:
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| Finished products | 5,743 | | | 3,403 | |
| Production in process | 5,101 | | | 3,305 | |
| Raw materials | 7,137 | | | 3,839 | |
Manufacturing supplies, spare parts and other 1 | 1,877 | | | 1,781 | |
| Total | 19,858 | | | 12,328 | |
1.Including spare parts of 1.4 billion and 1.4 billion, and manufacturing and other supplies of 0.5 billion and 0.4 billion as of December 31, 2021 and 2020, respectively.
Movements in the inventory write-downs are as follows:
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Finished products | 7,464 |
| | 6,321 |
|
| Production in process | 4,596 |
| | 4,049 |
|
| Raw materials | 6,822 |
| | 5,883 |
|
Manufacturing supplies, spare parts and other 1 | 1,862 |
| | 1,733 |
|
| Total | 20,744 |
| | 17,986 |
|
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Inventory write-downs - opening balance | 1,079 | | | 1,760 | | | 1,168 | |
Additions 1 | 178 | | | 294 | | | 726 | |
Deductions / Releases 2 | (236) | | | (878) | | | (212) | |
Foreign exchange and others3 | 2 | | | (97) | | | 78 | |
| Inventory write-downs - closing balance | 1,023 | | | 1,079 | | | 1,760 | |
1.Additions refer to write-downs of inventories excluding those utilized or written back during the same financial year.
2.Deductions/releases correspond to write-backs and utilizations related to the prior periods.
3.In 2021, others include inventory write-downs relating to the plate operations in Europe following discontinuation of held for sale classification (see note 2.3.2).
| | |
1. | This consists of spare parts of 1.3 billion and 1.3 billion, and manufacturing and other of 0.6 billion and 0.4 billion as of December 31, 2018 and 2017, respectively.
287 Consolidated financial statements |
Note 4.2 discloses the cost of inventories (materials) recognized as an expense during the year.
The movement in the inventory reserve is as follows: |
| | | | | | | | |
| Balance as of December 31, 2015 | | Additions 1 | | Deductions / Releases 2 | | Foreign exchange and others | | Balance as of December 31, 2016 |
| 1,707 | | 473 | | (964) | | (119) | | 1,097 |
| Balance as of December 31, 2016 | | Additions 1 | | Deductions / Releases 2 | | Foreign exchange and others | | Balance as of December 31, 2017 |
| 1,097 | | 442 | | (404) | | 104 | | 1,239 |
| Balance as of December 31, 2017 | | Additions 1 | | Deductions / Releases 2 | | Foreign exchange and others | | Balance as of December 31, 2018 |
| 1,239 | | 423 | | (382) | | (112) | | 1,168 |
| |
1. | Additions refer to write-downs of inventories including those utilized or written back during the same financial year.
|
| |
2. | Deductions/releases correspond to write-backs and utilizations related to the current and prior periods.
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
4.5 Prepaid expenses and other current assets
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| VAT receivables | 986 | | | 752 | |
| Prepaid expenses and non-trade receivables | 566 | | | 486 | |
| Financial amounts receivable | 108 | | | 94 | |
| Income tax receivable | 106 | | | 51 | |
| Receivables from public authorities | 127 | | | 143 | |
| Receivables from sale of financial and intangible assets | 48 | | | 78 | |
| Derivative financial instruments (notes 6.1 and 6.3) | 2,985 | | | 353 | |
| CO2 emission rights | 458 | | | 219 | |
Other 1 | 183 | | | 105 | |
| Total | 5,567 | | | 2,281 | |
1.Other includes mainly advances to employees, accrued interest and other miscellaneous receivables. |
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| VAT receivables | 1,049 |
| | 822 |
|
| Prepaid expenses and non-trade receivables | 416 |
| | 321 |
|
| Financial amounts receivable | 304 |
| | 219 |
|
| Income tax receivable | 106 |
| | 176 |
|
| Receivables from public authorities | 125 |
| | 147 |
|
| Receivables from sale of financial and intangible assets | 149 |
| | 118 |
|
| Derivative financial instruments | 617 |
| | 87 |
|
Other 1 | 68 |
| | 41 |
|
| Total | 2,834 |
| | 1,931 |
|
| |
1. | Other includes mainly advances to employees, accrued interest and other miscellaneous receivables.
|
4.6 Other assets
Other assets consisted of the following:
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Derivative financial instruments | 609 |
| | 995 |
|
| Financial amounts receivable | 1,679 |
| | 345 |
|
| Long-term VAT receivables | 322 |
| | 198 |
|
| Cash guarantees and deposits | 185 |
| | 190 |
|
| Receivables from public authorities | 172 |
| | 173 |
|
| Accrued interest | 86 |
| | 96 |
|
| Receivables from sale of financial and intangible assets | 61 |
| | 93 |
|
| Income tax receivable | 18 |
| | 14 |
|
Other 1 | 228 |
| | 130 |
|
| Total | 3,360 |
| | 2,234 |
|
| |
1. | Other mainly includes assets in pension funds and other amounts receivable.
|
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| Derivative financial instruments (notes 6.1 and 6.3) | 318 | | | 324 | |
| Financial amounts receivable | 411 | | | 503 | |
| Long-term VAT receivables | 179 | | | 156 | |
| Cash guarantees and deposits | 94 | | | 86 | |
| Receivables from public authorities | 60 | | | 41 | |
| Accrued interest | 29 | | | 30 | |
| Receivables from sale of financial and intangible assets | 150 | | | 172 | |
| Income tax receivable | 61 | | | 18 | |
Other 1 | 159 | | | 152 | |
| Total | 1,461 | | | 1,482 | |
Following the Indian Supreme Court ruling dated October 4, 2018, ArcelorMittal completed a series of payments to the financial creditors of Uttam Galva ("UG")1.Other mainly includes assets in pension funds and KSS Petron to clear overdue debts so that the Company's offer submitted for Essar Steel India Limited ("ESIL") remains eligible and can be considered by ESIL’s Committee of Creditors. At December 31, 2018, financialother amounts receivable included 844 and 193 related to such payments to UG and KSS Petron, respectively, measured at fair value through profit or loss as of December 31, 2018 (a Level 3 fair value estimate). The fair value of the UG payments was determined on the basis of market multiples and a discounted cash flow model including market participant synergies. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available and include primarily the discount rate, growth rate, expected changes to average selling prices, shipments and direct costs. Assumptions for average selling prices and shipments are based on historical experience and expectations of future changes in the market. receivable.
4.7 Trade accounts payable and other
Trade accounts payable are obligations to pay for goods that have been acquired in the ordinary course of business from suppliers. Trade accounts payable have maturities from 15 to 180 days depending on the type of material, the geographic area in which the purchase transaction occurs and the various contractual agreements. The carrying value of trade accounts payable approximates fair value. The Company’s average outstanding number of trade payable days amounted to 83 over the last 5 years. The ability of suppliers to provide payment terms may be dependent on their ability to obtain funding for their own working capital needs and or their ability to early discount their receivables at their own discretion (the Company
estimates that about 2.7 billion of trade payables were subject to early discount by its suppliers in 2021 as compared to 2.0 billion in 2020).
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
4.8 Accrued expenses and other liabilities
Accrued expenses and other liabilities arewere comprised of the following as of:following: | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Accrued payroll and employee related expenses | 1,545 | | | 1,238 | |
| Accrued interest and other payables | 1,207 | | | 1,151 | |
Payable from acquisition of intangible, tangible & financial assets1 | 867 | | | 847 | |
| Other amounts due to public authorities | 833 | | | 680 | |
| Derivative financial instruments (notes 6.1 and 6.3) | 316 | | | 208 | |
| Unearned revenue and accrued payables | 63 | | | 73 | |
| Total | 4,831 | | | 4,197 | |
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Accrued payroll and employee related expenses | 1,613 |
| | 1,787 |
|
| Accrued interest and other payables | 976 |
| | 794 |
|
| Payable from acquisition of intangible, tangible & financial assets | 1,332 |
| | 943 |
|
| Other amounts due to public authorities | 540 |
| | 587 |
|
| Derivative financial instruments | 190 |
| | 325 |
|
| Unearned revenue and accrued payables | 58 |
| | 69 |
|
| Total | 4,709 |
| | 4,505 |
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
NOTE 5: GOODWILL, INTANGIBLE AND TANGIBLE ASSETS
5.1 Goodwill and intangible assets
The carrying amounts of goodwill and intangible assets are summarized as follows:
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| Goodwill on acquisitions | 3,931 | | | 3,992 | |
| Concessions, patents and licenses | 195 | | | 190 | |
| Customer relationships and trade marks | 80 | | | 90 | |
Other1 | 219 | | | 40 | |
| Total | 4,425 | | | 4,312 | |
1. |
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Goodwill on acquisitions | 4,986 |
| | 5,294 |
|
| Concessions, patents and licenses | 293 |
| | 275 |
|
| Customer relationships and trade marks | 90 |
| | 118 |
|
Other1 | 359 |
| | 50 |
|
| Total | 5,728 |
| | 5,737 |
|
1. Other includes 201Includes 167 relating to CO2 emission rights and 76 favorable land lease contracts held by Ilva at acquisition date (please refer to note 2.2.4)
Goodwillin 2021.
Goodwill
Goodwill arising on an acquisition is recognized as previously described within the business combinations section in note 2.2.3. Goodwill is allocated to those groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose and in all cases is at the operating segment level, which represents the lowest level at which goodwill is monitored for internal management purposes.
| | |
| Consolidated financial statements 288 |
| (millions of U.S. dollar, except share and per share data) |
Goodwill acquired in business combinations for each of the Company’s operating segments is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | Divestments and assets held for sale | | Foreign exchange differences and other movements | | | | December 31, 2021 |
| NAFTA | 1,566 | | | — | | | 10 | | | | | 1,576 | |
| Brazil | 1,069 | | | — | | | (59) | | | | | 1,010 | |
| Europe | 540 | | | — | | | (41) | | | | | 499 | |
| ACIS | 817 | | | — | | | 29 | | | | | 846 | |
| Total | 3,992 | | | — | | | (61) | | | | | 3,931 | |
| | | | December 31, 2016 | | Divestments and assets held for sale | | Foreign exchange differences and other movements 1 | | December 31, 2017 | | December 31, 2019 | | Divestments and assets held for sale1 | | Foreign exchange differences and other movements | | | December 31, 2020 |
| NAFTA | 2,202 |
| | — |
| | 47 |
| | 2,249 |
| NAFTA | 2,233 | | | (672) | | | 5 | | | | 1,566 | |
| Brazil | 1,668 |
| | — |
| | (28 | ) | | 1,640 |
| Brazil | 1,353 | | | — | | | (284) | | | | 1,069 | |
| Europe | 529 |
| | — |
| | 53 |
| | 582 |
| Europe | 545 | | | (45) | | | 40 | | | | 540 | |
| ACIS | 849 |
| | — |
| | (26 | ) | | 823 |
| ACIS | 973 | | | — | | | (156) | | | | 817 | |
| Total | 5,248 |
| | — |
| | 46 |
| | 5,294 |
| Total | 5,104 | | | (717) | | | (395) | | | | 3,992 | |
1. The movements for Brazil includes 2 related to Sumaré acquisition (please refer to note 2.2.4) |
| | | | | | | | | | | |
| | December 31, 2017 | | Divestments and assets held for sale 2 | | Foreign exchange differences and other movements 1 | | December 31, 2018 |
| NAFTA | 2,249 |
| | — |
| | (51 | ) | | 2,198 |
|
| Brazil | 1,640 |
| | (18 | ) | | (218 | ) | | 1,404 |
|
| Europe | 582 |
| | (16 | ) | | (16 | ) | | 550 |
|
| ACIS | 823 |
| | — |
| | 11 |
| | 834 |
|
| Total | 5,294 |
| | (34 | ) | | (274 | ) | | 4,986 |
|
1. The movements for Brazil includes 24 related to Votorontim Siderurgia acquisition (please refer to note 2.2.4)
2. See notenotes 2.3.1 and 2.3.2
Intangible assets
Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets
will accrue to the Company and the cost can be reliably measured. Intangible assets acquired separately by ArcelorMittal are initially recorded at cost and those acquired in a business combination are initially recorded at fair value at the date of the business combination. These primarily include the cost of technology and licenses purchased from third parties and operating authorizations granted by governments or other public bodies (concessions). Intangible assets are amortized on a straight-line basis over their estimated economic useful lives, which typically do not exceed five years. Amortization is included in the consolidated statements of operations as part of cost of sales.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
ArcelorMittal’s industrial sites which are regulated by the European Directive 2003/87/EC of October 13, 2003 on carbon dioxide (“CO2”CO2”) emission rights, effective as of January 1, 2005, are located primarily in Belgium, Czech Republic, France, Germany, Luxembourg, Poland, Romania, Spain and Italy. In Ontario, Canada, ArcelorMittal's operations in Ontario, Canada arehave been subject to output based pricing system regulations since January 1, 2019 but starting January 1, 2022, they will be regulated on carbon pricing under the “Climate Change Mitigation and Low-carbon Economy Act, 2016”,Ontario Emissions Performance System (“OEPS”). In South Africa, a cap and trade program regulation effective from July 1, 2016.CO2 tax system was introduced in 2019. The emission rights allocated to the Company on a no-charge basis pursuant to the annual national allocation plan are recorded at nil value and purchased emission rights are recorded at cost.
| | |
| 289 Consolidated financial statements |
Other intangible assets are summarized as follows:
|
| | | | | | | | | | | |
| | Concessions, patents and licenses |
| Customer relationships and trade marks |
| Other |
| Total |
| Cost | |
| |
| |
| |
| At December 31, 2016 | 676 |
|
| 1,100 |
|
| 56 |
|
| 1,832 |
|
| Acquisitions | 6 |
|
| 21 |
|
| 34 |
|
| 61 |
|
| Disposals | (1 | ) |
| — |
|
| — |
|
| (1 | ) |
| Foreign exchange differences | 83 |
|
| 97 |
|
| 9 |
|
| 189 |
|
Transfers and other movements1 | 20 |
|
| (1 | ) |
| (3 | ) |
| 16 |
|
Fully amortized intangible assets 2 | (18 | ) |
| (3 | ) |
| — |
|
| (21 | ) |
| At December 31, 2017 | 766 |
|
| 1,214 |
|
| 96 |
|
| 2,076 |
|
| Acquisitions | 22 |
|
| — |
|
| 39 |
|
| 61 |
|
| Acquisitions through business combinations (note 2.2.4) | 2 |
|
| — |
|
| 317 |
|
| 319 |
|
| Disposal | — |
|
| — |
|
| (5 | ) |
| (5 | ) |
| Foreign exchange differences | (61 | ) |
| (83 | ) |
| (4 | ) |
| (148 | ) |
| Transfers to assets held for sale (note 2.3) | (32 | ) |
| — |
|
| — |
|
| (32 | ) |
Transfers and other movements 1 | 64 |
|
| 1 |
|
| — |
|
| 65 |
|
Fully amortized intangible assets 2 | (16 | ) |
| (4 | ) |
| — |
|
| (20 | ) |
| At December 31, 2018 | 745 |
|
| 1,128 |
|
| 443 |
|
| 2,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization and impairment losses |
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2016 | 424 |
|
| 980 |
|
| 25 |
|
| 1,429 |
|
| Amortization charge | 31 |
|
| 31 |
|
| 16 |
|
| 78 |
|
| Foreign exchange differences | 58 |
|
| 89 |
|
| 5 |
|
| 152 |
|
Transfers and other movements1 | (4 | ) |
| (1 | ) |
| — |
|
| (5 | ) |
Fully amortized intangible assets 2 | (18 | ) |
| (3 | ) |
| — |
|
| (21 | ) |
| At December 31, 2017 | 491 |
|
| 1,096 |
|
| 46 |
|
| 1,633 |
|
| Amortization charge | 47 |
|
| 22 |
|
| 42 |
|
| 111 |
|
| Foreign exchange differences | (44 | ) |
| (76 | ) |
| (3 | ) |
| (123 | ) |
| Transfers to assets held for sale (note 2.3) | (27 | ) |
| — |
|
| — |
|
| (27 | ) |
Transfers and other movements1 | 1 |
|
| — |
|
| (1 | ) |
| — |
|
Fully amortized intangible assets 2 | (16 | ) |
| (4 | ) |
| — |
|
| (20 | ) |
| At December 31, 2018 | 452 |
|
| 1,038 |
|
| 84 |
|
| 1,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount |
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2017 | 275 |
|
| 118 |
|
| 50 |
|
| 443 |
|
| At December 31, 2018 | 293 |
|
| 90 |
|
| 359 |
|
| 742 |
|
| |
1. | Transfers and other movements correspond mainly to transfer from assets under construction into patents and licenses in 2018 and 2017.
|
| |
2. | Fully amortized assets correspond mainly to licenses in 2018 and 2017.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Concessions, patents and licenses | | Customer relationships and trade marks | | Other | | Total |
| Cost | | | | | | | |
| At December 31, 2019 | 630 | | | 1,133 | | | 147 | | | 1,910 | |
| Acquisitions | 17 | | | — | | | 35 | | | 52 | |
| | | | | | | |
| Disposals | (8) | | | — | | | (2) | | | (10) | |
| Divestment (note 2.3.1) | (251) | | | (9) | | | — | | | (260) | |
| Foreign exchange differences | 16 | | | 24 | | | 11 | | | 51 | |
| Transfers to assets held for sale (note 2.3.2) | (12) | | | — | | | (11) | | | (23) | |
| Transfers and other movements | 37 | | | — | | | — | | | 37 | |
Fully amortized intangible assets 1 | (29) | | | — | | | — | | | (29) | |
| At December 31, 2020 | 400 | | | 1,148 | | | 180 | | | 1,728 | |
Acquisitions2 | 35 | | | — | | | 210 | | | 245 | |
| | | | | | | |
| Disposal | (6) | | | — | | | — | | | (6) | |
| | | | | | | |
| Foreign exchange differences | (54) | | | (69) | | | (21) | | | (144) | |
| Transfers from assets held for sale (note 2.3.2) | 12 | | | — | | | 11 | | | 23 | |
| Transfers and other movements | 30 | | | 2 | | | 10 | | | 42 | |
| | | | | | | |
| At December 31, 2021 | 417 | | | 1,081 | | | 390 | | | 1,888 | |
| | | | | | | |
| Accumulated amortization and impairment losses | | | | | | | |
| At December 31, 2019 | 433 | | | 1,038 | | | 111 | | | 1,582 | |
| Disposal | (7) | | | — | | | — | | | (7) | |
| Divestment (note 2.3.1) | (239) | | | (9) | | | — | | | (248) | |
| Amortization charge | 47 | | | 10 | | | 30 | | | 87 | |
| Impairment charge (note 5.3) | 4 | | | — | | | — | | | 4 | |
| Foreign exchange differences | 17 | | | 19 | | | 8 | | | 44 | |
| Transfers to assets held for sale (note 2.3.2) | (12) | | | — | | | (9) | | | (21) | |
| Transfers and other movements | (4) | | | — | | | — | | | (4) | |
Fully amortized intangible assets 1 | (29) | | | — | | | — | | | (29) | |
| At December 31, 2020 | 210 | | | 1,058 | | | 140 | | | 1,408 | |
| Disposals | (5) | | | — | | | — | | | (5) | |
| | | | | | | |
| Amortization charge | 50 | | | 7 | | | 33 | | | 90 | |
| | | | | | | |
| Foreign exchange differences | (44) | | | (64) | | | (13) | | | (121) | |
| Transfers from assets held for sale (note 2.3.2) | 9 | | | — | | | 9 | | | 18 | |
| Transfers and other movements | 2 | | | — | | | 2 | | | 4 | |
| | | | | | | |
| At December 31, 2021 | 222 | | | 1,001 | | | 171 | | | 1,394 | |
| | | | | | | |
| Carrying amount | | | | | | | |
| At December 31, 2020 | 190 | | | 90 | | | 40 | | | 320 | |
| At December 31, 2021 | 195 | | | 80 | | | 219 | | | 494 | |
1.Fully amortized intangible assets correspond mainly to licenses in 2020.
2.Acquisitions in 'other' mainly relate to CO2 emission rights in 2021.
Research and development costs not meeting the criteria for capitalization are expensed as incurred. These costs amounted to 290, 278270, 245 and 239301 for the years ended December 31, 2018, 2017,2021, 2020 and 2016,2019, respectively and were recognized in selling, general and administrative expenses.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
5.2 Property, plant and equipment and biological assets
Property, plant and equipment is recorded at cost less accumulated depreciation and impairment. Cost includes all related costs directly attributable to the acquisition or construction of the asset. Except for land and assets used in mining activities, property, plant and equipment is depreciated using the straight-line method over the useful lives of the related assets as presented in the table below.
|
| | |
| Consolidated financial statements 290 |
| (millions of U.S. dollar, except share and per share data) |
| | | | | | | | |
| Asset Category | | Useful Life Range |
| Land | | Not depreciated |
| Buildings | | 10 to 50 years |
| Property plant & equipment | | 15 to 5064 years |
| Auxiliary facilities | | 15 to 4560 years |
| Other facilities | | 5 to 20 years |
The Company’s annual review of useful lives leverages on the experience gained from an in-depth review performed every five years, any significant change in the expected pattern of consumption embodied in the asset, and the specialized knowledge of ArcelorMittal’s network of chief technical officers. The chief technical officer network includes engineers with facility-specific expertise related to plant and equipment used in the principal production units of the Company’s operations. The most recent in-depth review took place in 2014,2019, during which the Company performed a review of the useful lives of its fixed assets and determined its maintenance and operating practices enabled an extension ofthere were no material changes to the useful lives of property, plant and equipment. In performing this review, the Company gathered and evaluated data, including commissioning dates, designed capacities, maintenance records and programs, and asset performance history, among other attributes. In accordance with IAS 16, Property, Plant and Equipment, the Company considered this information at the level of components significant in relation to the total cost of the item of plant and equipment. Other factors the Company considered in its determination of useful lives included the expected use of the assets, technical or commercial obsolescence, and operational factors that led to improvements in monitoring and process control that contribute to longer asset lives.factors. In addition, the Company considered the accumulated technical experience and knowledge sharing programs that allowed for the exchange of best practices within the chief technical officer network and the deployment of these practices across the Company’s principal production units.
Major improvements, which add to productive capacity or extend the life of an asset, are capitalized, while repairs and maintenance are expensed as incurred. Where a tangible fixed asset comprises major components having different useful lives, these components are accounted for as separate items.
Property, plant and equipment under construction is recorded as construction in progress until it is ready for its intended use; thereafter it is transferred to the related class of property, plant and equipment and depreciated over its estimated useful life. Interest incurred during construction is capitalized if the borrowing cost is directly attributable to the construction. Gains and losses on retirement or disposal of assets are recognized in cost of sales.
Property, plant and equipment acquired by way of finance leases is stated at an amount equal to the lower of the fair value and the present value of the minimum lease payments at the inception of the lease. Each lease payment is allocated between the finance charges and a reduction of the lease liability. The interest element of the finance cost is charged to the consolidated statements of operations over the lease period so as to achieve a constant rate of interest on the remaining balance of the liability.
The residual values and useful lives of property, plant and equipment are reviewed at each reporting date and adjusted if
expectations differ from previous estimates. Depreciation methods applied to property, plant and equipment are reviewed at each reporting date and changed if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset. In the context of the 2021 annual review of useful lives and considering the expected date of retirement of certain assets in particular blast furnaces, basic oxygen furnaces, sinter plants and coke plants following the implementation of the Company's decarbonization strategy involving the construction of DRI - EAF facilities, the Company decreased estimates of residual useful lives of such items of property, plant and equipment for its flat carbon operations in the EU and in Canada. Accordingly, depreciation charge increased by 76 in the fourth quarter of 2021 and is expected to increase by 277, 168, 168, 142, 124, 28 and 26 for the years ended December 31, 2022, 2023, 2024, 2025, 2026, 2027 and 2028, respectively.
Mining assets comprise:
•
| |
• | Mineral rights acquired; |
| |
• | Capitalized developmental stripping (as described below in “—Stripping and overburden removal costs”).
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements•Capitalized developmental stripping (as described below in “—Stripping and overburden removal costs”).
(millions of U.S. dollars, except share and per share data)
Property, plant and equipment used in mining activities is depreciated over its useful life or over the remaining life of the mine, if shorter, and if there is no alternative use. For the majority of assets used in mining activities, the economic benefits from the asset are consumed in a pattern which is linked to the production level and accordingly, assets used in mining activities are primarily depreciated on a units-of-production basis. A unit-of-production is based on the available estimate of proven and probable reserves.
Capitalization of pre-production expenditures ceases when the mining property is capable of commercial production as it is intended by management. General administration costs that are not directly attributable to a specific exploration area are charged to the consolidated statements of operations.
MiningMineral Reserves and resources
Mineral Reserves are estimates of the amount of product that can be economically and legally extracted from the Company’s properties. Furthermore, mineral resource estimates constitute the part of a mineral deposit that have the potential to be economically and legally extracted or produced at the time of the resource determination. In order to estimate mineral reserves, estimates are required for a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. The potential for economic viability and
| | |
| 291 Consolidated financial statements |
estimate of mineral resources is established through high level and conceptual engineering studies.
Estimating the quantity and/or grade of mineral reserves requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. The estimation of mineral resource is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Because the economic assumptions used to estimate mineral reserves and mineral resources change from period to period, and because additional geological data is generated during the course of operations, estimates of mineral reserves and mineral resources may change from period to period. Changes in reported mineral reserves and mineral resources may affect the Company’s financial results and financial position in a number of ways, including the following:
•Asset carrying amounts may be affected due to changes in estimated future cash flows.
| |
• | Asset carrying amounts may be affected due to changes in estimated future cash flows.
|
| |
• | Depreciation, depletion and amortization charged in the consolidated statements of operations may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.
|
| |
• | Overburden removal costs recognized in the consolidated statements of financial position or charged to the consolidated statements of operations may change due to changes in stripping ratios or the units of production basis of depreciation.
|
| |
• | Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities.
|
•Depreciation, depletion and amortization charged in the consolidated statements of operations may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.
•Overburden removal costs recognized in the consolidated statements of financial position or charged to the consolidated statements of operations may change due to changes in stripping ratios or the units of production basis of depreciation.
•Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities.
Stripping and overburden removal costs
In open pit and underground mining operations, it is often necessary to remove overburden and other waste materials to access the deposit from which minerals can be extracted. This process is referred to as stripping. Stripping costs can be incurred before the mining production commences (“developmental stripping”) or during the production stage (“production stripping”).
A mine can operate several open pits that are regarded as separate operations for the purpose of mine planning and production. In this case, stripping costs are accounted for
separately, by reference to the ore extracted from each separate pit. If, however, the pits are highly integrated for the purpose of mine planning and production, stripping costs are aggregated.
The determination of whether multiple pit mines are considered separate or integrated operations depends on each mine’s specific circumstances. The following factors would point towards the stripping costs for the individual pits being accounted for separately:
•
| |
• | If mining of the second and subsequent pits is conducted consecutively with that of the first pit, rather than concurrently. |
| |
• | If separate investment decisions are made to develop each pit, rather than a single investment decision being made at the outset.
|
ARCELORMITTAL AND SUBSIDIARIES
Notes•If separate investment decisions are made to Consolidated Financial Statementsdevelop each pit, rather than a single investment decision being made at the outset.
(millions•If the pits are operated as separate units in terms of U.S. dollars, except sharemine planning and per share data)
the sequencing of overburden and ore mining, rather than as an integrated unit.
| |
| • | If the pits are operated as separate units in terms of mine planning and the sequencing of overburden and ore mining, rather than as an integrated unit.If expenditures for additional infrastructure to support the second and subsequent pits are relatively large.
|
| |
• | If expenditures for additional infrastructure to support the second and subsequent pits are relatively large.
|
| |
• | If the pits extract ore from separate and distinct ore bodies, rather than from a single ore body.
|
•If the pits extract ore from separate and distinct ore bodies, rather than from a single ore body.
The relative importance of each factor is considered by local management to determine whether the stripping costs should be attributed to the individual pit or to the combined output from several pits.
Developmental stripping costs contribute to the future economic benefits of mining operations when the production begins and so are capitalized as tangible assets (construction in progress), whereas production stripping is a part of on-going activities and commences when the production stage of mining operations begins and continues throughout the life of a mine.
Capitalization of developmental stripping costs ends when the commercial production of the minerals commences.
Production stripping costs are incurred to extract the ore in the form of inventories and/or to improve access to an additional component of an ore body or deeper levels of material. Production stripping costs are accounted for as inventories to the extent the benefit from production stripping activity is realized in the form of inventories. Production stripping costs are recognized as a non-current asset (“stripping activity assets”) to the extent it is probable that future economic benefit in terms of improved access to ore will flow to the Company, the components of the ore body for which access has been improved can be identified and the costs relating to the stripping
| | |
| Consolidated financial statements 292 |
| (millions of U.S. dollar, except share and per share data) |
activity associated with that component can be measured reliably.
All stripping costs assets (either stripping activity assets or capitalized developmental stripping costs) are presented within a specific “mining assets” class of property, plant and equipment and then depreciated on a units-of-production basis.
Exploration and evaluation expenditure
Exploration and evaluation activities involve the search for iron ore and coal resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activities include:
•researching and analyzing historical exploration data;
| |
• | researching and analyzing historical exploration data;
|
| |
• | conducting topographical, geological, geochemical and geophysical studies;
|
| |
• | carrying out exploratory drilling, trenching and sampling activities;
|
| |
• | drilling, trenching and sampling activities to determine the quantity and grade of the deposit;
|
| |
• | examining and testing extraction methods and metallurgical or treatment processes; and
|
| |
• | detailed economic feasibility evaluations to determine whether development of the reserves is commercially justified and to plan methods for mine development.
|
•conducting topographical, geological, geochemical and geophysical studies;
•carrying out exploratory drilling, trenching and sampling activities;
•drilling, trenching and sampling activities to determine the quantity and grade of the deposit;
•examining and testing extraction methods and metallurgical or treatment processes; and
•detailed economic feasibility evaluations to determine whether development of the reserves is commercially justified and to plan methods for mine development.
Exploration and evaluation expenditure is charged to the consolidated statements of operations as incurred except in the following circumstances, in which case the expenditure is capitalized: (i) the exploration and evaluation activity is within an area of interest which was previously acquired in a business combination and measured at fair value on acquisition; or (ii) when management has a high degree of confidence in the project’s economic viability and it is probable that future economic benefits will flow to the Company.
Capitalized exploration and evaluation expenditures are generally recorded as a component of property, plant and equipment at cost less impairment charges, unless their nature requires them to be recorded as an intangible asset. As the asset is not available for use, it is not depreciated and all capitalized exploration and evaluation expenditure is monitored for indications of impairment. To the extent that capitalized expenditure is not expected to be recovered, it is recognized as an expense in the consolidated statements of operations.
Cash flows associated with exploration and evaluation expenditure are classified as operating activities when they are
related to expenses or as an investing activity when they are related to a capitalized asset in the consolidated statements of cash flows.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Development expenditure
Development is the establishment of access to the mineral reserve and other preparations for commercial production. Development activities often continue during production and include:
•sinking shafts and underground drifts (often called mine development);
| |
• | sinking shafts and underground drifts (often called mine development);
|
| |
• | making permanent excavations;
|
| |
• | developing passageways and rooms or galleries;
|
| |
• | building roads and tunnels; and
|
| |
• | advance removal of overburden and waste rock.
|
•making permanent excavations;
•developing passageways and rooms or galleries;
•building roads and tunnels; and
•advance removal of overburden and waste rock.
Development (or construction) also includes the installation of infrastructure (e.g., roads, utilities and housing), machinery, equipment and facilities.
When reserves are determined and development is approved, expenditures capitalized as exploration and evaluation are reclassified as construction in progress and are reported as a component of property, plant and equipment. All subsequent development expenditures are capitalized and classified as construction in progress. On completion of development, all assets included in construction in progress are individually reclassified to the appropriate category of property, plant and equipment and depreciated accordingly.
Biological assets
Biological assets are part of the Brazil operating segment and consist of eucalyptus forests located in the Brazilian state of Minas Gerais exclusively from renewable plantations and intended for the production of charcoal to be utilized as fuel and a source of carbon in the direct reduction process of pig iron production in some of the Company’s blast furnaces in Brazil.
Biological assets are measured at their fair value, net of estimated costs to sell at the time of harvest. The fair value (level(Level 3 in the fair value hierarchy) is determined based on the discounted cash flow method, taking into consideration the cubic volume of wood, segregated by plantation year, and the equivalent sales value of standing trees. The average sales price was estimated based on domestic market prices. In determining the fair value of biological assets, a discounted cash flow model was used, with a harvest cycle of 6 to 7 years.
| | |
| 293 Consolidated financial statements |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Property, plant and equipment and biological assets are summarized as follows:
|
| | | | | | | | | | | | | | |
| | Land, buildings and
Improvements | | Machinery, equipment and other 2 | | Construction in progress | | Mining
Assets | | Total |
| Cost | | | | | | | | | |
| At December 31, 2016 | 11,108 |
| | 43,317 |
| | 3,257 |
| | 3,751 |
| | 61,433 |
|
| Additions | 90 |
| | 357 |
| | 2,441 |
| | 50 |
| | 2,938 |
|
| Foreign exchange differences | 1,629 |
| | 5,560 |
| | 154 |
| | — |
| | 7,343 |
|
| Disposals | (97 | ) | | (853 | ) | | (7 | ) | | (1 | ) | | (958 | ) |
| Divestments (note 2.3) | (7 | ) | | (40 | ) | | — |
| | — |
| | (47 | ) |
| Transfers to assets held for sale (note 2.3) | (21 | ) | | (95 | ) | | — |
| | — |
| | (116 | ) |
Other movements 1 | 143 |
| | 1,928 |
| | (2,113 | ) | | 75 |
| | 33 |
|
| At December 31, 2017 | 12,845 |
| | 50,174 |
| | 3,732 |
| | 3,875 |
| | 70,626 |
|
| Additions | 36 |
| | 282 |
| | 3,064 |
| | 28 |
| | 3,410 |
|
Acquisitions through business combinations (see note 2.2.4)
| 358 |
|
| 1,210 |
|
| 58 |
|
| — |
|
| 1,626 |
|
| Foreign exchange differences | (888 | ) | | (4,006 | ) | | (220 | ) | | (100 | ) | | (5,214 | ) |
| Disposals | (120 | ) | | (535 | ) | | (113 | ) | | (13 | ) | | (781 | ) |
| Divestments (note 2.3) | (43 | ) | | (215 | ) | | (2 | ) | | — |
| | (260 | ) |
| Transfers to assets held for sale (note 2.3) | (1,434 | ) | | (4,532 | ) | | (143 | ) | | — |
| | (6,109 | ) |
Other movements 1 | 125 |
| | 1,684 |
| | (2,013 | ) | | 111 |
| | (93 | ) |
| At December 31, 2018 | 10,879 |
| | 44,062 |
| | 4,363 |
| | 3,901 |
| | 63,205 |
|
| | | | | | | | | | |
| Accumulated depreciation and impairment | | | | | | | | |
| At December 31, 2016 | 3,138 |
| | 19,980 |
| | 993 |
| | 2,491 |
| | 26,602 |
|
| Depreciation charge for the year | 329 |
| | 2,249 |
| | — |
| | 112 |
| | 2,690 |
|
| Impairment (note 5.3) | 10 |
| | 196 |
| | — |
| | — |
| | 206 |
|
| Disposals | (61 | ) | | (820 | ) | | (1 | ) | | — |
| | (882 | ) |
| Foreign exchange differences | 940 |
| | 4,080 |
| | 18 |
| | 2 |
| | 5,040 |
|
| Divestments (note 2.3) | (4 | ) | | (39 | ) | | — |
| | — |
| | (43 | ) |
| Transfers to assets held for sale (note 2.3) | (18 | ) | | (64 | ) | | — |
| | — |
| | (82 | ) |
Other movements 1 | 22 |
| | 118 |
| | (22 | ) | | 6 |
| | 124 |
|
| At December 31, 2017 | 4,356 |
| | 25,700 |
| | 988 |
| | 2,611 |
| | 33,655 |
|
| Depreciation charge for the year | 356 |
| | 2,212 |
| | — |
| | 120 |
| | 2,688 |
|
| Impairment (note 5.3) | 21 |
| | 930 |
| | 9 |
| | — |
| | 960 |
|
| Disposals | (110 | ) | | (494 | ) | | — |
| | (13 | ) | | (617 | ) |
| Foreign exchange differences | (484 | ) | | (2,715 | ) | | (7 | ) | | (81 | ) | | (3,287 | ) |
| Divestments (note 2.3) | (31 | ) | | (181 | ) | | — |
| | — |
| | (212 | ) |
| Transfers to assets held for sale (note 2.3) | (989 | ) | | (4,456 | ) | | (26 | ) | | — |
| | (5,471 | ) |
Other movements 1 | (6 | ) | | (158 | ) | | 17 |
| | (2 | ) | | (149 | ) |
| At December 31, 2018 | 3,113 |
| | 20,838 |
| | 981 |
| | 2,635 |
| | 27,567 |
|
| | | | | | | | | | |
| Carrying amount | | | | | | | | | |
| At December 31, 2017 | 8,489 |
| | 24,474 |
| | 2,744 |
| | 1,264 |
| | 36,971 |
|
| At December 31, 2018 | 7,766 |
| | 23,224 |
| | 3,382 |
| | 1,266 |
| | 35,638 |
|
| | | | Land, buildings and
Improvements | | Machinery, equipment and other 2 | | Construction in progress | | Mining
Assets | | Total | | Land, buildings and
Improvements | | Machinery, equipment and other2 | | Construction in progress | | Right-of-use assets | | Mining
Assets | | Total |
| Cost | | | | | | | | | | Cost | | | | | | | | | |
| At December 31, 2016 | 11,108 |
| | 43,317 |
| | 3,257 |
| | 3,751 |
| | 61,433 |
| |
| At December 31, 2019 | | At December 31, 2019 | 10,897 | | | 44,628 | | | 5,490 | | | 2,092 | | | 4,113 | | | 67,220 | |
| Additions | 90 |
| | 357 |
| | 2,441 |
| | 50 |
| | 2,938 |
| Additions | 27 | | | 172 | | | 1,857 | | | 233 | | | 23 | | | 2,312 | |
| | Foreign exchange differences | 1,629 |
| | 5,560 |
| | 154 |
| | — |
| | 7,343 |
| Foreign exchange differences | 621 | | | 1,121 | | | (129) | | | 36 | | | (130) | | | 1,519 | |
| Disposals | (97 | ) | | (853 | ) | | (7 | ) | | (1 | ) | | (958 | ) | Disposals | (62) | | | (630) | | | (19) | | | — | | | (4) | | | (715) | |
| Divestments (note 2.3) | (7 | ) | | (40 | ) | | — |
| | — |
| | (47 | ) | |
| Transfers to assets held for sale (note 2.3) | (21 | ) | | (95 | ) | | — |
| | — |
| | (116 | ) | |
| Divestments (note 2.3.1) | | Divestments (note 2.3.1) | (858) | | | (8,559) | | | (261) | | | (449) | | | (766) | | | (10,893) | |
| Transfers to assets held for sale (note 2.3.2) | | Transfers to assets held for sale (note 2.3.2) | (461) | | | (1,911) | | | (612) | | | (89) | | | — | | | (3,073) | |
Other movements 1 | 143 |
| | 1,928 |
| | (2,113 | ) | | 75 |
| | 33 |
| Other movements 1 | 574 | | | 1,778 | | | (2,363) | | | (225) | | | 48 | | | (188) | |
| At December 31, 2017 | 12,845 |
| | 50,174 |
| | 3,732 |
| | 3,875 |
| | 70,626 |
| |
| At December 31, 2020 | | At December 31, 2020 | 10,738 | | | 36,599 | | | 3,963 | | | 1,598 | | | 3,284 | | | 56,182 | |
| Additions | 36 |
| | 282 |
| | 3,064 |
| | 28 |
| | 3,410 |
| Additions | 16 | | | 239 | | | 2,416 | | | 313 | | | 11 | | | 2,995 | |
Acquisitions through business combinations (see note 2.2.4)
| 358 |
|
| 1,210 |
|
| 58 |
|
| — |
|
| 1,626 |
| |
| Acquisitions through business combinations (note 2.2.4) | | Acquisitions through business combinations (note 2.2.4) | 34 | | | 5 | | | — | | | — | | | — | | | 39 | |
| Foreign exchange differences | (888 | ) | | (4,006 | ) | | (220 | ) | | (100 | ) | | (5,214 | ) | Foreign exchange differences | (910) | | | (3,311) | | | (97) | | | (104) | | | (14) | | | (4,436) | |
| Disposals | (120 | ) | | (535 | ) | | (113 | ) | | (13 | ) | | (781 | ) | Disposals | (66) | | | (553) | | | (2) | | | — | | | (5) | | | (626) | |
| Divestments (note 2.3) | (43 | ) | | (215 | ) | | (2 | ) | | — |
| | (260 | ) | |
| Transfers to assets held for sale (note 2.3) | (1,434 | ) | | (4,532 | ) | | (143 | ) | | — |
| | (6,109 | ) | |
| | Transfers from assets held for sale (note 2.3.2) | | Transfers from assets held for sale (note 2.3.2) | 156 | | | 827 | | | 14 | | | 2 | | | — | | | 999 | |
Other movements 1 | 125 |
| | 1,684 |
| | (2,013 | ) | | 111 |
| | (93 | ) | Other movements 1 | 153 | | | 1,542 | | | (1,761) | | | (59) | | | 131 | | | 6 | |
| At December 31, 2018 | 10,879 |
| | 44,062 |
| | 4,363 |
| | 3,901 |
| | 63,205 |
| |
| At December 31, 2021 | | At December 31, 2021 | 10,121 | | | 35,348 | | | 4,533 | | | 1,750 | | | 3,407 | | | 55,159 | |
| | | | | | | | | | | |
| Accumulated depreciation and impairment | Accumulated depreciation and impairment | | | | | | | | | Accumulated depreciation and impairment | |
| At December 31, 2016 | 3,138 |
| | 19,980 |
| | 993 |
| | 2,491 |
| | 26,602 |
| |
| At December 31, 2019 | | At December 31, 2019 | 3,488 | | | 22,889 | | | 991 | | | 857 | | | 2,764 | | | 30,989 | |
| Depreciation charge for the year | 329 |
| | 2,249 |
| | — |
| | 112 |
| | 2,690 |
| Depreciation charge for the year | 338 | | | 2,188 | | | — | | | 212 | | | 135 | | | 2,873 | |
| Impairment (note 5.3) | 10 |
| | 196 |
| | — |
| | — |
| | 206 |
| Impairment (note 5.3) | 111 | | | (280) | | | 29 | | | 3 | | | — | | | (137) | |
| Disposals | (61 | ) | | (820 | ) | | (1 | ) | | — |
| | (882 | ) | Disposals | (40) | | | (591) | | | (7) | | | — | | | (3) | | | (641) | |
| Foreign exchange differences | 940 |
| | 4,080 |
| | 18 |
| | 2 |
| | 5,040 |
| Foreign exchange differences | 424 | | | 1,189 | | | 8 | | | 8 | | | (102) | | | 1,527 | |
| Divestments (note 2.3) | (4 | ) | | (39 | ) | | — |
| | — |
| | (43 | ) | |
| Transfers to assets held for sale (note 2.3) | (18 | ) | | (64 | ) | | — |
| | — |
| | (82 | ) | |
| Divestments (note 2.3.1) | | Divestments (note 2.3.1) | (527) | | | (6,002) | | | (5) | | | (300) | | | (718) | | | (7,552) | |
| Transfers to assets held for sale (note 2.3.2) | | Transfers to assets held for sale (note 2.3.2) | (163) | | | (1,045) | | | (13) | | | (9) | | | — | | | (1,230) | |
Other movements 1 | 22 |
| | 118 |
| | (22 | ) | | 6 |
| | 124 |
| Other movements 1 | 177 | | | (212) | | | (9) | | | (212) | | | (13) | | | (269) | |
| At December 31, 2017 | 4,356 |
| | 25,700 |
| | 988 |
| | 2,611 |
| | 33,655 |
| |
| At December 31, 2020 | | At December 31, 2020 | 3,808 | | | 18,136 | | | 994 | | | 559 | | | 2,063 | | | 25,560 | |
| Depreciation charge for the year | 356 |
| | 2,212 |
| | — |
| | 120 |
| | 2,688 |
| Depreciation charge for the year | 320 | | | 1,801 | | | — | | | 190 | | | 122 | | | 2,433 | |
| Impairment (note 5.3) | 21 |
| | 930 |
| | 9 |
| | — |
| | 960 |
| |
| Impairment reversal (note 5.3) | | Impairment reversal (note 5.3) | (37) | | | (181) | | | — | | | — | | | — | | | (218) | |
| Disposals | (110 | ) | | (494 | ) | | — |
| | (13 | ) | | (617 | ) | Disposals | (49) | | | (517) | | | — | | | — | | | (5) | | | (571) | |
| Foreign exchange differences | (484 | ) | | (2,715 | ) | | (7 | ) | | (81 | ) | | (3,287 | ) | Foreign exchange differences | (546) | | | (2,459) | | | (10) | | | (37) | | | (13) | | | (3,065) | |
| Divestments (note 2.3) | (31 | ) | | (181 | ) | | — |
| | — |
| | (212 | ) | |
| Transfers to assets held for sale (note 2.3) | (989 | ) | | (4,456 | ) | | (26 | ) | | — |
| | (5,471 | ) | |
| | Transfers from assets held for sale (note 2.3.2) | | Transfers from assets held for sale (note 2.3.2) | 154 | | | 804 | | | 7 | | | — | | | — | | | 965 | |
Other movements 1 | (6 | ) | | (158 | ) | | 17 |
| | (2 | ) | | (149 | ) | Other movements 1 | (7) | | | 12 | | | 8 | | | (34) | | | 1 | | | (20) | |
| At December 31, 2018 | 3,113 |
| | 20,838 |
| | 981 |
| | 2,635 |
| | 27,567 |
| |
| At December 31, 2021 | | At December 31, 2021 | 3,643 | | | 17,596 | | | 999 | | | 678 | | | 2,168 | | | 25,084 | |
| | | | | | | | | | | |
| Carrying amount | | | | | | | | | | Carrying amount | |
| At December 31, 2017 | 8,489 |
| | 24,474 |
| | 2,744 |
| | 1,264 |
| | 36,971 |
| |
| At December 31, 2018 | 7,766 |
| | 23,224 |
| | 3,382 |
| | 1,266 |
| | 35,638 |
| |
| At December 31, 2020 | | At December 31, 2020 | 6,930 | | | 18,463 | | | 2,969 | | | 1,039 | | | 1,221 | | | 30,622 | |
| At December 31, 2021 | | At December 31, 2021 | 6,478 | | | 17,752 | | | 3,534 | | | 1,072 | | | 1,239 | | | 30,075 | |
1.Other movements predominantly represent transfers from construction in progress to other categories and retirement of fully amortizeddepreciated assets.
2.Machinery, equipment and other includes biological assets of 4938 and 3645 as of December 31, 20182021 and 2017,2020, respectively, and bearer plants of 3829 and 3529 as of December 31, 20182021 and 2017,2020, respectively.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The carrying amount of temporarily idle property, plant and equipment at December 31, 20182021 and 20172020 was 2608 and 325246 including 244nil and 297170 in Brazil, 144 and 631 in NAFTA, 4 and 2 and 2237 in the Europe segment and nil and 9 in the ACIS segment, respectively.
The carrying amount of property, plant and equipment retired from active use and not classified as held for sale was 5111 and 51
12 at December 31, 20182021 and 2017,2020, respectively. Such assets are carried at their recoverable amount.
Assets pledged as security
See note 9.4 for information about assets pledged as security by the Company.
The Company may enter into arrangements that do not take the legal form of a lease, but may contain a lease. This will be the case if the following two criteria are met:
| | |
• | The fulfillment of the arrangement depends on the use of a specific asset and
|
| Consolidated financial statements 294 |
• | The arrangement conveys a right to use the asset.(millions of U.S. dollar, except share and per share data)
|
Assets under lease arrangements which transfer substantially allCapital commitments
See note 9.4 for information about contractual commitments for acquisition of the risks and rewards of ownership to the Company are classified as finance leases. On initial recognition, the leased asset and its related liability are measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset while the minimum lease payments are apportioned between financing costs and reduction of the lease liability.
Assets held under lease arrangements that are not finance leases are classified as operating leases and are not recognized in the consolidated statements of financial position. Payments made under operating leases are recognized in cost of sales in the consolidated statements of operations on a straight-line basis over the lease terms.
The carrying amount of capitalized leases was 363 and 415 as of December 31, 2018 and 2017, respectively including 232 and 364 related to machineryproperty, plant and equipment 93 and 51 to buildings and 38 and 0 to land, respectively.by the Company.
The total future minimum lease payments related to finance leases for the year ended December 31, 2018 were as follows: |
| | |
| 2019 | 121 |
|
| 2020 – 2023 | 392 |
|
| 2024 and beyond | 86 |
|
| Total minimum lease commitments | 599 |
|
| Less: future finance charges | 176 |
|
| Present value of minimum lease payments | 423 |
|
The total future minimum lease payments related to finance leases for the year ended December 31, 2017 were as follows: |
| | |
| 2018 | 144 |
|
| 2019 – 2022 | 440 |
|
| 2023 and beyond | 160 |
|
| Total minimum lease commitments | 744 |
|
| Less: future finance charges | 256 |
|
| Present value of minimum lease payments | 488 |
|
The present value of the future minimum lease payments was 423 and 488 for the year ended December 31, 2018 and 2017, respectively. The 2018 calculation is based on an average discount rate of 12.5% (13.2% in 2017) considering maturities from 1 to 13 years (from 1 to 14 years in 2017) including the renewal option when intended to be exercised.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
5.3 Impairment of intangible assets, including goodwill, and tangible assets
Impairment Net impairment (reversals)/charges recognized were as follows: |
| | | | | | | | | |
| | | Year ended December 31, |
| Type of asset | | 2018 | | 2017 | | 2016 |
| Goodwill | | 34 |
| | — |
| | — |
|
| Tangible assets | | 960 |
| | 206 |
| | 205 |
|
| Total | | 994 |
| | 206 |
| | 205 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| Type of asset | | 2021 | | 2020 | | 2019 |
| | | | | | |
| | | | | | |
| Tangible assets | | (218) | | | (133) | | | 1,927 | |
| Total | | (218) | | | (133) | | | 1,927 | |
Impairment test of goodwill
Goodwill is tested for impairment annually, as of October 1 or whenever changes in circumstances indicate that the carrying amount may not be recoverable, at the level of the groups of cash-generating units (“GCGU”) which correspond to the operating segments representing the lowest level at which goodwill is monitored for internal management purposes. Whenever the cash-generating units comprising the operating segments are tested for impairment at the same time as goodwill, the cash-generating units are tested first and any impairment of the assets is recorded prior to the testing of goodwill. Until the year ended December 31, 2017, the Company performed its annual impairment test of goodwill using October 31 as the measurement date. Effective September 2018, the Company changed its impairment test date to October 1 in order to better align with its internal strategic and financial planning process. The Company believes that this change in dates is preferable under the circumstances and does not result in the delay, acceleration or avoidance of an impairment charge.
The recoverable amounts of the GCGUs are mainly determined based on their value in use. The value in use of each GCGU is determined by estimating future cash flows. The 20182021 impairment test of goodwill did not include the GCGU corresponding to the Mining segment (as from April 1, 2021, ArcelorMittal implemented changes to its organizational structure (see note 1.1) as goodwill allocated to this GCGU was fully impaired in 2015. The key assumptions for the value in use calculations are primarily the discount rates, growth rates, expected changes to average selling prices, shipments and direct costs during the period. Assumptions for average selling prices and shipments are based on historical experience and expectations of future changes in the market. In addition, with respect to raw material price assumptions, the Company applied a range of $60$71 per tonne to $65$112 per tonne for iron ore and $130$144 per tonne to $192$240 per tonne for coking coal. Cash flow forecasts adjusted for the risks specific to the tested assets are derived from the most recent financial plans approved by management for the next five years. Beyond the specifically forecasted period, the Company extrapolates cash flows for the remaining years based on an estimated growth rate of 2%. This rate does not exceed the average long-term growth rate for the relevant markets.
The Company considered its exposure to certain climate-related risks which could affect its estimates of future cash flow projections applied for the determination of the recoverable
amount of its GCGUs and CGUs. With the switch to electric vehicles and the move to wind and solar power generation, the Company sees additional opportunities as customers deepen their understanding of embedded and lifecycle emissions of the materials where steel compares favorably. ArcelorMittal's most substantial climate-related policy risk is the EU Emissions Trading scheme ("'ETS"), which applies to all its European plants. The risk concerns the Company's primary steelmaking plants which are exposed to this regulation and yet unprotected against competition from imported steel. The Company is committed to the objectives of the Paris agreement and announced its ambition to reduce carbon emissions by 35% in Europe and 25% group-wide by 2030 and achieve group-wide carbon neutrality by 2050. These announced goals will require significant long-term investments which require global level playing field, access to abundant and affordable clean energy, facilitating necessary energy infrastructure, access to sustainable finance for low-emissions steelmaking and accelerated transition to a circular economy. In addition, the Company considered the legal obligation of carbon neutrality by 2050 effective within the EU and in Canada following adoption of the Climate Law and the Net Zero Emission Accountability Act, respectively. Accordingly, with respect to its flat steel operations in the EU and in Canada, ArcelorMittal concluded that future decarbonization capital expenditures, which correspond essentially to the construction of DRI-EAF facilities, are necessary to maintain the level of economic benefits expected to arise from the assets in their current condition and should therefore be included in the Company’s assumptions for future cash flows of the recoverable amount of the respective GCGUs and CGUs.At the same time, the Company is engaged in developing in the near to medium term a range of innovative low-emission technologies for the transition to decarbonized steel including the Smart Carbon route and the Hydrogen-DRI route and required investments are considered either in the Company's future cash flow projections or in the context of joint ventures, as an element of the Company's best estimate of capital expenditures which are committed and / or being implemented. The Company acknowledged that GCGUs and CGUs applying the blast furnace basic oxygen furnace "BF-BOF" route in other jurisdictions than the EU and Canada will apply decarbonization at a different pace. They may also not yet be subject to a legal obligation of carbon neutrality, which would not allow to include future decarbonization capital expenditures in their value in use calculations. Accordingly, the Company increased risk premiums included in their discount rates until they are able to accelerate their decarbonization strategy to meet the 2050 carbon neutrality objective and a legal obligation arises in the relevant jurisdiction. Additionally, the Company’s assumptions for future cash flows include an estimate for costs that the Company expects to incur to acquire emission allowances, which primarily impacts the flat steel operations in the EU and in Canada. The assumption for carbon emission
| | |
| 295 Consolidated financial statements |
cost is based on historical experience, implementation of decarbonization strategies to mitigate or otherwise offset such future costs and information available of future changes. Due to economic developments, uncertainties over the pace of transition to low-emission technologies, political and environmental actions that will be taken to meet the carbon reduction goals, regulatory changes and emissions activity arising from climate-related matters, the Company’s assumptions used in the recoverable amount calculations, such as capital expenditure, carbon emission costs and other assumptions are inherently uncertain and may ultimately differ from actual amounts.
The assumptions used in the value in use calculations are inherently uncertain in the context of the ongoing presence and repercussions of the COVID-19 pandemic and require management judgment. The Company's process includes specific consideration given to the most recent short, medium and long-term price forecasts and discount rates consistent with
external information, expected production and shipment volumes and updated development plans, operating costs and capital expenditure plans. Operating margins benefited in 2021 from a continuing strong price environment, favorable supply demand balance following a prolonged period of destocking and structural cost improvements sustained from the Company's response to the COVID-19 crisis. While the restocking effect has run its course with inventories returning to normal levels, the Company expects real demand recovery to continue in 2022.
Management estimates discount rates using pre-tax rates that reflect current market rates for investments of similar risk. The rate for each GCGUCGU, including beta, cost of debt and capital structure was estimated from the weighted average cost of capital of producers, which operate a portfolio of assets similar to those of the Company’s assets. |
| | | | | | | |
| | NAFTA |
| Brazil |
| Europe |
| ACIS |
| GCGU weighted average pre-tax discount rate used in 2018 (in %) | 12.9 |
| 15.5 |
| 10.6 |
| 15.4 |
| GCGU weighted average pre-tax discount rate used in 2017 (in %) | 11.9 |
| 15.6 |
| 11.0 |
| 16.3 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | NAFTA | | Brazil | | Europe | | ACIS | | |
| GCGU weighted average pre-tax discount rate used in 2021 (in %) | 11.3 | | 15.6 | | 8.6 | | 14.7 | | |
| GCGU weighted average pre-tax discount rate used in 2020 (in %) | 10.5 | | 15.9 | | 8.5 | | 14.6 | | |
Once recognized, impairment losses for goodwill are not reversed.
There waswere no impairment chargecharges recognized with respect to goodwill following the Company’s impairment testtests as of October 1, 2018.2021 and October 1, 2020. The total value in use calculated for all GCGUs overall increased overall in 20182021 as compared to 2017. The Company recognized a 18 and 16 impairment loss in connection with the sale of the Votorantim remedies (see note 2.3.1.) and the intended sale of the Ilva remedies (see note 2.3.2.). 2020.
In validating the value in use determined for the GCGUs, the Company performed a sensitivity analysis of key assumptions used in the discounted cash-flow model (such as discount rates, average selling prices, shipments and terminal growth rate).
In 2017, the following changes in key assumptions in projected earnings in every year of initial five-year period and perpetuity, at the GCGU level, assuming unchanged values for the other assumptions, would have caused the recoverab
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
le amount to equal respective carrying value as of the impairment test date (i.e.: October 31, 2017). |
| | | |
| | 2017 |
| | ACIS | | Brazil |
| Excess of recoverable amount over carrying amount | 272 | | 1,307 |
| Increase in pre-tax discount rate (change in basis points) | 72 | | 140 |
| Decrease in average selling price (change in %) | 0.49 | | 1.37 |
| Decrease in shipments (change in %) | 2.16 | | 4.11 |
In 2018, given the overall increase in value in use, theThe Company did not identify any reasonably possible change in key assumptions which could cause an impairment loss to be recognized.recognized for any of its GCGUs.
Impairment test of property, plant and equipment
At each reporting date, ArcelorMittal reviews the carrying amounts of its intangible assets (excluding goodwill) and tangible assets 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 (or cash generating unit) is reviewed in order to determine the amount of the impairment, if any. The recoverable amount is the higher of its net selling price (fairfair value reduced by selling costs)less cost of disposal and its value in use.
In estimating its 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 (or cash-generating unit). For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount
is determined for the cash-generating unit to which the asset belongs. The cash-generating unit is the smallest identifiable group of assets corresponding to operating units that generate cash inflows. 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 consolidated statements of operations.
In the case of permanently idled assets, the impairment is measured at the individual asset level. Otherwise, the Company’s assets are measured for impairment at the cash-generating unit level. In certain instances, the cash-generating unit is an integrated manufacturing facility which may also be an operating subsidiary. Further, a manufacturing facility may be operated in concert with another facility with neither facility generating cash flowsinflows that are largely independent from the cash flowsinflows of the other. In this instance, the two facilities are combined for purposes of testing for impairment. As of December 31, 2018,2021, the Company determined it has 6158 cash-generating units.
An impairment loss, related to intangible assets other than goodwill and tangible assets recognized in prior years is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. However, the increased carrying amount of an asset due to a reversal of an impairment loss will not exceed the carrying amount that would
| | |
| Consolidated financial statements 296 |
| (millions of U.S. dollar, except share and per share data) |
have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately as part of operating income in the consolidated statements of operations.
Impairment charges and reversals relating to property, plant and equipment were as follows for the years ended December 31, 2018, 20172021, 2020 and 2016:2019:
20182021
In 2018,the second half of 2021, in connection with the Company’s annual test for impairment of goodwill, property, plant and
equipment was also tested for impairment at that date. The Company reversed 218 of impairment charges which had been recognized in 2015 for the Sestao facility in Spain following idling for an indefinite timing. The impairment reversal results from improved future cash flow projections following restart of operations and the Company's decarbonization strategy in Spain.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Region | | Operating Segment | | Impairment Reversed | | 2021 Pre-Tax Discount Rate | | 2020 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of December 31, 2021 |
| Europe flat products | | Europe | | Europe | | 218 | | | 8.53 | % | | 8.47 | % | | 11,005 | |
2020
In 2020, the Company recognized a 133 net reversal of impairment including impairment charges of 92 and 104 related to the permanent closure of the coke plant in Florange (France) and the permanent closure of part of a blast furnace and steel plant in Krakow (Poland), respectively. In addition, the Company recognized an impairment loss of 331 relating to its plate business in the Europe segment classified as held for sale at December 31, 2020 (see note 2.3.2).
In the third quarter of 2020, the Company reversed 660 of impairment charges of property, plant and equipment previously recognized for ArcelorMittal USA as a result of the increase in the recoverable amount. The Company calculated the fair value less cost of disposal using a market approach with market multiples derived from comparable transactions, a Level 3
unobservable input. ArcelorMittal USA was sold to Cleveland-Cliffs as described in note 2.3.1.
2019
In 2019, the Company recognized a total impairment charge related to property, plant and equipment amounting to 1,927, of 960which 1,300 relating to ArcelorMittal USA (NAFTA), 102 to ArcelorMittal South Africa (ACIS), and 525 in Europe, including 872 in connection with the intended sale of the Ilva remedies (see note 2.3.2) and 68 in relation497 related to the sale of the VotorantimArcelorMittal Italia remedies (see note 2.3.1).
2017
In 2017, the Company recognized a total impairment charge related to property, plant and equipment in AMSA (ACIS) amounting to 206.
During the six months ended June 30, 2017, management performed a test2019, the Company recognized an impairment charge for impairmentproperty, plant and equipment amounting to 600 relating to the Long Carbon cash-generating unit of ArcelorMittal South AfricaUSA as a result of a downward revision of cash flow projections. Accordingly, tprojections in particular with respect to near-term steel selling prices as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2019 Pre-Tax Discount Rate | | 2018 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of June 30, 2019 |
| ArcelorMittal USA | | USA | | NAFTA | | 600 | | | 13.98 | % | | 16.91 | % | | 3,213 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millionsIn the second half of U.S. dollars, except share and per share data)
he Company recognized an impairment charge of 46 consisting of the following: |
| | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2017 Pre-Tax Discount Rate | | 2016 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of June 30, 2017 |
| Long Steel Products | | South Africa | | ACIS | | 46 |
| | 17.12 | % | | 16.63 | % | | 325 |
|
In2019, in connection with management’s annual test for impairment of goodwill, property, plant and equipment was also tested for impairment at that date. AsThe Company recognized an impairment charge for property, plant
and equipment amounting to 700 relating to ArcelorMittal USA in the NAFTA operating segment as a result of December 31, 2017,a downward revision of cash flow projections in particular with respect to near-term steel selling prices consisting of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2019 Pre-Tax Discount Rate | | 2018 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of December 31, 2019 |
| ArcelorMittal USA | | USA | | NAFTA | | 700 | | | 10.17 | % | | 16.91 | % | | 2,568 | |
In the same context, the Company concluded that the value in use ofrecognized a impairment charge for property, plant and equipment of 75 relating to the
Long Steel Products facility of Newcastle in AMSA wasArcelorMittal South Africa as a result of a lower than its carrying amount in the context of the appreciation of the rand against U.S. dollar and the uncertainties about demand outlook. Accordingly,domestic volumes as follows:
| | |
| 297 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2019 Pre-Tax Discount Rate | | 2018 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of December 31, 2019 |
| Long Steel Products | | South Africa | | ACIS | | 75 | | | 13.87 | % | | 15.13 | % | | 163 | |
In addition, the Company
recognized a totalrecorded impairment
charge of 160 consisting mainly of the following: |
| | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2017 Pre-Tax Discount Rate | | 2016 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of December 31, 2017 |
| Vanderbijlpark facility | | South Africa | | ACIS | | 86 |
| | 15.23 | % | | 14.97 | % | | 296 |
|
| Long Steel Products | | South Africa | | ACIS | | 33 |
| | 15.24 | % | | 15.22 | % | | 306 |
|
2016
In 2016, the Company recognized a total impairment charge ofcharges for property, plant and equipment amountingof ArcelorMittal South Africa of 27 including 20 with respect to 205.
This charge included 49 in connection with the saleclosure of the ArcelorMittal Zaragoza facility in Spain (Europe segment) on September 30, 2016 (see note 2.3.1). Saldanha facility.
In connection with management’s annual test for impairment of goodwill as of October 31, 2016, property, plant and equipment was also tested for impairment at that date. The Company concluded that the value in use of property, plant and equipment in AMSA was lower than its carrying amount following a revised competitive outlook. Accordingly, the Company recognized a total impairment charge of 156 consisting mainly of the following: |
| | | | | | | | | | | | | | | | |
| Cash-Generating Unit | | Country | | Operating Segment | | Impairment Recorded | | 2016 Pre-Tax Discount Rate | | 2015 Pre-Tax Discount Rate | | Carrying amount of property, plant and equipment as of December 31, 2016 |
| Vanderbijlpark facility | | South Africa | | ACIS | | 125 |
| | 14.97 | % | | 14.71 | % | | 330 |
|
NOTE 6: FINANCING AND FINANCIAL INSTRUMENTS
6.1Financial assets and liabilities
Financial assets and liabilities mainly comprise:
| |
• | fair values versus carrying amounts (see note 6.1.1)
|
| |
• | gross debt (see note 6.1.2)
|
| |
• | cash and cash equivalents, restricted cash and reconciliations of cash flows (see note 6.1.3)
|
| |
• | net debt (see note 6.1.4)
|
| |
• | derivative financial instruments (see note 6.1.5)
|
| |
• | other non-derivative financial assets and liabilities (see note 6.1.6)
|
•fair values versus carrying amounts (see note 6.1.1)
•gross debt (see note 6.1.2)
•cash and cash equivalents, restricted cash, other restricted funds and reconciliations of cash flows (see note 6.1.3)
•net debt (see note 6.1.4)
•derivative financial instruments (see note 6.1.5)
•other non-derivative financial assets and liabilities (see note 6.1.6)
6.1.1 Fair values versus carrying amounts
The estimated fair values of certain financial instruments have been determined using available market information or other valuation methodologies that require judgment in interpreting market data and developing estimates. On January 1, 2018 (the date of initial application of IFRS 9), the Company has assessed which business model applies to the financial assets held
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
by the Company and has classified its financial instruments into the appropriate IFRS 9 categories. The Company has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9.
Classification and measurement of financial assets
The date of initial application (i.e. the date on which the Company has assessed its existing financial assets and financial liabilities in terms of IFRS 9 requirements) is January 1, 2018. Accordingly, the Company has applied the requirements of IFRS 9 to instruments that continue to be recognized at January 1, 2018 and has not applied the requirements to instruments that have already been derecognized at January 1, 2018. Comparative amounts in relation to instruments that continue to be recognized at January 1, 2018 have been reclassified where appropriate.
Equity investments previously classified as available-for-sale and at cost
The Company elected to present in OCI changes in the fair value of all its equity investments previously classified as available-for-sale and at cost, because these investments are held as long-term strategic investments that are not expected to be sold in the short to medium term. As a result, on January 1, 2018, assets with a carrying amount of 1,444 and 27 were reclassified from assets available-for-sale and investments at cost, respectively, to financial assets at FVOCI.
Trade accounts receivable previously classified as loans and receivables
Trade receivables subject to TSR programs with a carrying amount of 594 were reclassified on January 1, 2018 from loans and receivables at amortized cost to financial assets at FVOCI (see note 4.3).
The main impact of the adoption of IFRS 9 relates to financial assets as the requirements for financial liabilities remained substantially unchanged from IAS 39. On the date of initial application, the Company’s financial instruments were as follows, with any applicable reclassifications:
|
| | | | | | | | | | | |
| Measurement category | | Carrying amount |
| | Original (IAS 39) | | New (IFRS 9) | | Original | | New | | Change |
| Current financial assets | | | | | | | | | |
| Trade accounts receivable and other | Loans and receivables | | Amortized cost | | 3,269 |
| | 3,269 |
| | — |
| Trade accounts receivable and other subject to TSR programs | Loans and receivables | | FVOCI | | 594 |
| | 594 |
| | — |
| Cash and cash equivalents | Loans and receivables | | Amortized cost | | 2,574 |
| | 2,574 |
| | — |
| Restricted cash | Loans and receivables | | Amortized cost | | 212 |
| | 212 |
| | — |
| Prepaid expenses and other current assets | Loans and receivables | | Amortized cost | | 574 |
| | 574 |
| | — |
| Derivatives | Fair value recognized in profit or loss | | Fair value recognized in profit or loss | | 87 |
| | 87 |
| | — |
| Non-current financial assets | | | | | | | | | |
| Other assets | Loans and receivables | | Amortized cost | | 834 |
| | 834 |
| | — |
| Other investments | Available-for-sale | | FVOCI | | 1,444 |
| | 1,444 |
| | — |
| Other investments | Investments at cost | | FVOCI | | 27 |
| | 27 |
| | — |
| Derivatives | Fair value recognized in profit or loss | | Fair value recognized in profit or loss | | 989 |
| | 989 |
| | — |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The following tables summarizetable summarizes assets and liabilities based on their categories.categories at December 31, 2021:
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Carrying amount in the consolidated statements of financial position |
| Non-financial assets and liabilities |
| Assets/Liabilities at amortized cost |
| Fair value recognized in profit or loss |
| Fair value recognized in OCI |
| Derivatives |
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents | 2,172 |
|
| — |
|
| 2,172 |
|
| — |
|
| — |
|
| — |
|
| Restricted cash | 182 |
|
| — |
|
| 182 |
|
| — |
|
| — |
|
| — |
|
| Trade accounts receivable and other | 4,432 |
|
| — |
|
| 3,957 |
|
| — |
|
| 475 |
|
| — |
|
| Inventories | 20,744 |
|
| 20,744 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Prepaid expenses and other current assets | 2,834 |
|
| 1,405 |
|
| 812 |
|
| — |
|
| — |
|
| 617 |
|
| Assets held for sale | 2,111 |
|
| 2,111 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Total current assets | 32,475 |
|
| 24,260 |
|
| 7,123 |
|
| — |
|
| 475 |
|
| 617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current assets: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Goodwill and intangible assets | 5,728 |
|
| 5,728 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Property, plant and equipment and biological assets | 35,638 |
|
| 35,589 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| Investments in associates and joint ventures | 4,906 |
|
| 4,906 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Other investments | 855 |
|
| — |
|
| — |
|
| — |
|
| 855 |
|
| — |
|
| Deferred tax assets | 8,287 |
|
| 8,287 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Other assets | 3,360 |
|
| 526 |
|
| 1,188 |
|
| 1,037 |
|
| — |
|
| 609 |
|
| Total non-current assets | 58,774 |
|
| 55,036 |
|
| 1,188 |
|
| 1,086 |
|
| 855 |
|
| 609 |
|
| Total assets | 91,249 |
|
| 79,296 |
|
| 8,311 |
|
| 1,086 |
|
| 1,330 |
|
| 1,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND EQUITY | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Current liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Short-term debt and current portion of long-term debt | 3,167 |
|
| — |
|
| 3,167 |
|
| — |
|
| — |
|
| — |
|
| Trade accounts payable and other | 13,981 |
|
| — |
|
| 13,981 |
|
| — |
|
| — |
|
| — |
|
| Short-term provisions | 539 |
|
| 528 |
|
| 11 |
|
| — |
|
| — |
|
| — |
|
| Accrued expenses and other liabilities | 4,709 |
|
| 1,212 |
|
| 3,307 |
|
| — |
|
| — |
|
| 190 |
|
| Income tax liabilities | 238 |
|
| 238 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Liabilities held for sale | 821 |
|
| 821 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Total current liabilities | 23,455 |
|
| 2,799 |
|
| 20,466 |
|
| — |
|
| — |
|
| 190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Long-term debt, net of current portion | 9,316 |
|
| — |
|
| 9,316 |
|
| — |
|
| — |
|
| — |
|
| Deferred tax liabilities | 2,374 |
|
| 2,374 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Deferred employee benefits | 6,982 |
|
| 6,982 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Long-term provisions | 1,995 |
|
| 1,984 |
|
| 11 |
|
| — |
|
| — |
|
| — |
|
| Other long-term obligations | 3,019 |
|
| 457 |
|
| 1,854 |
|
| — |
|
| — |
|
| 708 |
|
| Total non-current liabilities | 23,686 |
|
| 11,797 |
|
| 11,181 |
|
| — |
|
| — |
|
| 708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Equity attributable to the equity holders of the parent | 42,086 |
|
| 42,086 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Non-controlling interests | 2,022 |
|
| 2,022 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Total equity | 44,108 |
|
| 44,108 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Total liabilities and equity | 91,249 |
|
| 58,704 |
|
| 31,647 |
|
| — |
|
| — |
|
| 898 |
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 298 |
| (millions of U.S. dollar, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Carrying amount in the consolidated statements of financial position | | Non-financial assets and liabilities | | Assets/Liabilities at amortized cost | | Fair value recognized in profit or loss | | Fair value recognized in OCI | | Derivatives |
| ASSETS | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | 4,215 | | | — | | | 4,215 | | | — | | | — | | | — | |
| Restricted cash and other restricted funds | 156 | | | — | | | 156 | | | — | | | — | | | — | |
| Trade accounts receivable and other | 5,143 | | | — | | | 4,521 | | | — | | | 622 | | | — | |
| Inventories | 19,858 | | | 19,858 | | | — | | | — | | | — | | | — | |
| Prepaid expenses and other current assets | 5,567 | | | 1,128 | | | 1,454 | | | — | | | — | | | 2,985 | |
| | | | | | | | | | | |
| Total current assets | 34,939 | | | 20,986 | | | 10,346 | | | — | | | 622 | | | 2,985 | |
| | | | | | | | | | | |
| Non-current assets: | | | | | | | | | | | |
| Goodwill and intangible assets | 4,425 | | | 4,425 | | | — | | | — | | | — | | | — | |
| Property, plant and equipment and biological assets | 30,075 | | | 30,037 | | | — | | | 38 | | | — | | | — | |
| Investments in associates and joint ventures | 10,319 | | | 10,319 | | | — | | | — | | | — | | | — | |
| Other investments | 1,146 | | | — | | | — | | | — | | | 1,146 | | | — | |
| Deferred tax assets | 8,147 | | | 8,147 | | | — | | | — | | | — | | | — | |
| Other assets | 1,461 | | | 359 | | | 648 | | | 136 | | | — | | | 318 | |
| Total non-current assets | 55,573 | | | 53,287 | | | 648 | | | 174 | | | 1,146 | | | 318 | |
| Total assets | 90,512 | | | 74,273 | | | 10,994 | | | 174 | | | 1,768 | | | 3,303 | |
| | | | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | |
| Short-term debt and current portion of long-term debt | 1,913 | | | — | | | 1,913 | | | — | | | — | | | — | |
| Trade accounts payable and other | 15,093 | | | — | | | 15,093 | | | — | | | — | | | — | |
| Short-term provisions | 1,064 | | | 1,048 | | | 16 | | | — | | | — | | | — | |
| Accrued expenses and other liabilities | 4,831 | | | 1,420 | | | 3,095 | | | — | | | — | | | 316 | |
| Income tax liabilities | 1,266 | | | 1,266 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | |
| Total current liabilities | 24,167 | | | 3,734 | | | 20,117 | | | — | | | — | | | 316 | |
| | | | | | | | | | | |
| Non-current liabilities: | | | | | | | | | | | |
| Long-term debt, net of current portion | 6,488 | | | — | | | 6,488 | | | — | | | — | | | — | |
| Deferred tax liabilities | 2,369 | | | 2,369 | | | — | | | — | | | — | | | — | |
| Deferred employee benefits | 3,772 | | | 3,772 | | | — | | | — | | | — | | | — | |
| Long-term provisions | 1,498 | | | 1,495 | | | 3 | | | — | | | — | | | — | |
| Other long-term obligations | 874 | | | 343 | | | 473 | | | — | | | — | | | 58 | |
| Total non-current liabilities | 15,001 | | | 7,979 | | | 6,964 | | | — | | | — | | | 58 | |
| | | | | | | | | | | |
| Equity: | | | | | | | | | | | |
| Equity attributable to the equity holders of the parent | 49,106 | | | 49,106 | | | — | | | — | | | — | | | — | |
| Non-controlling interests | 2,238 | | | 2,238 | | | — | | | — | | | — | | | — | |
| Total equity | 51,344 | | | 51,344 | | | — | | | — | | | — | | | — | |
| Total liabilities and equity | 90,512 | | | 63,057 | | | 27,081 | | | — | | | — | | | 374 | |
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Carrying amount in the consolidated statements of financial position | | Non-financial assets and liabilities | | Assets/Liabilities at amortized cost | | Fair value recognized in profit or loss | | Available-for-sale assets | | Derivatives |
| ASSETS | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | 2,574 |
| | — |
| | 2,574 |
| | — |
| | — |
| | — |
|
| Restricted cash | 212 |
| | — |
| | 212 |
| | — |
| | — |
| | — |
|
| Trade accounts receivable and other | 3,863 |
| | — |
| | 3,863 |
| | — |
| | — |
| | — |
|
| Inventories | 17,986 |
| | 17,986 |
| | — |
| | — |
| | — |
| | — |
|
| Prepaid expenses and other current assets | 1,931 |
| | 1,270 |
| | 574 |
| | — |
| | — |
| | 87 |
|
| Assets held for sale | 179 |
| | 179 |
| | — |
| | — |
| | — |
| | — |
|
| Total current assets | 26,745 |
| | 19,435 |
| | 7,223 |
| | — |
| | — |
| | 87 |
|
| | | | | | | | | | | | |
| Non-current assets: | |
| | |
| | |
| | |
| | |
| | |
|
| Goodwill and intangible assets | 5,737 |
| | 5,737 |
| | — |
| | — |
| | — |
| | — |
|
| Property, plant and equipment and biological assets | 36,971 |
| | 36,935 |
| | — |
| | 36 |
| | — |
| | — |
|
| Investments in associates and joint ventures | 5,084 |
| | 5,084 |
| | — |
| | — |
| | — |
| | — |
|
| Other investments | 1,471 |
| | — |
| | — |
| | — |
| | 1,471 |
| | — |
|
| Deferred tax assets | 7,055 |
| | 7,055 |
| | — |
| | — |
| | — |
| | — |
|
| Other assets | 2,234 |
| | 411 |
| | 834 |
| | — |
| | — |
| | 989 |
|
| Total non-current assets | 58,552 |
| | 55,222 |
| | 834 |
| | 36 |
| | 1,471 |
| | 989 |
|
| Total assets | 85,297 |
| | 74,657 |
| | 8,057 |
| | 36 |
| | 1,471 |
| | 1,076 |
|
| | | | | | | | | | | | |
| LIABILITIES AND EQUITY | |
| | |
| | |
| | |
| | |
| | |
|
| Current liabilities: | |
| | |
| | |
| | |
| | |
| | |
|
| Short-term debt and current portion of long-term debt | 2,785 |
| | — |
| | 2,785 |
| | — |
| | — |
| | — |
|
| Trade accounts payable and other | 13,428 |
| | — |
| | 13,428 |
| | — |
| | — |
| | — |
|
| Short-term provisions | 410 |
| | 394 |
| | 16 |
| | — |
| | — |
| | — |
|
| Accrued expenses and other liabilities | 4,505 |
| | 1,080 |
| | 3,100 |
| | — |
| | — |
| | 325 |
|
| Income tax liabilities | 232 |
| | 232 |
| | — |
| | — |
| | — |
| | — |
|
| Liabilities held for sale | 50 |
| | 50 |
| | — |
| | — |
| | — |
| | — |
|
| Total current liabilities | 21,410 |
| | 1,756 |
| | 19,329 |
| | — |
| | — |
| | 325 |
|
| | | | | | | | | | | | |
| Non-current liabilities: | |
| | |
| | |
| | |
| | |
| | |
|
| Long-term debt, net of current portion | 10,143 |
| | — |
| | 10,143 |
| | — |
| | — |
| | — |
|
| Deferred tax liabilities | 2,684 |
| | 2,684 |
| | — |
| | — |
| | — |
| | — |
|
| Deferred employee benefits | 7,630 |
| | 7,630 |
| | — |
| | — |
| | — |
| | — |
|
| Long-term provisions | 1,612 |
| | 1,612 |
| | — |
| | — |
| | — |
| | — |
|
| Other long-term obligations | 963 |
| | 204 |
| | 415 |
| | — |
| | — |
| | 344 |
|
| Total non-current liabilities | 23,032 |
| | 12,130 |
| | 10,558 |
| | — |
| | — |
| | 344 |
|
| | | | | | | | | | | | |
| Equity: | |
| | |
| | | | |
| | |
| | |
|
| Equity attributable to the equity holders of the parent | 38,789 |
| | 38,789 |
| | — |
| | — |
| | — |
| | — |
|
| Non-controlling interests | 2,066 |
| | 2,066 |
| | — |
| | — |
| | — |
| | — |
|
| Total equity | 40,855 |
| | 40,855 |
| | — |
| | — |
| | — |
| | — |
|
| Total liabilities and equity | 85,297 |
| | 54,741 |
| | 29,887 |
| | — |
| | — |
| | 669 |
|
| | |
| 299 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Carrying amount in the consolidated statements of financial position | | Non-financial assets and liabilities | | Assets/Liabilities at amortized cost | | Fair value recognized in profit or loss | | Fair value recognized in OCI | | Derivatives |
| ASSETS | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | 5,600 | | | — | | | 5,600 | | | — | | | — | | | — | |
| Restricted cash and other restricted funds | 363 | | | — | | | 363 | | | — | | | — | | | — | |
| Trade accounts receivable and other | 3,072 | | | — | | | 2,699 | | | — | | | 373 | | | — | |
| Inventories | 12,328 | | | 12,328 | | | — | | | — | | | — | | | — | |
| Prepaid expenses and other current assets | 2,281 | | | 910 | | | 1,018 | | | — | | | — | | | 353 | |
| Assets held for sale | 4,329 | | | 3,384 | | | 945 | | | — | | | — | | | — | |
| Total current assets | 27,973 | | | 16,622 | | | 10,625 | | | — | | | 373 | | | 353 | |
| | | | | | | | | | | |
| Non-current assets: | | | | | | | | | | | |
| Goodwill and intangible assets | 4,312 | | | 4,312 | | | — | | | — | | | — | | | — | |
| Property, plant and equipment and biological assets | 30,622 | | | 30,577 | | | — | | | 45 | | | — | | | — | |
| Investments in associates and joint ventures | 6,817 | | | 6,817 | | | — | | | — | | | — | | | — | |
| Other investments | 2,980 | | | — | | | — | | | — | | | 2,980 | | | — | |
| Deferred tax assets | 7,866 | | | 7,866 | | | — | | | — | | | — | | | — | |
| Other assets | 1,482 | | | 237 | | | 785 | | | 136 | | | — | | | 324 | |
| Total non-current assets | 54,079 | | | 49,809 | | | 785 | | | 181 | | | 2,980 | | | 324 | |
| Total assets | 82,052 | | | 66,431 | | | 11,410 | | | 181 | | | 3,353 | | | 677 | |
| | | | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | |
| Short-term debt and current portion of long-term debt | 2,507 | | | — | | | 2,507 | | | — | | | — | | | — | |
| Trade accounts payable and other | 11,525 | | | — | | | 11,525 | | | — | | | — | | | — | |
| Short-term provisions | 935 | | | 919 | | | 16 | | | — | | | — | | | — | |
| Accrued expenses and other liabilities | 4,197 | | | 1,160 | | | 2,829 | | | — | | | — | | | 208 | |
| Income tax liabilities | 464 | | | 464 | | | — | | | — | | | — | | | — | |
| Liabilities held for sale | 3,039 | | | 709 | | | 2,330 | | | — | | | — | | | — | |
| Total current liabilities | 22,667 | | | 3,252 | | | 19,207 | | | — | | | — | | | 208 | |
| | | | | | | | | | | |
| Non-current liabilities: | | | | | | | | | | | |
| Long-term debt, net of current portion | 9,815 | | | — | | | 9,815 | | | — | | | — | | | — | |
| Deferred tax liabilities | 1,832 | | | 1,832 | | | — | | | — | | | — | | | — | |
| Deferred employee benefits | 4,656 | | | 4,656 | | | — | | | — | | | — | | | — | |
| Long-term provisions | 1,697 | | | 1,691 | | | 6 | | | — | | | — | | | — | |
| Other long-term obligations | 1,148 | | | 354 | | | 698 | | | — | | | — | | | 96 | |
| Total non-current liabilities | 19,148 | | | 8,533 | | | 10,519 | | | — | | | — | | | 96 | |
| | | | | | | | | | | |
| Equity: | | | | | | | | | | | |
| Equity attributable to the equity holders of the parent | 38,280 | | | 38,280 | | | — | | | — | | | — | | | — | |
| Non-controlling interests | 1,957 | | | 1,957 | | | — | | | — | | | — | | | — | |
| Total equity | 40,237 | | | 40,237 | | | — | | | — | | | — | | | — | |
| Total liabilities and equity | 82,052 | | | 52,022 | | | 29,726 | | | — | | | — | | | 304 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 300 |
| (millions of U.S. dollar, except share and per share data) |
The Company classifies the bases used to measure certain assets and liabilities at their fair value. Assets and liabilities carried or measured at fair value have been classified into three levels based upon a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The levels are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2: Significant inputs other than within Level 1 that are observable for the asset or liability, either directly (i.e.: as prices) or indirectly (i.e.: derived from prices);
Level 3: Inputs for the assets or liabilities that are not based on observable market data and require management assumptions or inputs from unobservable markets.
The following tables summarize the bases used to measure certain Financialfinancial assets and Financialfinancial liabilities at their fair value on recurring basis. | | | As of December 31, 2018 | | | | | | | | | |
| As of December 31, 2021 | | As of December 31, 2021 | | | | | | | | |
| | | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets at fair value: | | | | | | | | | Assets at fair value: | | | | | | | | |
| Investments in equity instruments at FVOCI | | 793 |
| | — |
| | 62 |
| | 855 |
| Investments in equity instruments at FVOCI | | 1,069 | | | — | | | 77 | | | 1,146 | |
| Trade accounts receivable and other subject to TSR programs* | | — |
| | — |
| | 475 |
| | 475 |
| Trade accounts receivable and other subject to TSR programs* | | — | | | — | | | 622 | | | 622 | |
| Derivative financial current assets | | — |
| | 617 |
| | — |
| | 617 |
| Derivative financial current assets | | — | | | 2,985 | | | — | | | 2,985 | |
| Derivative financial non-current assets | | — |
| | 126 |
| | 483 |
| | 609 |
| Derivative financial non-current assets | | — | | | 303 | | | 15 | | | 318 | |
| Total assets at fair value | | 793 |
| | 743 |
| | 1,020 |
| | 2,556 |
| Total assets at fair value | | 1,069 | | | 3,288 | | | 714 | | | 5,071 | |
| Liabilities at fair value: | | |
| | |
| | |
| | |
| Liabilities at fair value: | | | | | | | | |
| Derivative financial current liabilities | | — |
| | 75 |
| | 115 |
| | 190 |
| Derivative financial current liabilities | | — | | | 316 | | | — | | | 316 | |
| Derivative financial non-current liabilities | | — |
| | 131 |
| | 577 |
| | 708 |
| Derivative financial non-current liabilities | | — | | | 58 | | | — | | | 58 | |
| Total liabilities at fair value | | — |
| | 206 |
| | 692 |
| | 898 |
| Total liabilities at fair value | | — | | | 374 | | | — | | | 374 | |
*The fair value of TSR program receivables equals carrying amount due to the short time frame between the initial recognition and time of sale.
|
| | | | | | | | | | | | |
| As of December 31, 2017 | | | | | | | | |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets at fair value: | | | | | | | | |
| Available-for-sale financial assets | | 1,444 |
| | — |
| | — |
| | 1,444 |
|
| Derivative financial current assets | | — |
| | 87 |
| | — |
| | 87 |
|
| Derivative financial non-current assets | | — |
| | 5 |
| | 984 |
| | 989 |
|
| Total assets at fair value | | 1,444 |
| | 92 |
| | 984 |
| | 2,520 |
|
| Liabilities at fair value: | | |
| | |
| | |
| | |
|
| Derivative financial current liabilities | | — |
| | 247 |
| | 78 |
| | 325 |
|
| Derivative financial non-current liabilities | | — |
| | 158 |
| | 186 |
| | 344 |
|
| Total liabilities at fair value | | — |
| | 405 |
| | 264 |
| | 669 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | | | | | | | | |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets at fair value: | | | | | | | | |
| Investments in equity instruments at FVOCI | | 2,934 | | | — | | | 46 | | | 2,980 | |
| Trade accounts receivable and other subject to TSR programs* | | — | | | — | | | 373 | | | 373 | |
| Derivative financial current assets | | — | | | 353 | | | — | | | 353 | |
| Derivative financial non-current assets | | — | | | 265 | | | 59 | | | 324 | |
| Total assets at fair value | | 2,934 | | | 618 | | | 478 | | | 4,030 | |
| Liabilities at fair value: | | | | | | | | |
| Derivative financial current liabilities | | — | | | 208 | | | — | | | 208 | |
| Derivative financial non-current liabilities | | — | | | 96 | | | — | | | 96 | |
| Total liabilities at fair value | | — | | | 304 | | | — | | | 304 | |
*The fair value of TSR program receivables equals carrying amount due to the short time frame between the initial recognition and time of sale.
InvestmentsInvestments in equity instruments at FVOCI classified as Level 1 refer to listed securities quoted in active markets. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited exceptions. The total fair value is either the price of the most recent trade at the time of the market close or the official close price as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. The decrease in investments in equity instruments at FVOCI in 2018 is2021 was mainly related to the decreasedivestment of the Company's interest in the share price of Erdemir and China Oriental.Cleveland-Cliffs (see note 2.5).
| | |
| 301 Consolidated financial statements |
Derivative financial assets and liabilities classified as Level 2 refer to instruments to hedge fluctuations in interest rates, foreign exchange rates, raw materials (base metals), freight, energy and emission rights, see note 6.1.5 for further information.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Derivative financial assets and liabilities classified as Level 3 are described in note 6.1.5.
6.1.2 Gross debt
Gross debt includes bank debt, debenture loans and finance lease obligations and is stated at amortized cost. However, loans that are hedged under a fair value hedge are remeasured for the changes in the fair value that are attributable to the risk that is being hedged.
6.1.2.1 Short-term debt
Short-term debt, including the current portion of long-term debt, consisted of the following: | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
Short-term bank loans and other credit facilities including commercial paper 1 | 888 | | | 1,647 | |
| Current portion of long-term debt | 836 | | | 677 | |
Lease obligations2 | 189 | | | 183 | |
| Total | 1,913 | | | 2,507 | |
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
Short-term bank loans and other credit facilities including commercial paper 1 | 1,968 |
| | 1,735 |
|
| Current portion of long-term debt | 1,130 |
| | 976 |
|
| Lease obligations | 69 |
| | 74 |
|
| Total | 3,167 |
| | 2,785 |
|
| |
1. | The weighted average interest rate on short-term borrowings outstanding was 1.3% and 3.1% as of December 31, 2018 and 2017,1.The weighted average interest rate on short-term borrowings outstanding was 0.9% and 1.3% as of December 31, 2021 and 2020, respectively.
|
2.See note 7.
On April 8, 2020, ArcelorMittal amended a €300 million (341) term loan with a financial institution to extend the maturity to April 8, 2021, on which date the term loan was fully repaid.
In 2014, ArcelorMittal entered into certain short-term committed bilateral credit facilities. The facilities were subsequently extended in 2016, 2017 and 2018.annually. During 2021 some facilities were not extended. As of December 31, 2018, the2021, facilities totaling approximately 0.90.3 billion, remain fully available.
On January 16, 2018, the Company entered into a fully drawn bilateral term loan due July 16, 2018, for an amount of €400 million (466). The bilateral term loan was fully repaid at maturity on July 16, 2018.
On August 10, 2018, the Company entered into a €300 million (344) term loan with a financial institution maturing on April 30, 2019.
On December 18, 2018, ArcelorMittal entered into an agreement for financing with a financial institution for net proceeds of CAD 292 million (214) with repayment over several dates in 2019 and 2020. As of December 31, 2018, CAD 295 million (216) was outstanding.
Commercial paper
The Company has a commercial paper program enabling borrowings of up to €1.5 billion. As of December 31, 20182021 and 2017,2020, the outstanding amount was 1,295541 and 1,125,1,044, respectively.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 302 |
| (millions of U.S. dollar, except share and per share data) |
6.1.2.2Long-term debt
Long-term debt is comprised of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | December 31, |
| Year of maturity | | Type of Interest | | Interest rate1 | | 2021 | | 2020 |
| Corporate | | | | | | | | | |
5.5 billion Revolving Credit Facility3 | 2023 - 2025 | | Floating | | | | — | | | — | |
| | | | | | | | | |
| | | | | | | | | |
| €500 million Unsecured Notes | 2021 | | Fixed | | 3.00 | % | | — | | | 350 | |
| €750 million Unsecured Notes | 2022 | | Fixed | | 3.13 | % | | 551 | | | 596 | |
| | | | | | | | | |
| €500 million Unsecured Notes | 2023 | | Fixed | | 0.95 | % | | 415 | | | 448 | |
| €750 million Unsecured Notes | 2023 | | Fixed | | 1.00 | % | | 848 | | | 917 | |
| €1.0 billion Unsecured Notes | 2024 | | Fixed | | 2.25 | % | | 604 | | | 1,234 | |
| 750 Unsecured Notes | 2024 | | Fixed | | 3.60 | % | | 289 | | | 747 | |
| 500 Unsecured Notes | 2025 | | Fixed | | 6.13 | % | | 183 | | | 256 | |
| €750 million Unsecured Notes | 2025 | | Fixed | | 1.75 | % | | 844 | | | 913 | |
| 750 Unsecured Notes | 2026 | | Fixed | | 4.55 | % | | 399 | | | 745 | |
| 500 Unsecured Notes | 2029 | | Fixed | | 4.25 | % | | 494 | | | 494 | |
| 1.5 billion Unsecured Bonds | 2039 | | Fixed | | 7.00 | % | | 671 | | | 671 | |
| 1.0 billion Unsecured Notes | 2041 | | Fixed | | 6.75 | % | | 428 | | | 428 | |
| Other loans | 2022 - 2023 | | Fixed | | 1.8% - 2.4% | | 142 | | | 218 | |
| EIB loan | 2025 | | Fixed | | 1.16 | % | | 215 | | | 304 | |
| Other loans | 2029 - 2035 | | Floating | | 0.4% - 2.3% | | 273 | | | 1,204 | |
| Total Corporate | | | | | | | 6,356 | | | 9,525 | |
| Americas | | | | | | | | | |
| Other loans | 2020 - 2030 | | Fixed/Floating | | 0.0% - 9.5% | | 72 | | | 83 | |
| Total Americas | | | | | | | 72 | | | 83 | |
| Europe, Asia & Africa | | | | | | | | | |
| EBRD Facility | 2024 | | Floating | | 2.2% - 2.5% | | 82 | | | 129 | |
| Other loans | 2021 - 2030 | | Fixed/Floating | | 0.0% - 4.7% | | 123 | | | 123 | |
| Total Europe, Asia & Africa | | | | | | | 205 | | | 252 | |
| Total | | | | | | | 6,633 | | | 9,860 | |
| Less current portion of long-term debt | | | | | | | (836) | | | (677) | |
| Total long-term debt (excluding lease obligations) | | | | | | | 5,797 | | | 9,183 | |
Long-term lease obligations2 | | | | | | | 691 | | | 632 | |
| Total long-term debt, net of current portion | | | | | | | 6,488 | | | 9,815 | |
|
| | | | | | | | | | | |
| | | | | | | | December 31, |
| | Year of maturity | | Type of Interest | | Interest rate1 | | 2018 | | 2017 |
| Corporate | | | | | | | | | |
| 5.5 billion Revolving Credit Facility | 2023 | | Floating | | | | — |
| | — |
|
€500 million Unsecured Notes2 | 2018 | | Fixed | | 5.75% | | — |
| | 400 |
|
€400 million Unsecured Notes3 | 2018 | | Floating | | 1.70% | | — |
| | 480 |
|
| €750 million Unsecured Notes | 2019 | | Fixed | | 3.00% | | 858 |
| | 897 |
|
| 500 Unsecured Notes | 2020 | | Fixed | | 5.13% | | 324 |
| | 323 |
|
| CHF 225 million Unsecured Notes | 2020 | | Fixed | | 2.50% | | 228 |
| | 230 |
|
| €600 million Unsecured Notes | 2020 | | Fixed | | 2.88% | | 685 |
| | 715 |
|
| 1.0 billion Unsecured Bonds | 2020 | | Fixed | | 5.25% | | 623 |
| | 622 |
|
| 1.5 billion Unsecured Notes | 2021 | | Fixed | | 5.50% | | 754 |
| | 753 |
|
| €500 million Unsecured Notes | 2021 | | Fixed | | 3.00% | | 570 |
| | 597 |
|
| €750 million Unsecured Notes | 2022 | | Fixed | | 3.13% | | 856 |
| | 895 |
|
1.1 billion Unsecured Notes4 | 2022 | | Fixed | | 6.25% | | 656 |
| | 655 |
|
| €500 million Unsecured Notes | 2023 | | Fixed | | 0.95% | | 568 |
| | 593 |
|
| 500 Unsecured Notes | 2025 | | Fixed | | 6.13% | | 497 |
| | 497 |
|
1.5 billion Unsecured Bonds4 | 2039 | | Fixed | | 7.00% | | 670 |
| | 1,092 |
|
1.0 billion Unsecured Notes4 | 2041 | | Fixed | | 6.75% | | 428 |
| | 619 |
|
| Other loans | 2019-2021 | | Fixed | | 1.25% - 3.46% | | 114 |
| | 53 |
|
| EIB loan | 2025 | | Fixed | | 1.16% | | 401 |
| | 420 |
|
| 7 billion Term Facility | 2020 |
| Floating |
| 3.31% |
| 1,000 |
|
| — |
|
| Other loans | 2019 - 2035 | | Floating | | 0.0% - 5.03% | | 639 |
| | 672 |
|
| Total Corporate | | | | | | | 9,871 |
| | 10,513 |
|
| | | | | | | | | | |
| Americas | | | | | | | | | |
| Other loans | 2019 - 2025 | | Fixed/Floating | | 2.25% - 10.00% | | 84 |
| | 107 |
|
| Total Americas | | | | | | | 84 |
| | 107 |
|
| |
| |
| |
| |
|
| |
|
|
| Europe, Asia & Africa | | | | | | | | | |
| EBRD Facility | 2024 | | Floating | | 4.77% - 5.07% | | 50 |
| | — |
|
| Other loans | 2019 - 2029 | | Fixed/Floating | | 0.00% - 2.62% | | 86 |
| | 85 |
|
| Total Europe, Asia & Africa | | | | | | | 136 |
| | 85 |
|
| | | | | | | | | | |
| Total | | | | | | | 10,091 |
| | 10,705 |
|
| Less current portion of long-term debt | | | | | | | (1,130 | ) | | (976 | ) |
| Total long-term debt (excluding lease obligations) | | | | | | | 8,961 |
| | 9,729 |
|
Long-term lease obligations5 | | | | | | | 355 |
| | 414 |
|
| Total long-term debt, net of current portion | | | | | | | 9,316 |
| | 10,143 |
|
| |
1. | Rates applicable to balances outstanding at December 31, 2018, including the effect of step-downs following rating changes. For debt that has been redeemed in its entirety during 2018,1.Rates applicable to balances outstanding at December 31, 2021. For debt that has been redeemed in its entirety during 2021, the interest rates refer to the rates at repayment date.
|
| |
2. | Amount outstanding was repaid at the original maturity, March 29, 2018.
|
| |
3. | Amount outstanding was repaid at the original maturity, April 9, 2018.
|
| |
4. | Bonds or Notes partially repurchased on August 22, 2018 and September 6, 2018, pursuant to cash tender offer.
|
| |
5. | Net of current portion of 69 and 74 as of December 31, 2018 and 2017, respectively.
|
ARCELORMITTAL AND SUBSIDIARIES
Notes2.Net of current portion of 189 and 183 as of December 31, 2021 and 2020, respectively. Further information regarding leases is provided in note 7.
3. On November 26, 2020, the commitments were extended by one year to Consolidated Financial StatementsDecember 19, 2025. The commitments are 5.5 billion until December 19, 2023 and 5.4 billion until December 19, 2025.
(millions of U.S. dollars, except share and per share data)
Corporate
Corporate
5.5 billion Revolving Credit Facility
On December 19, 2018, ArcelorMittal signed an agreement for a 5.5 billion revolving credit facility (the "Facility"). This Facility amends and restatesreplaced the 5.5 billion revolving credit facility dated April 30, 2015, and which was amended and extended on December 21, 2016. The new agreement incorporatesincorporated a single tranche of 5.5 billion maturing on December 19, 2023, with 2 one-year extension options. On November 27, 2019 and on November 26, 2020,
ArcelorMittal exercised the option to extend the facility's maturity by one year to December 19, 2024 and to December 19, 2025, respectively. The extension was completed for 5.4 billion of the available amount, with the 0.1 billion remaining with a maturity of December 19, 2023. On April 27, 2021, the Facility was amended so that the margin payable will be increased or decreased depending on the Company’s performance against two metrics measured annually against pre-defined targets with respect to its environmental and sustainability performance (CO2 intensity of the Company’s European operations and the
| | |
| 303 Consolidated financial statements |
number of facilities which have been certified by ResponsibleSteel™). The Facility may be used for general corporate purposes. As of December 31, 2018,2021, the 5.5 billion revolving credit facility was fully available. The Company makes drawdowns from and repayments on this Facility in the framework of its cash management.
On September 30, 2010, ArcelorMittal entered into 500 revolving multi-currency letter of credit facility (the "Letter of Credit Facility"). The Letter of Credit Facility is used by the Company and its subsidiaries for the issuance of letters of credit and other instruments. The terms of the letters of credit and other instruments contain certain restrictions as to duration. The Letter of Credit Facility was amended on October 26, 2012 and September 30, 2014 to reduce its amount to 450 and to 350, respectively. On July 31, 2019, the Company refinanced its Letter of Credit Facility by entering into a 350 revolving multi-currency letter of credit facility, which matures on July 31, 2022. On August 5, 2020, the Letter of Credit Facility maturity was extended to July 31, 2023. On November 25, 2020, the Letter or Credit Facility increased its amount to 395. On June 25, 2021, the maturity of the Letter of Credit Facility was extended to July 31, 2024.
Bonds
On March 29, 2018,April 9, 2021, at maturity, ArcelorMittal repaid all of the €334outstanding €285 million (411) principal amount that remained outstanding,
following the cash tender offers in April 2016(342) of its €500 million 4.5% unsecured bonds.
On April 9, 2018, at maturity,June 29, 2021, pursuant to a cash tender offer, ArcelorMittal repaidrepurchased €471 million (562) of its €400EUR denominated 2.25%
Notes due 2024 for a total aggregate purchase price including accrued interest of €501 million (491) 2018 Floating Rate Notes.(595). Following this purchase, €529 million (625) principal amount remained outstanding.
On June 29, 2021, pursuant to a cash tender offer, ArcelorMittal repurchased 73 of its U.S. dollar denominated 6.125% notes due 2025 for a total aggregate purchase price including accrued interest of 86. Following this purchase, 183 principal amount remained outstanding.
On August 7, 2018,June 29, 2021, pursuant to a cash tender offers and financed with existing cash and liquidity,offer, ArcelorMittal purchased:
| |
• | 195 of its U.S. dollar denominated 6.75% Notes due March 1, 2041 (the “USD 2041 Notes”) for a total aggregate purchase price (including premiums and accrued interest) of 224. Following this purchase, 434repurchased 349 of its U.S. dollar denominated 4.55% notes due 2026 for a total aggregate purchase price including accrued interest of 399. Following this purchase, 401 principal amount of the USD 2041 Notes remained outstanding.
|
| |
• | 432 of its U.S. dollar denominated 7.00% Notes due October 15, 2039 (the “2039 Notes”) for a total aggregate purchase price (including premiums and accrued interest) of 505. Following this purchase, 686 principal amount of the USD 2039 Notes remained outstanding.
|
As a result of the above mentioned early redemptions, net financing costs for the year ended December 31, 2018 included 104 of premiums.
On January 17, 2019, ArcelorMittal issued €750 million (854) 2.25% Notes due 2024. The Notes were issued under ArcelorMittal’s €10 billion wholesale Euro Medium Term Notes Program.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The margin applicable to ArcelorMittal’s principal credit facilities (5.5 billion revolving credit facility and certain other credit facilities) and the coupons on certain of its outstanding bonds are subject to adjustment in the event of a change in its long-term credit ratings. The following table provides details of the outstanding bonds on maturity, the original coupons and the current interest rates for the bonds impacted by changes in the long-term credit rating: |
| | | | | | | | |
| Nominal value | | Date of issuance | | Repayment date | | Original/Current interest rate1 | | Issued at |
| €750 million Unsecured Notes | | Mar 25, 2014 | | Mar 25, 2019 | | 3.00% | | 99.65% |
| 500 million Unsecured Notes | | Jun 1, 2015 | | Jun 1, 2020 | | 5.13% | | 100.00% |
| CHF 225 million Unsecured Notes | | Jul 3, 2015 | | Jul 3, 2020 | | 2.50% | | 100.00% |
| €600 million Unsecured Notes | | Jul 4, 2014 | | Jul 6, 2020 | | 2.88% | | 99.18% |
| 1.0 billion Unsecured Bonds | | Aug 5, 2010 | | Aug 5, 2020 | | 5.25% | | 98.46% |
| 1.5 billion Unsecured Notes | | Mar 7, 2011 | | Mar 1, 2021 | | 5.50% | | 99.36% |
| €500 million Unsecured Notes | | Apr 9, 2015 | | Apr 9, 2021 | | 3.00% | | 99.55% |
| €750 million Unsecured Notes | | Jan 14, 2015 | | Jan 14, 2022 | | 3.13% | | 99.73% |
| 1.1 billion Unsecured Notes | | Feb 28, 2012 | | Feb 25, 2022 | | 6.25% | | 98.28% |
| €500 million Unsecured Notes | | Dec 4, 2017 | | Jan 17, 2023 | | 0.95% | | 99.38% |
| 500 million Unsecured Notes | | Jun 1, 2015 | | Jun 1, 2025 | | 6.13% | | 100.00% |
| 1.0 billion Unsecured Bonds | | Oct 8, 2009 | | Oct 15, 2039 | | 7.00% | | 95.20% |
| 500 million Unsecured Bonds | | Aug 5, 2010 | | Oct 15, 2039 | | 7.00% | | 104.84% |
| 1.0 billion Unsecured Notes | | Mar 7, 2011 | | Mar 1, 2041 | | 6.75% | | 99.18% |
| |
1. | Rates applicable at December 31, 2018. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nominal value | | Date of issuance | | Repayment date | | Interest rate1 | | Issued at |
| | | | | | | | |
| €750 million Unsecured Notes | | Jan 14, 2015 | | Jan 14, 2022 | | 3.13 | % | | 99.73 | % |
| €500 million Unsecured Notes | | Dec 4, 2017 | | Jan 17, 2023 | | 0.95 | % | | 99.38 | % |
| €750 million Unsecured Notes | | Nov 19, 2019 | | May 19, 2023 | | 1.00 | % | | 99.89 | % |
| €250 million Unsecured Notes | | Jul 4, 2019 | | Jan 17, 2024 | | 2.25 | % | | 105.59 | % |
| €750 million Unsecured Notes | | Jan 17, 2019 | | Jan 17, 2024 | | 2.25 | % | | 99.72 | % |
| 750 Unsecured Notes | | Jul 16, 2019 | | Jul 16, 2024 | | 3.60 | % | | 99.86 | % |
| 500 Unsecured Notes | | Jun 1, 2015 | | Jun 1, 2025 | | 6.13 | % | | 100.00 | % |
| €750 million Unsecured Notes | | Nov 19, 2019 | | Nov 19, 2025 | | 1.75 | % | | 99.41 | % |
| 750 Unsecured Notes | | Mar 11, 2019 | | Mar 11, 2026 | | 4.55 | % | | 99.72 | % |
| 500 Unsecured Notes | | Jul 16, 2019 | | Jul 16, 2029 | | 4.25 | % | | 99.00 | % |
| 1.0 billion Unsecured Bonds | | Oct 8, 2009 | | Oct 15, 2039 | | 7.00 | % | | 95.20 | % |
| 500 Unsecured Bonds | | Aug 5, 2010 | | Oct 15, 2039 | | 7.00 | % | | 104.84 | % |
| 1.0 billion Unsecured Notes | | Mar 7, 2011 | | Mar 1, 2041 | | 6.75 | % | | 99.18 | % |
1.Rates applicable at December 31, 2021.
European Investment Bank (“EIB”) Loan
On June 2, 2021, ArcelorMittal signed a €280 million loan agreement with the European Investment Bank ("EIB") for
funding of research, development and innovation projects in Europe over the period of 2021-2023. This operation benefits from a guarantee from the European Union under the European
| | |
| Consolidated financial statements 304 |
| (millions of U.S. dollar, except share and per share data) |
Fund for Strategic Investments. As of December 31, 2021 the facility remained fully available. On March 1, 2022 ArcelorMittal sent disbursement request to the EIB for the full amount of €280 million (335).
On December 16, 2016, ArcelorMittal signed a €350 million finance contract with the European Investment BankEIB in order to finance European research, development and innovation projects over the period 2017-2020 within the European Union, namely predominantly in France, Belgium and Spain, but also in Czech Republic, Poland Luxembourg and Romania.Luxembourg. This operation benefits from a guarantee from the European Union under the European Fund for Strategic Investments. As of December 31, 2018, €3502021, €190 million (401)(215) was fully drawn.outstanding.
Other loans
On November 20,July 7, 2021, the Company fully prepaid Schuldschein borrowings for a total of €450 million (532), of which €405 million (479) maturing originally on July 5, 2023 and €45 million (53) maturing originally on July 7, 2025.
On December 21, 2018, ArcelorMittalthe Company entered into a 7 billion term facility agreement with a group of lenders for €235 million to finance the construction of a new hot strip mill in connection with the acquisitionMexico. This facility became effective upon issuance of ESIL. The agreement has a term of one year (until November 20, 2019), subject to ArcelorMittal’s option to extend the term by six months. The facility may be used for certain payments by ArcelorMittal as well asguarantee by the joint venture through whichOesterreichische Kontrollbank AG in March 2019. The last installment under this agreement is due 8.5 years after the Company expects jointly to ownstarting date of the credit facility (which means the earlier of (a) the date of issue of the provisional acceptance certificate for the hot strip mill and operate ESIL(b) June 30, 2021). The outstanding amount in partnership with Nippon Steel & Sumitomo Metal Corporation (the “Joint Venture”). Any amounts borrowed by the Joint Venture under the agreement are irrevocably and unconditionally guaranteed by ArcelorMittal. The Term Facilities Agreement includes the same Leverage Ratio financial covenanttotal as that included in the Company’s 5.5 billion revolving credit facility. The Term Facilities Agreement is also subject to certain mandatory prepayment events, including the use of proceeds from debt capital market issuances by the Group or capital raising by the JV group and certain disposals, in each case above 1 billion.December 31, 2021 was €162 million (184).
On May 14, 2018,21, 2019, ArcelorMittal entered into a bilateral term facility agreement inloan due May 20, 2022. On July 31, 2020, the bilateral term loan was extended for one year to May 19, 2023. The bilateral term loan was fully drawn on June 3, 2019 for an amount of 1 billion to make a payment to the financial creditors of Uttam Galva and KSS Petron to clear overdue debts in order that the offer€125 million (142). On March 4, 2021, the Company submitted for ESIL on April 2, 2018 would be eligible and considered by ESIL’s Committee of Creditors.early repaid the bilateral term loan.
On December 20, 2019, the Company entered into a bilateral loan due June 20, 2023. The facilitybilateral term loan was fully drawn on May 14, 2018January 30, 2020, for an amount of €100 million (110). This term loan could have been extended twice, each time for one additional year. On March 8, 2021, the Company early repaid the bilateral term loan.
On July 2, 2020, ArcelorMittal entered into an agreement for financing with a financial institution for net proceeds of CAD174 million (128) with repayment over several dates in connection with the payment2021 and was repaid on2022.
On November 29, 2018 via2021, ArcelorMittal entered into an agreement for financing with a drawing under the above-referenced 7 billion term facility.financial institution for net proceeds of CAD130 million (105) with repayment over several dates in 2021, 2022 and 2023.
Other loans relate to various debt with banks and public institutions.
On October 9, 2017, ArcelorMittal completed the offering of a €300 million (344) variable rate loan in the German Schuldschein market. The proceeds of the issuance were used to repay or prepay existing indebtedness.Americas
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Americas
1 billion senior secured asset-based revolving credit facility
On May 23, 2016, ArcelorMittal USA LLC signed a 1 billion senior secured asset-based revolving credit facility maturing on May 23, 2021. Borrowings under the facility are secured by inventory and certain other working capital and related assets of ArcelorMittal USA and certain of its subsidiaries in the United States. The facility may be used for general corporate purposes. The facility is not guaranteed by ArcelorMittal. As of December 31, 2018, the facility is fully available.
Other loans
Other loans relate mainly to loans contracted by ArcelorMittal Brazilsubsidiaries in Mexico with different counterparties.
Europe, Asia and Africa
On December 21, 2017, ArcelorMittal Kryvyi Rih entered into a 175 loan agreement with the European Bank for Reconstruction and Development ("EBRD") in order to support the upgrade of its production facilities, energy efficiency improvement and environmental impact reduction. The loan agreement also provides for an additional 175 in loan facilities which are currently uncommitted. As of December 31, 2018, 502021, 175 was drawn under the agreement and the remainder remains fully available.agreement.
On May 25, 2017, ArcelorMittal South Africa signed a 4.5 billion South African rand revolving borrowing base finance facility maturing on May 25, 2020. The facility was amended and extended on July 26, 2019 with a maturity of on July 26, 2022. On August 23, 2021, the facility was further amended and restated for an amount of 3.5 billion South African rand and with a maturity of September 3, 2024. Any borrowings under the facility are secured by certain eligible inventory and receivables, as well as certain other working capital and related assets of ArcelorMittal South Africa. The facility is used for general corporate purposes. The facility is not guaranteed by ArcelorMittal. As of December 31, 2018, 0.32021, 1.8 billion South African rand (21)(113) was drawn.
Other loans
Other loans mainly relate to loans contracted by ArcelorMittal subsidiaries in Spain with different counterparties.
Other
Certain debt agreements of the Company or its subsidiaries contain certain restrictive covenants. Among other things, these covenants limit encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittal’s subsidiaries to incur debt and the ability of ArcelorMittal and its subsidiaries to dispose of assets in certain circumstances. Certain of these agreements also require compliance with a financial covenant. On April 13, 2021, ArcelorMittal's Facility was amended so that the Leverage ratio financial covenant would permanently cease to apply in the event that the Company obtained an investment grade long-term credit rating (with stable outlook) from two rating agencies (which occurred in 2021, as described in "Operating and financial review — Liquidity and Capital Resources" – section).
| | |
| 305 Consolidated financial statements |
Hedge of net investments
As of April 1, 2018, the Company designated a portfolio of euro denominated debt (€5,1693,709 million as of December 31, 2018)2021) as a hedge of certain euro denominated investments (€7,8048,261 million as of December 31, 2018)2021) in order to mitigate the foreign currency risk arising from certain euro denominated subsidiaries' net assets. The risk arises from the fluctuation in spot exchange rates between the U.S. dollar and euro, which causes the amount of the net investments to vary. The hedged risk in the hedge of net investments is a risk of a weakening euro against the U.S. dollar that will result in a reduction in the carrying amount of the Company's net investments in the subsidiaries subject to the hedge. The euro denominated debt is designated as a hedging instrument for the change in the value of the net investments that is attributable to changes in the euro/U.S. dollar spot rate.
To assess the hedge effectiveness, the Company determines the economic relationship between the hedging instrument and the hedged item by comparing changes in the carrying amount of the debt portfolio that are attributable to a change in the spot rate with changes in the net investments in the foreign operations due to movements in the spot rate.
As of December 31, 2018,2021, the Company recognized 474423 foreign exchange gainsgain arising on the translation of the euro denominated debt designated as a hedge of the euro
denominated net investments in foreign operations in other comprehensive income within the foreign exchange translation reserve.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
As of December 31, 20182021 the scheduled maturities of short-term debt, long-term debt and long-term lease obligations, including their current portion are as follows: |
| | | |
| Year of maturity | | Amount |
| 2019 | | 3,167 |
|
| 2020 | | 3,163 |
|
| 2021 | | 1,769 |
|
| 2022 | | 1,690 |
|
| 2023 | | 808 |
|
| Subsequent years | | 1,886 |
|
| Total | | 12,483 |
|
The carrying amount and the estimated fair | | | | | | | | |
| Year of maturity | | Amount |
| 2022 | | 1,913 | |
| 2023 | | 1,545 | |
| 2024 | | 1,124 | |
| 2025 | | 1,163 | |
| 2026 | | 542 | |
| Subsequent years | | 2,114 | |
| Total | | 8,401 | |
Fair value
of the Company’s short and long-term debt is: |
| | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
| Instruments payable bearing interest at fixed rates | 8,692 |
| | 9,078 |
| | 9,862 |
| | 11,084 |
|
| Instruments payable bearing interest at variable rates | 1,823 |
| | 1,759 |
| | 1,331 |
| | 1,301 |
|
| Total long-term debt, including current portion | 10,515 |
| | 10,837 |
| | 11,193 |
| | 12,385 |
|
| Short term bank loans and other credit facilities including commercial paper | 1,968 |
| | 1,967 |
| | 1,735 |
| | 1,731 |
|
The following tables summarize the Company’s bases used to estimate its debt at fair value. Fair value measurement has been classified into three levels based upon a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 | Carrying amount | | Fair Value |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Instruments payable bearing interest at fixed rates | 7,011 | | | 6,380 | | | 1,261 | | | — | | | 7,641 | |
| Instruments payable bearing interest at variable rates | 502 | | | — | | | 480 | | | — | | | 480 | |
| Total long-term debt, including current portion | 7,513 | | | 6,380 | | | 1,741 | | | — | | | 8,121 | |
| Short term bank loans and other credit facilities including commercial paper | 888 | | | — | | | 888 | | | — | | | 888 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | Carrying amount | | Fair Value |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Instruments payable bearing interest at fixed rates | 9,195 | | | 8,698 | | | 1,431 | | | — | | | 10,129 | |
| Instruments payable bearing interest at variable rates | 1,480 | | | 0 | | 1,488 | | | — | | | 1,488 | |
| Total long-term debt, including current portion | 10,675 | | | 8,698 | | | 2,919 | | | — | | | 11,617 | |
| Short term bank loans and other credit facilities including commercial paper | 1,647 | | | 0 | | 1,649 | | | — | | | 1,649 | |
|
| | | | | | | | | | | | | | |
| As of December 31, 2018 | Carrying amount | | Fair Value |
| | | | Level 1 | | Level 2 | | Level 3 | | Total |
| Instruments payable bearing interest at fixed rates | 8,692 |
| | 8,029 |
| | 1,049 |
| | — |
| | 9,078 |
|
| Instruments payable bearing interest at variable rates | 1,823 |
| | — |
| | 1,759 |
| | — |
| | 1,759 |
|
| Total long-term debt, including current portion | 10,515 |
| | 8,029 |
| | 2,808 |
| | — |
| | 10,837 |
|
| Short term bank loans and other credit facilities including commercial paper | 1,968 |
| | — |
| | 1,967 |
| | — |
| | 1,967 |
|
|
| | | | | | | | | | | | | | |
| As of December 31, 2017 | Carrying amount | | Fair Value |
| | | | Level 1 | | Level 2 | | Level 3 | | Total |
| Instruments payable bearing interest at fixed rates | 9,862 |
| | 9,946 |
| | 1,138 |
| | — |
| | 11,084 |
|
| Instruments payable bearing interest at variable rates | 1,331 |
| | 481 |
| | 820 |
| | — |
| | 1,301 |
|
| Total long-term debt, including current portion | 11,193 |
| | 10,427 |
| | 1,958 |
| | — |
| | 12,385 |
|
| Short term bank loans and other credit facilities including commercial paper | 1,735 |
| | — |
| | 1,731 |
| | — |
| | 1,731 |
|
Instruments payable classified as Level 1 refer to the Company’s listed bonds quoted in active markets. The total fair value is the official closing price as defined by the exchange on which the instrument is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
Instruments payable classified as Level 2 refer to all debt instruments not classified as Level 1. The fair value of the debt is based on estimated future cash flows converted into U.S. dollar at the forward rate and discounted using current U.S. dollar zero coupon rates and ArcelorMittal’s credit spread quotations for the relevant maturities.
| | |
| Consolidated financial statements 306 |
| (millions of U.S. dollar, except share and per share data) |
There were no instruments payable classified as Level 3.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
6.1.3 Cash and cash equivalents, restricted cash and other restricted funds and reconciliations of cash flows
Cash and cash equivalents consist of cash and short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at the time of purchase and are carried at cost plus accrued interest, which approximates fair value.
SignificantCash and cash equivalents are primarily centralized at the parent level and are managed by ArcelorMittal Treasury SNC, although from time to time cash or cash equivalent balances may be held from time to time at the Company’s international operating subsidiaries including in particular those in France and the United States, where the Company maintains cash management systems under which most ofor its cash and cash equivalents are centralized. Other subsidiaries which may hold significant cash balances, include those in Brazil, Canada, India, Kazakhstan, South Africa and Ukraine.holding companies. Some of these operating subsidiaries have debt outstanding or are subject to acquisition agreements that impose restrictions on such operating subsidiaries’ ability to pay dividends, but such restrictions are not significant in the context of ArcelorMittal’s overall liquidity. Repatriation of funds from operating subsidiaries may also be affected by tax and foreign exchange policies in place from time to time in the various countries where the Company operates, though none of these policies are currently significant in the context of ArcelorMittal’s overall liquidity.
Cash and cash equivalents consisted of the following:
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Cash at bank | 2,674 | | | 3,487 | |
| Term deposits | 607 | | | 393 | |
Money market funds1 | 934 | | | 1,720 | |
| Total | 4,215 | | | 5,600 | |
1Money market funds are highly liquid investments with a maturity of 3 months or less from the date of acquisition.
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Cash at bank | 1,832 |
| | 1,701 |
|
| Term deposits | 283 |
| | 297 |
|
Money market funds1 | 57 |
| | 576 |
|
| Total | 2,172 |
| | 2,574 |
|
| |
1 | Money market funds are highly liquid investments with a maturity of 3 months or less from the date of acquisition.
|
Restricted cash represents cash and cash equivalents not readily available to the Company, mainly related to insurance deposits, cash accounts in connection with environmental obligations and true sale of receivables programs, as well as various other deposits or required balance obligations related to letters of credit and credit arrangements. Changes in restricted cash are included within other investing activities (net) in the consolidated statements of cash flows.
Restricted cash and other restricted funds of 182156 as of December 31, 20182021 included 10389 relating to various environmental obligations, true sales of receivables programs and letter of credits issued in ArcelorMittal South Africa. Restricted cash of 363 as of December 31, 2020 included 56 relating to various environmental obligations and true sales of receivables programs in ArcelorMittal South Africa. RestrictedAfrica and 260 with respect to a cash collateral provided by the Company until collection of the TSR receivables retained in ArcelorMittal USA after disposal (see note 4.1). It also included 20 and 7520 in connection with the mandatory convertible bonds as of December 31, 20182021 and December 31, 2017,2020, respectively (see note 10.2)11.2).
Changes in restricted cash are included within investing activities in the consolidated statements of cash flows.
Reconciliation of liabilities arising from financing activities
The table below details changes in the Company's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be classified in the Company's consolidated statements of cash flows from financing activities.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | |
| | Long-term debt, net of current portion | | Short-term debt and current portion of long term debt |
| Balance as of December 31, 2016 | 11,789 |
| | 1,885 |
|
| Proceeds from long-term debt | 1,407 |
| | — |
|
| Payments of long-term debt | (2,691 | ) | | — |
|
| Amortized cost | 19 |
| | 22 |
|
| Unrealized foreign exchange effects | 589 |
| | 190 |
|
| Proceeds from short-term debt | — |
| | 1,859 |
|
Payments of short-term debt1 | — |
| | (2,164 | ) |
| Current portion of long-term debt | (976 | ) | | 976 |
|
Other movements2 | 6 |
| | 17 |
|
| Balance as of December 31, 2017 (note 6.1.2) | 10,143 |
| | 2,785 |
|
| Proceeds from long-term debt | 1,138 |
| | — |
|
| Payments of long-term debt | (798 | ) | | — |
|
| Amortized cost | 9 |
| | 18 |
|
| Unrealized foreign exchange effects | (240 | ) | | (219 | ) |
| Proceeds from short-term debt | — |
| | 2,319 |
|
Payments of short-term debt1 | — |
| | (2,949 | ) |
| Current portion of long-term debt | (1,130 | ) | | 1,130 |
|
| Debt acquired through business combinations | 174 |
| | 69 |
|
| Debt classified as held for sale (2.3.2) | (77 | ) | | — |
|
Other movements2 | 97 |
| | 14 |
|
| Balance as of December 31, 2018 (note 6.1.2) | 9,316 |
| | 3,167 |
|
| | |
1. | Cash payments decreasing the outstanding liability relating to finance leases are classified under other financing activities in the Company's consolidated307 Consolidated financial statements of cash flows.
|
| | | | | | | | | | | |
| Long-term debt, net of current portion | | Short-term debt and current portion of long term debt |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Balance as of December 31, 2019 (note 6.1.2) | 11,471 | | | 2,869 | |
| Proceeds from long-term debt | 323 | | | — | |
| Payments of long-term debt | (1,645) | | | — | |
| Amortized cost | 8 | | | 7 | |
| | | |
| Proceeds from short-term debt | — | | | 430 | |
| Payments of short-term debt | — | | | (1,503) | |
| Current portion of long-term debt | (860) | | | 860 | |
Payments of principal portion of lease liabilities (note 7) 1 | (7) | | | (235) | |
| Additions to lease liabilities (notes 5.2 and 7) | 195 | | | 38 | |
| Derecognition of lease liabilities following the divestment of ArcelorMittal USA (note 2.3.1) | (208) | | | (70) | |
| Debt classified as held for sale (note 2.3.2) | (21) | | | (3) | |
| Unrealized foreign exchange effects and other movements | 559 | | | 114 | |
| Balance as of December 31, 2020 (note 6.1.2) | 9,815 | | | 2,507 | |
| Proceeds from long-term debt | 147 | | | — | |
| Payments of long-term debt | (2,332) | | | — | |
| Amortized cost | 4 | | | 10 | |
| | | |
| Proceeds from short-term debt | — | | | 287 | |
| Payments of short-term debt | — | | | (1,664) | |
| Current portion of long-term debt | (1,025) | | | 1,025 | |
Payments of principal portion of lease liabilities (note 7) 1 | (8) | | | (191) | |
| Additions to lease liabilities (notes 5.2 and 7) | 289 | | | 24 | |
| Unrealized foreign exchange effects and other movements | (402) | | | (85) | |
| Balance as of December 31, 2021 (note 6.1.2) | 6,488 | | | 1,913 | |
1.Cash payments decreasing the outstanding liability relating to leases are classified under payments of principal portion of lease liabilities and other financing activities in the Company's consolidated statements of cash flows.
| | |
2.Consolidated financial statements 308 |
Others movements include non-current(millions of U.S. dollar, except share and current obligations under finance leases.per share data)
|
6.1.4 Net debt
The Company monitors its net debt in order to manage its capital. The following tables present the structure of the Company’s net debt by original currency at December 31, 20182021 and December 31, 2017:2020:
| | | As of December 31, 2018 | Total USD |
| | EUR |
| | USD |
| | CHF |
| | INR |
| | CAD |
| | Other
(in USD) |
| |
| As of December 31, 2021 | | As of December 31, 2021 | Total USD | | EUR | | USD | | PLN | | CAD | | ZAR | | Other
(USD) |
| Short-term debt and current portion of long-term debt | 3,167 |
| | 2,566 |
| | 338 |
| | — |
| | 8 |
| | 151 |
| | 104 |
| Short-term debt and current portion of long-term debt | 1,913 | | | 1,456 | | | 97 | | | 14 | | | 132 | | | 115 | | | 99 | |
| Long-term debt, net of current portion | 9,316 |
| | 3,530 |
| | 5,405 |
| | 228 |
| | — |
| | 69 |
| | 84 |
| Long-term debt, net of current portion | 6,488 | | | 3,443 | | | 2,637 | | | 215 | | | 55 | | | 5 | | | 133 | |
| Cash and cash equivalents including restricted cash | (2,354 | ) | | (454 | ) | | (1,017 | ) | | (2 | ) | | (307 | ) | | (29 | ) | | (545 | ) | |
| Cash and cash equivalents and restricted cash | | Cash and cash equivalents and restricted cash | (4,371) | | | (1,646) | | | (1,531) | | | (97) | | | (56) | | | (268) | | | (773) | |
| Net debt | 10,129 |
| | 5,642 |
| | 4,726 |
| | 226 |
| | (299 | ) | | 191 |
| | (357 | ) | Net debt | 4,030 | | | 3,253 | | | 1,203 | | | 132 | | | 131 | | | (148) | | | (541) | |
|
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | Total USD |
| | EUR |
| | USD |
| | CHF |
| | ZAR |
| | CAD |
| | Other
(in USD) |
|
| Short-term debt and current portion of long-term debt | 2,785 |
| | 1,875 |
| | 291 |
| | — |
| | 304 |
| | 191 |
| | 124 |
|
| Long-term debt, net of current portion | 10,143 |
| | 4,831 |
| | 5,044 |
| | 230 |
| | 4 |
| | 1 |
| | 33 |
|
| Cash and cash equivalents including restricted cash | (2,786 | ) | | (724 | ) | | (1,387 | ) | | (1 | ) | | (249 | ) | | (17 | ) | | (408 | ) |
| Net debt | 10,142 |
| | 5,982 |
| | 3,948 |
| | 229 |
| | 59 |
| | 175 |
| | (251 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | Total USD | | EUR | | USD | | CAD | | PLN | | UAH | | Other
(USD) |
| Short-term debt and current portion of long-term debt | 2,507 | | | 1,283 | | | 765 | | | 172 | | | 19 | | | 46 | | | 222 | |
| Long-term debt, net of current portion | 9,815 | | | 5,775 | | | 3,567 | | | 91 | | | 239 | | | 17 | | | 126 | |
| Cash and cash equivalents, restricted cash and other restricted funds | (5,963) | | | (2,637) | | | (2,236) | | | (35) | | | (152) | | | (19) | | | (884) | |
| Net debt | 6,359 | | | 4,421 | | | 2,096 | | | 228 | | | 106 | | | 44 | | | (536) | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
6.1.5 Derivative financial instruments
The Company uses derivative financial instruments principally to manage its exposure to fluctuations in interest rates, exchange rates, prices of raw materials, energy and emission rights allowances arising from operating, financing and investing activities. Derivative financial instruments are classified as current or non-current assets or liabilities based on their maturity dates and are accounted for at the trade date. Embedded derivatives are separated from the host contract and accounted for separately if they are not closely related to the host contract. The Company measures all derivative financial instruments based on fair values derived from market prices of the instruments or from option pricing models, as appropriate. Gains or losses arising from changes in fair value of derivatives are recognized in the consolidated statements of operations, except for derivatives that are designated and qualify for cash flow or net investment hedge accounting.
Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income. Amounts deferred in equity are recorded in the consolidated statements of operations in the periods when the hedged item is recognized in the consolidated statements of operations and within the same line item (see note 6.3 Cash flow hedges).
The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. When a hedging
instrument is sold, terminated, expired or exercised, the accumulated unrealized gain or loss on the hedging instrument is maintained in equity until the forecasted transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss, which had been recognized in equity, is reported immediately in the consolidated statements of operations.
Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized directly as a separate component of equity, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in the consolidated statements of operations (see note 6.3 Net investment hedge).
The Company manages the counter-party risk associated with its instruments by centralizing its commitments and by applying procedures which specify, for each type of transaction and underlying position, risk limits and/or the characteristics of the counter-party. The Company does not generally grant to or require guarantees from its counterparties for the risks incurred. Allowing for exceptions, the Company’s counterparties are part of its financial partners and the related market transactions are governed by framework agreements (mainly International Swaps and Derivatives Association agreements which allow netting only in case of counterparty default). Accordingly, derivative assets and derivative liabilities are not offset.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 309 Consolidated financial statements |
Derivative financial instruments classified as Level 2:
The following tables summarize this portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Assets | | Liabilities |
| Notional Amount | | Fair Value | | Notional Amount | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Foreign exchange rate instruments | | | | | | | |
| Forward purchase contracts | 3,845 | | | 133 | | | 1,023 | | | (43) | |
| Forward sale contracts | 2,685 | | | 16 | | | 1,431 | | | (15) | |
| | | | | | | |
| Exchange option purchases | 712 | | | 2 | | | 254 | | | (7) | |
| Exchange options sales | 338 | | | 5 | | | 707 | | | (2) | |
| Total foreign exchange rate instruments | | | 156 | | | | | (67) | |
| | | | | | | |
| Raw materials (base metals), freight, energy, emission rights | | | | | | | |
| Term contracts sales | 121 | | | 1 | | | 644 | | | (259) | |
| Term contracts purchases | 3,461 | | | 3,131 | | | 497 | | | (48) | |
| | | | | | | |
| Total raw materials (base metals), freight, energy, emission rights | | | 3,132 | | | | | (307) | |
| Total | | | 3,288 | | | | | (374) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Assets | | | Liabilities |
| Notional Amount | | Fair Value | | | | | Notional Amount | | Fair Value | | | |
| Interest rate instruments | | | | | | | | | | | | | |
| Other interest rate instruments | 22 | | | — | | | | | | 10 | | | — | | | | |
| Total interest rate instruments | | | — | | | | | | | | — | | | | |
| | | | | | | | | | | | | |
| Foreign exchange rate instruments | | | | | | | | | | | | | |
| Forward purchase contracts | 356 | | | 2 | | | | | | 2,199 | | | (113) | | | | |
| Forward sale contracts | 847 | | | 24 | | | | | | 371 | | | (19) | | | | |
| Currency swaps sales | 260 | | | 36 | | | | | | — | | | — | | | | |
| Exchange option purchases | 2,938 | | | 18 | | | | | | 1,176 | | | (15) | | | | |
| Exchange options sales | 2,960 | | | 26 | | | | | | 1,208 | | | (23) | | | | |
| Total foreign exchange rate instruments | | | 106 | | | | | | | | (170) | | | | |
| | | | | | | | | | | | | |
| Raw materials (base metals), freight, energy, emission rights | | | | | | | | | | | | | |
| Term contracts sales | 567 | | | 38 | | | | | | 370 | | | (46) | | | | |
| Term contracts purchases | 1,673 | | | 473 | | | | | | 854 | | | (87) | | | | |
| Option sales/purchases | 47 | | | 1 | | | | | | 48 | | | (1) | | | | |
| Total raw materials (base metals), freight, energy, emission rights | | | 512 | | | | | | | | (134) | | | | |
| Total | | | 618 | | | | | | | | (304) | | | | |
|
| | | | | | | | | | | |
| | December 31, 2018 |
| | Assets | | Liabilities |
| | Notional Amount | | Fair Value | | Notional Amount | | Fair Value |
| Foreign exchange rate instruments |
|
| |
|
| |
|
| |
|
|
| Forward purchase contracts | 2,005 |
| | 66 |
| | 1,258 |
| | (13 | ) |
| Forward sale contracts | 5,810 |
| | 252 |
| | 724 |
| | (9 | ) |
| Currency swaps purchases | — |
| | — |
| | — |
| | — |
|
| Currency swaps sales | — |
| | — |
| | 1,000 |
| | (101 | ) |
| Exchange option purchases | 2,000 |
| | 71 |
| | 43 |
| | — |
|
| Exchange options sales | 234 |
| | 3 |
| | 1,000 |
| | (35 | ) |
| Total foreign exchange rate instruments |
|
| | 392 |
| |
|
| | (158 | ) |
| |
|
| |
|
| |
|
| |
|
|
| Raw materials (base metals), freight, energy, emission rights |
|
| |
|
| |
|
| |
|
|
| Term contracts sales | 79 |
| | 4 |
| | 24 |
| | (6 | ) |
| Term contracts purchases | 1,524 |
| | 347 |
| | 739 |
| | (42 | ) |
| Total raw materials (base metals), freight, energy, emission rights |
|
| | 351 |
| |
|
| | (48 | ) |
| Total |
|
| | 743 |
| |
|
| | (206 | ) |
| | |
| Consolidated financial statements 310 |
| (millions of U.S. dollar, except share and per share data) |
|
| | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Assets | | Liabilities |
| | Notional Amount | | Fair Value | Average Rate 1 | Notional Amount | | Fair Value | Average Rate 1 |
| Interest rate swaps - fixed rate borrowing/loans | 6 |
| | — |
| 0.98 | % | | | — |
| 1.01 | % |
| | | | | | | | | |
| Foreign exchange rate instruments |
|
| |
|
| |
|
| |
|
| |
| Forward purchase contracts | 586 |
| | 8 |
| | 3,939 |
| | (140 | ) | |
| Forward sale contracts | 525 |
| | 17 |
| | 774 |
| | (11 | ) | |
| Currency swaps purchases | — |
| | — |
| | 9 |
| | (7 | ) | |
| Currency swaps sales | — |
| | — |
| | 1,000 |
| | (157 | ) | |
| Exchange option purchases | — |
| | — |
| | 338 |
| | (7 | ) | |
| Exchange options sales | — |
| | — |
| | 319 |
| | (5 | ) | |
| Total foreign exchange rate instruments |
|
| | 25 |
| |
|
| | (327 | ) | |
| |
|
| |
|
| |
|
| |
|
| |
| Raw materials (base metals), freight, energy, emission rights |
|
| |
|
| |
|
| |
|
| |
| Term contracts sales | 20 |
| | 1 |
| | 467 |
| | (38 | ) | |
| Term contracts purchases | 796 |
| | 65 |
| | 534 |
| | (40 | ) | |
| Option sales/purchases | 9 |
| | 1 |
| | — |
| | — |
| |
| Total raw materials (base metals), freight, energy, emission rights |
|
| | 67 |
| |
|
| | (78 | ) | |
| Total |
|
| | 92 |
| |
|
| | (405 | ) | |
1. The average rate is determined for fixed rate instruments on basis of the U.S. dollar and foreign currency rates and for variable rate instruments generally
on basis of Euribor or Libor.
Derivative financial assets and liabilities classified as Level 2 refer to instruments to hedge fluctuations in interest rates, foreign exchange rates, raw materials (base metals), freight, energy and emission rights. The total fair value is based on the price a dealer would pay or receive for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and the fair value is calculated using standard industry models based on significant observable market inputs such as foreign exchange rates, commodity prices, swap rates and interest rates.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Derivative financial instruments classified as Level 3:
Derivative financial non-current assets classified as Level 3 refer to the call option on the 1,000 mandatory convertible bonds (see note 10.2)11.2). The fair valuation of Level 3 derivative instruments is established at each reporting date and compared to the prior period. ArcelorMittal’s valuation policies for Level 3 derivatives are an integral part of its internal control procedures and have been reviewed and approved according to the Company’s principles for establishing such procedures. In particular, such procedures address the accuracy and reliability of input data, the accuracy of the valuation model and the knowledge of the staff performing the valuations.
ArcelorMittal establishes the fair valuation of the call option on the 1,000 mandatory convertible bonds through the use of binomial valuation models based on the estimated values of the underlying equity spot priceprice of $219$137 and volatility of 24.33%18%. Binomial valuation models use an iterative procedure to price options, allowing for the specification of nodes, or points in time, during the time span between the valuation date and the option’s expiration date. In contrast to the Black-Scholes model, which provides a numerical result based on inputs, the binomial model allows for the calculation of the asset and the option for multiple periods along with the range of possible results for each period.
Observable input data used in the valuations include zero coupon yield curves, stock market prices of Erdemir and China Oriental,price, European Central Bank foreign exchange fixing rates and Libor interest rates. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available. Specifically, the Company computescomputed unobservable volatility data during 2021 based mainly on the movement of Erdemir and China Oriental stock market prices observable in the active market over 90 working days, which is particularly sensitive for the valuation resulting from the model. Following the repayment of notes issued by subsidiaries to the Company which were linked to the value of Erdemir shares in 2019 as described in note 11.2, the unobservable volatility data from the movement of Erdemir shares does no longer impact the valuation. A 10% increase or decrease in Hera Ermac share prices would result in a 28%465% and 26%95% increase and decrease of the fair value of the call option at December 31, 2018,2021, respectively.
DerivativeAs of December 31, 2019, derivative financial liabilities classified as Level 3 relate toalso included a pellet purchase agreement that containscontaining a special payment that variesvaried according to the price of steel in the United States domestic market (“domestic steel price”). The Company concluded that this payment featureinstrument was an embedded derivative not closely related toderecognized on December 9, 2020 following the host contract.sale of ArcelorMittal establishesUSA (note 2.3.1). Until the divestment date the fair valuation of the special payment had been established by comparing the current forecasted domestic steel price to the projected domestic steel price at the inception of the contract. Observable input data includesincluded third-party forecasted domestic steel prices. Unobservable inputs arewere used to measure fair value to the extent that relevant observable inputs arewere not available or not consistent with the Company’sCompany's views on future prices and referreferred specifically to domestic steel prices beyond the timeframe of available third-party forecasts. A U.S. dollar one change per metric ton in the price of hot rolled steel would result in a U.S. dollar ten cents per metric ton change in the price of iron ore. Any significant increase in the steel price would result in a significant increase in fair value, and vice versa. As of December 31, 2018,the date of sale the fair valuationvalue of the pellet purchase agreement was based on the future average US domestic steel price of $633$554 per metric ton.tone.
Derivative financial liabilities classified as Level 3 relate also to the put option granted to ISP in the context of the acquisition of Ilva (see note 2.2.4). The option exercise price is the higher of a reference operating income projection and the net present value of ISP's initial €100 million equity contribution bearing interest at a contractually agreed rate at the put option exercise date. The fair value of the put option liability is sensitive to unobservable inputs such as ArcelorMittal Italia's future cash flow projections. Observable inputs include ISP's credit rating.
The following table summarizes the reconciliation of the fair value of the conversion optionfinancial instruments classified as Level 3 with respect to the put option granted to ISP , the call option on the 1,000 mandatory convertible bonds and the fair value of the special payment included in the pellet purchase agreement:3:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Put option with ISP | | Call option on 1,000 mandatory convertible bonds | | Special payment in pellet purchase agreement | | Total |
| Balance as of December 31, 2019 | (125) | | | 127 | | | (176) | | | (174) | |
| Change in fair value/foreign exchange differences | (10) | | | (68) | | | 6 | | | (72) | |
| Value of option at exercise date/divested balance | 135 | | | — | | | 170 | | | 305 | |
| Balance as of December 31, 2020 | — | | | 59 | | | — | | | 59 | |
| Change in fair value/foreign exchange differences | — | | | (44) | | | — | | | (44) | |
| | | | | | | |
| Balance as of December 31, 2021 | — | | | 15 | | | — | | | 15 | |
|
| | | | | | | | | | | |
| | Put option with ISP1 |
| Call option on 1,000 mandatory convertible bonds |
| Special payment in pellet purchase agreement |
| Total |
| Balance as of December 31, 2016 | — |
|
| 175 |
|
| (33 | ) |
| 142 |
|
| Change in fair value | — |
|
| 809 |
|
| (231 | ) |
| 578 |
|
| Balance as of December 31, 2017 | — |
|
| 984 |
|
| (264 | ) |
| 720 |
|
| Change in fair value | (124 | ) |
| (501 | ) |
| (304 | ) |
| (929 | ) |
| Balance as of December 31, 2018 | (124 | ) |
| 483 |
|
| (568 | ) |
| (209 | ) |
| |
1. | The change in fair value was recognized through the business combination (see note 2.2). |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The fair value movement on Level 3 derivative instruments is recorded in the consolidated statements of operations and other comprehensive income. The decrease in the fair value of the call
option on 1,000 mandatory convertible bonds is due to a decrease in the share price of Erdemir and China Oriental, which impacts the
| | |
| 311 Consolidated financial statements |
value of the notes in which Hera Ermac, a wholly-owned subsidiary, invested the bonds proceeds (see note 10.2)11.2).
6.1.6 Other non-derivative financial assets and liabilities
Other non-derivative financial assets and liabilities include cash and cash equivalents, and restricted cash and other restricted funds (see note 6.1.3), certain trade and certain other receivables (see note 4.3, 4.5 and 4.6), investments in equity instruments at FVOCI (see note 2.5), trade payables and certain other liabilities (see notes 4.7 and 4.8). These instruments are recognized initially at fair value when the Company becomes a party to the contractual provisions of the instrument. Non-derivative financial assets are derecognized if the Company’s contractual rights to the cash flows from the financial instruments expire or if the Company transfers the financial instruments to another party without retaining control of substantially all risks and rewards of the instruments. Non-derivative financial liabilities are derecognized when they are extinguished (i.e. when the obligation specified in the contract is discharged, canceled or expired).
Impairment of financial assets
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss (ECL) model as opposed to an incurred credit loss model under IAS 39.("ECL") model. The ECL model requires the Group to account for expected credit losses and changes in those ECL at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In particular, IFRS 9 requires the GroupCompany to measure the loss allowance for a financial instrument at an amount equal to the lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition. ArcelorMittal considered the continued impact of the COVID-19 pandemic on the economic environment in its risk of default assessment for receivables outstanding less than 180 days. Receivables aged 31 days or older and uninsured trade receivables remain consistent with historical levels and the Company did not identify any expected increased risk of default (note 4.3).
In the case ofAll fair value movements for investments in equity instruments at FVOCI, all fair value movements, including the difference between the acquisition cost and the current fair value, are recorded in OCI and are no longernot reclassified to the consolidated statements of operations. Equity investmentsInvestments in equity instruments at FVOCI are exemptedexempt from the annual impairment test under IFRS 9 because the fair value of the equity investmentsinvestment is recorded in OCI areand not recycled to Profitprofit and Loss. loss.
Financial assets are tested for expected credit lossesECLs annually or whenever changes in circumstances indicate that there is a change in credit risk .risk. Any expected credit lossECL is recognized in the consolidated statements of operations. An expected credit lossECL related to financial assets is reversed if and to the extent there has been a change in the factors used to determine the recoverable amount. The loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined if no expected credit lossECL had been recognized. Reversals of expected credit lossesECLs are recognized in net income, except for investments in equity instruments at FVOCI, forin which all fair value movements are recognized in OCI.
6.2 Financing costs - net
Financing costs - net recognized in the years ended December 31, 2018, 20172021, 2020 and 20162019 are as follows:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| | | | | |
| Interest expense | (357) | | | (477) | | | (695) | |
| Interest income | 79 | | | 56 | | | 88 | |
Change in fair value adjustment on call option on mandatory convertible bonds and pellet purchase agreement (note 6.1.5)2 | (44) | | | (143) | | | (320) | |
| Accretion of defined benefit obligations and other long term liabilities | (164) | | | (325) | | | (405) | |
| Net foreign exchange result | (155) | | | 107 | | | 4 | |
Other1 | (514) | | | (474) | | | (324) | |
| Total | (1,155) | | | (1,256) | | | (1,652) | |
1.Other mainly includes expenses related to true sale of receivables (“TSR”) programs and bank fees. In 2021, other also include 163 charges relating to an unfavorable court decision in an arbitration case against Sitrel (see note 9.3), 130 premiums and fees relating to the bonds early redeemed in 2021 (as compared to 120 and 71 in 2020 and 2019, respectively) and 61 charges relating to the early redemption of MCNs (see note 11.2). In 2020, other also includes 178 relating to renewal of mandatorily convertible bonds (see note 11.2).
2. The instrument related to the pellet purchase agreement was derecognized on December 9, 2020 see note 6.1.5.
|
| | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Interest expense | (687 | ) | | (879 | ) | | (1,172 | ) |
| Interest income | 72 |
| | 56 |
| | 58 |
|
| Change in fair value adjustment on call option on mandatory convertible bonds and pellet purchase agreement (note 6.1.5) | (572 | ) | | 578 |
| | 138 |
|
| Accretion of defined benefit obligations and other long term liabilities | (349 | ) | | (353 | ) | | (435 | ) |
| Net foreign exchange result | (235 | ) | | 546 |
| | (3 | ) |
Other 1 | (439 | ) | | (823 | ) | | (642 | ) |
| Total | (2,210 | ) | | (875 | ) | | (2,056 | ) |
| |
1. | Other mainly includes expenses related to true sale of receivables (“TSR”) programs and bank fees. It also includes premiums and fees of 104 relating to the bonds early redeemed in 2018 (389 and 399 of premiums and fees relating to bonds early redeemed in 2017 and 2016, respectively). In 2017, other also includes expenses relating to the extension of the mandatory convertible bonds (see note 10.2) of 92.
|
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
6.3 Risk management policy
The Company's operations expose it to a variety of financial risks: interest rate risk, foreign exchange risk, liquidity risk and risks in fluctuations in prices of raw materials, freight, energy and energy.CO2 emissions. The Company actively monitors and seeks to reduce volatility of these exposures through a diversity of financial instruments, where considered appropriate. The Company has formalized how it manages these risks within the Treasury and Financial Risk Management Policy, which has been approved by Management.
Capital management
The Company's objective when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios to support its business and provide adequate return to shareholders through continuing growth.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments. The funding requirement
| | |
| Consolidated financial statements 312 |
| (millions of U.S. dollar, except share and per share data) |
is met through a combination of equity, bonds and other long-term and short-term borrowings.
The Company monitors capital using a gearing ratio, being the ratio of net debt as a percentage of total equity. |
| | | | | |
| December 31, |
| 2018 |
| 2017 |
| Total equity | 44,108 |
|
| 40,855 |
|
| Net debt (including 67 cash and debt classified as held for sale as of December 31, 2018) | 10,196 |
|
| 10,142 |
|
| Gearing | 23.1 | % |
| 24.8 | % |
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Total equity | 51,344 | | 40,237 |
Net debt (including NaN and 21 cash and debt classified as held for sale as of December 31, 2021 and 2020 respectively) | 4,030 | | 6,380 |
| Gearing | 7.8 | % | | 15.9 | % |
Interest rate risk
The Company is exposed to interest rate risk on short-term and long-term floating rate instruments and on refinancing of fixed rate debt. The Company's policy is to maintain a balance of fixed and floating interest rate borrowings, which is adjusted dependingdepending on the prevailing market interest rates and outlook. As at December 31, 2018,2021, the long-term debt was comprised of 83%93% fixed rate debt and 17%7% variable rate debt (note 6.1.2). The Company utilizes certain instruments to manage interest rate risks. Interest rate instruments allow the Company to borrow long-term at fixed or variable rates, and to swap the rate of this debt either at inception or during the lifetime of the borrowing. The Company and its counterparties exchange, at predefined intervals, the difference between the agreed fixed rate and the variable rate, calculated on the basis of the notional amount of the swap. Similarly, swaps may be used for the exchange of variable rates against other variable rates.
Foreign exchange rate risk
The Company is exposed to changes in values arising from foreign exchange rate fluctuations generated by its operating activities. Because a substantial portion of ArcelorMittal’s assets, liabilities, sales and earnings are denominated in currencies other than the U.S. dollar (its reporting currency), ArcelorMittal has an exposure to fluctuations and depreciation in the values of these currencies relative to the U.S. dollar. These currency fluctuations, especially the fluctuation of the value of the U.S. dollar relative to the euro, the Canadian dollar, Brazilian real, Polish Zloty, KazakhKazakhstani tenge, South African rand, Mexican peso and Ukrainian hryvnia, as well as fluctuations in the other countries’ currencies in which ArcelorMittal has significant operations and/or sales, could have a material impact on its financial position, cash flows and results of operations.
ArcelorMittal faces transaction risk, where its businesses generate sales in one currency but incur costs relating to that revenue in a different currency. For example, ArcelorMittal’s non-U.S. subsidiaries may purchase raw materials, including iron ore and coking coal, in U.S. dollars,dollar, but may sell finished steel products in other currencies. Consequently, an appreciation of the U.S.
dollar will increase the cost of raw materials; thereby having a negative impact on the Company’s operating margins, unless the Company is able to pass along the higher cost in the form of higher selling prices.
Following its Treasury and Financial Risk Management Policy, the Company hedges a portion of its net exposure to foreign exchange rates through forwards, options and swaps.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
ArcelorMittal also faces foreign currency translation risk, which arises when ArcelorMittal translates the statements of operations of its subsidiaries, its corporate net debt (note 6.1.4) and other items denominated in currencies other than the U.S. dollar, for inclusion in the consolidated financial statements. The Company manages translation risk arising from its investments in subsidiaries by monitoring the currency mix of the consolidated statements of financial position. The Company may enter into derivative transactions to hedge the residual exposure and currently designated an EUR/USD cross currency swap with a notional of 1,000 to hedge euro denominated net investments in foreign operations (see “—Net“Net investment hedge”).
The Company also uses the derivative instruments described above, at the corporate level to hedge debt recorded in foreign currency other than the functional currency or the balance sheet risk associated with certain monetary assets denominated in a foreign currency other than the functional currency.
In October 2018, the Company entered into hedging programs including non deliverable forwards and non deliverable options for a nominal amount of $5.9 billion in order to hedge the volatility between Indian Rupee and U.S. dollar in relation to the proposed acquisition of ESIL.
Foreign currency sensitivity analysis
As of December 31, 2018,2021, the Company is mainly subject to foreign exchange exposure relating to the euro, Brazilian real, Canadian dollar, Kazakhstani tenge, South African rand, Mexican peso, Polish zloty, Argentine peso and Ukranian hryvnia against the U.S. dollar resulting from its trade payables and receivables.
|
| | | | | |
| | December 31, 2018 |
| | Trade receivables | | Trade payables |
| USD | 1,115 |
| | 5,723 |
|
| EUR | 1,630 |
| | 5,585 |
|
| BRL | 656 |
| | 686 |
|
| CAD | 76 |
| | 488 |
|
| KZT | 43 |
| | 106 |
|
| ZAR | 166 |
| | 424 |
|
| MXN | 94 |
| | 96 |
|
| UAH | 54 |
| | 129 |
|
| PLN | 135 |
| | 323 |
|
| ARS | 73 |
| | — |
|
| Other (non-USD) | 390 |
| | 421 |
|
| Total | 4,432 |
| | 13,981 |
|
| | | | | | | | | | | |
| December 31, 2021 |
| Trade receivables | | Trade payables |
| USD | 1,386 | | | 5,579 | |
| EUR | 1,822 | | | 6,219 | |
| BRL | 778 | | | 633 | |
| CAD | 132 | | | 464 | |
| KZT | 83 | | | 52 | |
| ZAR | 137 | | | 356 | |
| MXN | 9 | | | 46 | |
| UAH | 88 | | | 302 | |
| PLN | 305 | | | 955 | |
| ARS | 75 | | | 78 | |
| Other | 328 | | | 409 | |
| Total | 5,143 | | | 15,093 | |
The sensitivity analysis carried out by the Company considers the effects on its trade receivables and trade payables of a 10%
| | |
| 313 Consolidated financial statements |
increase or decrease between the relevant foreign currencies and the U.S. dollar.
|
| | | | | | | | | | | |
| 10% increase |
| 10% decrease |
| Trade receivables |
| Trade payables |
| Trade receivables |
| Trade payables |
| EUR | 1,793 |
| | 6,144 |
|
| 1,467 |
| | 5,027 |
|
| BRL | 722 |
|
| 755 |
|
| 590 |
|
| 617 |
|
| CAD | 84 |
| | 537 |
|
| 68 |
| | 439 |
|
| KZT | 47 |
|
| 117 |
|
| 39 |
|
| 95 |
|
| ZAR | 183 |
| | 466 |
|
| 149 |
| | 382 |
|
| MXN | 103 |
|
| 106 |
|
| 85 |
|
| 86 |
|
| UAH | 59 |
| | 142 |
|
| 49 |
| | 116 |
|
| PLN | 149 |
| | 355 |
|
| 122 |
| | 291 |
|
| ARS | 80 |
| | — |
|
| 66 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 10% increase | | 10% decrease |
| Trade receivables | | Trade payables | | Trade receivables | | Trade payables |
| EUR | 182 | | | 622 | | | (182) | | | (622) | |
| BRL | 78 | | | 63 | | | (78) | | | (63) | |
| CAD | 13 | | | 46 | | | (13) | | | (46) | |
| KZT | 8 | | | 5 | | | (8) | | | (5) | |
| ZAR | 14 | | | 36 | | | (14) | | | (36) | |
| MXN | 1 | | | 5 | | | (1) | | | (5) | |
| UAH | 9 | | | 30 | | | (9) | | | (30) | |
| PLN | 31 | | | 96 | | | (31) | | | (96) | |
| ARS | 8 | | | 8 | | | (8) | | | (8) | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The use of a 10% sensitivity rate is used when reporting foreign currency exposure internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes trade receivables and trade payables denominated in a currency other than the U.S. dollar and adjusts their translation at the period end for a 10% change in foreign currency rates. AFor trade receivables, a positive number indicates an increase in profit,income and a negative number an expense. For trade payables, a decrease in profit.positive number indicates an expense and a negative number an income.
Hedge accounting policy
The Company determines the economic relationship between the hedged item and the hedging instrument by analyzing the critical terms of the hedge relationship. In case critical terms do not match and fair value changes in the hedging instrument cannot be expected to perfectly offset changes in the fair value of the hedged item, further qualitative analysis may be performed. Such analysis serves to establish whether the economic relationship is sufficiently strong to comply with the Company’s risk management policies.
The hedge ratio is set out in the Company's risk management strategy and may be individually tailored for each hedging program in the risk management objective. Hedge ratios below 100% would usually be applied on hedging of forecast exposures with the hedge ratio typically reducing where there is uncertainty due to long hedging tenors or volatility in the underlying exposure.
The most frequent sources of hedge ineffectiveness relate to changes in the hedged item (such as maturity, volume and pricing indices), basis spread and significant changes in the credit risk. Such sources are analyzed at hedge initiation and monitored throughout the life of a hedge.
Liquidity Risk
Liquidity risk is the risk that the Company may encounter difficulties in meeting its obligations associated with financial liabilities that are settled by delivering cash. ArcelorMittal Treasury is responsible for the Company's funding and liquidity management. ArcelorMittal’s principal sources of liquidity are cash generated from its operations, its credit lines at the corporate level and various working capital credit lines at the level of its operating subsidiaries. The Company actively manages its liquidity. Following the Company's Treasury and Financial Risk Management Policy, the levels of cash, credit lines and debt are closely monitored and appropriate actions are taken in order to comply with the covenant ratios, leverage, fixed/floating ratios, maturity profile and currency mix.
The contractual maturities of the below financial liabilities include estimated loan repayments, interest payments and settlement of derivatives, excluding any impact of netting agreements. The cash flows are calculated based on market data as of December 31, 2018,2021, and as such are sensitive to movements in mainly forexforeign exchange rates and interest rates. The cash flows are non-discounted, except for derivative financial liabilities where the cash flows equal their fair values.
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Carrying amount | | Contractual Cash Flow | | 2019 | | 2020 | | from 2021 to 2023 | | After 2023 |
| Non-derivative financial liabilities | | | | | | | | | | | |
| Bonds | (7,807 | ) | | (10,277 | ) | | (1,200 | ) | | (2,166 | ) | | (3,898 | ) | | (3,013 | ) |
| Loans over 100 | (2,322 | ) | | (2,505 | ) | | (639 | ) | | (1,153 | ) | | (629 | ) | | (84 | ) |
| Trade and other payables | (13,981 | ) | | (13,999 | ) | | (13,999 | ) | | — |
| | — |
| | — |
|
| Other loans | (2,354 | ) | | (2,456 | ) | | (1,783 | ) | | (228 | ) | | (310 | ) | | (135 | ) |
| Total | (26,464 | ) | | (29,237 | ) | | (17,621 | ) | | (3,547 | ) | | (4,837 | ) | | (3,232 | ) |
| Derivative financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity contracts (Put options) | (124 | ) |
| (124 | ) |
| — |
|
| — |
|
| (124 | ) |
| — |
|
| Foreign exchange contracts | (158 | ) |
| (158 | ) |
| (52 | ) |
| (41 | ) |
| (3 | ) |
| (62 | ) |
Other commodities contracts1 | (616 | ) |
| (616 | ) |
| (138 | ) |
| (148 | ) |
| (217 | ) |
| (113 | ) |
| Total | (898 | ) |
| (898 | ) |
| (190 | ) |
| (189 | ) |
| (344 | ) |
| (175 | ) |
| | |
1.Consolidated financial statements 314 |
| (millions of U.S. dollar, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Carrying amount | | Contractual Cash Flow | | 2022 | | 2023 | | from 2024 to 2026 | | After 2026 |
| Non-derivative financial liabilities | | | | | | | | | | | |
| Bonds | (5,816) | | | (7,722) | | | (748) | | | (1,442) | | | (2,733) | | | (2,799) | |
| Loans over 100 | (735) | | | (1,030) | | | (373) | | | (88) | | | (196) | | | (373) | |
| Trade and other payables | (15,093) | | | (15,098) | | | (15,098) | | | — | | | — | | | — | |
| Other loans and leases | (1,850) | | | (2,104) | | | (1,027) | | | (225) | | | (375) | | | (477) | |
| Total | (23,494) | | | (25,954) | | | (17,246) | | | (1,755) | | | (3,304) | | | (3,649) | |
| Derivative financial liabilities | | | | | | | | | | | |
| Foreign exchange contracts | (67) | | | (67) | | | (44) | | | (18) | | | (5) | | | 0 |
Commodity contracts1 | (307) | | | (307) | | | (270) | | | (18) | | | (13) | | | (6) | |
| Total | (374) | | | (374) | | | (314) | | | (36) | | | (18) | | | (6) | |
1.Commodity contracts include base metals, freight, energy and emission rights.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Carrying amount | | Contractual Cash Flow | | 2021 | | 2022 | | from 2023 to 2025 | | After 2025 |
| Non-derivative financial liabilities | | | | | | | | | | | |
| Bonds | (7,888) | | | (10,307) | | | (616) | | | (851) | | | (5,135) | | | (3,705) | |
| Loans over 100 | (1,998) | | | (2,345) | | | (769) | | | (190) | | | (998) | | | (388) | |
| Trade and other payables | (11,525) | | | (11,530) | | | (11,530) | | | — | | | — | | | — | |
| Other loans and leases | (2,436) | | | (2,692) | | | (1,448) | | | (211) | | | (546) | | | (487) | |
| Total | (23,847) | | | (26,874) | | | (14,363) | | | (1,252) | | | (6,679) | | | (4,580) | |
| Derivative financial liabilities | | | | | | | | | | | |
| | | | | | | | | | | |
| Foreign exchange contracts | (170) | | | (170) | | | (149) | | | (13) | | | (8) | | | — | |
Commodity contracts1 | (134) | | | (134) | | | (59) | | | (28) | | | (47) | | | — | |
| Total | (304) | | | (304) | | | (208) | | | (41) | | | (55) | | | — | |
1.Commodity contracts include base metals, freight, energy and emission rights.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Carrying amount | | Contractual Cash Flow | | 2018 | | 2019 | | from 2020 to 2022 | | After 2022 |
| Non-derivative financial liabilities | | | | | | | | | | | |
| Bonds | (9,458 | ) | | (13,514 | ) | | (1,309 | ) | | (1,306 | ) | | (5,658 | ) | | (5,241 | ) |
| Loans over 100 | (1,371 | ) | | (1,546 | ) | | (549 | ) | | (118 | ) | | (676 | ) | | (203 | ) |
| Trade and other payables | (13,428 | ) | | (13,448 | ) | | (13,448 | ) | | — |
| | — |
| | — |
|
| Other loans | (2,099 | ) | | (2,232 | ) | | (1,444 | ) | | (263 | ) | | (258 | ) | | (267 | ) |
| Total | (26,356 | ) | | (30,740 | ) | | (16,750 | ) | | (1,687 | ) | | (6,592 | ) | | (5,711 | ) |
| Derivative financial liabilities | | | | | | | | | | | |
| Foreign exchange contracts | (327 | ) | | (327 | ) | | (170 | ) | | — |
| | (64 | ) | | (93 | ) |
Other commodities contracts1 | (342 | ) | | (342 | ) | | (156 | ) | | (37 | ) | | (68 | ) | | (81 | ) |
| Total | (669 | ) | | (669 | ) | | (326 | ) | | (37 | ) | | (132 | ) | | (174 | ) |
| |
1. | Commodity contracts include base metals, freight, energy and emission rights.
|
The sensitivity analysis carried out by the Company considers the effects on its trade receivables and trade payables of a 10% increase or decrease between the relevant foreign currencies and the U.S. dollar.
The use of a 10% sensitivity rate is used when reporting foreign currency exposure internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes trade receivables and trade payables denominated in a currency other than the U.S. dollar and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number indicates an increase in profit, and a negative number a decrease in profit.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Cash flow hedges
The following tables present the periods in which the derivatives designated as cash flows hedges are expected to mature:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Assets/ (liabilities) | | (Outflows)/inflows |
| Fair value | | 3 months and less | | 3-6 months | | 6-12 months | | 2023 | | After 2023 |
| Foreign exchange contracts | 4 | | | 2 | | | 2 | | | 3 | | | (1) | | | (2) | |
| Commodities | 378 | | | 33 | | | 24 | | | 56 | | | 132 | | | 133 | |
| Emission rights | 2,447 | | | — | | | — | | | 2,447 | | | — | | | — | |
| Total | 2,829 | | | 35 | | | 26 | | | 2,506 | | | 131 | | | 131 | |
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Assets/ (liabilities) | | (Outflows)/inflows |
| | Fair value | | 3 months and less | | 3-6 months | | 6-12 months | | 2020 | | After 2020 |
| Foreign exchange contracts | 329 |
| | 329 |
| | 4 |
| | — |
| | (1 | ) | | (3 | ) |
| Commodities | (20 | ) | | (8 | ) | | (1 | ) | | — |
| | (3 | ) | | (8 | ) |
| Emission rights | 317 |
| | — |
| | — |
| | 206 |
| | 111 |
| | — |
|
| Total | 626 |
| | 321 |
| | 3 |
| | 206 |
| | 107 |
| | (11 | ) |
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Assets/ (liabilities) | | (Outflows)/inflows |
| | Fair value | | 3 months and less | | 3-6 months | | 6-12 months | | 2019 | | After 2019 |
| Foreign exchange contracts | (118 | ) | | (83 | ) | | (25 | ) | | (10 | ) | | — |
| | — |
|
| Commodities | 20 |
| | 9 |
| | 4 |
| | 6 |
| | 1 |
| | — |
|
| Emission rights | (37 | ) | | — |
| | — |
| | (37 | ) | | — |
| | — |
|
| Total | (135 | ) | | (74 | ) | | (21 | ) | | (41 | ) | | 1 |
| | — |
|
| | |
| 315 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Assets/ (liabilities) | | (Outflows)/inflows |
| Fair value | | 3 months and less | | 3-6 months | | 6-12 months | | 2022 | | After 2022 |
| Foreign exchange contracts | (37) | | | (29) | | | (31) | | | (21) | | | 2 | | | 42 | |
| Commodities | (35) | | | — | | | 1 | | | 6 | | | (9) | | | (33) | |
| Emission rights | 405 | | | 89 | | | — | | | 129 | | | 187 | | | — | |
| Total | 333 | | | 60 | | | (30) | | | 114 | | | 180 | | | 9 | |
Associated gains or losses that were recognized in other comprehensive income are reclassified from equity to the consolidated statements of operations in the same period during which the hedged forecasted cash flow affects the consolidated statements of operations. The following table presents the periods in which the realized and unrealized gains or losses on derivatives designated as cash flows hedges recognized in other comprehensive income, net of tax, are expected to impact the consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Cash flow hedge reserve1 | | (Expense)/income |
| Carrying amount | | 3 months and less | | 3-6 months | | 6-12 months | | 2023 | | After 2023 |
| Foreign exchange contracts | (1) | | | (4) | | | 2 | | | 3 | | | (1) | | | (1) | |
| Commodity contracts | 302 | | | 22 | | | 29 | | | 40 | | | 110 | | | 101 | |
| Emission rights | 1,786 | | | 13 | | | 13 | | | 44 | | | 56 | | | 1,660 | |
| Total | 2,087 | | | 31 | | | 44 | | | 87 | | | 165 | | | 1,760 | |
1.The cash flow hedge reserve balance as of December 31, 2021 includes 603 deferred gains for the Company's share of such reserves at its equity method investments, which are not included in the table above (30 as of December 31, 2020).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Cash flow hedge reserve1 | | (Expense)/income |
| Carrying amount | | 3 months and less | | 3-6 months | | 6-12 months | | 2022 | | After 2022 |
| Foreign exchange contracts | (13) | | | 3 | | | 1 | | | (23) | | | 2 | | | 4 | |
| Commodity contracts | (2) | | | 2 | | | 2 | | | 8 | | | 4 | | | (18) | |
| Emission rights | 214 | | | 15 | | | 15 | | | 33 | | | 81 | | | 70 | |
| Total | 199 | | | 20 | | | 18 | | | 18 | | | 87 | | | 56 | |
1.The cash flow hedge reserve balance as of December 31, 2020 also includes 30 deferred gains for the Company's share of such reserves at its equity method investments, which are not included in the table above (nil as of December 31, 2019).
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Assets/ (liabilities) | | (Expense)/income |
| | Carrying amount | | 3 months and less | | 3-6 months | | 6-12 months | | 2020 | | After 2020 |
| Foreign exchange contracts | 4 |
| | — |
| | — |
| | 4 |
| | — |
| | — |
|
| Commodity contracts | (390 | ) | | (34 | ) | | (32 | ) | | (59 | ) | | (115 | ) | | (150 | ) |
| Emission rights | 778 |
| | 46 |
| | 47 |
| | 93 |
| | 87 |
| | 505 |
|
| Total | 392 |
| | 12 |
| | 15 |
| | 38 |
| | (28 | ) | | 355 |
|
| | |
| Consolidated financial statements 316 |
| (millions of U.S. dollar, except share and per share data) |
|
| | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Assets/ (liabilities) | | (Expense)/income |
| | Carrying amount | | 3 months and less | | 3-6 months | | 6-12 months | | 2019 | | After 2019 |
| Foreign exchange contracts | (141 | ) | | (95 | ) | | (26 | ) | | (20 | ) | | — |
| | — |
|
| Commodity contracts | 19 |
| | 9 |
| | 4 |
| | 5 |
| | 1 |
| | — |
|
| Emission rights | 84 |
| | — |
| | — |
| | 7 |
| | 33 |
| | 44 |
|
| Total | (38 | ) | | (86 | ) | | (22 | ) | | (8 | ) | | 34 |
| | 44 |
|
The following tables summarize the effect of hedge accounting on ArcelorMittal’s consolidated statement of financial position, statement of comprehensive income and statement of changes in equity.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Hedging Instruments | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount | | Line item in the statement of financial position where the hedging instrument is located |
| Cash flow hedges | | | | | | | |
| Foreign exchange risk - Option/forward/swap contracts | 185 | | | 9 | | | (2) | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| Foreign exchange risk - Option/forward/swap contracts | 120 | | | 2 | | | (5) | | | Other assets/Other long-term obligations |
| Price risk - Commodities forwards | 872 | | | 325 | | | (212) | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| Price risk - Commodities forwards | 1,321 | | | 299 | | | (34) | | | Other assets/Other long-term obligations |
| Price risk - Emission rights forwards | 1,555 | | | 2,447 | | | — | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| | | | | | | |
| Total | | | 3,082 | | | (253) | | | |
| Current derivative assets classified as cash flow hedge | | | 2,781 | | | | | |
| Other current derivative assets | | | 204 | | | | |
| Total current derivative assets (note 4.5) | | | 2,985 | | | | | |
| Non-current derivative assets classified as cash flow hedge | | | 301 | | | | |
| Other non-current derivative assets | | | 17 | | | | |
| Total non-current derivative assets (note 4.6) | | | 318 | | | | |
| Current derivative liabilities classified as cash flow hedge | | | | | (214) | | | |
| Other current derivative liabilities | | | | | (102) | | | |
| Total current derivative liabilities (note 4.8) | | | | | (316) | | | |
| Non-current derivative liabilities classified as cash flow hedge | | | | | (39) | | | |
| Other non-current derivative liabilities | | | | | (19) | | | |
| Total non-current derivative liabilities (note 9.2) | | | | | (58) | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Hedging Instruments | Cash flow hedge reserve at December 31, 2020 | | Hedging gains or losses of the reporting period that were recognized in OCI | Gains or losses reclassification adjustment and hedge ineffectiveness | | Basis adjustment | | Line item in the statement of comprehensive income that includes the reclassification adjustment and hedge ineffectiveness | Cash flow hedge reserve1 at December 31, 2021 |
| Cash flow hedges | | | | | | | | | |
| Foreign exchange risk - Option/Forward contracts | (13) | | | 81 | | 8 | | | (77) | | | Sales | (1) | |
| Price risk - Commodities Option/Forward contracts | (2) | | | 398 | | (55) | | | (39) | | | Sales, Cost of sales | 302 | |
| Price risk - Emission rights forwards | 214 | | | 1,700 | | (128) | | | — | | | Cost of sales | 1,786 | |
| Total | 199 | | | 2,179 | | (175) | | | (116) | | | | 2,087 | |
ARCELORMITTAL AND SUBSIDIARIES1.The cash flow hedge reserve balance as of December 31, 2021 also includes 603 deferred gains for the Company's share of such reserves at its equity method investments, which are not disclosed above.
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | |
| December 31, 2018 | | |
| Hedging Instruments | Nominal amount of the hedging instrument |
| Assets carrying amount |
| Liabilities carrying amount |
| Line item in the statement of financial position where the hedging instrument is located |
| Changes in fair value used for calculated hedge ineffectiveness | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness |
| Cash flow hedges |
|
|
|
|
|
|
|
|
| | |
| Foreign exchange risk - Option/Forward contracts | 7,465 |
|
| 332 |
|
| — |
|
| Prepaid expenses and other current assets |
| — |
| | n/a |
| Price risk - Commodities forwards | 350 |
|
| — |
|
| (124 | ) |
| Accrued expenses and other liabilities |
| — |
| | n/a |
Price risk - Commodities forwards
| 491 |
| | — |
| | (454 | ) | | Other long-term obligations | | — |
| | n/a |
| Price risk - Energy forwards | 765 |
| | — |
| | (9 | ) | | Other long-term obligations
| | — |
| | n/a
|
| Price risk - Emission rights forwards | 1,091 |
| | 205 |
| | — |
| | Prepaid expenses and other current assets | | (1 | ) | | Financing costs - net |
| Price risk - Emission rights forwards | 79 |
|
| 112 |
|
| — |
|
| Other assets |
| — |
| | n/a |
| Total | 10,241 |
|
| 649 |
|
| (587 | ) |
|
|
| (1 | ) | | |
|
| | | | | | | | | | |
| December 31, 2018 |
| Hedging Instruments | Hedging gains or losses of the reporting period that were recognized in OCI |
| Change in value used for calculating hedge ineffectiveness for 2018 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness
| | Cash flow hedge reserve |
|
|
| Cash flow hedges |
|
|
| |
| |
|
| Foreign exchange risk - Option/Forward contracts | 469 |
|
| — |
| | n/a | | 282 |
|
| Price risk - Commodities forwards | (28 | ) |
| — |
| | n/a | | (9 | ) |
Price risk - Energy forwards
| (9 | ) | | — |
| | n/a | | (9 | ) |
| Price risk - Emission rights forwards | 694 |
|
| (1 | ) | | Financing costs - net | | 778 |
|
| Total | 1,126 |
|
| (1 | ) | |
| | 1,042 |
|
|
| | | | | | | | | | | | | | | |
| December 31, 2017 | | |
| Hedging Instruments | Nominal amount of the hedging instrument |
| Assets carrying amount |
| Liabilities carrying amount |
| Line item in the statement of financial position where the hedging instrument is located |
| Changes in fair value used for calculated hedge ineffectiveness | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness
|
| Cash flow hedges |
|
|
|
|
|
|
|
|
| | |
| Foreign exchange risk - Option contracts | 4,460 |
|
| — |
|
| (113 | ) |
| Accrued expenses and other liabilities |
| — |
| | n/a |
| Price risk - Option/Commodities forwards | 317 |
|
| — |
|
| (23 | ) |
| Accrued expenses and other liabilities |
| — |
| | n/a |
| Price risk - Emission rights forwards | 484 |
|
| — |
|
| (37 | ) |
| Accrued expenses and other liabilities |
| (2 | ) | | Financing costs - net |
| Total | 5,261 |
|
| — |
|
| (173 | ) |
|
|
| (2 | ) | | |
| | |
| 317 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Hedging Instruments | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount | | Line item in the statement of financial position where the hedging instrument is located |
| Cash flow hedges | | | | | | | |
| Foreign exchange risk - Option/Forward contracts | 2,379 | | | 3 | | | (84) | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| Foreign exchange risk - Option/Forward/Swap contracts | 440 | | | 44 | | — | | | Other assets/Other long-term obligations |
| Price risk - Commodities forwards | 459 | | | 22 | | | (14) | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| Price risk - Commodities forwards | 971 | | | 32 | | | (75) | | | Other assets/Other long-term obligations |
| Price risk - Emission rights forwards | 686 | | | 218 | | | — | | | Prepaid expenses and other current assets/Accrued expenses and other liabilities |
| Price risk - Emission rights forwards | 348 | | | 187 | | — | | | Other assets/Other long-term obligations |
| Total | | | 506 | | | (173) | | | |
| Current derivative assets classified as cash flow hedge | | | 243 | | | | | |
| Other current derivative assets | | | 110 | | | | | |
| Total current derivative assets (note 4.5) | | | 353 | | | | | |
| Non-current derivative assets classified as cash flow hedge | | | 263 | | | | | |
| Other non-current derivative assets | | | 61 | | | | | |
| Total non-current derivative assets (note 4.6) | | | 324 | | | | | |
| Current derivative liabilities classified as cash flow hedge | | | | | (98) | | | |
| Other current derivative liabilities | | | | | (110) | | | |
| Total current derivative liabilities (note 4.8) | | | | | (208) | | | |
| Non-current derivative liabilities classified as cash flow hedge | | | | | (75) | | | |
| Other non-current derivative liabilities | | | | | (21) | | | |
| Total non-current derivative liabilities (note 9.2) | | | | | (96) | | | |
. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Hedging Instruments | Cash flow hedge reserve at December 31, 2019 | | Hedging gains or losses of the reporting period that were recognized in OCI | | Gains or losses reclassification adjustment and hedge ineffectiveness | | Basis adjustment | | Line item in the statement of comprehensive income that includes the reclassification adjustment and hedge ineffectiveness | | Cash flow hedge reserve1 at December 31, 2020 |
| Cash flow hedges | | | | | | | | | | | |
| Foreign exchange risk - Option/Forward contracts | 31 | | | (96) | | | 35 | | | 17 | | | Sales | | (13) | |
Price risk - Commodities forwards1 | (106) | | | (140) | | | 241 | | | 3 | | | Sales, Cost of sales | | (2) | |
| Price risk - Emission rights forwards | 310 | | | 271 | | | (367) | | | — | | | Cost of sales | | 214 | |
| Total | 235 | | | 35 | | | (91) | | | 20 | | | | | 199 | |
ARCELORMITTAL AND SUBSIDIARIES1.
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | |
| December 31, 2017 |
| Hedging Instruments | Hedging gains or losses of the reporting period that were recognized in OCI | | Change in value used for calculating hedge ineffectiveness for 2017 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness
| | Cash flow hedge reserve |
| |
| Cash flow hedges | | | | | | | |
| Foreign exchange risk - Option contracts | (198 | ) | | — |
| | n/a | | (141 | ) |
| Price risk - Commodities forwards | (1 | ) | | — |
| | n/a | | 18 |
|
| Price risk - Emission rights forwards | 62 |
| | (2 | ) | | Financing costs - net
| | 84 |
|
| Total | (137 | ) | | (2 | ) | | | | (39 | ) |
Net investmentThe cash flow hedge
In December 2014, the Company entered into euro/U.S. dollar cross currency swaps (“CCS”) to hedge an euro denominated net investment in foreign operations amounting to €303 million, and designated them reserve balance as a net investment hedge. The euro/U.S. dollar CCS with a notional of 375 were unwound on January 14, 2016. A deferred gain of 83, net of a deferred tax expense of 24, will be recycled to the consolidated statements of operations when the hedged assets are disposed of.
On May 27, 2015, the Company entered into additional euro/U.S. dollar CCS with a notional of 1,000 to hedge an euro denominated net investment in foreign operations amounting to €918 million, and designated them as a net investment hedge. As of December 31, 2018 and 2017,2020 also includes 30 deferred gains for the euro/U.S. dollar CCS have a fair value lossCompany's share of 101, net of a deferred tax of 28, and a fair value loss of 157, net of a deferred tax of 44, respectively. Fair value movements have been recorded in the consolidated statements of other comprehensive income. The fair value of the CCS is included in other long-term obligations in the consolidated statements of financial position. The CCS is categorized as Level 2.such reserves at its equity method investments, which are not disclosed above
| | |
| Consolidated financial statements 318 |
| (millions of U.S. dollar, except share and per share data) |
Net investment hedge
As of April 1, 2018, the CompanyCompany designated a portfolio of euro denominated debt (€5,169(€3,709 million as of December 31, 2018)2021) as a hedge of certain euro denominated investmentsinvestments (€7,8048,261 million as of December 31, 2018)2021) in order to mitigate the foreign currency risk arising from certain euro denominated subsidiaries net assets. The risk arises from the fluctuation of the euro/U.S dollar spot rate, which causes the amount of the net investments to vary. The euro denominated debt is designated as a hedging instrument for the change in the value of the net investments that is attributable to changes in the euro/U.SU.S. dollar spot rate. As of December 31, 2018,2021, the Company recognized 474423 foreign exchange gainsgain (597 foreign exchange loss as of December 31, 2020) arising on the translation of the euro denominated debt
designated as a hedge of the euro denominated net investments in foreign operations in other comprehensive income within the foreign exchange translation reserve. The hedgehedging instrument is categorized as Level 2.
Hedging instruments inSince 2014, the Company has periodically hedged a part of its euro denominated net investments via euro/U.S. dollar cross currency swaps ("CCS"). These CCS, all of which have been unwound, were designated as net investment hedgeshedges.
The following tables summarizes the historical gain/loss that will be recycled to the consolidation statements of operations when the hedged assets are disposed of.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | 1 |
| Date traded | Date maturity /unwound | | Notional | OCI gross | Deferred tax | OCI net of deferred tax | |
| December, 2014 | January, 2016 | | 375 | 83 | | (24) | | 59 | | |
| May, 2015 | March, 2020 | '2 | 500 | 11 | | (3) | | 8 | | |
| May, 2015 | July, 2019 | | 500 | (16) | | 5 | | (11) | | |
| March, 2018 | June, 2018 | | 100 | 8 | | (2) | | 6 | | |
| April, 2019 | November, 2019 | | 200 | 11 | | (3) | | 8 | |
| Total | | | | 97 | | (27) | | 70 | | |
1.In 2021, the Company did not designate any new CCS as follows:net investment hedge.
2. On March 25, 2020 and March 26, 2020, the Company unwound euro/U.S. dollar CCS with a notional of 300 and 200, respectively, which were entered into on May 27, 2015 and designated as a net investment hedge of a euro denominated net investment in foreign operations amounting to €459. A deferred gain of 8, net of tax, was recorded in other comprehensive income and it will be recycled to the consolidation statements of operations when the hedged assets are disposed of.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Hedging Instruments | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount | | Line item in the statement of financial position where the hedging instrument is located | | Change in value used for calculating hedge ineffectiveness for 2021 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness | | Foreign currency translation reserve |
| Net investment hedges | | | | | | | | | | |
| Foreign exchange risk - Cross Currency Swap | — | | | — | | | — | | | N/a | | — | | | N/a | | 70 | |
| Foreign exchange risk - EUR debt | 4,204 | | | — | | | (4,201) | | | Short-term debt and current portion of long-term debt; long-term debt, net of current portion | | — | | | N/a | | 308 | |
| Total | 4,204 | | | — | | | (4,201) | | | | | — | | | | | 378 | |
|
| | | | | | | | | | |
| | | December 31, 2018 |
| Derivatives | | Notional amount | | Date traded | | Fair value at
December 31, 2017 | | Change in fair value | | Fair value as of December 31, 20181 |
| CCS 5Y | | 500 | | May 27, 2015 | | (64) | | 29 | | (35) |
| CCS 10Y | | 300 | | May 27, 2015 | | (56) | | 17 | | (39) |
| CCS 10Y | | 160 | | May 27, 2015 | | (30) | | 9 | | (21) |
| CCS 10Y | | 40 | | May 27, 2015 | | (7) | | 1 | | (6) |
| Total | | 1,000 | | | | (157) | | 56 | | (101) |
| | |
1. | The net investment hedges were fully effective. As such, the change in fair value is entirely recorded in other comprehensive income.
319 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Hedging Instruments | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount | | Line item in the statement of financial position where the hedging instrument is located | | Change in value used for calculating hedge ineffectiveness for 2020 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness | | Foreign currency translation reserve |
| Net investment hedges | | | | | | | | | | | | | |
| Foreign exchange risk - Cross Currency Swap | — | | | — | | | — | | | N/a | | — | | | N/a | | 70 | |
| Foreign exchange risk - EUR debt | 6,335 | | | — | | | (6,327) | | | Short-term debt and current portion of long-term debt; long-term debt, net of current portion | | — | | | N/a | | (10) | |
| Total | 6,335 | | | — | | | (6,327) | | | | | — | | | | | 60 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
|
| | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Hedging Instruments | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount
| | Line item in the statement of financial position where the hedging instrument is located
| | Change in value used for calculating hedge ineffectiveness for 2018 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness | | Cash flow hedge reserve |
| Net investment hedges | | | | | | | | | | |
| Foreign exchange risk - Cross Currency Swap | 1,000 |
| | — |
| | (101 | ) | | Other long-term obligations | | — |
| | n/a | | 28 |
|
| Foreign exchange risk - EUR debt | 5,931 |
| | — |
| | (5,918 | ) | | Short-term debt and current portion of long-term debt; long-term debt, net of current portion | | — |
| | n/a | | 474 |
|
| Total | 6,931 |
| | — |
| | (6,019 | ) | | | | — |
| | | | 502 |
|
|
| | | | | | | | | | |
| | | December 31, 2017 |
| Derivatives | | Notional amount | | Date traded | | Fair value at
December 31, 2016 | | Change in fair value | | Fair value as of December 31, 20171 |
| CCS 5Y | | 500 | | May 27, 2015 | | 3 | | (67) | | (64) |
| CCS 10Y | | 300 | | May 27, 2015 | | (14) | | (42) | | (56) |
| CCS 10Y | | 160 | | May 27, 2015 | | (8) | | (22) | | (30) |
| CCS 10Y | | 40 | | May 27, 2015 | | (2) | | (5) | | (7) |
| Total | | 1,000 | | | | (21) | | (136) | | (157) |
| |
1. | The net investment hedges were fully effective. As such, the change in fair value is entirely recorded in other comprehensive income.
|
|
| | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Hedging Instrument | Nominal amount of the hedging instrument | | Assets carrying amount | | Liabilities carrying amount | | Line item in the statement of financial position in which the hedged item is located | | Change in value used for calculating hedge ineffectiveness for 2017 | | Line item in the statement of comprehensive income that includes the recognized hedge ineffectiveness | | Cash flow hedge reserve |
| Net investment hedge | | | | | | | | | | | | | |
| Foreign exchange risk - Cross Currency Swap | 1,000 |
| | — |
| | (157 | ) | | Other long-term obligations | | — |
| | n/a | | (56 | ) |
| Total | 1,000 |
| | — |
| | (157 | ) | | | | — |
| | | | (56 | ) |
Raw materials, freight, energy risks and emission rights
The Company is exposed to risks in fluctuations in prices of raw materials (including base metals such as zinc, nickel, aluminum, tin, copper and iron ore), freight and energy, both through the purchase of raw materials and through sales contracts. The Company uses financial instruments such as forward purchases or sales, options and swaps in order to manage the volatility of prices of certain raw materials, freight and energy.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Fair values of raw material, freight, energy and emission rights instruments categorized as Level 2 are as follows: |
| | | |
| | December 31, |
| | 2018 | | 2017 |
| Base metals | (9) | | 26 |
| Freight | — | | — |
| Energy (oil, gas, electricity) | (5) | | — |
| Emission rights | 317 | | (37) |
| Total | 303 | | (11) |
| | | | |
| Derivative assets associated with raw materials, energy, freight and emission rights | 351 | | 67 |
| Derivative liabilities associated with raw materials, energy, freight and emission rights | (48) | | (78) |
| Total | 303 | | (11) |
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Base metals | 27 | | | 7 | |
| Freight | 5 | | | — | |
| Energy (oil, gas, electricity) | 350 | | | (36) | |
| Emission rights | 2,443 | | | 407 | |
| Total | 2,825 | | | 378 | |
| | | |
| Derivative assets associated with raw materials, energy, freight and emission rights | 3,132 | | | 512 | |
| Derivative liabilities associated with raw materials, energy, freight and emission rights | (307) | | | (134) | |
| Total | 2,825 | | | 378 | |
ArcelorMittal consumes large amounts of raw materials (the prices of which are related to the London Metals Exchange price index, the Steel Index and Platts Index), ocean freight (the price of which is related to a Baltic Exchange Index), and energy (the prices of which are mainly related to the New York Mercantile Exchange energy index (NYMEX), and the European Energy Exchange (EEX) power indexes, the powernext gas indexes). As a general matter, ArcelorMittal is exposed to price volatility with respect to its purchases in the spot market and under its long-term supply contracts. In accordance with its risk management policy, ArcelorMittal hedges a part of its exposure related to raw materials procurements.
Emission rights
Pursuant to the application of the European Directive 2003/87/EC of October 13, 2003, as amended by the European Directive 2009/29/EC of April 23, 2009, establishing a scheme for
emission allowance trading, the Company enters into certain types of derivatives (mainly forward transactions and options) in order to implement its management policy for associated risks. As of December 31, 20182021 and 2017,2020, the Company had a net notional position of 1,1701,555 with a net positive fair value of 3172,443 and a net notional position of 4841,035 with a net negativepositive fair value of 37,407, respectively.
Credit risk
The Company’s treasury department monitors various market data regarding the credit standings and overall reliability of the financial institutions for all countries where the Company’s subsidiaries operate. The choice of the financial institution for the financial transactions must be approved by the treasury department. Credit risk related to customers, customer credit terms and receivables are discussed in note 4.3.
| | |
| Consolidated financial statements 320 |
| (millions of U.S. dollar, except share and per share data) |
Sensitivity analysis
Foreign currency sensitivity
The following tables detail the Company’s derivative financial instruments’instruments' sensitivity to a 10% strengthening and a 10% weakening in the U.S. dollar against the euro. A positive number indicates an increase in profit or loss and other equity, where a negative number indicates a decrease in profit or loss and other equity.
The sensitivity analysis includes the Company’s complete portfolio of foreign currency derivatives outstanding. The impact on the non €/$euro derivatives reflects the estimated move of such currency pairs, when the U.S. dollar appreciates or depreciates 10% against the euro, based on computations of correlations in the foreign exchange markets in 20182021 and 2017. |
| | | |
| | December 31, 2018 |
| | Income | | Other Equity |
| 10% strengthening in U.S. dollar | 132 | | (422) |
| 10% weakening in U.S. dollar | (148) | | 674 |
ARCELORMITTAL AND SUBSIDIARIES 2020.
Notes to Consolidated Financial Statements | | | | | | | | | | | |
| December 31, 2021 |
| Income (loss) | | Other Equity |
| 10% strengthening in U.S. dollar | 18 | | | (10) | |
| 10% weakening in U.S. dollar | (30) | | | 11 | |
(millions of U.S. dollars, except share and per share data)
| | | | | | | | | | | |
| December 31, 2020 |
| (loss) Income | | Other Equity |
| 10% strengthening in U.S. dollar | (60) | | | 196 | |
| 10% weakening in U.S. dollar | 64 | | | (202) | |
|
| | | |
| | December 31, 2017 |
| | Income | | Other Equity |
| 10% strengthening in U.S. dollar | (24) | | 497 |
| 10% weakening in U.S. dollar | 13 | | (511) |
Cash flow sensitivity analysis for variable rate instruments
The following tables detail the Company’s variable interest rate instruments’ sensitivity. A change of 100 basis points (“bp”) in interest rates during the period would have increased (decreased) profit or loss by the amounts presented below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. |
| | | | | | | | | | |
| December 31, 20182021 |
| Floating porting of net debt1 | | Interest Rate Swaps/Forward Rate Agreements |
| 100 bp increase | 136 | | | — | |
| 100 bp decrease | (1)(36) | | | — | |
|
| | | | | | | | | | |
| December 31, 20172020 |
| Floating porting of net debt1 | | Interest Rate Swaps/Forward Rate Agreements |
| 100 bp increase | 1140 | | | — | |
| 100 bp decrease | (11)(40) | | | — | |
| |
1. | Please refer to note 6.1.4 for a description of net debt (including fixed and floating portion) |
1.See note 6.1.4 for a description of net debt (including fixed and floating portion).
Base metals, energy, freight, emissions rights
The following tables detail the Company’s sensitivity to a 10% increase and decrease in the price of the relevant base metals, energy, freight and emissions rights. The sensitivity analysis includes only outstanding, un-matured derivative instruments either held for trading at fair value through the consolidated statements of operations or designated in hedge accounting relationships.
| | | | | | | | | | | |
| December 31, 2021 |
| Income (loss) | | Other Equity Cash Flow Hedging Reserves |
'+10% in prices | | | |
| Base Metals | 2 | | | 33 | |
| Iron Ore | — | | | 1 | |
| Freight | — | | | — | |
| Emission rights | — | | | 401 | |
| Energy | 1 | | | 165 | |
'-10% in prices | | | |
| Base Metals | (2) | | | (33) | |
| Iron Ore | — | | | (1) | |
| Freight | — | | | — | |
| Emission rights | — | | | (401) | |
| Energy | (1) | | | (165) | |
| | | | | | | | | | | |
| December 31, 2020 |
| Income (loss) | | Other Equity Cash Flow Hedging Reserves |
'+10% in prices | | | |
| Base Metals | 2 | | | 10 | |
| Iron Ore | — | | | (1) | |
| Freight | — | | | 3 | |
| Emission rights | — | | | 145 | |
| Energy | — | | | 82 | |
'-10% in prices | | | |
| Base Metals | (2) | | | (10) | |
| Iron Ore | — | | | 1 | |
| Freight | — | | | (3) | |
| Emission rights | — | | | (145) | |
| Energy | — | | | (82) | |
NOTE 7: LEASES
As a lessee, the Company assesses if a contract is or contains a lease at inception of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company recognizes a right-of-use asset and a lease liability at the commencement date, except for short-term leases
|
| | | |
| December 31, 2018 |
| Income |
| Other Equity Cash Flow Hedging Reserves |
| +10% in prices |
|
|
|
| Base Metals | (1) |
| 19 |
| Iron Ore | — |
| 1 |
| Freight | 3 |
| — |
| Emission rights | — |
| 149 |
| Energy | — |
| 75 |
| -10% in prices |
|
|
|
| Base Metals | 1 |
| (19) |
| Iron Ore | — |
| (1) |
| Freight | (3) |
| — |
| Emission rights | — |
| (149) |
| Energy | — |
| (75) |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 321 Consolidated financial statements |
|
| | | |
| | December 31, 2017 |
| | Income | | Other Equity Cash Flow Hedging Reserves |
| +10% in prices | | | |
| Base Metals | 4 | | 30 |
| Iron Ore | — | | — |
| Emission rights | — | | 45 |
| Energy | 1 | | — |
| -10% in prices | | | |
| Base Metals | (4) | | (30) |
| Iron Ore | — | | — |
| Emission rights | — | | (45) |
| Energy | (1) | | — |
of twelve months or less and leases for which the underlying asset is of low value, which are expensed in the consolidated statement of operations on a straight-line basis over the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or, if not readily determinable, the incremental borrowing rate specific to the country, term and currency of the contract. Lease payments can include fixed payments, variable payments that depend on an index or rate known at the commencement date, as well as any extension or purchase options, if the Company is reasonably certain to exercise these options. The lease liability is subsequently measured at amortized cost using the effective interest method and remeasured with a corresponding adjustment to the related right-of-use asset when there is a change in future lease payments in case of renegotiation, changes of an index or rate or in case of reassessments of options.
The right-of-use asset comprises, at inception, the initial lease liability, any initial direct costs and, when applicable, the
obligations to refurbish the asset, less any incentives granted by the lessors. The right-of-use asset is subsequently depreciated, on a straight-line basis, over the lease term or, if the lease transfers the ownership of the underlying asset to the Company at the end of the lease term or, if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, over the estimated useful life of the underlying asset. Right-of-use assets are also subject to testing for impairment if there is an indicator that they may be impaired.
Variable lease payments not included in the measurement of the lease liabilities are expensed to the consolidated statement of operations in the period in which the events or conditions which trigger those payments occur.
In the statement of financial position, right-of-use assets and lease liabilities are classified, respectively, as part of property, plant and equipment and short-term/long-term debt.
Balances for the Company’s lease activities are summarized as follows:
| | | | | | | | | | | | | | |
| As at December 31, 2021 | | As at December 31, 2020 | |
| Lease liabilities | 880 | | | 815 | | |
| Right of-use assets: | | | | |
| Land, buildings and improvements | 729 | | | 761 | | |
| Machinery, equipment and others | 343 | | | 278 | | |
| Total right-of-use assets | 1,072 | | | 1,039 | | |
| | | | |
| Year ended December 31, 2021 | | Year ended December 31, 2020 | |
| Depreciation and impairment charges: | | | | |
| Land, buildings and improvements | 120 | | | 114 | |
| Machinery, equipment and others | 70 | | | 101 | |
| Total depreciation and impairment charges | 190 | | | 215 | | |
| | | | |
| Other lease related expenses: | | | | |
| Interest expense on lease liabilities | 33 | | | 66 | | |
| Expenses of short-term leases | 79 | | | 134 | | |
| Expenses of leases of low-value assets | 65 | | | 61 | | |
| Expenses related to variable lease payments not included in the measurement of lease liabilities | 86 | | | 73 | | |
| | | | |
| Additions to right-of-use assets | 313 | | | 233 | | |
| Lease payments recorded as reduction of lease liabilities and cash outflow from financing activities | 199 | | | 242 | | |
The Company's lease contracts relate to a variety of assets used in its operational and administrative activities through several units, such as land, buildings, vehicles, industrial machinery, logistic and commercial facilities and power generation facilities. There are no sale and lease back transactions and no restrictions or covenants are imposed by the Company's current effective lease contracts.
| | |
| Consolidated financial statements 322 |
| (millions of U.S. dollar, except share and per share data) |
The maturity analysis of the lease liabilities as of December 31, 2021 and December 31, 2020, is as follows:
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2021 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Lease liabilities (undiscounted) | 222 | | 254 | | 152 | | 836 | | 1,464 | |
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2020 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Lease liabilities (undiscounted) | 217 | 265 | 156 | 778 | 1,416 | |
Expenses for variable lease payments relate to rental fees that vary based on the actual level of activities or performance of the underlying leased assets such as a percentage of sales of the Company's goods through certain leased commercial warehouses and fixed rental fees per actual unit of output produced or transported by the leased assets.
An estimation of the future cash outflows to which the Company is potentially exposed in relation to those contracts involving variable lease payments, which are not reflected in the measurement of lease liabilities as of December 31, 2021 and December 31, 2020, is as follows:
| | | | | | | | | | | | | | | | | |
| | | | | December 31, 2021 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Potential variable lease payments | 79 | | 140 | | 84 | | 119 | | 422 | |
| | | | | | | | | | | | | | | | | |
| | | | | December 31, 2020 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Potential variable lease payments | 58 | | 99 | | 68 | | 123 | | 348 | |
Also, some of the Company's lease contracts have extension and/or termination options as well as residual value guarantees whose amounts are not reflected in the measurement of the lease liabilities as of December 31, 2021 and December 31, 2020. The potential addition/(reduction) in future cash outflows to which the Company is exposed in case such options are exercised or the guarantees required are as shown in the table below:
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2021 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Potential extension options | 1 | | 2 | | — | | 1 | | 4 | |
| Potential termination options | — | | (1) | | — | | — | | (1) | |
| Potential residual value guarantees | — | | 1 | | 2 | | 4 | | 7 | |
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2020 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Potential extension options | 1 | | 1 | | — | | 1 | | 3 | |
| Potential termination options | (1) | | — | | — | | — | | (1) | |
| Potential residual value guarantees | 1 | | 1 | | 2 | | 3 | | 7 | |
Undiscounted amounts related to lease contracts not yet commenced and therefore not included in the recognized lease liabilities as of December 31, 2021 and December 31, 2020, to which the Company is committed are described below:
| | |
| 323 Consolidated financial statements |
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2021 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Leases not yet commenced | 2 | | 7 | | 8 | | 55 | | 72 | |
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2020 |
| 1 year or less | 2-3 years | 4-5 years | Greater than 5 years | TOTAL |
| Leases not yet commenced | 2 | | 6 | | 9 | | 51 | | 68 | |
There were neither income from subleasing right-of-use assets nor gains or losses from sales and leaseback for the years ended December 31, 2021 and December 31, 2020.
NOTE 7:8: PERSONNEL EXPENSES AND DEFERRED EMPLOYEE BENEFITS
7.18.1 Employees and key management personnel
As of December 31, 2018, 20172021, 2020 and 2016,2019, ArcelorMittal had approximately 209,000, 197,000158,000, 168,000 and 199,000191,000 employees, respectively, and the total annual compensation of ArcelorMittal’s employees in 2018, 20172021, 2020 and 20162019 was as follows: |
| | | | | | | | |
| | Year Ended December 31, |
| Employee Information | 2018 | | 2017 | | 2016 |
| Wages and salaries | 8,176 |
| | 7,912 |
| | 7,675 |
|
| Pension cost (see note 7.2) | 264 |
| | 265 |
| | 124 |
|
| Loss/(gain) following new labor agreement in the U.S. (see note 7.2) | 15 |
| | — |
| | (832 | ) |
| Other staff expenses | 2,004 |
| | 1,791 |
| | 1,591 |
|
| Total | 10,459 |
| | 9,968 |
| | 8,558 |
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| Employee Information | 2021 | | 2020 | | 2019 |
| Wages and salaries | 6,707 | | | 7,681 | | | 8,380 | |
| Defined benefits cost (see note 8.2) | 117 | | | 260 | | | 201 | |
| | | | | |
| Other staff expenses | 1,166 | | | 1,405 | | | 1,668 | |
| Total | 7,990 | | | 9,346 | | | 10,249 | |
The total annual compensation of ArcelorMittal’s key management personnel, including its Board of Directors, expensed in
2018, 20172021, 2020 and
20162019 was as follows:
|
| | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Base salary and directors fees | 8 | | 8 | | 12 |
| Short-term performance-related bonus | 8 | | 7 | | 2 |
| Post-employment benefits | 1 | | 1 | | 1 |
| Share-based compensation | 4 | | 3 | | 2 |
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Base salary and directors fees | 10 | | | 7 | | | 8 | |
| Short-term performance-related bonus | 12 | | | 3 | | | 9 | |
| Post-employment benefits | 2 | | | 1 | | | 1 | |
| Share-based payments | 7 | | | 4 | | | — | |
The fair value of the stock options granted and shares allocated based on Restricted Share Unit (“RSU”) and Preference Share Unit (“PSU”) plans to the ArcelorMittal’s key management personnel iswas recorded as an expense in the consolidated statements of operations over the relevant vesting periods.
As of December 31, 2018, 20172021, 2020 and 2016,2019, ArcelorMittal did not have any outstanding loans or advances to members of its Board of Directors or key management personnel, and, as of December 31, 2018, 20172021, 2020 and 2016,2019, ArcelorMittal had not given
any guarantees for the benefit of any member of its Board of Directors or key management personnel.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
7.28.2 Deferred employee benefits
ArcelorMittal’s operating subsidiaries sponsor different types of pension plans for their employees. Also, some of the operating subsidiaries offer other post-employment benefits, that are principally post-retirement healthcare plans. These benefits are broken down into defined contribution plans and defined benefit plans.
Defined contribution plans are those plans where ArcelorMittal pays fixed or determinable contributions to external life insurance or other funds for certain categories of employees. Contributions are paid in return for services rendered by the employees during the period. Contributions are expensed as incurred consistent with the recognition of wages and salaries.
Defined benefit plans are those plans that provide guaranteed benefits to certain categories of employees, either by way of contractual obligations or through a collective agreement. For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out each fiscal year.
The retirement benefit obligation recognized in the consolidated statements of financial position represents the present value of the defined benefit obligation less the fair value of plan assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Remeasurement arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensive income in the period in which they arise. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan.
Current service cost, which is the increase of the present value of the defined benefit obligation resulting from the employee service in the current period, is recorded as an expense as part of cost of sales and selling, general and administrative
| | |
| Consolidated financial statements 324 |
| (millions of U.S. dollar, except share and per share data) |
expenses in the consolidated statements of operations. The net interest cost, which is the change during the period in the net defined benefit liability or asset that arises from the passage of time, is recognized as part of financing costs net in the consolidated statements of operations.
The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs. The gain or loss on settlement comprises any resulting change in the fair value of plan assets and any change in the present value of the defined benefit obligation. Past service cost is the change in the present value of the defined benefit obligation resulting from a plan amendment or a curtailment. Past service cost is recognized immediately in the consolidated statements of operations in the period in which it arises.
Voluntary retirement plans primarily correspond to the practical implementation of social plans or are linked to collective agreements signed with certain categories of employees.
Early retirementTermination plans are those plans that primarily correspond to terminating an employee’s contract usually following the decision of the employee before the normal retirement date. Liabilities for early retirementtermination plans are recognized when the affected employees have formally been informed and when amounts owed have been determined using an appropriate actuarial calculation. Liabilities relating to thelong-term termination plans (like early retirement plansplans) are calculated annually on the basis of the number of employees that have taken or contractually agreed to take early retirement and are discounted using an interest rate that corresponds to that of high quality bonds that have maturity dates similar to the terms of the Company’s early retirement obligations. Termination benefitsProvisions for social plans are providedrecorded in connection with voluntary separation plans. Voluntary retirement plans primarily correspond to the practical implementation of social plans or are linked to collective agreements signed with certain categories of employees. The Company recognizes a liability and expense when it can no longer withdraw the offer or, if earlier, when it has a detailed formal plan which has been communicated to employees or their representatives.
Other long-term employee benefits include various plans that depend on the length of service, such as long service and sabbatical awards, disability benefits and long-term compensated absences such as sick leave. The amount recognized as a liability is the present value of benefit obligations at the consolidated statements of financial position date, and all changes in the provision (including actuarial gains and losses or past service costs) are recognized in the consolidated statements of operations in the period in which they arise.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The expense associated with the above pension plans and post-employment benefits, as well as the carrying amount of the related liability/asset on the consolidated statements of financial position are based on a number of assumptions and factors
such as discount rates, expected rate of compensation increase, healthcare cost trend rates, mortality rates and retirement rates.
| |
• | Discount rates – The discount rate is based on several high quality corporate bond indexes and yield curves in the appropriate jurisdictions (rated AA by a recognized rating agency). In countries where there is no deep market in such bonds, the market rates on government bonds are used. Nominal interest rates vary worldwide due to exchange rates and local inflation rates.
|
| |
• | Rate of compensation increase – The rate of compensation increase reflects actual experience and the Company’s long-term outlook, including contractually agreed wage rate increases for represented hourly employees.
|
| |
• | Healthcare cost trend rate – The healthcare cost trend rate is based on historical retiree cost data, near-term healthcare outlook, including appropriate cost control measures implemented by the Company, and industry benchmarks and surveys.
|
| |
• | Mortality and retirement rates – Mortality and retirement rates are based on actual and projected plan experience.
|
•Discount rates – The discount rate is based on several high quality corporate bond indexes and yield curves in the appropriate jurisdictions. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Nominal interest rates vary worldwide due to exchange rates and local inflation rates.
•Rate of compensation increase – The rate of compensation increase reflects actual experience and the Company’s long-term outlook, including contractually agreed wage rate increases for represented hourly employees.
•Healthcare cost trend rate – The healthcare cost trend rate is based on historical retiree cost data, near-term healthcare outlook, including appropriate cost control measures implemented by the Company, and industry benchmarks and surveys.
•Mortality and retirement rates – Mortality and retirement rates are based on actual and projected plan experience.
Statements of Financial Position
Total deferred employee benefits including pension or other post-employment benefits, are as follows:
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| Pension plan benefits | 2,334 | | | 3,000 | |
| Other post-employment benefits and other long-term employee benefits ("OPEB") | 1,184 | | | 1,432 | |
| Termination benefits | 191 | | | 173 | |
| Defined benefit liabilities | 3,709 | | | 4,605 | |
| Provisions for social plans (non-current) | 63 | | | 51 | |
| Total | 3,772 | | | 4,656 | |
This note, including the table above, discloses the following benefit categories:
•pension plan benefits are pension plans and lump sum benefits that are classified under post employment benefits as required by IAS 19 which are not mandatory by law;
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Pension plan benefits | 3,034 |
| | 3,067 |
|
| Other post-employment benefits | 3,600 |
| | 4,140 |
|
| Early retirement benefits | 222 |
| | 280 |
|
| Defined benefit liabilities | 6,856 |
| | 7,487 |
|
| Termination benefits | 126 |
| | 143 |
|
| Total | 6,982 |
| | 7,630 |
|
| | |
| 325 Consolidated financial statements |
other long-term employee benefits as defined in IAS 19;
The•termination benefits, which relate to provisions for long term termination benefits as defined in IAS 19 (e.g. early retirement benefitsbenefits); and
•provisions for social plans (non-current) which relate to provisions for social plans in restructuring provisions as required by IAS 37, including a provision of 55 related to early retirement scheme in Spain recognized in cost of sales.
The provisions for termination benefits are mainly relatedrelate to European countries (Belgium, Spain, Germany and Luxembourg).
On December 9, 2020, following the sale of ArcelorMittal USA (see note 2.3.1), the Company derecognized all of ArcelorMittal's USA pension and OPEB liabilities net of plan assets in the amount of 3,243. The Company continues to present below the corresponding changes in pension and OPEB defined benefit obligation, plan assets and the components of net periodic pension and OPEB cost in 2020 for the United States.
Pension plans
This section includes post employment benefits that are pension plan and lump sum benefits which are not mandatory by law. A summary of the significant defined benefit pension plans is as follows:
U.S.Canada
ArcelorMittal USA’s pension plan is a non-contributory defined benefit plan covering approximately 13% of its employees. Certain non-represented salaried employees hired before 2003 receive pension benefits which are determined under a “Cash Balance” formula as an account balance which grows with interest credits and allocations based on a percentage of pay. Certain wage and salaried employees represented by a union hired before November 2005 receive a monthly benefit at retirement based on a fixed rate and years of service. These plans are closed to new participants.
Represented employees hired after November 2005 and employees at locations which were acquired from International Steel Group Inc. receive defined pension benefits through a multi-employer pension plan that is accounted for as a defined contribution plan, due to the limited information made available to each of the 483 (as of December 31, 2017) different participating employers. ArcelorMittal USA’s labor agreement with the United Steelworkers (“USW”) on September 1, 2018 increased the contributions to the multi-employer plan to $3.50 per contributory hour from $2.80. Changes to the defined pension plan under the new labor agreement, principally for a higher monthly benefit rate for certain periods of service, resulted in an expense of 25 recorded in cost of sales in the consolidated statements of operations in 2018.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Canada
The primary pension plans are those of ArcelorMittal Dofasco, AMMICAMMC and ArcelorMittal Long Products Canada.
The ArcelorMittal Dofasco pension plan is a hybrid plan providing the benefits of both a defined benefit and defined contribution pension plan. The defined contribution component is financed by both employer and employee contributions. The employer’s defined contribution is based on a percentage of company profits. The defined benefit pension plan was closed for new hires on December 31, 2010 and replaced by a new defined contribution pension plan with contributions related to age, service and earnings.
At the end of 2012, ArcelorMittal Dofasco froze and capped benefits for the majority of its hourly and salaried employees who were still accruing service under the defined benefit plan and began transitioning these employees to the new defined contribution pension plan for future pension benefits.
The AMMICAMMC defined benefit plan provides salary related benefit for non-union employees and a flat dollar pension depending on an employee’s length of service for union employees. This plan was closed for new non-union hires on December 31, 2009 and
replaced by a defined contribution pension plan with contributions related to age and service. Effective January 1, 2015, AMMICAMMC implemented a plan to transition its non-union employees who were still benefiting under the defined benefit plan to a defined contribution pension plan. Transition dates can extend up to January 1, 2025 depending on the age and service of each member.
ArcelorMittal Long Products Canada sponsors several defined benefit and defined contribution pension plans for its various groups of employees, with most defined benefit plans closed to new entrants several years ago. The primary defined benefit pension plan sponsored by ArcelorMittal Long Products Canada provides certain unionized employees with a flat dollar pension depending on an employee’s length of service.
ArcelorMittal Long Products Canada entered into a six-year collective labor agreement ("CLA") during the third quarter of 2014 with its Contrecoeur-West union group. The defined benefit plan was closed to new hires. A new defined contribution type arrangement was established for new hires. This collective labor agreement was renewed during the third quarter of 2020 for six years under similar conditions. The six-year labor agreement ratified in February 2016, covering Contrecoeur East and Longueuil facilities remains valid until January 31, 2022. The positive vote of the workers assembly on February 27, 2022 concluded the CLA negotiations for a new six-year CLA ending the labor dispute which began on February 2, 2022. It ensured a return to normal operations at the Contrecoeur East and Longueuil facilities on February 28, 2022.
In 2020, ArcelorMittal Long Products Canada entered into a buy-in transaction for some of its fully funded pension plans representing 112 in liabilities.
Brazil
The primary defined benefit plans, financed through trust funds, have been closed to new entrants. Brazilian entities have all established defined contribution plans that are financed by employer and employee contributions. On December 28, 2018, the Brazilian Autarchy that oversees pension funds called PREVIC (Complementary Pension National Superintendence) approved a planned settlement of the major defined benefit plans. ThisThe transaction was completed in 2019 and reduced the defined benefit obligation by 169 and the fair value of the plan asset by 143. The settlement is expected to be effectivegain of 26 was recognized in 2019.cost of sales and selling, general and administrative expenses.
Europe
Certain European operating subsidiaries maintain primarily unfunded defined benefit pension plans for a certain number of employees. Benefits are based on such employees’ length of service and applicable pension table under the terms of individual agreements. Some of these unfunded plans have
| | |
| Consolidated financial statements 326 |
| (millions of U.S. dollar, except share and per share data) |
been closed to new entrants and replaced by defined contribution pension plans for active members financed by employer and employee contributions.
As from December 2015 new Belgian legislation modifies the minimum guaranteed rates of return applicable to Belgian defined contribution plans. For insured plans, the rates of 3.25% on employer contributions and 3.75% on employee contributions will continue to apply to the accumulated pre-2016 contributions. For contributions paid as from January 1, 2016, a new variable minimum guaranteed rate of return applies. ForFrom 2016 2017 and 2018,through 2021, the minimum guaranteed rate of return was 1.75% and this is also the best estimate for 2019.2022. Due to the statutory minimum guaranteed return, Belgian defined contribution plans do not meet the definition of defined contribution plans under IFRS. Therefore, the Belgian defined contribution plans are classified as defined benefit plans.
On April 25, 2016, the Company agreed with unions in France to cap the annual indexation of the IRUS pension plan until 2026 and to pay a lump sum amount to cover the indexation obligation for subsequent years. These changes resulted in a gain of 96 recorded in cost of sales and selling, general and administrative expenses in the statements of operations.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Others
A very limited number of defined benefit plans are in place in other countries (such as South Africa, Mexico, Kazakhstan, Ukraine and Morocco).
On January 1, 2018, ArcelorMittal South Africa settled its defined benefit plan. This discontinued its participation in the fund and, therefore, ArcelorMittal South Africa no longer has any financial obligation to ensure the funding of the remaining plan. Accordingly, the related benefit obligation, the plan assets and unrecoverable surplus were derecognized from the 2018 consolidated statements of financial position. The only remaining pension plans for ArcelorMittal South Africa are defined contribution pension plans that are financed by employer and employee contributions.
The majority of the funded defined benefit pension plans described earlier provide benefit payments from trustee-administered funds. ArcelorMittal also sponsors a number of unfunded plans where the Company meets the benefit payment obligation as it falls due. Plan assets held in trusts are legally separated from the Company and are governed by local regulations and practice in each country, as is the nature of the relationship between the Company and the governing bodies and their composition. In general terms, governing bodies are required by law to act in the best interest of the plan members and are responsible for certain tasks related to the plan (e.g. setting the plan's investment policy).
In case of the funded pension plans, the investment positions are generally managed within an asset-liability matching ("ALM") framework that has been developed to achieve long-term investments that are in line with the obligations of the pension plans.
A long-term investment strategy has been set for ArcelorMittal’s major funded pension plans, with its asset allocation comprising of a mixture of equity securities, fixed income securities, real estate and other appropriate assets. This recognizes that different asset classes are likely to produce different long-term returns and some asset classes may be more volatile than others. The long-term investment strategy ensures, in particular, that investments are adequately diversified.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 327 Consolidated financial statements |
The following tables detail the reconciliation of defined benefit obligation (“DBO”), plan assets, irrecoverable surplus and statements of financial position. |
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2018 |
| Total |
| United States |
| Canada |
| Brazil |
| Europe |
| Other |
| Change in benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
| Benefit obligation at beginning of the period | 10,835 |
|
| 3,508 |
|
| 3,481 |
|
| 766 |
|
| 2,990 |
|
| 90 |
|
| Current service cost | 136 |
|
| 31 |
|
| 25 |
|
| 3 |
|
| 68 |
|
| 9 |
|
| Interest cost on DBO | 360 |
|
| 120 |
|
| 110 |
|
| 68 |
|
| 42 |
|
| 20 |
|
| Past service cost - Plan amendments | 25 |
|
| 25 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Plan participants’ contribution | 3 |
|
| — |
|
| 1 |
|
| — |
|
| 2 |
|
| — |
|
| Settlements | (76 | ) |
| — |
|
| (61 | ) |
| — |
|
| — |
|
| (15 | ) |
| Actuarial (gain) loss | (290 | ) |
| (159 | ) |
| (72 | ) |
| 50 |
|
| (104 | ) |
| (5 | ) |
| Demographic assumptions | 20 |
|
| 9 |
|
| 1 |
|
| — |
|
| 10 |
|
| — |
|
| Financial assumptions | (311 | ) |
| (163 | ) |
| (75 | ) |
| 38 |
|
| (92 | ) |
| (19 | ) |
| Experience adjustment | 1 |
|
| (5 | ) |
| 2 |
|
| 12 |
|
| (22 | ) |
| 14 |
|
| Benefits paid | (671 | ) |
| (259 | ) |
| (203 | ) |
| (48 | ) |
| (144 | ) |
| (17 | ) |
| Termination benefits | 6 |
|
| — |
|
| — |
|
| — |
|
| 6 |
|
| — |
|
| Foreign currency exchange rate differences and other movements | (456 | ) |
| — |
|
| (280 | ) |
| (115 | ) |
| (144 | ) |
| 83 |
|
| Benefit obligation at end of the period | 9,872 |
|
| 3,266 |
|
| 3,001 |
|
| 724 |
|
| 2,716 |
|
| 165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value of plan assets at beginning of the period | 7,822 |
|
| 2,993 |
|
| 3,167 |
|
| 723 |
|
| 924 |
|
| 15 |
|
| Interest income on plan assets | 267 |
|
| 92 |
|
| 97 |
|
| 63 |
|
| 15 |
|
| — |
|
| Return on plan assets greater/(less) than discount rate | (333 | ) |
| (197 | ) |
| (142 | ) |
| 20 |
|
| (15 | ) |
| 1 |
|
| Employer contribution | 151 |
|
| 42 |
|
| 59 |
|
| 6 |
|
| 44 |
|
| — |
|
| Plan participants’ contribution | 3 |
|
| — |
|
| 1 |
|
| — |
|
| 2 |
|
| — |
|
| Settlement | (78 | ) |
| — |
|
| (63 | ) |
| — |
|
| — |
|
| (15 | ) |
| Benefits paid | (550 | ) |
| (254 | ) |
| (203 | ) |
| (48 | ) |
| (45 | ) |
| — |
|
| Foreign currency exchange rate differences and other movements | (405 | ) |
| — |
|
| (252 | ) |
| (109 | ) |
| (43 | ) |
| (1 | ) |
| Fair value of plan assets at end of the period | 6,877 |
|
| 2,676 |
|
| 2,664 |
|
| 655 |
|
| 882 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Present value of the wholly or partly funded obligation | (8,537 | ) |
| (3,238 | ) |
| (2,988 | ) |
| (723 | ) |
| (1,500 | ) |
| (88 | ) |
| Fair value of plan assets | 6,877 |
|
| 2,676 |
|
| 2,664 |
|
| 655 |
|
| 882 |
|
| — |
|
| Net present value of the wholly or partly funded obligation | (1,660 | ) |
| (562 | ) |
| (324 | ) |
| (68 | ) |
| (618 | ) |
| (88 | ) |
| Present value of the unfunded obligation | (1,335 | ) |
| (28 | ) |
| (13 | ) |
| (1 | ) |
| (1,216 | ) |
| (77 | ) |
| Prepaid due to unrecoverable surpluses | (27 | ) |
| — |
|
| (21 | ) |
| (3 | ) |
| (3 | ) |
| — |
|
| Net amount recognized | (3,022 | ) |
| (590 | ) |
| (358 | ) |
| (72 | ) |
| (1,837 | ) |
| (165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets related to funded obligations | 12 |
|
| — |
|
| 9 |
|
| — |
|
| 3 |
|
| — |
|
| Recognized liabilities | (3,034 | ) |
| (590 | ) |
| (367 | ) |
| (72 | ) |
| (1,840 | ) |
| (165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| Change in unrecoverable surplus |
|
|
|
|
|
|
|
|
|
|
|
| Unrecoverable surplus at beginning of the period | (34 | ) |
| — |
|
| (23 | ) |
| (3 | ) |
| (6 | ) |
| (2 | ) |
| Interest cost on unrecoverable surplus | (1 | ) |
| — |
|
| (1 | ) |
| — |
|
| — |
|
| — |
|
| Change in unrecoverable surplus in excess of interest | 6 |
|
| — |
|
| 2 |
|
| (1 | ) |
| 3 |
|
| 2 |
|
| Exchange rates changes | 2 |
|
| — |
|
| 1 |
|
| 1 |
|
| — |
|
| — |
|
| Unrecoverable surplus at end of the period | (27 | ) |
| — |
|
| (21 | ) |
| (3 | ) |
| (3 | ) |
| — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 |
| Total | | United States | | Canada | | Brazil | | Europe | | Other |
| Change in benefit obligation | | | | | | | | | | | |
| Benefit obligation at beginning of the period | 7,604 | | | 39 | | | 3,590 | | | 517 | | | 3,173 | | | 285 | |
| Current service cost | 105 | | | 1 | | | 29 | | | — | | | 69 | | | 6 | |
| Interest cost on DBO | 162 | | | 1 | | | 89 | | | 33 | | | 17 | | | 22 | |
| Past service cost - Plan amendments | 31 | | | — | | | 28 | | | — | | | 3 | | | — | |
| | | | | | | | | | | |
| Plan participants’ contribution | 1 | | | — | | | — | | | — | | | 1 | | | — | |
| Settlements | (5) | | | — | | | (4) | | | (1) | | | — | | | — | |
| Actuarial (gain) loss | (509) | | | (4) | | | (216) | | | (83) | | | (173) | | | (33) | |
| Demographic assumptions | 9 | | | — | | | — | | | 10 | | | (1) | | | — | |
| Financial assumptions | (364) | | | (3) | | | (207) | | | (103) | | | (13) | | | (38) | |
| Experience adjustment | (154) | | | (1) | | | (9) | | | 10 | | | (159) | | | 5 | |
| Benefits paid | (428) | | | (3) | | | (219) | | | (31) | | | (148) | | | (27) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Foreign currency exchange rate differences and other movements | (222) | | | — | | | 9 | | | (37) | | | (191) | | | (3) | |
| Benefit obligation at end of the period | 6,739 | | | 34 | | | 3,306 | | | 398 | | | 2,751 | | | 250 | |
| | | | | | | | | | | |
| Change in plan assets | | | | | | | | | | | |
| Fair value of plan assets at beginning of the period | 4,654 | | | 45 | | | 3,167 | | | 435 | | | 1,007 | | | — | |
| Interest income on plan assets | 108 | | | 1 | | | 76 | | | 26 | | | 5 | | | — | |
| Return on plan assets greater (less) than discount rate | 41 | | | (4) | | | 103 | | | (25) | | | (33) | | | — | |
| Employer contribution | 72 | | | — | | | 29 | | | — | | | 43 | | | — | |
| Plan participants’ contribution | 1 | | | — | | | — | | | — | | | 1 | | | — | |
| Settlements | (5) | | | — | | | (4) | | | (1) | | | — | | | — | |
| | | | | | | | | | | |
| Benefits paid | (313) | | | (3) | | | (218) | | | (31) | | | (61) | | | — | |
| | | | | | | | | | | |
| Foreign currency exchange rate differences and other movements | (62) | | | — | | | 10 | | | (28) | | | (44) | | | — | |
| Fair value of plan assets at end of the period | 4,496 | | | 39 | | | 3,163 | | | 376 | | | 918 | | | — | |
| | | | | | | | | | | |
| Present value of the wholly or partly funded obligation | (5,222) | | | (32) | | | (3,291) | | | (398) | | | (1,501) | | | — | |
| Fair value of plan assets | 4,496 | | | 39 | | | 3,163 | | | 376 | | | 918 | | | — | |
| Net present value of the wholly or partly funded obligation | (726) | | | 7 | | | (128) | | | (22) | | | (583) | | | — | |
| Present value of the unfunded obligation | (1,517) | | | (2) | | | (15) | | | — | | | (1,250) | | | (250) | |
| Prepaid due to unrecoverable surpluses | (33) | | | — | | | (28) | | | (2) | | | (3) | | | — | |
| Net amount recognized | (2,276) | | | 5 | | | (171) | | | (24) | | | (1,836) | | | (250) | |
| | | | | | | | | | | |
| Net assets related to funded obligations | 58 | | | 7 | | | 47 | | | — | | | 4 | | | — | |
| Recognized liabilities | (2,334) | | | (2) | | | (218) | | | (24) | | | (1,840) | | | (250) | |
| | | | | | | | | | | |
| Change in unrecoverable surplus | | | | | | | | | | | |
| Unrecoverable surplus at beginning of the period | (27) | | | — | | | (23) | | | (1) | | | (3) | | | — | |
| Interest cost on unrecoverable surplus | (1) | | | — | | | (1) | | | — | | | — | | | — | |
| Change in unrecoverable surplus in excess of interest | (5) | | | — | | | (4) | | | (1) | | | — | | | — | |
| | | | | | | | | | | |
| Unrecoverable surplus at end of the period | (33) | | | — | | | (28) | | | (2) | | | (3) | | | — | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 328 |
| (millions of U.S. dollar, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 |
| Total | | United States | | Canada | | Brazil | | Europe | | Other |
| Change in benefit obligation | | | | | | | | | | | |
| Benefit obligation at beginning of the period | 10,629 | | | 3,505 | | | 3,360 | | | 664 | | | 2,830 | | | 270 | |
| Current service cost | 129 | | | 28 | | | 25 | | | — | | | 64 | | | 12 | |
| Interest cost on DBO | 279 | | | 95 | | | 96 | | | 36 | | | 29 | | | 23 | |
| Past service cost - Plan amendments | 8 | | | 1 | | | 3 | | | — | | | 4 | | | — | |
| Past service cost - Curtailments | 2 | | | 2 | | | — | | | — | | | — | | | — | |
| Plan participants’ contribution | 1 | | | — | | | — | | | — | | | 1 | | | — | |
| | | | | | | | | | | |
| Actuarial (gain) loss | 705 | | | 237 | | | 250 | | | (3) | | | 185 | | | 36 | |
| Demographic assumptions | (32) | | | (32) | | | — | | | — | | | — | | | — | |
| Financial assumptions | 795 | | | 286 | | | 276 | | | 5 | | | 214 | | | 14 | |
| Experience adjustment | (58) | | | (17) | | | (26) | | | (8) | | | (29) | | | 22 | |
| Benefits paid | (693) | | | (279) | | | (206) | | | (32) | | | (149) | | | (27) | |
| Divestments (note 2.3.1) | (3,550) | | | (3,550) | | | — | | | — | | | — | | | — | |
| Foreign currency exchange rate differences and other movements | 94 | | | — | | | 62 | | | (148) | | | 209 | | | (29) | |
| Benefit obligation at end of the period | 7,604 | | | 39 | | | 3,590 | | | 517 | | | 3,173 | | | 285 | |
| | | | | | | | | | | |
| Change in plan assets | | | | | | | | | | | |
| Fair value of plan assets at beginning of the period | 7,395 | | | 2,881 | | | 3,021 | | | 576 | | | 917 | | | — | |
| Interest income on plan assets | 192 | | | 69 | | | 84 | | | 31 | | | 8 | | | — | |
| Return on plan assets greater (less) than discount rate | 444 | | | 209 | | | 188 | | | (12) | | | 59 | | | — | |
| Employer contribution | 64 | | | 2 | | | 21 | | | 1 | | | 40 | | | — | |
| Plan participants’ contribution | 1 | | | — | | | — | | | — | | | 1 | | | — | |
| Plan amendments | 2 | | | 2 | | | — | | | — | | | — | | | — | |
| Benefits paid | (579) | | | (276) | | | (205) | | | (32) | | | (66) | | | — | |
| Divestments (note 2.3.1) | (2,842) | | | (2,842) | | | — | | | — | | | — | | | — | |
| Foreign currency exchange rate differences and other movements | (23) | | | — | | | 58 | | | (129) | | | 48 | | | — | |
| Fair value of plan assets at end of the period | 4,654 | | | 45 | | | 3,167 | | | 435 | | | 1,007 | | | — | |
| | | | | | | | | | | |
| Present value of the wholly or partly funded obligation | (5,831) | | | (37) | | | (3,575) | | | (517) | | | (1,702) | | | — | |
| Fair value of plan assets | 4,654 | | | 45 | | | 3,167 | | | 435 | | | 1,007 | | | — | |
| Net present value of the wholly or partly funded obligation | (1,177) | | | 8 | | | (408) | | | (82) | | | (695) | | | — | |
| Present value of the unfunded obligation | (1,773) | | | (2) | | | (15) | | | — | | | (1,471) | | | (285) | |
| Prepaid due to unrecoverable surpluses | (27) | | | — | | | (23) | | | (1) | | | (3) | | | — | |
| Net amount recognized | (2,977) | | | 6 | | | (446) | | | (83) | | | (2,169) | | | (285) | |
| | | | | | | | | | | |
| Net assets related to funded obligations | 23 | | | 8 | | | 11 | | | — | | | 4 | | | — | |
| Recognized liabilities | (3,000) | | | (2) | | | (457) | | | (83) | | | (2,173) | | | (285) | |
| | | | | | | | | | | |
| Change in unrecoverable surplus | | | | | | | | | | | |
| Unrecoverable surplus at beginning of the period | (30) | | | — | | | (25) | | | (2) | | | (3) | | | — | |
| Interest cost on unrecoverable surplus | (1) | | | — | | | (1) | | | — | | | — | | | — | |
| Change in unrecoverable surplus in excess of interest | 4 | | | — | | | 3 | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
| Unrecoverable surplus at end of the period | (27) | | | — | | | (23) | | | (1) | | | (3) | | | — | |
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2017 |
| | Total | | United States | | Canada | | Brazil | | Europe | | Other |
| Change in benefit obligation | | | | | | | | | | | |
| Benefit obligation at beginning of the period | 10,054 |
| | 3,627 |
| | 3,053 |
| | 704 |
| | 2,582 |
| | 88 |
|
| Current service cost | 125 |
| | 32 |
| | 26 |
| | 4 |
| | 60 |
| | 3 |
|
| Interest cost on DBO | 397 |
| | 142 |
| | 119 |
| | 79 |
| | 46 |
| | 11 |
|
| Past service cost - Plan amendments | 14 |
| | — |
| | 13 |
| | — |
| | 1 |
| | — |
|
| Plan participants’ contribution | 3 |
| | — |
| | 1 |
| | — |
| | 2 |
| | — |
|
| Actuarial (gain) loss | 323 |
| | (28 | ) | | 237 |
| | 40 |
| | 72 |
| | 2 |
|
| Demographic assumptions | (131 | ) | | (130 | ) | | 1 |
| | — |
| | (2 | ) | | — |
|
| Financial assumptions | 418 |
| | 154 |
| | 188 |
| | 22 |
| | 54 |
| | — |
|
| Experience adjustment | 36 |
| | (52 | ) | | 48 |
| | 18 |
| | 20 |
| | 2 |
|
| Benefits paid | (656 | ) | | (265 | ) | | (197 | ) | | (49 | ) | | (130 | ) | | (15 | ) |
| Foreign currency exchange rate differences and other movements | 575 |
| | — |
|
| 229 |
| | (12 | ) | | 357 |
|
| 1 |
|
| Benefit obligation at end of the period | 10,835 |
| | 3,508 |
| | 3,481 |
| | 766 |
| | 2,990 |
| | 90 |
|
| | | | | | | | | | | |
| Change in plan assets | | | | | | | | | | | |
| Fair value of plan assets at beginning of the period | 7,048 |
| | 2,768 |
| | 2,795 |
| | 684 |
| | 777 |
| | 24 |
|
| Interest income on plan assets | 292 |
| | 94 |
| | 107 |
| | 75 |
| | 15 |
| | 1 |
|
| Return on plan assets greater/(less) than discount rate | 468 |
| | 274 |
| | 169 |
| | 16 |
| | 17 |
| | (8 | ) |
| Employer contribution | 249 |
| | 117 |
| | 83 |
| | 8 |
| | 41 |
| | — |
|
| Plan participants’ contribution | 3 |
| | — |
| | 1 |
| | — |
| | 2 |
| | — |
|
| Benefits paid | (545 | ) | | (260 | ) | | (196 | ) | | (49 | ) | | (37 | ) | | (3 | ) |
| Foreign currency exchange rate differences and other movements | 307 |
| | — |
|
| 208 |
| | (11 | ) | | 109 |
|
| 1 |
|
| Fair value of plan assets at end of the period | 7,822 |
| | 2,993 |
| | 3,167 |
| | 723 |
| | 924 |
| | 15 |
|
| | | | | | | | | | | |
| Present value of the wholly or partly funded obligation | (9,352 | ) | | (3,477 | ) | | (3,463 | ) | | (765 | ) | | (1,635 | ) | | (12 | ) |
| Fair value of plan assets | 7,822 |
| | 2,993 |
| | 3,167 |
| | 723 |
| | 924 |
| | 15 |
|
| Net present value of the wholly or partly funded obligation | (1,530 | ) | | (484 | ) | | (296 | ) | | (42 | ) | | (711 | ) | | 3 |
|
| Present value of the unfunded obligation | (1,483 | ) | | (31 | ) | | (18 | ) | | (1 | ) | | (1,355 | ) | | (78 | ) |
| Prepaid due to unrecoverable surpluses | (34 | ) | | — |
| | (23 | ) | | (3 | ) | | (6 | ) | | (2 | ) |
| Net amount recognized | (3,047 | ) | | (515 | ) | | (337 | ) | | (46 | ) | | (2,072 | ) | | (77 | ) |
| | | | | | | | | | | |
| Net assets related to funded obligations | 20 |
| | — |
| | 17 |
| | — |
| | 3 |
| | — |
|
| Recognized liabilities | (3,067 | ) | | (515 | ) | | (354 | ) | | (46 | ) | | (2,075 | ) | | (77 | ) |
| | | | | | | | | | | | |
| Change in unrecoverable surplus | | | | | | | | | | | |
| Unrecoverable surplus at beginning of the period | (34 | ) | | — |
| | (18 | ) | | (3 | ) | | (4 | ) | | (9 | ) |
| Interest cost on unrecoverable surplus | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | — |
|
| Change in unrecoverable surplus in excess of interest | 2 |
| | — |
| | (3 | ) | | — |
| | (2 | ) | | 7 |
|
| Exchange rates changes | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | — |
|
| Unrecoverable surplus at end of the period | (34 | ) | | — |
| | (23 | ) | | (3 | ) | | (6 | ) | | (2 | ) |
| | |
| 329 Consolidated financial statements |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The following tables detail the components of net periodic pension cost:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2021 |
| Net periodic pension cost (income) | Total | | United States | | Canada | | Brazil | | Europe | | Others |
| Current service cost | 105 | | | 1 | | | 29 | | | — | | | 69 | | | 6 | |
| Past service cost - Plan amendments | 31 | | | — | | | 28 | | | — | | | 3 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net interest cost (income) on net DB liability (asset) | 55 | | | — | | | 14 | | | 7 | | | 12 | | | 22 | |
| Total | 191 | | | 1 | | | 71 | | | 7 | | | 84 | | | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2020 |
| Net periodic pension cost (income) | Total | | United States | | Canada | | Brazil | | Europe | | Others |
| Current service cost | 129 | | | 28 | | | 25 | | | — | | | 64 | | | 12 | |
| Past service cost - Plan amendments | 6 | | | (1) | | | 3 | | | — | | | 4 | | | — | |
| Past service cost - Curtailments | 2 | | | 2 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | |
| Net interest cost/(income) on net DB liability (asset) | 88 | | | 26 | | | 13 | | | 5 | | | 21 | | | 23 | |
| Total | 225 | | | 55 | | | 41 | | | 5 | | | 89 | | | 35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2019 |
| Net periodic pension cost (income) | Total | | United States | | Canada | | Brazil | | Europe | | Others |
| Current service cost | 114 | | | 26 | | | 21 | | | — | | | 58 | | | 9 | |
| Past service cost - Plan amendments | 4 | | | — | | | — | | | 2 | | | 2 | | | — | |
| Past service cost - Settlements | (26) | | | — | | | — | | | (26) | | | — | | | — | |
| | | | | | | | | | | |
| Net interest cost (income) on net DB liability (asset) | 112 | | | 35 | | | 19 | | | 4 | | | 32 | | | 22 | |
| Total | 204 | | | 61 | | | 40 | | | (20) | | | 92 | | | 31 | |
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2018 |
| Net periodic pension cost (benefit) | Total |
| United States |
| Canada |
| Brazil |
| Europe |
| Others |
| Current service cost | 136 |
|
| 31 |
|
| 25 |
|
| 3 |
|
| 68 |
|
| 9 |
|
| Past service cost - Plan amendments | 25 |
|
| 25 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Past service cost - Settlements | 2 |
|
| — |
|
| 2 |
|
| — |
|
| — |
|
| — |
|
| Cost of termination benefits | 6 |
|
| — |
|
| — |
|
| — |
|
| 6 |
|
| — |
|
| Net interest cost/(income) on net DB liability/(asset) | 94 |
|
| 28 |
|
| 14 |
|
| 5 |
|
| 27 |
|
| 20 |
|
| Total | 263 |
|
| 84 |
|
| 41 |
|
| 8 |
|
| 101 |
|
| 29 |
|
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2017 |
| Net periodic pension cost (benefit) | Total | | United States | | Canada | | Brazil | | Europe | | Others |
| Current service cost | 125 |
| | 32 |
| | 26 |
| | 4 |
| | 60 |
| | 3 |
|
| Past service cost - Plan amendments | 14 |
| | — |
| | 13 |
| | — |
| | 1 |
| | — |
|
| Net interest cost/(income) on net DB liability/(asset) | 106 |
| | 48 |
| | 13 |
| | 4 |
| | 31 |
| | 10 |
|
| Total | 245 |
| | 80 |
| | 52 |
| | 8 |
| | 92 |
| | 13 |
|
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2016 |
| Net periodic pension cost (benefit) | Total | | United States | | Canada | | Brazil | | Europe | | Others |
| Current service cost | 112 |
| | 31 |
| | 25 |
| | 2 |
| | 50 |
| | 4 |
|
| Past service cost - Plan amendments | (80 | ) | | 12 |
| | 4 |
| | — |
| | (96 | ) | | — |
|
| Past service cost - Curtailments | (6 | ) | | — |
| | — |
| | — |
| | — |
| | (6 | ) |
| Net interest cost/(income) on net DB liability/(asset) | 108 |
| | 47 |
| | 15 |
| | 2 |
| | 35 |
| | 9 |
|
| Total | 134 |
| | 90 |
| | 44 |
| | 4 |
| | (11 | ) | | 7 |
|
Other post-employment benefits and other long-term employee benefits ("OPEB")
This section includes post employment employees benefits that are not disclosed above (i.e. includes lump sum benefits which are mandatory by law, medical insurance and life insurance). In addition, this section includes all other long-term employee benefits.
ArcelorMittal’s principal operating subsidiaries in the United States, Canada, Europe and certain other countries, provide other post-employmentpost employment benefits and other long-term employee benefits, including medical benefits and life insurance benefits, work
medals and retirement indemnity plans, to employees and retirees. Substantially all union-represented
In April 2021, ArcelorMittal USA employees hired before June 2016 are covered under post-employment life insurancePoland and medical benefit plans that requiretrade unions reached an agreement on the new CLA. The parties agreed a levelten-year transition period for retirement benefits and jubilee awards. At the end of cost sharing from retirees. The post-employment life insurance benefit formula usedthe transition period, in 2031, ArcelorMittal Poland will pay the determination of post-employment benefit cost is primarilyretirement benefits based on a specific amount for hourly employees.the labor code. In June 2021, the CLA was registered by the National Labor Inspectorate in Poland and accordingly ArcelorMittal USA does not pre-fund most of these post-employment benefits.
ArcelorMittal’s USA labor agreement with the United Steelworkers (“USW”) was ratified in 2016. This labor agreement is valid until September 1, 2018. ArcelorMittal performed a number of changes mainly related to healthcare post-employment benefits in its subsidiary ArcelorMittal USA. Also, in accordance with the new agreement, required payments into an existing Voluntary Employee Beneficiary Association (“VEBA”) trust were fixed at 5% of ArcelorMittal USA’s operating income after the first quarter of 2018. The changes resulted in aPoland recognized total plan amendment and curtailment gain of 832 recorded51 in cost of sales in the consolidated statements of operations in 2016. sales.
ArcelorMittal’s USA new labor agreement with the USW was ratified in 2018. This labor agreement is in effect until September 1, 2022. There were minor changes for OPEB in the new contract mainly related to healthcare post-employment premiums paid by participants. The changes resulted in a gain of 10 recorded in cost of sales in the consolidated statement of operations in 2018.
The Company has significant assets mostly in the VEBA post-employment benefit plan. These assets consist of 71% in fixed income and 29% in equities. The total fair value of the assets in the VEBA trust was 451 as of December 31, 2018.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 330 |
| (millions of U.S. dollar, except share and per share data) |
Summary of changes in the other post-employment benefit obligation and changes in plan assets are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 |
| Total | | United States | | Canada | | Europe | | Others |
| Change in benefit obligation | | | | | | | | | |
| Benefit obligation at beginning of the period | 1,438 | | | 28 | | | 742 | | | 590 | | | 78 | |
| Current service cost | 9 | | | — | | | (1) | | | 7 | | | 3 | |
| Interest cost on DBO | 25 | | | 1 | | | 18 | | | 2 | | | 4 | |
| Past service cost - Plan amendments | (57) | | | — | | | 1 | | | (58) | | | — | |
| Past service cost - Curtailments | (7) | | | — | | | — | | | (7) | | | — | |
| | | | | | | | | |
| Actuarial (gain) loss | (111) | | | (1) | | | (66) | | | (43) | | | (1) | |
| Demographic assumptions | (1) | | | — | | | (2) | | | 1 | | | — | |
| Financial assumptions | (66) | | | — | | | (55) | | | (5) | | | (6) | |
| Experience adjustment | (44) | | | (1) | | | (9) | | | (39) | | | 5 | |
| Benefits paid | (82) | | | (1) | | | (34) | | | (44) | | | (3) | |
| | | | | | | | | |
| Foreign currency exchange rate differences and other movements | (25) | | | — | |
| 1 | | | (24) | | | (2) | |
| Benefit obligation at end of the period | 1,190 | | | 27 | | | 661 | | | 423 | | | 79 | |
| | | | | | | | | |
| Change in plan assets | | | | | | | | | |
| Fair value of plan assets at beginning of the period | 6 | | | — | | | — | | | 6 | | | — | |
| | | | | | | | | |
| Return on plan assets greater than discount rate | 1 | | | — | | | — | | | 1 | | | — | |
| | | | | | | | | |
| | | | | | | | | |
| Benefits paid | (1) | | | — | | | — | | | (1) | | | — | |
| | | | | | | | | |
| | | | | | | | | |
| Fair value of plan assets at end of the period | 6 | | | — | | | — | | | 6 | | | — | |
| | | | | | | | | |
| Present value of the wholly or partly funded obligation | (29) | | | — | | | — | | | (29) | | | — | |
| Fair value of plan assets | 6 | | | — | | | — | | | 6 | | | — | |
| Net present value of the wholly or partly funded obligation | (23) | | | — | | | — | | | (23) | | | — | |
| Present value of the unfunded obligation | (1,161) | | | (27) | | | (661) | | | (394) | | | (79) | |
| Net amount recognized | (1,184) | | | (27) | | | (661) | | | (417) | | | (79) | |
|
| | | | | | | | | | | | | | |
| Year ended December 31, 2018 |
| Total |
| United States |
| Canada |
| Europe |
| Others |
| Change in benefit obligation |
|
|
|
|
|
|
|
|
|
| Benefit obligation at beginning of the period | 4,686 |
|
| 3,269 |
|
| 679 |
|
| 579 |
|
| 159 |
|
| Current service cost | 85 |
|
| 49 |
|
| 10 |
|
| 25 |
|
| 1 |
|
| Interest cost on DBO | 155 |
|
| 120 |
|
| 21 |
|
| 12 |
|
| 2 |
|
| Past service cost - Plan amendments | (13 | ) |
| (10 | ) |
| (1 | ) |
| (2 | ) |
| — |
|
| Past service cost - Curtailments | (2 | ) |
| — |
|
| — |
|
| (2 | ) |
| — |
|
| Plan participants’ contribution | 32 |
|
| 32 |
|
| — |
|
| — |
|
| — |
|
| Actuarial (gain) loss | (395 | ) |
| (365 | ) |
| (32 | ) |
| 3 |
|
| (1 | ) |
| Demographic assumptions | (11 | ) |
| (14 | ) |
| 2 |
|
| 1 |
|
| — |
|
| Financial assumptions | (320 | ) |
| (285 | ) |
| (24 | ) |
| (8 | ) |
| (3 | ) |
| Experience adjustment | (64 | ) |
| (66 | ) |
| (10 | ) |
| 10 |
|
| 2 |
|
| Benefits paid | (266 | ) |
| (188 | ) |
| (34 | ) |
| (41 | ) |
| (3 | ) |
| Foreign currency exchange rate differences and other movements | (184 | ) |
| — |
|
| (52 | ) |
| (43 | ) |
| (89 | ) |
| Benefit obligation at end of the period | 4,098 |
|
| 2,907 |
|
| 591 |
|
| 531 |
|
| 69 |
|
|
|
|
|
|
|
|
|
|
|
| Change in plan assets |
|
|
|
|
|
|
|
|
|
| Fair value of plan assets at beginning of the period | 546 |
|
| 538 |
|
| — |
|
| 8 |
|
| — |
|
| Interest income on plan assets | 17 |
|
| 17 |
|
| — |
|
| — |
|
| — |
|
| Return on plan assets greater/(less) than discount rate | (33 | ) |
| (32 | ) |
| — |
|
| (1 | ) |
| — |
|
| Employer contribution | (3 | ) |
| (3 | ) |
| — |
|
| — |
|
| — |
|
| Plan participants’ contribution | 32 |
|
| 32 |
|
| — |
|
| — |
|
| — |
|
| Benefits paid | (63 | ) |
| (61 | ) |
| — |
|
| (2 | ) |
| — |
|
| Foreign currency exchange rate differences and other movements | 2 |
|
| — |
|
| — |
|
| 2 |
|
| — |
|
| Fair value of plan assets at end of the period | 498 |
|
| 491 |
|
| — |
|
| 7 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Present value of the wholly or partly funded obligation | (589 | ) |
| (528 | ) |
| — |
|
| (61 | ) |
| — |
|
| Fair value of plan assets | 498 |
|
| 491 |
|
| — |
|
| 7 |
|
| — |
|
| Net present value of the wholly or partly funded obligation | (91 | ) |
| (37 | ) |
| — |
|
| (54 | ) |
| — |
|
| Present value of the unfunded obligation | (3,509 | ) |
| (2,379 | ) |
| (591 | ) |
| (470 | ) |
| (69 | ) |
| Net amount recognized | (3,600 | ) |
| (2,416 | ) |
| (591 | ) |
| (524 | ) |
| (69 | ) |
| | |
| 331 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 |
| Total | | United States | | Canada | | Europe | | Others |
| Change in benefit obligation | | | | | | | | | |
| Benefit obligation at beginning of the period | 4,294 | | | 2,976 | | | 688 | | | 546 | | | 84 | |
| Current service cost | 85 | | | 44 | | | 10 | | | 27 | | | 4 | |
| Interest cost on DBO | 122 | | | 91 | | | 19 | | | 7 | | | 5 | |
| Past service cost - Plan amendments | (1) | | | — | | | (1) | | | — | | | — | |
| Past service cost - Curtailments | 3 | | | 3 | | | — | | | — | | | — | |
| Plan participants’ contribution | 23 | | | 23 | | | — | | | — | | | — | |
| Actuarial (gain) loss | 113 | | | 46 | | | 41 | | | 26 | | | — | |
| Demographic assumptions | (39) | | | (39) | | | — | | | — | | | — | |
| Financial assumptions | 266 | | | 170 | | | 54 | | | 37 | | | 5 | |
| Experience adjustment | (114) | | | (85) | | | (13) | | | (11) | | | (5) | |
| Benefits paid | (208) | | | (131) | | | (30) | | | (37) | | | (10) | |
| Divestments (note 2.3.1) | (3,024) | | | (3,024) | | | — | | | — | | | — | |
| Foreign currency exchange rate differences and other movements | 31 | | | — | |
| 15 | | | 21 | | | (5) | |
| Benefit obligation at end of the period | 1,438 | | | 28 | | | 742 | | | 590 | | | 78 | |
| | | | | | | | | |
| Change in plan assets | | | | | | | | | |
| Fair value of plan assets at beginning of the period | 502 | | | 496 | | | — | | | 6 | | | — | |
| Interest income on plan assets | 12 | | | 12 | | | — | | | — | | | — | |
| Return on plan assets greater/(less) than discount rate | 11 | | | 11 | | | — | | | — | | | — | |
| Employer contribution | (32) | | | (32) | | | — | | | — | | | — | |
| Plan participants’ contribution | 23 | | | 23 | | | — | | | — | | | — | |
| Benefits paid | (22) | | | (21) | | | — | | | (1) | | | — | |
| Divestments (note 2.3.1) | (489) | | | (489) | | | — | | | — | | | — | |
| Foreign currency exchange rate differences and other movements | 1 | | | — | | | — | | | 1 | | | — | |
| Fair value of plan assets at end of the period | 6 | | | — | | | — | | | 6 | | | — | |
| | | | | | | | | |
| Present value of the wholly or partly funded obligation | (34) | | | — | | | — | | | (34) | | | — | |
| Fair value of plan assets | 6 | | | — | | | — | | | 6 | | | — | |
| Net present value of the wholly or partly funded obligation | (28) | | | — | | | — | | | (28) | | | — | |
| Present value of the unfunded obligation | (1,404) | | | (28) | | | (742) | | | (556) | | | (78) | |
| Net amount recognized | (1,432) | | | (28) | | | (742) | | | (584) | | | (78) | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 332 |
| (millions of U.S. dollar, except share and per share data) |
|
| | | | | | | | | | | | | | |
| Year ended December 31, 2017 |
| Total |
| United States |
| Canada |
| Europe |
| Others |
| Change in benefit obligation |
|
|
|
|
|
|
|
|
|
| Benefit obligation at beginning of the period | 5,400 |
|
| 4,183 |
|
| 592 |
|
| 492 |
|
| 133 |
|
| Current service cost | 100 |
|
| 58 |
|
| 9 |
|
| 26 |
|
| 7 |
|
| Interest cost on DBO | 226 |
|
| 181 |
|
| 23 |
|
| 11 |
|
| 11 |
|
| Past service cost - Plan amendments | 4 |
|
| — |
|
| 1 |
|
| 2 |
|
| 1 |
|
| Plan participants’ contribution | 29 |
|
| 29 |
|
| — |
|
| — |
|
| — |
|
| Actuarial (gain) loss | (942 | ) |
| (1,005 | ) |
| 45 |
|
| 7 |
|
| 11 |
|
| Demographic assumptions | (153 | ) |
| (168 | ) |
| 2 |
|
| 3 |
|
| 10 |
|
| Financial assumptions | (680 | ) |
| (728 | ) |
| 40 |
|
| 9 |
|
| (1 | ) |
| Experience adjustment | (109 | ) |
| (109 | ) |
| 3 |
|
| (5 | ) |
| 2 |
|
| Benefits paid | (258 | ) |
| (177 | ) |
| (32 | ) |
| (42 | ) |
| (7 | ) |
| Foreign currency exchange rate differences and other movements | 127 |
|
| — |
|
| 41 |
|
| 83 |
|
| 3 |
|
| Benefit obligation at end of the period | 4,686 |
|
| 3,269 |
|
| 679 |
|
| 579 |
|
| 159 |
|
|
|
|
|
|
|
|
|
|
|
| Change in plan assets |
|
|
|
|
|
|
|
|
|
| Fair value of plan assets at beginning of the period | 599 |
|
| 592 |
|
| — |
|
| 7 |
|
| — |
|
| Interest income on plan assets | 22 |
|
| 22 |
|
| — |
|
| — |
|
| — |
|
| Return on plan assets greater/(less) than discount rate | 17 |
|
| 15 |
|
| — |
|
| 2 |
|
| — |
|
| Employer contribution | (44 | ) |
| (44 | ) |
| — |
|
| — |
|
| — |
|
| Plan participants’ contribution | 12 |
|
| 12 |
|
| — |
|
| — |
|
| — |
|
| Benefits paid | (61 | ) |
| (59 | ) |
| — |
|
| (2 | ) |
| — |
|
| Foreign currency exchange rate differences and other movements | 1 |
|
| — |
|
| — |
|
| 1 |
|
| — |
|
| Fair value of plan assets at end of the period | 546 |
|
| 538 |
|
| — |
|
| 8 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Present value of the wholly or partly funded obligation | (757 | ) |
| (689 | ) |
| — |
|
| (68 | ) |
| — |
|
| Fair value of plan assets | 546 |
|
| 538 |
|
| — |
|
| 8 |
|
| — |
|
| Net present value of the wholly or partly funded obligation | (211 | ) |
| (151 | ) |
| — |
|
| (60 | ) |
| — |
|
| Present value of the unfunded obligation | (3,929 | ) |
| (2,580 | ) |
| (679 | ) |
| (511 | ) |
| (159 | ) |
| Net amount recognized | (4,140 | ) |
| (2,731 | ) |
| (679 | ) |
| (571 | ) |
| (159 | ) |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The following tables detail the components of net periodic other post-employment cost: |
| | | | | | | | | | | | | | |
| | Year ended December 31, 2018 |
| Components of net periodic OPEB cost (benefit) | Total |
| United States |
| Canada |
| Europe |
| Others |
| Current service cost | 85 |
|
| 49 |
|
| 10 |
|
| 25 |
|
| 1 |
|
| Past service cost - Plan amendments | (13 | ) |
| (10 | ) |
| (1 | ) |
| (2 | ) |
| — |
|
| Past service cost - Curtailments | (2 | ) |
| — |
|
| — |
|
| (2 | ) |
| — |
|
| Net interest cost/(income) on net DB liability/(asset) | 138 |
|
| 103 |
|
| 21 |
|
| 12 |
|
| 2 |
|
| Actuarial (gains)/losses recognized during the year | 7 |
|
| — |
|
| — |
|
| 7 |
|
| — |
|
| Total | 215 |
|
| 142 |
|
| 30 |
|
| 40 |
|
| 3 |
|
| | | | | | | | | | | | | Year ended December 31, 2021 |
| | Year ended December 31, 2017 | |
| Components of net periodic OPEB cost (benefit) | Total | | United States | | Canada | | Europe | | Others | |
| Components of net periodic OPEB cost (income) | | Components of net periodic OPEB cost (income) | Total | | United States | | Canada | | Europe | | Others |
| Current service cost | 100 |
| | 58 |
| | 9 |
| | 26 |
| | 7 |
| Current service cost | 9 | | | — | | | (1) | | | 7 | | | 3 | |
| Past service cost - Plan amendments | 4 |
| | — |
| | 1 |
| | 2 |
| | 1 |
| Past service cost - Plan amendments | (57) | | | — | | | 1 | | | (58) | | | — | |
| Net interest cost/(income) on net DB liability/(asset) | 204 |
| | 159 |
| | 23 |
| | 11 |
| | 11 |
| |
| Actuarial (gains)/losses recognized during the year | 2 |
| | — |
| | — |
| | 2 |
| | — |
| |
| Past service cost - Curtailments | | Past service cost - Curtailments | (7) | | | — | | | — | | | (7) | | | — | |
| Net interest cost (income) on net DB liability (asset) | | Net interest cost (income) on net DB liability (asset) | 25 | | | 1 | | | 18 | | | 2 | | | 4 | |
| Actuarial gain recognized during the year | | Actuarial gain recognized during the year | (14) | | | — | | | (1) | | | (13) | | | — | |
| Total | 310 |
| | 217 |
| | 33 |
| | 41 |
| | 19 |
| Total | (44) | | | 1 | | | 17 | | | (69) | | | 7 | |
|
| | | | | | | | | | | | | | |
| | Year ended December 31, 2016 |
| Components of net periodic OPEB cost (benefit) | Total | | United States | | Canada | | Europe | | Others |
| Current service cost | 100 |
| | 59 |
| | 7 |
| | 27 |
| | 7 |
|
| Past service cost - Plan amendments | (851 | ) | | (844 | ) | | (3 | ) | | (4 | ) | | — |
|
| Net interest cost/(income) on net DB liability/(asset) | 223 |
| | 177 |
| | 25 |
| | 12 |
| | 9 |
|
| Actuarial (gains)/losses recognized during the year | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
| Total | (527 | ) | | (608 | ) | | 29 |
| | 36 |
| | 16 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2020 |
| Components of net periodic OPEB cost (income) | Total | | United States | | Canada | | Europe | | Others |
| Current service cost | 85 | | | 44 | | | 10 | | | 27 | | | 4 | |
| Past service cost - Plan amendments | (1) | | | — | | | (1) | | | — | | | — | |
| Past service cost - Curtailments | 3 | | | 3 | | | — | | | — | | | — | |
| Net interest cost (income) on net DB liability (asset) | 110 | | | 79 | | | 19 | | | 7 | | | 5 | |
| Actuarial losses recognized during the year | 8 | | | — | | | — | | | 8 | | | — | |
| Total | 205 | | | 126 | | | 28 | | | 42 | | | 9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2019 |
| Components of net periodic OPEB cost (income) | Total | | United States | | Canada | | Europe | | Others |
| Current service cost | 80 | | | 40 | | | 9 | | | 28 | | | 3 | |
| | | | | | | | | |
| | | | | | | | | |
| Net interest cost (income) on net DB liability (asset) | 143 | | | 104 | | | 22 | | | 11 | | | 6 | |
| Actuarial losses recognized during the year | 8 | | | — | | | — | | | 8 | | | — | |
| Total | 231 | | | 144 | | | 31 | | | 47 | | | 9 | |
The following tables detail where the expense is recognized in the consolidated statements of operations:
| | | | Year ended December 31, | | Year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Net periodic pension cost | 263 |
| | 245 |
| | 134 |
| Net periodic pension cost | 191 | | | 225 | | | 204 | |
| Net periodic OPEB cost | 215 |
| | 310 |
| | (527 | ) | Net periodic OPEB cost | (44) | | | 205 | | | 231 | |
| Total | 478 |
| | 555 |
| | (393 | ) | Total | 147 | | | 430 | | | 435 | |
| | | | | | | | | |
| Cost of sales | 212 |
| | 220 |
| | (725 | ) | Cost of sales | 72 | | | 189 | | | 142 | |
| Selling, general and administrative expenses | 34 |
| | 23 |
| | — |
| Selling, general and administrative expenses | 9 | | | 34 | | | 30 | |
| Financing costs - net | 232 |
| | 312 |
| | 332 |
| Financing costs - net | 66 | | | 207 | | | 263 | |
| Total | 478 |
| | 555 |
| | (393 | ) | Total | 147 | | | 430 | | | 435 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 333 Consolidated financial statements |
The weighted-average asset allocations for the funded defined benefit plans by asset category were as follows:
| | | | December 31, 2018 | | | December 31, 2021 |
| | United States | | Canada | | Brazil | | Europe | | | | Canada | | Brazil | | Europe | |
| Equity Securities | 35 | % | | 42 | % | | — |
| | 3 | % | | Equity Securities | | 35 | % | | 6 | % | | 1 | % | |
| - Asset classes that have a quoted market price in an active market | 12 | % | | 33 | % | | — |
| | 3 | % | | - Asset classes that have a quoted market price in an active market | | 27 | % | | 3 | % | | 1 | % | |
| - Asset classes that do not have a quoted market price in an active market | 23 | % | | 9 | % | | — |
| | — |
| | - Asset classes that do not have a quoted market price in an active market | | 8 | % | | 3 | % | | — | | |
| Fixed Income Securities (including cash) | 46 | % | | 50 | % | | 78 | % | | 72 | % | | Fixed Income Securities (including cash) | | 53 | % | | 87 | % | | 69 | % | |
| - Asset classes that have a quoted market price in an active market | — |
| | 44 | % | | 78 | % | | 67 | % | | - Asset classes that have a quoted market price in an active market | | 49 | % | | 87 | % | | 69 | % | |
| - Asset classes that do not have a quoted market price in an active market | 46 | % | | 6 | % | | — |
| | 5 | % | | - Asset classes that do not have a quoted market price in an active market | | 4 | % | | — | | | — | | |
| Real Estate | 5 | % | | 6 | % | | 1 | % | | — |
| | Real Estate | | 7 | % | | 1 | % | | — | | |
| - Asset classes that have a quoted market price in an active market | — |
| | — |
| | 1 | % | | — |
| | - Asset classes that have a quoted market price in an active market | | — | | | — | | | — | | |
| - Asset classes that do not have a quoted market price in an active market | 5 | % | | 6 | % | | — |
| | — |
| | - Asset classes that do not have a quoted market price in an active market | | 7 | % | | 1 | % | | — | | |
| Other | 14 | % | | 2 | % | | 21 | % | | 25 | % | | Other | | 5 | % | | 6 | % | | 30 | % | |
| - Asset classes that have a quoted market price in an active market | 4 | % | | 2 | % | | 21 | % | | 4 | % | | - Asset classes that have a quoted market price in an active market | | — | | | 6 | % | | 8 | % | |
| - Asset classes that do not have a quoted market price in an active market | 10 | % | | — |
| | — |
| | 21 | % | 1 | - Asset classes that do not have a quoted market price in an active market | | 5 | % | | — | | | 22 | % | '1 |
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | Total | | 100 | % | | 100 | % | | 100 | % | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Canada | | Brazil | | Europe | |
| Equity Securities | | 47 | % | | 6 | % | | 1 | % | |
| - Asset classes that have a quoted market price in an active market | | 39 | % | | 3 | % | | 1 | % | |
| - Asset classes that do not have a quoted market price in an active market | | 8 | % | | 3 | % | | — | | |
| Fixed Income Securities (including cash) | | 46 | % | | 77 | % | | 72 | % | |
| - Asset classes that have a quoted market price in an active market | | 42 | % | | 77 | % | | 72 | % | |
| - Asset classes that do not have a quoted market price in an active market | | 4 | % | | — | | | — | | |
| Real Estate | | 6 | % | | 1 | % | | — | | |
| - Asset classes that have a quoted market price in an active market | | — | | | 1 | % | | — | | |
| - Asset classes that do not have a quoted market price in an active market | | 6 | % | | — | | | — | | |
| Other | | 1 | % | | 16 | % | | 27 | % | |
| - Asset classes that have a quoted market price in an active market | | — | | | 16 | % | | 5 | % | |
| - Asset classes that do not have a quoted market price in an active market | | 1 | % | | — | | | 22 | % | '1 |
| Total | | 100 | % | | 100 | % | | 100 | % | |
1.The percentage consists primarily of assets from insurance contracts in Belgium.
|
| | | | | | | | | | | | | | |
| | December 31, 2017 |
| | United States | | Canada | | Brazil | | Europe | | Others |
| Equity Securities | 53 | % | | 56 | % | | — |
| | 3 | % | | 41 | % |
| - Asset classes that have a quoted market price in an active market | 26 | % | | 47 | % | | — |
| | 3 | % | | 41 | % |
| - Asset classes that do not have a quoted market price in an active market | 27 | % | | 9 | % | | — |
| | — |
| | — |
|
| Fixed Income Securities (including cash) | 34 | % | | 42 | % | | 97 | % | | 71 | % | | 49 | % |
| - Asset classes that have a quoted market price in an active market | 4 | % | | 33 | % | | 97 | % | | 67 | % | | 49 | % |
| - Asset classes that do not have a quoted market price in an active market | 30 | % | | 9 | % | | — |
| | 4 | % | | — |
|
| Real Estate | — |
| | 2 | % | | 1 | % | | — |
| | 2 | % |
| - Asset classes that have a quoted market price in an active market | — |
| | — |
| | 1 | % | | — |
| | 2 | % |
| - Asset classes that do not have a quoted market price in an active market | — |
| | 2 | % | | — |
| | — |
| | — |
|
| Other | 13 | % | | — |
| | 2 | % | | 26 | % | | 8 | % |
| - Asset classes that have a quoted market price in an active market | 4 | % | | — |
| | 2 | % | | 3 | % | | 8 | % |
| - Asset classes that do not have a quoted market price in an active market | 9 | % | | — |
| | — |
| | 23 | % | 1 | — |
|
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| |
1. | The percentage consists primarily of assets from insurance contracts in Belgium. |
These assets do not include direct investments in ArcelorMittal stock of approximately 1, but not in property or other assets occupied or used by ArcelorMittal. These assetsArcelorMittal bonds. They may also include ArcelorMittal shares or bonds held by mutual fund investments. The invested assets produced an actual loss of 82 in 2018 and a return of 799150 and 659 in 2017.2021 and 2020, respectively.
The Finance and Retirement Committees of the Boards of Directors for the respective operating subsidiaries have general supervisory authority over the respective trust funds. These committees have establishedusually establish, monitor and review asset allocation targets for the period as described below.respective funds. Asset managers are permitted some flexibility to vary the asset allocation from the long-term investmeinvestment strategy within agreed upon control ranges. The established targets observed as of December 31, 2021 are as described below:
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
nt strategy within control ranges agreed upon. |
| | | | | | | | | | | | |
| | December 31, 2018 | |
| | United States | | Canada | | Brazil | | Europe | |
| Equity Securities | 38 | % | | 49 | % | | — |
| | 3 | % | |
| Fixed Income Securities (including cash) | 45 | % | | 44 | % | | 78 | % | | 72 | % | |
| Real Estate | 3 | % | | 6 | % | | 1 | % | | — |
| |
| Other | 14 | % | | 1 | % | | 21 | % | | 25 | % | 1 |
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | |
| | |
1.Consolidated financial statements 334 |
The percentage consists primarily(millions of assets from insurance contracts in Belgium.U.S. dollar, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Canada | | Brazil | | Europe | |
| Equity Securities | | 35 | % | | 6 | % | | 2 | % | |
| Fixed Income Securities (including cash) | | 55 | % | | 87 | % | | 68 | % | |
| Real Estate | | 5 | % | | 1 | % | | — | | |
| Other | | 5 | % | | 6 | % | | 30 | % | '1 |
| Total | | 100 | % | | 100 | % | | 100 | % | |
1.The percentage consists primarily of assets from insurance contracts in Belgium.
Assumptions used to determine benefit obligations at December 31,
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Plans | | Other Post-employment Benefits |
| | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Discount rate | | | | | | | | | | | |
| Range | 1.00% - 11.00% | | 0.50% - 10.00% | | 1.00% - 10.50% | | 1.00% - 7.95% | | 0.50% - 6.20% | | 1.00% - 7.25% |
| Weighted average | 2.75% | | 2.13% | | 2.90% | | 2.65% | | 1.84% | | 3.06% |
| Rate of compensation increase | | | | | | | | | | | |
| Range | 2.00% - 10.00% | | 1.72% - 10.00% | | 1.90% - 10.00% | | 2.00% - 4.80% | | 1.30% - 4.80% | | 1.60% - 4.80% |
| Weighted average | 2.87% | | 2.71% | | 2.80% | | 3.14% | | 2.85% | | 2.95% |
|
| | | | | | | | | | | |
| | Pension Plans | | Other Post-employment Benefits |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 |
| Discount rate | | | | | | | | | | | |
| Range | 1.75% - 16.00% | | 1.50% - 15.00% | | 1.60% - 16.00% | | 1.75% - 9.50% | | 1.30% - 7.65% | | 0.90% - 7.65% |
| Weighted average | 3.80% | | 3.45% | | 3.92% | | 3.98% | | 3.60% | | 4.19% |
| Rate of compensation increase | | | | | | | | | | | |
| Range | 2.00% - 10.00% | | 1.80% - 9.00% | | 1.80% - 10.00% | | 2.00% - 4.80% | | 2.00% - 4.50% | | 2.00% - 32.00% |
| Weighted average | 2.85% | | 2.81% | | 3.11% | | 3.24% | | 3.32% | | 3.38% |
|
| | | | | |
| | Other Post-employment Benefits |
| | 2018 | | 2017 | | 2016 |
| Healthcare cost trend rate assumed | | | | | |
| Range | 1.80% - 8.00% | | 1.80% - 5.00% | | 1.80% - 5.60% |
| Weighted average | 4.46% | | 4.48% | | 4.51% |
| | | | | | | | | | | | | | | | | |
| | Other Post-employment Benefits |
| | 2021 | | 2020 | | 2019 |
| Healthcare cost trend rate assumed | | | | | |
| Range | 1.30% - 4.50% | | 1.40% - 4.50% | | 1.80% - 5.00% |
| Weighted average | 3.95% | | 3.94% | | 4.42% |
Cash contributions and maturity profile of the plans
In 2019,2022, the Company expects its cash contributions to amount to 194157 for pension plans, 23165 for other post-employment benefits plans 116and 148 for defined contribution plansplans. In 2021 and 67 for United States multi-employer plans. Cash2020, cash contributions to defined contributioncontributions plans were 78 and 88, respectively.
In 2020, cash contributions to United States multi-employer plans sponsored by the Company were respectively 123 and 65, in 2018.until December 9, 2020, date of sale of ArcelorMittal USA (see note 2.3.1).
At December 31, 2018,2021 and December 31, 2020, the weighted average duration of the liabilities related to the pension and other post-employment benefits plans were 1213 years (2017: 12 years)and 13 years and 14 years (2017: 14 years),and 13 years, respectively.
Risks associated with defined benefit plans
Through its defined benefit pension plans and OPEB plans, ArcelorMittal is exposed to a number of risks, the most significant of which are detailed below:
Changes in bond yields
A decreaseAn increase in corporate bond yields will increasedecrease plan liabilities, although thishowever it will be partially offset by an increase indecrease simultaneously the value of the plans’ bond holdings.
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. In most countries with funded plans, plan assets hold a significant portion of equities, which are expected to outperform corporate bonds in the long-term but contribute to volatility and risk in the short-term. As the plans mature, ArcelorMittal intends to reduce the level of investment risk by investing more in assets that better
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
match the liabilities. However, ArcelorMittal believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of a long-term strategy to manage the plans efficiently.
| | |
| 335 Consolidated financial statements |
Life expectancy
Most plans provide benefits for the life of the covered members, so increases in life expectancy will result in an increase in the plans’ benefit obligations.
Assumptions regarding future mortality rates have been set considering published statistics and, where possible, ArcelorMittal’s own experience. In 2017, ArcelorMittal USA updated the company specific tables it uses to value most of its postretirement liabilities. These tables were projected forward using the most recent projection scales issued by the Society of Actuaries. Use of these new mortality assumptions resulted in reducing the 2017 pension and OPEB liabilities by 95 and 51, respectively.
The current longevitieslongevity at retirement underlying the values of the defined benefit obligation werewas approximately 22.23 years.
Healthcare cost trend rate
The majority of the OPEB plans’ benefit obligations are linked to the change in the cost of various health care components. Future healthcare cost will vary based on several factors including price inflation, utilization rate, technology advances, cost shifting and cost containing mechanisms. A higher healthcare cost trend would lead to higher OPEB plan benefit obligations.
In 2017, the Company changed its provider of insured coverage of Medicare eligible participants in the United States. This resulted in significantly lowering the premiums and resulted in reducing the OPEB defined benefit obligations by 1,061. In 2017, the healthcare cost trend rate assumption in the United States was adjusted, which resulted in increasing the OPEB defined benefit obligations by 117.
Sensitivity analysis
The following information illustrates the sensitivity to a change of the significant actuarial assumptions related to ArcelorMittal’s pension plans (as of December 31, 2018,2021, the defined benefit obligation for pension plans was 9,872)6,739): |
| | | |
| | Effect on 2019 Pre-Tax Pension Expense (sum of service cost and interest cost) | | Effect on December 31, 2018 DBO |
| Change in assumption | | | |
| 100 basis points decrease in discount rate | (42) | | 1,204 |
| 100 basis points increase in discount rate | 33 | | (987) |
| 100 basis points decrease in rate of compensation | (14) | | (173) |
| 100 basis points increase in rate of compensation | 15 | | 177 |
| 1 year increase of the expected life of the beneficiaries | 11 | | 250 |
| | | | | | | | | | | |
| Effect on 2022 Pre-Tax Pension Expense (sum of service cost and interest cost) | | Effect on December 31, 2021 DBO |
| Change in assumption | | | |
| 100 basis points decrease in discount rate | (27) | | | 955 | |
| 100 basis points increase in discount rate | 21 | | | (764) | |
| 100 basis points decrease in rate of compensation | (14) | | | (182) | |
| 100 basis points increase in rate of compensation | 15 | | | 182 | |
| 1 year increase of the expected life of the beneficiaries | 6 | | | 192 | |
The following table illustrates the sensitivity to a change of the significant actuarial assumptions related to ArcelorMittal’s OPEB plans (as of December 31,
20182021 the defined benefit obligation for post-employment benefit plans was
4,098)1,190):
|
| | | |
| | Effect on 2019 Pre-Tax OPEB Expense (sum of service cost and interest cost) | | Effect on December 31, 2018 DBO |
| Change in assumption | | | |
| 100 basis points decrease in discount rate | — | | 610 |
| 100 basis points increase in discount rate | 2 | | (487) |
| 100 basis points decrease in healthcare cost trend rate | (27) | | (407) |
| 100 basis points increase in healthcare cost trend rate | 39 | | 506 |
| 1 year increase of the expected life of the beneficiaries | 9 | | 142 |
| | | | | | | | | | | |
| Effect on 2022 Pre-Tax OPEB Expense (sum of service cost and interest cost) | | Effect on December 31, 2021 DBO |
| Change in assumption | | | |
| 100 basis points decrease in discount rate | (1) | | | 179 | |
| 100 basis points increase in discount rate | 1 | | | (142) | |
| 100 basis points decrease in healthcare cost trend rate | (5) | | | (83) | |
| 100 basis points increase in healthcare cost trend rate | 6 | | | 104 | |
| 1 year increase of the expected life of the beneficiaries | 1 | | | 28 | |
The above sensitivities reflect the effect of changing one assumption at a time. Actual economic factors and conditions often affect multiple assumptions simultaneously, and the effects of changes in key assumptions are not necessarily linear.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Multi-employer plans
ArcelorMittal participates in one material multi-employer pension plan in the United States. Under multi-employer plans, several participating employers make contributions into a pension plan. The assets of the plan are not limited to the participants of a particular employer. If an employer is unable to make required contributions to the plan, any unfunded obligations may be borne by the remaining employers. Additionally, if an employer withdraws from the plan, it may be required to pay an amount based on the underfunded status of the plan. As of December 31, 2017, which is the latest period for which information is available, the multi-employer pension plan had a total actuarial liability of 5,272 and assets with market value of 4,758 for a funded ratio of about 90%. ArcelorMittal represented approximately 30% of total contributions made to the plan in the past three years.
7.38.3 Share-based payments
ArcelorMittal issues equity-settled share-based payments to certain employees, including stock options, RSUs and PSUs. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant.grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a graded vesting basis over the vesting period, based on the Company’s estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. For stock options, RSUs and PSUs, fair value is measured using the Black-Scholes-Mertonpricing model and the market value of the shares at the date of the grant after deduction of dividend payments during the vesting period, respectively. Where the fair value calculation requires modeling of the Company’s
performance against other market index, fair value is measured using the Monte Carlo pricing model to estimate the forecasted target performance goal for the company and its peer companies. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. In addition, the expected annualized volatility has been set by reference to the implied volatility of options available on ArcelorMittal shares in the open market, as well as, historical patterns of volatility. For the RSUs and PSUs, the fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line method over the vesting period and adjusted for the effect of non market-based vesting conditions.
On May 22, 2017, ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into one share without nominal value. As a result of this reverse stock split, the outstanding number of stock options, PSUs and RSUs per employee has been recast for prior periods. | | |
| Consolidated financial statements 336 |
| (millions of U.S. dollar, except share and per share data) |
Stock Option Plans
Prior to the May 2011 annual general shareholders’ meeting of shareholders ("AGM") adoption of the ArcelorMittal Equity Incentive Plan described below, ArcelorMittal’s equity-based incentive plan took the form of a stock option plan known as the Global Stock Option Plan.
Under the terms of the ArcelorMittal Global Stock Option Plan 2009-2018 (which replaced the ArcelorMittal Shares plan that expired in 2009), ArcelorMittal may grant options to purchase common shares to senior management of ArcelorMittal and its associates for up to 100,000,000 (33,333,333 shares after reverse stock split) shares of33,333,333 common shares. The exercise price of each option equals not less than the fair market value of ArcelorMittal shares on the grant date, with a maximum term of 10ten years. Options are granted at the discretion of ArcelorMittal’s Appointments, Remuneration and Corporate Governance ("ARCG") Committee (formerly ARCGS Committee), or its delegate. The options vest either ratably upon each of the first three anniversaries of the grant date, or, in total, upon the death, disability or retirement of the participant.
|
| | | | |
Date of grantGrant date | Exercise prices
(per |
| August 2010 | $91.98 |
August 2009 | 109.14 |
No options were granted during the years ended December 31, 2018, 2017,2021, 2020, and 2016.
2019. The compensation expense recognized for stock option plans was nil for each of the years ended December 31, 2018, 20172021, 2020 and 2016.2019.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Option activity with respect to ArcelorMittal Shares and ArcelorMittal Global Stock Option Plan 2009-2018 is summarized below as of and for each of the years ended December 31, 2018, 20172021, 2020 and 2016: |
| | | | | | | |
| Number of Options |
| Range of Exercise Prices
(per option) |
| Weighted Average Exercise Price
(per option) |
|
| Outstanding, December 31, 2015 | 5,730,800 |
|
| 63.42 – 235.32 |
| 148.06 | Outstanding, |
| Expired | (1,048,266 | ) |
| 91.98 – 235.32 |
| 125.17 |
|
| Outstanding, December 31, 2016 | 4,682,534 |
|
| 63.42 – 235.32 |
| 153.19 | Outstanding, |
| Expired | (1,397,659 | ) |
| 63.42 – 235.32 |
| 170.40 |
|
| Outstanding, December 31, 2017 | 3,284,875 |
|
| 63.42 – 235.32 |
| 145.86 | Outstanding, |
| Expired | (1,295,500 | ) |
| 63.42 – 235.32 |
| 215.77 |
|
| Outstanding, December 31, 2018 | 1,989,375 |
|
| 91.98 – 109.14 |
| 100.33 | Outstanding, |
|
|
|
|
|
|
|
|
| Exercisable, December 31, 2016 | 4,682,534 |
|
| 63.42 – 235.32 |
| 153.19 | Exercisable, |
| Exercisable, December 31, 2017 | 3,284,875 |
|
| 63.42 – 235.32 |
| 145.86 | Exercisable, |
| Exercisable, December 31, 2018 | 1,989,375 |
|
| 91.98 – 109.14 |
| 100.33 | Exercisable, |
| | | | | | | | | | | | | | | | | |
| Number of Options | | Range of Exercise Prices
(per option) | | Weighted Average Exercise Price
(per option) |
| | | | | |
| | | | | |
| Outstanding, December 31, 2018 | 1,989,375 | | | 91.98 – 109.14 | | 100.33 | |
| Expired | (1,084,985) | | | 91.98 – 109.14 | | 107.29 | |
| Outstanding, December 31, 2019 | 904,390 | | | 91.98 | | 91.98 | |
| Expired | (904,390) | | | 91.98 | | 91.98 | |
| Outstanding, December 31, 2020 | — | | | — | | | — | |
| | | | | |
| | | | | |
| Exercisable, December 31, 2019 | 904,390 | | | 91.98 | | 91.98 | |
| Exercisable, December 31, 2020 | — | | | — | | | — | |
| Exercisable, December 31, 2021 | — | | | — | | | — | |
The following table summarizes information about totalThere were no stock options of the Company outstanding as of December 31, 2018: |
| | | | | | | | | | |
| Options Outstanding |
Exercise Prices
(per option) |
| Number of
options |
| Weighted average contractual life
(in years) |
| Options exercisable (number of options) |
| Maturity |
| $91.98 |
| 1,021,058 |
|
| 1.59 |
| 1,021,058 |
|
| August 3, 2020 |
| 109.14 |
| 968,317 |
|
| 0.59 |
| 968,317 |
|
| August 4, 2019 |
| $91.98 - $109.14 |
| 1,989,375 |
|
| 1.11 |
| 1,989,375 |
|
|
|
Long-Term Incentives: Equity-Based Incentives (Share Unit Plans)
ArcelorMittal Equity Incentive Plan
On May 10, 2011, the annual general meeting of shareholdersAGM approved the ArcelorMittal Equity Incentive Plan, a new equity-based incentive plan that replaced the Global Stock Option Plan. The ArcelorMittal Equity Incentive Plan is intended to align the interests of the Company’s shareholders and eligible employees by allowing them to participate in the success of the Company. The ArcelorMittal Equity Incentive Plan provides for the grant of RSUs and PSUs to eligible Company employees (including the Executive Officers) and is designed to incentivize employees, improve the Company’s long-term performance and retain key employees. On May 8, 2013, the annual general meeting of shareholders approved the GMB PSU Plan, which provides for the grant of PSUs to GMB members (and is now applicable to the CEO Office). Until the introduction of the GMB PSU Plan in 2013, GMB members were eligible to receive RSUs and PSUs under the ArcelorMittal Equity Incentive Plan. In 2016, a special grant was approved in order to align the grant with the Action 2020 plan put in place by ArcelorMittal.
The maximum number of PSUs (and RSUs previously) available for grant during any given year is subject to the prior approval of the Company’s shareholders at the annual general meeting. The annual shareholders’ meeting on May 4, 2016 approved the maximum to be granted until the next annual shareholders’ meeting. For the period from the May 2016 annual general shareholders’ meeting to the May 2017 annual general shareholders’ meeting, a maximum of 30,000,000 PSUs (10,000,000 PSU's after the reverse stock split) may be allocated to eligible employees under the ArcelorMittal Equity Incentive Plan and the GMB PSU Plan combined. The 2017 Cap for the number of PSUs that may be allocated to the CEO Office and other retention based grants below the CEO Office level was approved at the annual shareholders' meeting on May 10, 2017 at a maximum of 3,000,000 shares. The 2018 Cap for the number of PSUs that may be allocated to the CEO Office and other retention based grants below the CEO Office level, was approved at the annual shareholders’ meeting on May 9, 2018 at a maximum of 1,500,000 shares.
ArcelorMittal Equity Incentive Plan
RSUs granted under the ArcelorMittal Equity Incentive Plan are designed to provide a retention incentive to eligible employees. RSUs are subject to “cliff vesting” after three years, with 100% of the grant vesting on the third anniversary of the grant contingent upon the continued active employment of the eligible employee within the Company.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The grant of PSUs under the ArcelorMittal Equity Incentive Plan aims to serve as an effective performance-enhancing scheme based on the employee’s contribution to the eligible achievement of the Company’s strategy. Awards in connection with PSUs are subject to the fulfillment of cumulative performance criteria (such as return on capital employed ("ROCE"), total shareholders return ("TSR"), earnings per share ("EPS"), environmental, social and governance ("ESG") and gap to competition) over a three yearthree-year period from the date of the PSU grant. The employees eligible to receive PSUs are a sub-set of the group of employees eligible to receive RSUs. The target group for PSU grants initially included the Chief Executive Officer and the other GMB members. However, from 2013 onwards, the Chief Executive Officer and other GMB members (and in 2016, the CEO Office) received PSU grants only
RSUs granted under the GMB PSU Plan instead of the ArcelorMittal Equity Incentive Plan.Plan are designed to provide a retention incentive to eligible employees. RSUs are subject to “cliff vesting” after three years, with 100% of the grant vesting on the third anniversary of the grant contingent upon the continued active employment of the eligible employee within the Company.
The maximum number of PSUs (and RSUs) available for grant during any given year is subject to the prior approval of the Company’s shareholders at the AGM. The 2019, 2020 and 2021 Caps for the number of PSUs/RSUs that may be allocated to the Executive Office and other retention and performance based grants below the Executive Office level, were approved at the AGMs on May 7, 2019, June 13, 2020 and June 8, 2021, respectively, at a maximum of 2,500,000 shares, 4,250,000 shares and 3,500,000 shares, respectively.
In 2020, 316,684 RSUs were granted as a special grant with a one year vesting period to compensate salary reduction in 2020 contingent upon the continued active employment of the eligible employee within the Company until the vesting date i.e. December 14, 2021.
| | |
| 337 Consolidated financial statements |
Conditions of the 20182021 grant were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Executive office | | Executive Officers |
| 2021 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions |
| | Threshold | Target | | | Target | Stretch |
| TSR vs. peer group (50%) / EPS vs. peer group (20%)
| 100% median | ≥120% median | | TSR vs. peer group (40%) | 100% weighted average | ≥120% weighted average |
| Vesting percentage | 50% | 100% | | Vesting percentage | 100% | 150% |
| | | | | | Gap to competition (40%) | 100% of target | 120% of target |
| ESG (30%) | | 100% of target | | Vesting percentage | 100% | 150% |
| | | | | | ESG | (20%) | 100% of target | 120% of target |
| Vesting percentage | | 100% | | | | 100% | 150% |
| | | | | l | RSUs with a three year vesting period |
| l | RSUs with a two year vesting period |
|
| | | | | | | | | | |
| | | CEO Office | | Executive Officers and other qualifying employees |
| 2018 Grant | l | PSUs with a three year performance period |
| PSUs with a three year performance period
|
|
|
|
|
| l | Value at grant 100% of base salary for the CEO and the President and CFO |
|
|
| l | Vesting conditions: | | Vesting conditions |
| | | Threshold | Target | | |
| Target |
| | TSR/EPS vs. peer group
| 100% median | ≥120% median | | ROCE |
| 100% target
100% vesting |
| | TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% outperformance | | Gap to competition (where applicable) |
| 100% target
100% vesting |
| | Vesting percentage
| 50% | 100% | | |
Awards made in previous financial years which have not yet reached the end of the vesting period
The Company's Long-TermArcelorMittal's Equity Incentive Plan for senior management including Executive Officers follows the Company's strategy.
In 2014 and 2015, the Company's goal was to achieve ROCE and Mining volume for the Mining segment and therefore the target was based on these performance measures.
In 2016, in order to ensure achievement of the Action 2020 plan, ArcelorMittal made a special grant (“Special Grant”) to qualifying employees (including the Executive Officers), instead of the standard grant. The value of the Special Grant at grant date is
based generally on a specified percentage of the base salary depending on the position of the employee at grant date. The vesting is subject to continued active employment within the ArcelorMittal group and to yearly performance of ROCE targets and other strategic objectives within the business units.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Executive office | | |
| 2016 Special Grant | l | PSUs with a five year performance period, 50% vesting after three year performance period and 50% after additional two year performance period | | |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | | |
| l | Value at grant: 150% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | | | |
| Threshold | Target | | | | | |
| TSR/EPS vs. peer group | 100% median | ≥120% median | | | | |
| TSR vs. S&P 500 | Performance equal to Index | ≥Performance equal to Index + 2% p.a. outperformance | | | | |
| Vesting percentage | 50% | 100% | | | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 338 |
| (millions of U.S. dollar, except share and per share data) |
The plans in 2017, 2016 and 2015 are summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive office | Executive officers |
| 2018 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period | |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | | |
| l | Vesting conditions: | l | Vesting conditions | |
| | Threshold | Target | | | |
| TSR/EPS vs. peer group
| 100% median | ≥120% median | | ROCE | 100% target 100% vesting |
| TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% p.a. outperformance | | Gap to competition (where applicable) | 100% target 100% vesting |
| Vesting percentage | 50% | 100% | | | |
| | | | | | | | | | |
| Executive office | Executive officers |
| 2019 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | |
| l | Vesting conditions: | l | Vesting conditions: | |
| | Threshold | Target | | |
| TSR/EPS vs. peer group | 100% median | ≥120% median | | ROCE | 100% target 100% vesting |
| TSR vs. S&P 500 | Performance equal to Index | ≥Performance equal to Index + 2% p.a. outperformance | | Gap to competition (where applicable) | 100% target 100% vesting |
| Vesting percentage | 50% | 100% | |
| | | | | | | | | | |
| Executive office | Executive officers |
| 2020 Grant | l | PSUs with a three year performance period | l | PSUs with a three year performance period |
| l | Value at grant 100% of base salary for the Executive Chairman and the CEO | | |
| l | Vesting conditions: | l | Vesting conditions: |
| Threshold | Target | | | Threshold | Target |
| TSR/EPS vs. peer group | 100% median | ≥120% median | | TSR/EPS vs. peer group | 100% median | ≥120% median |
| | | | | Vesting percentage | 50% | 100% |
| TSR vs. S&P 500 | Performance equal to Index | ≥Performance equal to Index + 2% p.a. outperformance | | Gap to competition (where applicable) | | 100% target 100% vesting |
| Vesting percentage | 50% | 100% | | Vesting percentage | 0% | 100% |
| | | | | | | | | |
| | | | l | RSUs with a three year vesting period |
| | | | | | | | | |
| | | | | l | RSUs with a one year vesting period |
|
| | | | | | | | | | | | |
| | | CEO Office | | Other Executive Officers |
| 2015 Grant | l | PSUs with a three-year performance period | l | RSUs with a three-year vesting period (2015 grant vested in December 2018) |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | PSUs with a three-year performance period |
| l | Value at grant: 100% of base salary for the CEO and 80% for the President and CFO | l | Performance target: mainly ROCE and mining volume plan for the Mining segment |
| | | l | One PSU can give right to 0 up to 1.5 share |
| l | Vesting conditions: | l | Vesting conditions: |
| | | Threshold | Target | Stretch | | Performance | Threshold | Target | Stretch |
| | TSR/EPS vs. peer group | 80% median | 100% median | ≥120% median | | Performance | 80% | 100% | ≥120% |
| | TSR vs. S&P 500 | Performance equal to 80% of Index
| Performance equal to Index | ≥Performance equal to Index + 2% outperformance | | Vesting | 50% | 100% | 150% |
| | Vesting percentage
| 50% | 100% | 150% | | |
| 2016 Special Grant | l | PSUs with a five-year performance period, 50% vesting after three-year performance period and 50% after additional two-year performance period | l | PSUs with a five-year performance period, 50% vesting after three-year performance period and 50% after additional two-year performance period |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | Performance criteria: ROCE and Gap to competition in some areas
one target grant: a share will vest if performance is met at target
one overperformance grant: a share will vest if performance exceeds 120% |
| l | Value at grant: 150% of base salary for the CEO and the President and CFO | l | Vesting conditions: |
| l | Vesting conditions: | | |
| | | | Threshold | Target | | Performance | | 100% | ≥120% |
| | TSR/EPS vs. peer group | | 100% median | ≥120% median | | Target award vesting | 100% | 100% |
| | TSR vs. S&P 500 | | Performance equal to Index
| ≥Performance equal to Index + 2% outperformance | | Overperformance award (=20% of target award) | - | 100% |
| | Vesting percentage
| | 50% | 100% | | |
| 2017 Grant | l | PSUs with a three-year performance period | | l | PSUs with a three-year performance period | |
| l | Performance criteria: 50% TSR (½ vs. S&P 500 and ½ vs. peer group) and 50% EPS vs. peer group | l | Performance criteria: TSR and Gap to competition in some areas |
| l | Value at grant: 100% of base salary for the CEO and the President and CFO | | | |
| l | Vesting conditions: | | l | Vesting conditions: | |
| | | Threshold | Target | | | | Threshold | Target |
| | TSR/EPS vs. peer group
| 100% median | ≥120% median | | TSR vs. peer group
| 100% median 50% vesting | ≥120% median 100% vesting |
| | TSR vs. S&P 500
| Performance equal to Index
| ≥Performance equal to Index + 2% outperformance | | Gap to competition (where applicable) | - | 100% target
100% vesting |
| | Vesting percentage
| 50% | 100% | | | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 339 Consolidated financial statements |
The following table summarizes the Company’s share unit plans outstanding as of December 31, 2018: |
| | | | | | | | | | | | | | | | | | | | | |
| At Grant date |
| Number of shares issued as of December 31, 2018 |
| Grant date |
| Type of plan |
| Number of shares |
| Number of beneficiaries |
| Maturity |
| Fair value
per share |
| Shares outstanding |
| Shares exited |
| Shares forfeited |
| December 20, 2018 |
| PSU |
| 1,358,750 |
|
| 524 |
|
| January 1, 2022 |
| 21.31 |
| 1,358,750 |
|
| — |
|
| — |
|
| December 20, 2018 |
| CEO Office |
| 134,861 |
|
| 2 |
|
| January 1, 2022 |
| 16.58 |
| 134,861 |
|
| — |
|
| — |
|
| December 20, 2017 |
| PSU |
| 1,081,447 |
|
| 527 |
|
| January 1, 2021 |
| 18.42 |
| 1,046,816 |
|
| — |
|
| 34,631 |
|
| December 20, 2017 |
| CEO Office |
| 90,084 |
|
| 2 |
|
| January 1, 2021 |
| 22.85 |
| 90,084 |
|
| — |
|
| — |
|
| June 30, 2016 |
| PSU II |
| 3,472,355 |
|
| 554 |
|
| January 1, 2021 |
| 13.17 |
| 3,105,045 |
|
| — |
|
| 367,310 |
|
| June 30, 2016 |
| CEO PSU II |
| 153,268 |
|
| 2 |
|
| January 1, 2022 |
| 16.62 |
| 153,268 |
|
| — |
|
| — |
|
| June 30, 2016 |
| PSU I |
| 3,472,355 |
|
| 554 |
|
| January 1, 2019 |
| 13.74 |
| 3,105,045 |
|
| — |
|
| 367,310 |
|
| June 30, 2016 |
| CEO PSU I |
| 153,268 |
|
| 2 |
|
| January 1, 2020 |
| 10.68 |
| 153,268 |
|
| — |
|
| — |
|
| December 18, 2015 |
| PSU |
| 295,935 |
|
| 322 |
|
| January 1, 2019 |
| 11.49 |
| 223,323 |
|
| — |
|
| 72,612 |
|
| Total |
|
|
| 10,212,323 |
|
|
|
|
|
|
| $10.68 – $22.85 |
| 9,370,460 |
|
| — |
|
| 841,863 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Grant date | | Number of shares issued as of December 31, 2021 |
| Grant date | | Type of plan | | Number of shares | | Number of beneficiaries | | Maturity | | Fair value
per share | | Shares outstanding | | | | Shares forfeited | | Shares exited |
| December 16, 2021 | | RSU | | 729,250 | | | 658 | | | December 16, 2024 | | 32.66 | | | 729,250 | | | | | — | | | — | |
| December 16, 2021 | | PSU | | 575,400 | | | 244 | | | January 1, 2025 | | 28.29 | | | 575,400 | | | | | — | | | — | |
| December 16, 2021 | | Executive Office | | 109,143 | | | 2 | | | January 1, 2025 | | 27.20 | | | 109,143 | | | | | — | | | — | |
| May 7, 2021 | | RSU | | 350,000 | | | 189 | | | May 7, 2023 | | 32.55 | | | 336,500 | | | | | 12,194 | | | 1,306 | |
| December 14, 2020 | | RSU | | 1,074,600 | | | 656 | | | December 14, 2023 | | 21.15 | | | 1,029,200 | | | | | 41,628 | | | 3,772 | |
| | | | | | | | | | | | | | | | | | |
| December 14, 2020 | | PSU | | 714,250 | | | 235 | | | January 1, 2024 | | 19.74 | | | 687,250 | | | | | 27,000 | | | — | |
| December 14, 2020 | | Executive Office | | 148,422 | | | 2 | | | January 1, 2024 | | 18.19 | | | 148,422 | | | | | — | | | — | |
| December 16, 2019 | | PSU | | 1,760,350 | | | 517 | | | January 1, 2023 | | 18.57 | | | 1,381,750 | | | | | 202,850 | | | 175,750 | |
| December 16, 2019 | | Executive Office | | 172,517 | | | 2 | | | January 1, 2023 | | 14.89 | | | 172,517 | | | | | — | | | — | |
| December 20, 2018 | | PSU | | 1,358,750 | | | 524 | | | January 1, 2022 | | 21.31 | | | 943,200 | | | | | 293,300 | | | 122,250 | |
| December 20, 2018 | | Executive Office | | 134,861 | | | 2 | | | January 1, 2022 | | 16.58 | | | 134,861 | | | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| June 30, 2016 | | Executive Office | | 153,268 | | | 2 | | | January 1, 2022 | | 16.62 | | | 153,268 | | | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| Total | | | | 7,280,811 | | | | | | | $14.89 – $32.66 | | 6,400,761 | | | | | 576,972 | | | 303,078 | |
The compensation expense recognized for RSUs and PSUs was 31, 3135, 30 and 13nil for the years ended December 31, 2018, 20172021, 2020 and 2016.2019.
Share unit plan activity is summarized below as of and for each year ended December 31, 2018, 20172021, 2020 and 2016:2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| RSUs | | PSUs |
| Number of shares | | Fair value per share | | Number of shares | | Fair value per share |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Outstanding, December 31, 2018 | — | | | — | | | 9,370,460 | | | 15.34 | |
Granted 1 | — | | | — | | | 2,018,176 | | | 17.96 | |
| Exited | — | | | — | | | (2,677,011) | | | 13.49 | |
| Forfeited | — | | | — | | | (1,239,569) | | | 14.25 | |
| Outstanding, December 31, 2019 | — | | | — | | | 7,472,056 | | | 16.76 | |
| Granted | 1,391,284 | | | 21.15 | | | 862,672 | | | 19.47 | |
| Exited | — | | | — | | | (658,141) | | | 16.86 | |
| Forfeited | — | | | — | | | (526,420) | | | 15.48 | |
| Outstanding, December 31, 2020 | 1,391,284 | | | 21.15 | | | 7,150,167 | | | 17.18 | |
| Granted | 1,079,250 | | | 32.62 | | | 684,543 | | | 28.12 | |
| Exited | (315,699) | | | 21.20 | | | (613,385) | | | 14.04 | |
| Forfeited | (59,885) | | | 23.47 | | | (2,915,514) | | | 15.37 | |
| Outstanding, December 31, 2021 | 2,094,950 | | | 26.99 | | | 4,305,811 | | | 20.58 | |
1.Including 85,309 over-performance shares granted for the targets achievement of the PSU grant December 18, 2015. |
| | | | | | | | | |
| RSUs |
| PSUs |
| Number of shares |
| Fair value per share |
| Number of shares |
| Fair value per share |
| Outstanding, December 31, 2015 | 1,320,654 |
|
| 28.78 |
| 1,370,675 |
|
| 33.32 |
Granted 2 | — |
|
| — |
| 7,252,814 |
|
| 13.46 |
| Exited | (564,679 | ) |
| 38.24 |
| (19,816 | ) |
| 37.11 |
| Forfeited | (105,721 | ) |
| 26.12 |
| (564,179 | ) |
| 37.76 |
| Outstanding, December 31, 2016 | 650,254 |
|
| 21.00 |
| 8,039,494 |
|
| 15.08 |
Granted 2 | — |
|
| — |
| 1,199,338 |
|
| 19.25 |
| Exited | (303,550 | ) |
| 30.69 |
| (204,855 | ) |
| 43.34 |
| Forfeited | (40,699 | ) |
| 20.32 |
| (437,141 | ) |
| 18.33 |
| Outstanding, December 31, 2017 | 306,005 |
|
| 11.49 |
| 8,596,836 |
|
| 14.83 |
Granted 1 | — |
|
| — |
| 1,577,865 |
|
| 21.32 |
| Exited | (288,721 | ) |
| 11.49 |
| (412,893 | ) |
| 28.98 |
| Forfeited | (17,284 | ) |
| 11.49 |
| (391,348 | ) |
| 16.41 |
| Outstanding, December 31, 2018 | — |
|
|
|
| 9,370,460 |
|
| 15.34 |
| |
1. | Including 56,606 over-performance shares granted for the targets achievement of the PSU grant September 17, 2014 and 27,648 of the GMB PSU grant June 30, 2015
|
| |
2. | Including 27,807 over-performance shares granted for the targets achievement of the PSU grant September 27, 2013 in 2017 (1,567 over-performance shares for the PSU grant March 29, 2013 in 2016).
|
NOTE 8:9: PROVISIONS, CONTINGENCIES AND COMMITMENTS
ArcelorMittal recognizes provisions for liabilities and probable losses that have been incurred when it has a present legal or constructive obligation as a result of past events, it is probable that the Company will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a financing cost. Future operating expenses or losses are excluded from recognition as provisions as they do not meet the definition of a liability. Contingent assets and contingent liabilities are excluded from recognition in the consolidated statements of financial position.
Provisions for onerous contracts are recorded in the consolidated statements of operations when it becomes known that the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Assets dedicated to the onerous contracts are tested for impairment before recognizing a separate provision for the onerous contract.
Provisions for restructuring are recognized when and only when a detailed formal plan exists and a valid expectation in those affected by the restructuring has been raised, by starting to implement the plan or announcing its main features.
| | |
| Consolidated financial statements 340 |
| (millions of U.S. dollar, except share and per share data) |
ArcelorMittal records asset retirement obligations (“ARO”) initially at the fair value of the legal or constructive obligation in the period in which it is incurred and capitalizes the ARO by increasing the carrying amount of the related non-current asset. The fair value of the obligation is determined as the discounted value of the expected future cash flows. The liability is accreted to its present value through net financing cost and the capitalized cost is depreciated in accordance with the Company’s depreciation policies for property, plant and equipment. Subsequently, when reliably measurable, ARO is recorded on the consolidated statements of financial position increasing the cost of the asset and the fair value of the related obligation. Foreign exchange gains or losses on AROs denominated in foreign currencies are recorded in the consolidated statements of operations.
ArcelorMittal is subject to changing and increasingly stringent environmental laws and regulations concerning air emissions, water discharges and waste disposal, as well as certain remediation activities that involve the clean-up of soil and groundwater. ArcelorMittal is currently engaged in the investigation and remediation of environmental contamination at a number of its facilities. Most of these are legacy obligations arising from acquisitions.
Environmental costs that relate to current operations or to an existing condition caused by past operations, and which do not contribute to future revenue generation or cost reduction, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the cost can be reliably estimated based on ongoing engineering studies, discussions with the environmental authorities and other assumptions relevant to the nature and extent of the remediation that may be required. The ultimate cost to ArcelorMittal is dependent upon factors beyond its control such as the scope and methodology of the remedial action requirements to be established by environmental and public health authorities, new laws or government regulations, rapidly changing technology and the outcome of any potential related litigation. Environmental liabilities are discounted if the aggregate amount of the obligation and the amount and timing of the cash payments are fixed or reliably determinable.
The estimates of loss contingencies for environmental matters and other contingencies are based on various judgments and assumptions including the likelihood, nature, magnitude and timing of assessment, remediation and/or monitoring activities and the probable cost of these activities. In some cases, judgments and assumptions are made relating to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of cost of these activities, including third parties who sold assets to ArcelorMittal or purchased assets from it subject to environmental liabilities. ArcelorMittal also considers, among other things, the activity to date at particular
sites, information obtained through consultation with applicable regulatory authorities and third-party consultants and contractors and its historical experience with other circumstances judged to be comparable. Due to the numerous variables associated with these judgments and assumptions, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. As estimated costs to remediate change, the Company will reduce or increase the recorded liabilities through write backs or additional provisions in the consolidated statements of operations. ArcelorMittal does not expect these environmental issues to affect the utilization of its plants, now or in the future.
ArcelorMittal is currently and may in the future be involved in litigation, arbitration or other legal proceedings. Provisions related to legal and arbitration proceedings are recorded in accordance with the principles described above.
Most of these claims involve highly complex issues. Often these issues are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain. Consequently, ArcelorMittal may be unable to make a reliable estimate of the expected financial effect that will result from ultimate resolution of the proceeding. In those cases, ArcelorMittal has disclosed information with respect to the nature of the contingency. ArcelorMittal has not accrued a provision for the potential outcome of these cases.
For cases in which the Company was able to make a reliable estimate of the expected loss or range of probable loss and has accrued a provision for such loss, it believes that publication of this information on a case-by-case basis would seriously prejudice the Company’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases, the Company has disclosed information with respect to the nature of the contingency, but has not disclosed its estimate of the range of potential loss.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
In the cases in which quantifiable fines and penalties have been assessed, the Company has indicated the amount of such fine or penalty or the amount of provision accrued that is the estimate of the probable loss.
These assessments can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. The assessments are based on estimates and assumptions that have been deemed reasonable by management. The Company believes that the aggregate provisions recorded for the above matters are adequate based upon currently available information. However, given the inherent uncertainties related to these cases and in estimating contingent liabilities, the Company could, in the future, incur
| | |
| 341 Consolidated financial statements |
judgments that have a material adverse effect on its results of operations in any particular period. The Company considers it
highly unlikely, however, that any such judgments could have a material adverse effect on its liquidity or financial condition.
9.1 Provisions
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | | Additions1 | | Deductions/
Payments | | Effects of foreign exchange and other movements | | | | Balance at December 31, 2021 |
| Environmental | 661 | | | 47 | | | (65) | | | (48) | | | | | 595 | |
| Emission obligations | 571 | | | 606 | | | (565) | | | (120) | | | | | 492 | |
| Asset retirement obligations | 397 | | | 20 | | | (5) | | | (15) | | | | | 397 | |
| Site restoration | 309 | | | 25 | | | (93) | | | (21) | | | | | 220 | |
| Staff related obligations | 127 | | | 40 | | | (31) | | | (16) | | | | | 120 | |
| Voluntary separation plans | 55 | | | 13 | | | (27) | | | (10) | | | | | 31 | |
| Litigation and other (see note 9.3) | 269 | | | 143 | | | (70) | | | (19) | | | | | 323 | |
| Tax claims | 62 | | | 32 | | | (10) | | | (5) | | | | | 79 | |
| Other legal claims | 207 | | | 111 | | | (60) | | | (14) | | | | | 244 | |
| Commercial agreements and onerous contracts | 25 | | | 4 | | | (5) | | | (1) | | | | | 23 | |
| Other | 218 | | | 278 | | | (112) | | | (23) | | | | | 361 | |
| 2,632 | | | 1,176 | | | (973) | | | (273) | | | | | 2,562 | |
| Short-term provisions | 935 | | | | | | | | | | | 1,064 | |
| Long-term provisions | 1,697 | | | | | | | | | | | 1,498 | |
| 2,632 | | | | | | | | | | | 2,562 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2019 | | Additions1 | | Deductions/ Payments | | Effects of foreign exchange and other movements | | Divestments and reclassification to held for sale 2, 3 | | Balance at December 31, 2020 |
| Environmental | 1,074 | | | 137 | | | (88) | | | 57 | | | (519) | | | 661 | |
| Emission obligations | 484 | | | 373 | | | (92) | | | (40) | | | (154) | | | 571 | |
| Asset retirement obligations | 478 | | | 21 | | | (10) | | | 41 | | | (133) | | | 397 | |
| Site restoration | 136 | | | 167 | | | (12) | | | 18 | | | — | | | 309 | |
| Staff related obligations | 185 | | | 88 | | | (41) | | | (14) | | | (91) | | | 127 | |
| Voluntary separation plans | 47 | | | 30 | | | (38) | | | 20 | | | (4) | | | 55 | |
| Litigation and other (see note 9.3) | 312 | | | 40 | | | (36) | | | (39) | | | (8) | | | 269 | |
| Tax claims | 81 | | | 5 | | | (6) | | | (18) | | | — | | | 62 | |
| Other legal claims | 231 | | | 35 | | | (30) | | | (21) | | | (8) | | | 207 | |
| Commercial agreements and onerous contracts | 46 | | | 68 | | | (31) | | | (4) | | | (54) | | | 25 | |
| Other | 229 | | | 29 | | | (44) | | | 16 | | | (12) | | | 218 | |
| 2,991 | | | 953 | | | (392) | | | 55 | | | (975) | | | 2,632 | |
| Short-term provisions | 516 | | | | | | | | | | | 935 | |
| Long-term provisions | 2,475 | | | | | | | | | | | 1,697 | |
| 2,991 | | | | | | | | | | | 2,632 | |
8.1 Provisions overview1.Additions exclude provisions reversed or utilized during the same year.
2.On December 9, 2020, the Company completed the sale of ArcelorMittal USA and certain other US operations (see note 2.3.1).
3.On December 10, 2020, the Company signed a binding agreement with Invitalia, an Italian state-owned company, to form a public-private partnership between the parties. As a result, the carrying amounts of the assets and liabilities of ArcelorMittal Italia were classified as held for sale as of December 31, 2020 (see note 2.3.2).
|
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2017 |
| Additions1 |
| Deductions/
Payments |
|
| Effects of foreign exchange and other movements |
|
| Balance at December 31, 2018 |
| Environmental (see note 8.3) | 815 |
|
| 24 |
|
| (90 | ) |
|
| 479 |
| 2 |
| 1,228 |
|
| Asset retirement obligations (see note 8.3) | 427 |
|
| 26 |
|
| (11 | ) |
|
| (20 | ) |
|
| 422 |
|
| Site restoration | 40 |
|
| 117 |
|
| (13 | ) |
|
| (3 | ) |
|
| 141 |
|
| Staff related obligations | 183 |
|
| 75 |
|
| (46 | ) |
|
| (11 | ) |
|
| 201 |
|
| Voluntary separation plans | 79 |
|
| 3 |
|
| (56 | ) |
|
| 12 |
|
|
| 38 |
|
| Litigation and other (see note 8.3) | 328 |
|
| 79 |
|
| (76 | ) |
|
| 38 |
|
|
| 369 |
|
| Tax claims | 126 |
|
| 13 |
|
| (14 | ) |
|
| (5 | ) |
|
| 120 |
|
| Other legal claims | 202 |
|
| 66 |
|
| (62 | ) |
|
| 43 |
|
|
| 249 |
|
| Commercial agreements and onerous contracts | 24 |
|
| 14 |
|
| (20 | ) |
|
| 16 |
|
|
| 34 |
|
| Other | 126 |
|
| 19 |
|
| (32 | ) |
|
| (12 | ) |
|
| 101 |
|
| 2,022 |
|
| 357 |
|
| (344 | ) |
|
| 499 |
|
|
| 2,534 |
|
| Short-term provisions | 410 |
|
|
|
|
|
|
|
|
|
|
|
|
| 539 |
|
| Long-term provisions | 1,612 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,995 |
|
| 2,022 |
|
|
|
|
|
|
|
|
|
|
|
|
| 2,534 |
|
|
| | | | | | | | | | | | | | | | |
| | Balance at December 31, 2016 | | Additions1 | | Deductions/
Payments | | | Effects of foreign exchange and other movements | | | Balance at December 31, 2017 |
| Environmental (see note 8.3) | 745 |
| | 64 |
| | (57 | ) | | | 63 |
| | | 815 |
|
| Asset retirement obligations (see note 8.3) | 358 |
| | 60 |
| | (9 | ) | | | 18 |
| | | 427 |
|
| Site restoration | 43 |
| | — |
| | (9 | ) | | | 6 |
| | | 40 |
|
| Staff related obligations | 168 |
| | 48 |
| | (41 | ) | | | 8 |
| | | 183 |
|
| Voluntary separation plans | 79 |
| | 22 |
| | (44 | ) | | | 22 |
| | | 79 |
|
| Litigation and other (see note 8.3) | 413 |
| | 64 |
| | (173 | ) | | | 24 |
| | | 328 |
|
| Tax claims | 211 |
| | 11 |
| | (109 | ) | | | 13 |
| | | 126 |
|
| Other legal claims | 202 |
| | 53 |
| | (64 | ) | | | 11 |
| | | 202 |
|
| Commercial agreements and onerous contracts | 26 |
| | 18 |
| | (22 | ) | 3 | | 2 |
| | | 24 |
|
| Other | 115 |
| | 39 |
| | (37 | ) | | | 9 |
| | | 126 |
|
| | 1,947 |
| | 315 |
| | (392 | ) | | | 152 |
| | | 2,022 |
|
| Short-term provisions | 426 |
| | | | | | | | | | 410 |
|
| Long-term provisions | 1,521 |
| | | | | | | | | | 1,612 |
|
| | 1,947 |
| | | | | | | | | | 2,022 |
|
| | |
1. | Additions exclude provisions reversed or utilized during the same year.
|
| Consolidated financial statements 342 |
2. | Other movements primarily relate to the provisions in connection with environmental remediation obligations in Italy (see note 8.3).(millions of U.S. dollar, except share and per share data)
|
| |
3. | Deductions and payments for commercial agreements and onerous contracts reflect the increase in raw materials and steel prices.
|
The Company uses derivative financial instruments and spot purchases to manage its exposure to fluctuations in prices of emission rights allowances. See note 6.3 for the details of the cash flow hedging in place for emission rights, note 4.5 for CO2 emission rights held as current assets and note 5.1 for CO2 emission rights held as Intangible non-current assets. The Company also receives indirect compensation through rebates on its energy tariffs.
There are uncertainties regarding the timing and amount of the provisions above. Changes in underlying facts and circumstances for each provision could result in differences in the amounts provided for and the actual outflows. In general,
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
provisions are presented on a non-discounted basis due to the uncertainties regarding the timing or the short period of their expected consumption.
Environmental provisions have been estimated based on internal and third-party estimates of contaminations, available remediation technology, and environmental regulations. Estimates are subject to revision as further information develops or circumstances change.
Provisions for site restoration are related to costs incurred forin connection with the dismantling of site facilities, mainly in France.France and Poland. In the fourth quarter of 2018, the agreement between ArcelorMittal and the French government regarding a six yearsix-year idling period of the Florange liquid phase expired. The Company will proceed withhas started the process of definitive closure of the facility at the end of 2018. The provision included in site restoration at December 31, 2021 and recorded accordingly a 113 provision for the2020, related to dismantling of the facility.this facility amount to 98 and 120, respectively.
Provisions for staff related obligations primarily concern the United States and Brazil and are related to various employees’ compensation.
Provisions for voluntary separation plans primarily concern plans in Spain, Czech Republic, Belgium, Germany, France and the United StatesBrazil which are expected to be settled within one year.
Provisions for litigation include losses relating to a present legal obligationobligations that are considered to be probable. Further detail regarding legal matters is provided in note 8.3.9.3.
Other mainly includesIn 2021 and 2020 provisions for commercial agreements and onerous contracts concern primarily onerous contracts recognized in Poland and Brazil.
In 2021, other provisions decreased by 98 with respect to the indemnification arrangement between the Company and Global Chartering (see note 2.3.1) following a revision of the shipping market rate outlook for certain of Global Chartering's fleet lease terms. Other provisions increased by 240 as a result of the Complementary Agreement Term signed on June 7, 2021 between ArcelorMittal Brasil, the Federal and State Prosecutor
Offices and the Commission representing affected people with respect to the precautionary evacuation of the communities close to the Serra Azul dam as well as the commitment to implement action plans in order to ensure the stability, security and decommissioning of the tailing dam. As of December 31, 2021 such provisions amounted to 217. Other provisions comprise as well technical warranties and guarantees.
8.2 Other long-term obligations
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Derivative financial instruments | 708 |
| | 344 |
|
| Payable from acquisitions | 1,506 |
| | 35 |
|
| Unfavorable contracts | 217 |
| | — |
|
| Other | 588 |
| | 584 |
|
| Total | 3,019 |
| | 963 |
|
Derivative financial instruments include 124 as of December 31, 2018 relating to the fair value of the put option granted to ISP in the framework of the acquisition of Ilva (see note 2.2.4).
Payable from acquisitions include 1,245 relating to the non-current portion of the consideration payable with respect to the acquisition of Ilva and 253 relating to the financial liability with respect to the acquisition of Votorantim (see note 2.2.4).
Unfavorable contracts include 217 as of December 31, 2018 relating to the acquisition of Votorantim Siderurgia (see note 2.2.4).
8.3 Environmental liabilities, asset retirement obligations and legal proceedings
Environmental Liabilities
ArcelorMittal’s operations are subject to a broad range of laws and regulations relating to the protection of human health and the environment at its multiple locations and operating subsidiaries. As of December 31, 2018,2021, excluding asset retirement obligations, ArcelorMittal had established provisions of 1,228595 for environmental remedial activities and liabilities. The provisions for all operations by geographic area were 930445 in Europe, 132 in the United States, 135120 in South Africa and 3130 in Canada. In addition, ArcelorMittal and the previous owners of its facilities have expended substantial amounts to achieve or maintain ongoing compliance with applicable environmental laws and regulations. ArcelorMittal expects to continue to expend resources in this respect in the future.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
United States
ArcelorMittal’s operations in the United States have environmental provisions of 132 (exclusive of asset retirement obligations) to address existing environmental liabilities, of which 15 is expected to be spent in 2019. The environmental provisions principally relate to the investigation, monitoring and remediation of soil and groundwater at ArcelorMittal’s current and former facilities. ArcelorMittal USA continues to have significant environmental provisions relating to investigation and remediation at Indiana Harbor, Lackawanna, and its closed coal mining operations in southwestern Pennsylvania. ArcelorMittal USA’s environmental provisions also include 33, with anticipated spending of 2 during 2019, to specifically address the removal and disposal of asbestos-containing materials and polychlorinated biphenyls (“PCBs”).
All of ArcelorMittal’s major operating and former operating sites in the United States 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. In some cases, soil or groundwater contamination requiring remediation is present at both currently operating and historical sites where ArcelorMittal has a continuing obligation. In other cases, ArcelorMittal USA is required to conduct studies to determine the extent of contamination, if any, that exists at these sites.
ArcelorMittal USA’s Indiana Harbor facility was party to a lawsuit filed by the United States Environmental Protection Agency (the “EPA”) under the United States Resource Conservation and Recovery Act (“RCRA”). An ArcelorMittal USA predecessor company entered into a Consent Decree, which, among other things, requires facility-wide RCRA Corrective Action and sediment assessment and remediation in the adjacent Indiana Harbor Ship Canal. ArcelorMittal USA entered into a Consent Decree Amendment defining the objectives for limited sediment assessment and remediation of a small portion of the Indiana Harbor Ship Canal. The provisions for environmental liabilities include 7 for such sediment assessment and remediation, and 5 for RCRA Corrective Action at the Indiana Harbor facility itself. Remediation ultimately may be necessary for other contamination that may be present at Indiana Harbor, but the potential costs of any such remediation cannot yet be reasonably estimated at this time.
ArcelorMittal USA’s properties in Lackawanna, New York are subject to an Administrative Order on Consent with the EPA requiring facility-wide RCRA Corrective Action. The Administrative Order requires the Company to perform a Remedial Facilities Investigation (“RFI”), a Corrective Measures Study, to implement appropriate interim and final remedial measures, and to perform required post-remedial closure activities. The New York State Department of Environmental Conservation and the EPA conditionally approved the RFI. ArcelorMittal USA has executed Orders on Consent to perform certain interim corrective measures while advancing the Corrective Measures Study. These include installation and operation of a ground water treatment system and dredging of a local waterway known as Smokes Creek. A Corrective Measure Order on Consent was executed for other site remediation activities. ArcelorMittal USA’s provisions for environmental liabilities include 29 for anticipated remediation and post-remediation activities at this site. The provisioned amount is based on the extent of soil and groundwater contamination identified by the RFI and the CMS remedial measures likely to be required, including excavation and consolidation of containment structures in an on-site landfill and continuation of groundwater pump and treatment systems.
ArcelorMittal USA is required to prevent acid mine drainage from discharging to surface waters at its closed mining operations in southwestern Pennsylvania. ArcelorMittal USA entered into a revised Consent Order and Agreement outlining a schedule for implementation of capital improvements and requiring the establishment of a treatment trust, estimated by the PaDEP to be the net present value of all future treatment cost. ArcelorMittal USA has been funding the treatment trust, which reached the target value in 2017. This target value is based on average spending over the last three years. The trust had a market value of 45 as of December 31, 2018. ArcelorMittal can be reimbursed from the fund for the continuing cost of treatment of acid mine drainage. ArcelorMittal USA’s provisions for environmental liabilities include 32 for this matter.
In 2011, the United States EPA Region V issued Notices of Violations ("NOVs") to Indiana Harbor, Burns Harbor and Cleveland alleging operational noncompliance based primarily on self-reported Title V permit concerns. Comprehensive settlement discussions with the United States EPA and affected state agencies involving all NOVs are ongoing and a comprehensive settlement with the United States EPA and affected state agencies, which is anticipated to encompass self-reported non-compliance through September 30, 2018 was finalized pending approvals by the government parties which are anticipated in early 2019. The settlement will include payment of penalties and injunctive relief. Liabilities associated with this comprehensive settlement are estimated at 7.
In 2014, the ArcelorMittal Monessen coke plant was re-started after having been idled since 2008. Since re-start, state regulatory authorities (“PADEP”) issued numerous NOVs, the majority of which concerns Clean Air Act violations. United States EPA Region 3 also issued an NOV and, in addition, issued an information request seeking detailed testing and
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
information concerning air compliance related issues. PADEP issued a proposed penalty assessment of 1 for alleged violations occurring from April 2014 through May 2015. Penalties were finalized as part of comprehensive Consent Decree negotiations with PADEP and United States EPA enforcement officials and with Penn Environment, a local environmental group which filed a Citizen Suit under the Clean Air Act in 2015. The litigation was stayed in 2016. A Consent Decree was executed on February 2, 2018 requiring civil penalty payment and injunctive relief. The total payment of 2 was paid and injunctive relief requirements, including a caustic scrubber demonstration, are being performed.
Europe
Environmental provisions for ArcelorMittal’s operations in Europe total 930445 and are mainly related to the investigation and remediation of environmental contamination at current and former operating sites in Belgium (224), France (74)(68), Belgium (229)Poland (62), Luxembourg (47), Poland (25)(52), Germany (25), Italy (523)(31) and Spain (7)(8). This investigation and remediation work relates to various matters such as decontamination of water discharges, waste disposal, cleaning water ponds and remediation activities that involve the clean-up of soil and groundwater. These provisions also relate to human health protection measures such as fire prevention and additional contamination prevention measures to comply with local health and safety regulations.
Belgium
In Belgium, environmental provisions amount to 224, of which the most significant elements are legal site remediation obligations linked to the closure of the primary installations at ArcelorMittal Belgium (Liège). The provisions also concern the external recovery and disposal of waste, residues or by-products that cannot be recovered internally at the ArcelorMittal Ghent and Liège sites and the removal and disposal of material containing asbestos.
France
In France, there is an environmental provisionprovisions of 74,68 principally relatingrelate to the remediation of former sites, including several coke plants, and the capping and monitoring of landfills or basins previously used for residues and secondary materials. material.
| | |
| 343 Consolidated financial statements |
The remediation of the coke plants concerns mainly the Thionville, Moyeuvre Grande,Moyeuvre-Grande, Homecourt, Hagondange and Micheville sites, and is related to treatment of soil and groundwater. At Moyeuvre Petite, the recovery processThionville coke plant, soil remediation will be completed by the end of 2022, while additional investigations are ongoing for groundwater. At Moyeuvre-Petite, the slagcovering of sludge basins is ongoing and completed.
ArcelorMittal is responsible for closure and final rehabilitation of the rest of the site. Atsite corresponding to the former Conroy and Pérotin slag-heaps, from which the administrative procedure for cessation of activity is underway but due to the COVID-19 pandemic the project slowed down but it is expected that the remediation will start in 2022. In other sites, ArcelorMittal France is responsible for monitoring the concentration of organic compound and heavy metals in soil and groundwater.groundwater on all former sites closed and/or already remediated. The Florange coke plant shut down in 2020 and is now under investigation for its demolition and remediation.
ArcelorMittal Atlantique et LorraineFrance has an environmental provision that principally relates to the remediation and improvement of storage of secondary materials, the disposal of waste at different ponds and landfills and an action plan for removing asbestos from the installations and mandatory financial guarantees to cover risks of major accident hazard or for gasholders and waste storage. Most of the provision relates to the stocking areas at the Dunkirk site that will need to be restored to comply with local law and to the mothballing of the liquid phase in Florange, (prior to the dismantling of the facility see note 8.1), including study and surveillance of soil and water to prevent environmental damage, treatment and elimination of waste and financial guarantees demanded by Public Authorities. The environmentalEnvironmental provisions also include treatment of slag dumps at the Florange and Dunkirk sites as well as removal and disposal of asbestos-containing material containing asbestos at the Dunkirk and Mardyck sites.
ArcelorMittal Atlantique et LorraineFrance also has an environmental provision that principally relates to the remediation and improvement of storage of secondary materials, the disposal of waste at different ponds and landfills:landfills as the stocking areas at the Dunkirk site need to be restored to comply with local law.
Industeel France has an environmental provision that principally relates to ground remediation at the Le Creusot site and to the rehabilitation of waste disposal areas at the Châteauneuf site.Poland
Belgium
In Belgium, there is anArcelorMittal Poland’s environmental provision of 229 of which the most significant elements are legal site62 includes 37 for cleaning and remediation obligations linked tocosts recognized in 2020 following the closure of primary facilities in Kraków; the primary installations at ArcelorMittal Belgium (Liège). The provisions also concernremaining 25 relates to the external recoveryobligation to reclaim a landfill in Lipówka to dispose of the residues which cannot be internally recycled or externally recovered in Dabrowa Gornicza, the storage and disposal of waste, residues or by-products thatiron-bearing sludge which cannot be recovered internally onreused in the ArcelorMittal Gentmanufacturing process under the environmental law (i.e., waste storage time cannot exceed three years) and Liège sites and the removal and disposalalso land
remediation in post-industrial areas in Ruszcza (district of asbestos-containing material.Kraków).
Luxembourg
In Luxembourg, there is an environmental provisionprovisions of 47, which relates52 relate to the post-closure monitoring and remediation of former production sites, waste disposal areas, slag deposits and mining sites.
In 2007, ArcelorMittal Luxembourg sold the former Ehlerange slag deposit (93 hectares) to the State of Luxembourg. ArcelorMittal Luxembourg is contractually liable to clean the site and move approximately 400,000 cubic meters of material to other sites. ArcelorMittal Luxembourg also has an environmental provision to secure, stabilize and conduct waterproofing treatment on mining galleries and entrances and various dumping areas in Mondercange, Differdange and Dommeldange. In
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
addition, ArcelorMittal Luxembourg has secured the disposal of laddleladle slag, sludge and certain other residues coming from different sites at the Differdange dump for a total volume of 1,300,0001,400,000 cubic meters until mid 2023.the end of 2021. In 2022 the covering process of this dump will be started. A provision of 4042 covers these obligations.
ArcelorMittal Belval and Differdange has an environmental provision of 710 to clean historical landfills in order to meet the requirements of the Luxembourg Environment Administration and to cover dismantling and soil cleaning costs of the former PRIMOREC installation.
Poland
ArcelorMittal Poland S.A.’s environmental provision of 25 mainly relates to the obligation to reclaim a landfill site and to dispose of the residues which cannot be internally recycled or externally recovered. The provision also concerns the storage and disposal of iron-bearing sludge which cannot be reused in the manufacturing process under the new environmental law; waste storage time cannot exceed 1 year.
Germany
In Germany, the environmental provision of 2531 essentially relates to ArcelorMittal Bremen’s post-closure obligations mainly established for soil remediation, groundwater treatment and monitoring at the Prosper coke plant in Bottrop.
Italy
In Italy, ArcelorMittal Italia has environmental provisions of 523.
A provision of 309 relates to remediation activities to be carried out in the site of Taranto derived from obligations on the previous operator that have been transferred to ArcelorMittal Italia through the environmental permit, the most significant elements being the waterproofing of certain areas to confine historical pollution, the removal of historical accumulation of process materials mainly consisting of blast furnace ("BF") and basic oxygen furnace ("BOF") dusts and sludges and scales, an action plan for the removal and disposal of asbestos-containing materials present on site, the dismantling of several installations no longer in operation, the dredging of the discharge channel and disposal of the sludge removed, the decontamination of high depth groundwater in the primary yards area and the capping of an exhausted landfill.
Provisions of 214 are allocated to the implementation of preventive measures, permanent safety measures and clean up measures in relation to historical pollution of soil and groundwater, not derived from obligations in the environmental permit, but that ArcelorMittal Italia undertook to implement as a contractual obligation vis-a-vis the previous operator.
Spain
In Spain, ArcelorMittal España has environmental provisions of 78 due to obligations of sealing landfills basically located in the Asturias site and post-closure obligations in accordance with national legislation. These obligations include the collection and treatment of leachates that can be generated during the operational phase and a period of 30 years after the closure.
South Africa
AMSA has environmental provisions of 135120 to be used over 1815 years, mainly relating to environmental remediation obligations attributable to historical or legacy settling/evaporation dams and waste disposal activities. An important determinant in the final timing of the remediation work relates to the obtaining of the necessary environmental authorizations.
A provision of 3739 relates to the decommissioned Pretoria Works site. This site is in a state of partial decommissioning and rehabilitation with one coke battery and a small-sections rolling facility still in operation. AMSA transformed this old plant into an
| | |
| Consolidated financial statements 344 |
| (millions of U.S. dollar, except share and per share data) |
industrial hub for light industry since the late 1990s. Particular effort is directed to landfill sites, with sales of slag from legacy disposal sites to vendors in the construction industry continuing unabated, but other remediation works continued at a slow pace as remediation actions for these sites are long-term in nature due toin terms of a complex legal process that needs to be followed with authorities and surrounding landowners.remediation order received during October 2021.
The Vanderbijlpark Works site, the main flat carbon steel operation of AMSA, contains a number of legacy facilities and areas requiring remediation. The remediation entails the implementation of rehabilitation and decontamination measures of waste disposal sites, waste water dams, ground water and historically contaminated open areas. 19 of the provision is allocatedProvisions relating to this site.site amount to 19.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The Newcastle Works site is the main long carbon steel operation of AMSA. A provision of 20 is allocated25 relates to this site. As with all operating sites of AMSA, the above retirement and remediation actions dovetail with numerous large capital expenditure projects dedicated to environmental management. In the case of the Newcastle site, the major current environmental capital project is for air quality improvements.improvements and storm water management.
A provision of 5133 relates to the environmental rehabilitation of the Thabazimbi Mine. On November 1, 2018, the Thabazimbi mine was acquired from Sishen Iron Ore Company (Pty) Ltd, enablingmine. AMSA to control the environmental rehabilitation process. In terms of the sales agreement, AMSA is liable for all environmental remediation obligations. The acquisition did not have a significant impact on the environmental obligations of AMSA as it has always been contractually responsible for the majority of the rehabilitation cost relating to the Thabazimbi Mine. As part of the acquisition, AMSA acquired an asset in the form ofholds an environmental trust which holds investments for a value of 22. These investments26 that will be used for rehabilitation purposes.
The remainder of the obligation of 84 relates to Vereeniging site for the historical pollution that needs to be remediated at waste disposal sites, waste water dams and groundwater aquifers.
Canada
In Canada, ArcelorMittal Dofasco has an environmental provision of 2730 for the expected cost of remediating toxic sediment located in the Company’s East Boatslip site, of which 51 is expected to be spent in 2019. ArcelorMittal Long Products Canada has an environmental provision of 4 for future disposal of sludge left in ponds after flat mills closure at Contrecoeur.2022.
Asset Retirement Obligations (“AROs”)
AROs arise from legal requirements and represent management’s best estimate of the present value of the costs that will be required to retire plant and equipment or to restore a site at the end of its useful life. As of December 31, 2018,2021, ArcelorMittal had established provisions for asset retirement obligations of 422,397, including mainly154 for Canada, 63 for Mexico, 46 for Ukraine, 42 for Ukraine, 121Germany, 23 for Canada, 80 for the United States, 57 for Mexico, 15 for Belgium, 37 for Germany, 14Liberia, 19 for South Africa, 12 for Spain,Belgium, 13 for Kazakhstan, 21 for Brazil, 122 for KazakhstanBosnia and 17 for Liberia.Herzegovina and others.
The AROs in Ukraine are legal obligations for site rehabilitation at the iron ore mining site in Kryvyi Rih, upon closure of the mine pursuant to its restoration plan.
The AROs in Canada are legal obligations for site restoration and dismantling of the facilities near the mining sites in Mont-Wright and Fire Lake, and the accumulation area of mineral substances at the facility of Port-Cartier in Quebec, upon closure of the minemines pursuant to the restoring plan of the mines. In addition,
The AROs in
Dofasco has legal obligations for the United States principally relate to mine closure costs of the Hibbing and Minorca iron ore mines and Princeton coal mines.former Sherman Mine site near Temagami, Ontario.
The AROs in Mexico relate to the restoration costs following the closure of the Las Truchas, El Volcan and the joint operation of PenaPeña Colorada iron ore mines.
In Belgium, the AROs in Ukraine are to cover the demolition costslegal obligations for primary facilitiessite rehabilitation at the Liège sites.
In Spain, the AROs relate to the discontinuanceiron ore mining site in Kryvyi Rih, upon closure of the activities of various assets within the upstream installations.mine pursuant to its restoration plan.
In Germany, AROs principally relate to the Hamburg site, which operates on leased land with the contractual obligation to remove all buildings and other facilities upon the termination of the lease, and to the Prosper coke plant in Bottrop for filling the basin, restoring the layer and stabilizing the shoreline at the harbor.
The In Liberia, AROs relate to iron ore mine and associated infrastructure and mine related environmental damage and compensation. They cover the closure and rehabilitation plan under both the current operating phase and the not yet completed Phase 2 expansion project.
AROs in South Africa are for the Pretoria, Vanderbijlpark, Saldanha, Newcastle as well as the Coke and Chemical sites, and relate to the closure and clean-up of the plant associated with decommissioned tank farms, tar plants, chemical stores, railway lines, pipelines and defunct infrastructure.
In Belgium, AROs are to cover the demolition costs for the primary facilities at the Liège site.
In Kazakhstan, AROs relate to the restoration obligations of the iron ore and coal mines.
In Brazil, the AROs relate to legal obligations to clean and restore the mining areas of Serra Azul and Andrade, both located in the State of Minas Gerais. The related provisions are expected to be fully settled in 2024up to 2072 and 2029,2078, respectively.
In Bosnia and Herzegovina, ARO relates to re-cultivation of dump yard of old iron ore pit Jezero and closing dam Medjedja.
| | |
| 345 Consolidated financial statements |
9.2 Other long-term obligations
In Kazakhstan, the AROs relate | | | | | | | | | | | |
| | Balance at December 31, |
| | 2021 | | 2020 |
| Derivative financial instruments (notes 6.1 and 6.3) | 58 | | | 96 | |
| Payable from acquisition of financial assets | 115 | | | 359 | |
| Unfavorable contracts | 105 | | | 132 | |
| Income tax payable | 219 | | | 214 |
| Other | 377 | | | 347 | |
| Total | 874 | | | 1,148 | |
As of December 31, 2021 and 2020, payable from acquisition of financial assets included 80 and 95 respectively relating to AMNS India's debt guarantee. At December 31, 2020 payable from acquisition of financial assets included also 235 relating to the restoration obligationsfinancial liability with respect to the acquisition of AMSF (see note 11.5.2). In 2021, the iron oreliability was reclassified as accrued expenses and coal mines.other liabilities (see note 4.8).
Unfavorable contracts of 105 and 132 as of December 31, 2021 and 2020, respectively, mainly related to AMSF (see note 2.2.4).
As of December 31, 2021, the income tax payable mainly related to income tax contingencies (in majority unasserted claims) and withholding tax.
9.3 Contingent liabilities
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
In Liberia, the AROs relate to iron ore mine and associated infrastructure and mine related environmental damage and compensation. They cover the closure and rehabilitation plan under both the current operating phase and the not yet completed Phase 2 expansion project.
Tax Claims
ArcelorMittal is a party to various tax claims. As of December 31, 2018,2021, ArcelorMittal had recorded short-term and long-term liabilities related to income and non-income tax contingencies of 131 and provisions for non-income tax claims in the aggregate of 12079 for tax claims in respect of which it considers the risk of loss to be probable. Set out below is a summary description of the tax claims (i) in respect offor which ArcelorMittal had recorded a provision as of December 31, 2018,2021, (ii) that constitute a contingent liability, (iii) that were resolved in 20182021 or (iv) that were resolved and had a financial impact in 20172020 or 2016,2019 in each case involving amounts deemed material by ArcelorMittal. The Company is vigorously defending against the pending claims discussed below.
Brazil
In 2003, the Federal Revenue Service granted ArcelorMittal Brasil (through its predecessor company, then known as CST) a tax benefit for certain investments. ArcelorMittal Brasil had received certificates from SUDENE, the former Agency for the Development of the Northeast Region of Brazil, confirming ArcelorMittal Brasil’s entitlement to this benefit. In September 2004, ArcelorMittal Brasil was notified of the annulment of these certificates. ArcelorMittal Brasil has pursued its right to this tax benefit through the courts against both ADENE, the successor to SUDENE, and against the Federal Revenue Service. The Federal Revenue Service issued a tax assessment in this regard for 451 in December 2007. In December 2008, the administrative tribunal of first instance upheld the amount of the assessment. ArcelorMittal Brasil appealed to the administrative tribunal of second instance, and, on August 8, 2012, the administrative tribunal of the second instance found in favor of ArcelorMittal invalidating the tax assessment, thereby ending this case except for 6, which is still pending a final decision. On April 16, 2011, ArcelorMittal Brasil received a further tax assessment for the periods of March, June and September 2007, which, taking into account interest and currency fluctuations, amounted to 163 as of December 31, 2018. In October 2011, the administrative tribunal of first instance upheld the tax assessment received by ArcelorMittal Brasil on April 16, 2011, but decided that no penalty (amounting to 77 at that time) was due. Both parties have filed an appeal with the administrative tribunal of second instance. In February 2018, the administrative tribunal of second instance found in favor of ArcelorMittal Brasil and, in June 2018, the Federal Revenue Service filed an appeal with the administrative tribunal of the third instance. In January 2019, the administrative tribunal of the third instance found in favor of ArcelorMittal Brasil.
In 2011, ArcelorMittal Brasil (at the time SOL Coqueria Tubarão S.A.) received 21 separate tax assessments from the Revenue Service of the State of Espirito Santo for ICMS (a value-added tax) in the totalan amount of 30which totaled 23 relating to a tax incentive (INVEST) it used. The dispute concerns the definition of fixed assets. In August 2015, the administrative tribunal of the first instance upheld the 21 of theseparate tax assessments. In September 2015, ArcelorMittal Brasil filed appeals with respect to each of the administrative tribunal’s decisions. As of December 31,
2018, there have beenwere final unfavorable decisions at the administrative tribunal level in 15 of the 21 cases, each of which ArcelorMittal Brasil has appealed to the judicial instance. In March 2018, the administrative tribunal of the third instance found in favor of ArcelorMittal Brasil sending the six6 other cases back to the administrative tribunal of the second instance. After the administrative tribunal of the second instance issued a partially favorable ruling on these 6 cases in December 2019, related only to the recognition of the limitation period of May 2005, a further appeal to the administrative tribunal of the third instance was filed. In July 2021, the third administrative instance denied ArcelorMittal Brasil's appeal and upheld the tax assessments. Following the conclusion of this proceeding at the administrative level, in September 2021, ArcelorMittal Brasil appealed to the judicial instance where all of the 21 cases now await a first instance decision.
In 2011, ArcelorMittal Brasil received a tax assessment for corporate income tax (known as IRPJ) and social contributions on net profits (known as CSL) in relation to (i) the amortization of goodwill on the acquisition of Mendes Júnior Siderurgia (for the 2006 and 2007 fiscal years), (ii) the amortization of goodwill arising from the mandatory tender offer (MTO)("MTO") made by ArcelorMittal (ex-Mittal Steel N.V.) to minority shareholders of Arcelor Brasil followingin connection with the two-step merger of Arcelor and Mittal Steel N.V. (for the 2007 tax year), (iii) expenses related to pre-export financing used to finance the MTO, which were deemed by the tax authorities to be unnecessary for ArcelorMittal Brasil since the expenses were incurred to buy shares of its own company and (iv) CSL over profits of controlled companies in Argentina and Costa Rica. The amount claimed totals 524.387. On January 31, 2014, the administrative tribunal of the first instance found in partial favor of ArcelorMittal Brasil, reducing the penalty component of the assessment from, according to ArcelorMittal Brasil’s calculations, 266120 to 14163 (as calculated at the time of the assessment), while upholding the remainder of the assessment. The Federal Revenue Service has appealed the administrative tribunal’s decision to reduce the amount of the original penalty. ArcelorMittal Brasil has also appealed the administrative tribunal’s decision to uphold the tax authority’s assessment (including the revised penalty component). In September 2017, the administrative tribunal of the second instance found largely in favor of the Federal Revenue Service. In January 2018, ArcelorMittal Brasil filed a motion for clarification of this decision. In February 2018, the motion for clarification was rejected and, in March 2018, an appeal was filed to the administrative tribunal of the third instance.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
In 2013, ArcelorMittal Brasil received a tax assessment in relation to the 2008-2010 tax years for IRPJ and CSL in relation to (i) the amortization of goodwill on the acquisition of Mendes Júnior Siderurgia, Dedini Siderurgia and CST, (ii) the
| | |
| Consolidated financial statements 346 |
| (millions of U.S. dollar, except share and per share data) |
amortization of goodwill arising from the mandatory tender offerMTO made by ArcelorMittal (ex-Mittal Steel N.V.) to minority shareholders of Arcelor Brasil followingin connection with the two-step merger of Arcelor and Mittal Steel N.V. and (iii) CSL and IRPJ over profits of controlled companies in Argentina, Costa Rica, Venezuela and the Netherlands. The amount claimed totals 457.342. In October 2014, the administrative tribunal of the first instance found in favor of the Federal Revenue Service and ArcelorMittal Brasil filed its appeal in November 2014. In September 2017, the administrative tribunal of the second instance found in favor of the Federal Revenue Service. ArcelorMittal Brasil filed a motion for clarification with respect to this decision, which was denied, and thereafter filed an appeal to the administrative tribunal of the third instance.
In April 2016, ArcelorMittal Brasil received a tax assessment in relation to (i) the amortization of goodwill resulting from Mittal Steel’s mandatory tender offerthe MTO made by ArcelorMittal (ex-Mittal Steel N.V.) to the minority shareholders of Arcelor Brasil followingin connection with the two-step merger of Arcelor and Mittal Steel’s merger with ArcelorSteel N.V. in 2007 and (ii) the amortization of goodwill resulting from ArcelorMittal Brasil’s acquisition of CST in 2008. While the assessment, if upheld, would not result in a cash payment as ArcelorMittal Brasil did not have any tax liability for the fiscal years in question (2011 and 2012), it would result in the write-offa 59 financial impact arising from a write off of 249 worth of ArcelorMittal Brasil’s net operating loss carryforwards and as a result could have an effect on net income over time.carry forwards with respect to the 2011-2012 tax year. In May 2016, ArcelorMittal Brasil filed its defense, which was not accepted at the first administrative instance. On March 10, 2017, ArcelorMittal Brasil filed an appeal to the second administrative instance, which was rejected in May 2019, filed a motion for clarification which was denied in November 2019 and thereafter filed an appeal to the administrative tribunal of the third instance.
In December 2018, ArcelorMittal Brasil received a tax assessment for 151 forof 94, which could have an additional 20 financial impact arising from a write off of net operating loss carry forward with respect to the 2013-2014 tax years, principally in relation to the amortization of goodwill resulting from Mittal Steel’s mandatory tender offerthe MTO made by ArcelorMittal (ex-Mittal Steel N.V.) to the minority shareholders of Arcelor Brasil followingin connection with the two-step merger of Arcelor and Mittal Steel’s merger with ArcelorSteel N.V. in 2007. In January 2019, ArcelorMittal Brasil filed a defense in the first administrative instance, which issued an unfavorable decision in June 2019. An appeal to the second administrative instance was filed in July 2019.
In December 2020, ArcelorMittal Brasil received a tax assessment of 32, which could have an additional 43 financial impact arising from a write off of net operating loss carry forwards, with respect to the 2015-2016 tax years, related to the amortization of goodwill resulting from the MTO made by ArcelorMittal (ex-Mittal Steel N.V.) to the minority shareholders of Arcelor Brasil in connection with the two-step merger of
Arcelor and Mittal Steel N.V. in 2007. ArcelorMittal Brasil filed its defense in the first administrative instance in January 2019.2021 which issued an unfavorable decision in August, 2021. An appeal to the second administrative instance was filed in September 2021.
In 2013, ArcelorMittal Brasil filed a lawsuit against the Federal Revenue Service disputing the basis of calculation of a tax called additional freight for the renewal of the Brazilian Merchant Navy ("AFRMM"), amounting to 55.55. The dispute is related to the inclusion of the unloading and land transport costs of the imported goods after landing to calculate AFRMM. InJune 2013, ArcelorMittal Brasil obtained a preliminary decision allowing the Company not to pay such amount until a final decision was rendered. In February 2017, ArcelorMittal Brasil obtained a favorable decision at the judicial first instance but thiswhich was upheld by the Federal Court of Appeals in February 2019. In July 2019, the Federal Revenue Service filed appeals with the Superior Court of Justice and the Supreme Court. In February 2020, the appeal to the Supreme Court of Justice was dismissed and, in July 2020, the Appeal to the Supreme Court was dismissed. This decision is subject to further mandatory review.final and unappealable. In November 2018, a related tax assessment was received from the Federal Revenue Service claiming 2218 as a penalty for alleged failure to comply with formal requirements in the import declarations delivered by the Company in the years 2013-2018, which were the subject matter of the preliminary decision of June 2013. In December 2018, ArcelorMittal Brasil presented its defense in the first administrative instance. In Februaryinstance, which in June 2019 the Judicial Court of Appeals upheld the favorable first instance decision. Thedecided in ArcelorMittal Brasil’s favor. This decision is subject to appeal. A further appeals.
For over 18 years, ArcelorMittal Brasil has been challenging the basis of the calculation of the Brazilian COFINS and PIS social security taxes (specifically, whether Brazilian VAT may be deductedrelated tax assessment was received in September 2018 from the base amount on which the COFINS and PIS taxes are calculated), in an amount of 4. ArcelorMittal Brasil deposited the disputed amount in escrow with the relevant Brazilian judicial branch when it became due. Since the principal amount bears interest at a rate applicable to judicial deposits, the amount stood at 49 as of December 31, 2018. In March 2017, the Supreme Court decided a separate case, not involving ArcelorMittal Brasil, on the same subject in favor of the relevant taxpayers. Such separate Supreme Court decision, which is of binding precedential value with respect to all similar cases, including those of ArcelorMittal Brasil, is being appealed by the Federal Revenue Service. In July 2018, the second judicial instance found in favor of ArcelorMittal Brasil after applying the Supreme Court’s precedent. In December 2018, the Federal Revenue Service brought an appeal ofclaiming 0.2 as a penalty for alleged failure to comply with formal requirements in the second judicial instance’simport declarations delivered by the Company in the period between September and November 2013. In October 2018 ArcelorMittal Brasil presented its defense in the first administrative instance, and a decision to the Supreme Court.is pending.
In the period from 2014 to 2018, ArcelorMittal Brasil received four6 tax assessments from the Federal Revenue Service in the amount of 5134 disputing its use of credits for PIS and COFINS social security taxes in 2010, 2011 and 2013. The dispute relates to the concept of production inputs in the context of these taxes. In 2017, in the first and second cases,case, the administrative tribunal of secondthe first instance found partially in favor of ArcelorMittal Brasil,Brasil. The decision was upheld in the administrative tribunal of the second instance and ArcelorMittal Brasil filed an appeal to the administrative tribunal of the third instance which ruled partially in favor of ArcelorMittal Brasil in May 2019. In January 2020, the case was sent back to the Federal Revenue which is verifying the extent of the administrative tribunal of the third instance’s decision in order to proceed with the write-off of amounts due. In August 2020, the tax assessment was reduced by 4, reflecting
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| 347 Consolidated financial statements |
the partially favorable decision. The remaining amount of 12 will be discussed at the judicial level. In the second case, the administrative tribunal of the first instance found partially in favor of ArcelorMittal Brasil and an appeal has been filed to the administrative tribunal of the second instance. In the third case, the administrative tribunal of the first instance upheld the tax assessment, and ArcelorMittal Brasil appealed to the administrative tribunal of the second instance. In the fourth case,and fifth cases, ArcelorMittal Brasil has filed its defenses to the administrative tribunal of the first instance. In November 2020, a defensepartially favorable decision was issued in the fifth case and an appeal was presented. In the fourth case, in March 2018.2021, a partially favorable decision was issued and an appeal has been filed to the second administrative instance. In the sixth case, the administrative tribunal of the first instance upheld the tax assessment, and ArcelorMittal Brasil appealed to the administrative tribunal of the second instance. In March 2018, the Superior Court decided a leading case, not involving ArcelorMittal Brasil, that established that the restrictive concept of inputs adopted by the tax authorities is illegal and that credits over inputs must be accepted on the basis of the criteria of essentiality or relevance towards the production process of each taxpayer. In September 2018, the Federal Union published an internal orientation for its attorneys, expressing a restrictive view of the Superior Court’sCourt's decision and determining that each individual case would be analyzed in order to decide whether the items are essential or not.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share However, this federal orientation has not been followed in unrelated cases, and per share data)
In that sense,therefore ArcelorMittal Brasil’sBrasil's cases willmay be submitted for review by the Federal Union Attorney’sAttorney's office before further decisions are taken. taken or may be taken to trial without such review.
In May 2014, ArcelorMittal Comercializadora de Energia received a tax assessment from the state of Minas Gerais alleging that the Company did not correctly calculate tax credits on interstate sales of electricity from February 2012 to December 2013. The amount claimed totals 51.31. ArcelorMittal Comercializadora de Energia filed its defense in June 2014. Following an unfavorable administrative decision in November 2014, ArcelorMittal filed an appeal in December 2014. In March 2015, there was a further unfavorable decision at the second administrative level. Following the conclusion of this proceeding at the administrative level, the Company received the tax enforcement notice in December 2015 and filed its defense in February 2016. In April 2016, ArcelorMittal Comercializadora de Energia received an additional tax assessment in the amount, of 44, after taking account of a reduction of fines mentioned below of 57, regarding the same matter, for infractions which allegedly occurred during the 2014 to 2015 period, and filed its defense in May 2016. In May 2017, there was a further unfavorable decision at the second administrative level in respect of the tax assessment received in April 2016. In June 2017, ArcelorMittal Comercializadora de Energia filed an appeal to the second
administrative instance. This appeal was rejected in August 2017. In October and November 2017, the Company appealed in relation to both tax assessments to the judicial instance. In November 2017, the Company received a notice from the tax authority informing it of the reduction of the fines element by 18,12, due to the retroactive application of a new law. In February 2019, due to the retrospective application of a new law, a reduction of the fine element of 7 was finalized in the first case.
In the period from May to July 2015, ArcelorMittal Brasil received nine9 tax assessments from the state of Rio Grande do Sul alleging that the Company, through its branches in that state, had not made advance payments of ICMS on sales in that state covering the period from May 2010 to April 2015. The amount claimed totals 88.67. The administrative tribunal of the first instance upheld the tax assessments in each of the nine9 cases, and ArcelorMittal Brasil appealed each of the administrative tribunal’s decisions. Each case was decided unfavorably to ArcelorMittal Brasil at the administrative tribunal of the second instance, and ArcelorMittal Brasil has appealed the cases to the judicial instance.
On May 17, 2016, ArcelorMittal Brasil received a tax assessment from the state of Santa Catarina in the amount of 13896 alleging that it had used improper methods to calculate the amount of its ICMS credits. ArcelorMittal Brasil filed its defense in July 2016. In December 2016, ArcelorMittal Brasil received an unfavorable decision at the first administrative level, in respect of which it filed an appeal. In March 2018, the administrative tribunal of the second instance found against ArcelorMittal Brasil and, in April 2018, ArcelorMittal Brasil filed an appeal to the administrative tribunal of the third instance.
France
Following audits In December 2019, the tax assessment was upheld by the administrative tribunal of the third instance. In January 2020, ArcelorMittal Brasil filed a motion for 2006, 2007 and 2008 ofclarification which was rejected in August 2020. ArcelorMittal France and other French ArcelorMittal entities, URSSAF, the French body responsible for collecting social contributions, commenced formal proceedings for these years alleging that the French ArcelorMittal entities owe 69 in social contributions on various payments, the most significant of which relate to profit sharing schemes, professional fees and stock options. Proceedings were commenced in relationBrasil appealed to the 2006 claimsjudicial instance in December 2009. Proceedings were commenced in relation to the 2007 and 2008 claims in February and March 2010, respectively. In three decisions dated December 10, 2012, the arbitration committee hearing the matter found that social contributions in an amount of 17, 11 and 5 are due in respect of profit-sharing schemes, stock options and professional fees, respectively. These amounts cover the audits for 2006, 2007 and 2008. In March 2013, the Company filed appeals against the decisions relating to the profit-sharing schemes and stock options.
Following audits for 2009, 2010 and 2011 of ArcelorMittal France and other French ArcelorMittal entities, URSSAF commenced formal proceedings in December 2012 for these years alleging that these entities owe 150 in social contributions (including interest and late fees relating thereto) on various payments, the most significant of which relate to voluntary separation schemes, profit sharing schemes, professional fees and stock options. In its decision dated April 24, 2013, the arbitration committee reduced the amount claimed by 29. The dispute then entered into a judicial phase before the Tribunal des Affaires de Sécurité Sociale (“TASS”). At a hearing on January 12, 2017 before the TASS, the parties signed a conciliation agreement settling the audits covered by the above two cases.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Mexico
In 2015, the Mexican Tax Administration Service issued a tax assessment to ArcelorMittal Mexico, alleging that ArcelorMittal Mexico owes 160184 with respect to 2008, principally due to improper interest deductions relating to certain loans, and unpaid corporate income tax for interest payments that the tax authority has categorized as profit.dividends. In November 2015, ArcelorMittal Mexico filed an administrative appeal in respect of this assessment, which was dismissed by the tax authority. In November 2017, ArcelorMittal Mexico filed an annulment complaint before a Federal Administrative and Tax Justice Court, which has not been determined.
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| Consolidated financial statements 348 |
| (millions of U.S. dollar, except share and per share data) |
With respect to 2007 and 2009, the Mexican Tax Administration Service also challenged the interest deduction related to the aforementioned loans and issued tax assessments to ArcelorMittal Mexico for 2123 and 25,28, respectively. In November 2018, a Federal Administrative and Tax Justice Court ruled against the annulment complaint filed by ArcelorMittal Mexico in relation to the 2007 tax assessment and in December 2018, ArcelorMittal Mexico filed an appeala constitutional claim before the Collegiate Tribunal For Administrative Matters.Matters, which was rejected in June 2019. A review appeal was filed in July 2019 and rejected in August 2019. An extraordinary appeal of constitutional review was filed against this decision in September 2019 before the Supreme Court of Justice. In November 2019, the Court dismissed the extraordinary appeal of constitutional review confirming the earlier decision in favor of the tax authorities. No further appeal is possible. With respect to the 2009 tax assessment, in November 2016 ArcelorMittal Mexico filed an administrative appeal before the Administrative Authority on Federal Tax Matters, which has not been determined.was rejected in June 2020. In September 2020, an annulment complaint was filed before the Federal Administrative and Tax Justice Court. In December 2021, a reduction of the penalty component of the tax assessment was requested, an amount of 20 was paid and the Court issued a dismissal ruling in respect of this case, thereby closing the proceedings.
In 2013, the Mexican Tax Administration Service issued a tax assessment to ArcelorMittal Las Truchas, alleging that ArcelorMittal Las Truchas owes 6389 in respect of (i) non-payment of withholding tax on capitalized interest, (ii) non-deduction of accrued interest regarding certain loans, and (iii) reduction of assets taxthe taxable basis of assets in 2007. In 2015, ArcelorMittal Las Truchas filed an administrative appeal in respect of the aforementioned assessment, which the tax authority dismissed. In October 2015, ArcelorMittal Las Truchas filed an annulment complaint before the Federal Administrative and Tax Justice Court, which ruled partially in favor of ArcelorMittal Las Truchas in October 2018.2018 by declaring the illegality of item (i). The tax authority filed an application for judicial review in January 2019.2019 and in March 2020, the Court upheld the ruling in favor of ArcelorMittal Las Truchas regarding item (i) which decision is definitive. ArcelorMittal Las Truchas also filed a nullity lawsuit to challenge the ruling in respect of items (ii) and (iii), and, in June 2020, the Court upheld the rulings of the Tax Court. ArcelorMittal Las Truchas promptly thereafter submitted an extraordinary appeal for constitutional review before the Supreme Court of Justice regarding items (ii) and (iii).
In October 2018, the Mexican Tax Administration Service issued a tax assessment to ArcelorMittal Las Truchas, alleging that ArcelorMittal Las Truchas owes 8593 with respect to 2013 due to: (i) improper interest deductions relating to certain loans and (ii) non-deduction of advanced rent payments. In November 2018,
ArcelorMittal Las Truchas filed an administrative appeal before the Administrative Authority on Federal Tax Matters.Matters, which was partially rejected in June 2019 and is being appealed.
Ukraine
In August 2021, ArcelorMittal Kryvyi Rih commenced court proceedings to dispute the assessment by Ukrainian tax authorities of a subsoil usage rent/tax (in the amount of approximately 104) on production activities by ArcelorMittal Kryvyi Rih for the period from January 2015 to March 2019. In November 2021, the court found that the tax notice decision was illegal and cancelled it. The Ukrainian tax authorities and the Prosecutor’s office appealed this decision. Subsequently, (a) on November 17, 2021, the Prosecutor General’s office and the Security Service of Ukraine notified the Chief Financial Officer of ArcelorMittal Kryvyi Rih that he had been placed under an investigation on suspicion of alleged tax evasion and official forgery, and (b) on January 4, 2022 the Prosecutor General’s office, acting pursuant to a ruling of the Shevchenkivsky District Court of Kyiv dated November 30, 2021 blocked the accounts of ArcelorMittal Kryvyi Rih with 3 banks in Ukraine. ArcelorMittal Kryvyi Rih appealed the blocking of these accounts; as of the date of these financial statements, by court order the restrictions on 2 of the 3 accounts have been partially lifted to allow the payment of wages, taxes and other mandatory payments.
Kazakhstan
In November 2020, ArcelorMittal Temirtau filed a lawsuit in the Astana investment court against the State revenue committee. The dispute is related to a tax claim by the said committee resulting from an audit for the years 2013-2017. The court hearings started in February 2021 and resulted in a June 2021 judgment against ArcelorMittal Temirtau for 45 for tax and late payment interest as estimated by the authorities in their notification of September 28, 2020. ArcelorMittal Temirtau
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| 349 Consolidated financial statements |
appealed this decision with the Court of second instance, which confirmed the judgment in September 2021. The judgment came into force and was satisfied. In November 2021, ArcelorMittal filed an appeal with the Court of Cassation which in January 2022, the Court declined to hear bringing the case to an end.
In January 2022, ArcelorMittal Temirtau filed a lawsuit in the Nur-Sultan (Astana) administrative court against the State revenue committee.The dispute is related to a tax claim by the said committee in the amount of 63 resulting from an audit for the years 2018-2019. In January 2022, ArcelorMittal Temirtau withdrew the lawsuit and is paying the tax due with interest and the applicable administrative penalty.
Competition/Antitrust Claims
ArcelorMittal is a party to various competition/antitrust claims. As of December 31, 2018,2021, ArcelorMittal had not recorded any provisionsa non-material amount provision in respect of such claims. Set out below is a summary description of competition/antitrust claims (i) that constitute a contingent liability, (ii) that were resolved in 20182021 or (iii) that were resolved and had a financial impact in 20172020 or 2016,2019, in each case involving amounts deemed material by ArcelorMittal. The Company is vigorously defending against each of the pending claims discussed below.
Brazil
In September 2000, two2 construction trade organizations filed a complaint with Brazil’s Administrative Council for Economic Defense (“CADE”) against three3 long steel producers, including ArcelorMittal Brasil. The complaint alleged that these producers colluded to raise prices in the Brazilian rebar market, thereby violating applicable antitrust laws. In September 2005, CADE issued its final decision against ArcelorMittal Brasil, imposing a fine of 58.51. ArcelorMittal Brasil appealed the decision to the Brazilian Federal Court. In September 2006, ArcelorMittal Brasil offered a guarantee letter and obtained an injunction to suspend enforcement of this decision pending the court’s judgment. In September 2017, the Court found against ArcelorMittal Brasil. In October 2017, ArcelorMittal Brasil filed a motion for clarification of this decision, which was dismissed. In December 2017, ArcelorMittal Brasil filed an appeal to the second judicial instance.
There is also a related class action commenced by the Federal Public Prosecutor of the state of Minas Gerais against ArcelorMittal Brasil for damages in an amount of 6259 based on the alleged violations investigated by CADE.
A further related lawsuit was commenced in February 2011 by four4 units of Sinduscons, a civil construction trade organization, in federal court in Brasilia against, inter alia, ArcelorMittal Brasil claiming damages based on an alleged cartel in the rebar market as investigated by CADE and as noted above.
Romania
ARCELORMITTAL AND SUBSIDIARIES
NotesIn November 2018, the Comision Nacional de los Mercados y la Competencia (“CNMC”), the Spanish competition authority, carried out a dawn raid at the offices of ArcelorMittal in Villaverde (Madrid) in relation to Consolidated Financial Statements
(millionsa preliminary investigation concerning alleged coordination between competitors to fix the purchase price of U.S. dollars, except sharescrap. In March 2020, further dawn raids were carried out extending the investigation to the sale of long products. In July 2020, CNMC announced that they were commencing a formal sanctioning procedure against ArcelorMittal Spain Holding ("AMSH") and per share data)
In 2010its subsidiaries ArcelorMittal Madrid, ArcelorMittal Comercial Perfiles España, ArcelorMittal Aceralia Basque Holding (“AMABH”), and 2011, ArcelorMittal Galati entered into high volume electricity purchasing contracts with Hidroelectrica, Arcelor Mittal España partially state-owned electricity producer. Following allegations by Hidroelectrica’s minority shareholders that ArcelorMittal Galati (and other industrial electricity consumers) benefited from artificially low tariffs, the European Commission opened a formal investigation into alleged state aid in April 2012. The European Commission announced on June 12, 2015 that electricity supply contracts signed by Hidroelectrica with certain electricity traders and industrial customers (including the one entered bycompanies not part of ArcelorMittal Galati) did not involve state aid within the meaning of the EU rules. In March 2017, the European Commission's decision was officially published. As no challenge was filed within two months of publication, the decision has become definitive.
South Africa
In February 2007, the complaint previously filed with the South African Competition Commission by Barnes Fencing, a South African producer of galvanized wire, alleging that ArcelorMittal South Africa, as a “dominant firm”, discriminated in pricing its low carbon wire rod was referred to the Competition Tribunal. The Competition Commission sought an order declaring that ArcelorMittal South Africa’s pricing in 2000-2003group) in respect of low carbon wire rod amounted to price discriminationpurchases of scrap and an order that ArcelorMittal South Africa cease its pricing discrimination. In March 2008, the Competition Tribunal accepted the claimants’ application for leave to intervene. In November 2012, a second complaint alleging price discrimination regarding the same product over the 2004 to 2006 period was referred by the Competition Commission to the Competition Tribunal. ArcelorMittal is unable to assess the outcomesale of these proceedings or the amount of ArcelorMittal South Africa’s potential liability, if any.
On September 1, 2009, the South African Competition Commission referred a complaint against four producers of long carbon steel in South Africa, including ArcelorMittal South Africa, and the South African Iron and Steel Institute to the Competition Tribunal. The complaint referral followed an investigation into alleged collusion among the producers initiated in April 2008, on-site inspections conducted at the premises of some of the producers and a leniency application by Scaw South Africa, one of the producers under investigation. The Competition Commission recommended that the Competition Tribunal impose an administrative penalty against ArcelorMittal South Africa, Cape Gate and Cape Town Iron Steel Works in the amount of 10% of their annual revenues in South Africa (in the year preceding any final decision) and exports from South Africa for 2008. ArcelorMittal filed an application to access the file of the Competition Commission that was rejected. ArcelorMittal appealed the decision to reject the application, and applied for a review of that decision and a suspension of the obligation to respond to the referral on the substance pending final outcome on the application for access to the documents. The appeal was upheld by the Competition Appeals Court (CAC) and the matter was referred back to the Competition Tribunal for a determination of confidentiality and scope of access to the documents. The Competition Commission appealed the decision of the CAC, and, on May 31, 2013, the Supreme Court of Appeal dismissed the appeal of the Competition Commission and confirmed the decision of the CAC. In 2014, ArcelorMittal South Africa requested the documents from the Competition Commission, which provided an index thereof. On July 7, 2011, ArcelorMittal filed an application before the Competition Tribunal to set aside the complaint referral based on procedural irregularities but this application was withdrawn by notice dated August 7, 2014.
In March 2012, the South African Competition Commission referred to the Competition Tribunal an allegation that ArcelorMittal South Africa and steel producer Highveld acted by agreement or concerted practice to fix prices and allocate markets in respect of certain flat carbonfinished steel products, over a period of 10 years (1999-2009) in contravention of the South African Competition Act.
especially long products. In August 2013,2021, the South African Competition Commission referredCNMC issued a complaint against four scrap metal purchasersstatement of objections to AMSH and AMABH, among other parties. The CNMC stated that it had found evidence of a purported cartel in South Africa, including ArcelorMittal South Africa, to the South African Competition Tribunal for prosecution. The complaint alleged collusion among the purchasers to fix the price and other trading conditions forterms of the purchase of scrap, over a period from 1998 to at least 2008.
In relation to all these cases, following an extensive engagement, ArcelorMittal South Africa reached an agreement on an overall settlementwhile noting that it had not found evidence of infringement with the Competition Commission for an amount of 1.5 billion South African rand (approximately 110). In October 2016, Barnes Fencing filed an application with the Competition Tribunal to review and set aside the said settlement agreement in respect of the Barnes matters. In addition, Barnes filed an objectionregard to the settlement agreementsales of long products. The infringement with respect to the scrap was alleged to have taken place from 2009 to 2020 and an applicationis attributed to stay. The settlement agreement, as amendedAMSH and AMABH. In September 2021, AMSH and AMABH responded to exclude the Barnes case referredallegations and objected to above, was approved, subjectthe claims of infringement. In November 2021, the CNMC notified AMABH and AMSH of its resolution proposal to minor amendments, bybe submitted to the Competition Tribunal, on November 16, 2016.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millionsCouncil proposing a sanction for AMABH, with joint and several liability for AMSH, of U.S. dollars, except share and per share data)
Germany
In the first half of 2016, the German Federal Cartel Office carried out unannounced investigations of ArcelorMittal Ruhrort GmbH and ArcelorMittal Commercial Long Deutschland GmbH following alleged breaches of antitrust rules. ArcelorMittal Ruhrort GmbH and ArcelorMittal Commercial Long Deutschland GmbH cooperated with the German Federal Cartel Office in its investigation and, in July 2018, as a result3 (€2.7 million which is 6.5% of a settlement process,turnover figure of €42.3 million) and notified AMSH and AMABH that it had restricted the Company andalleged infringement due to certain contacts held from January to August 2018. On December 16, 2021, AMABH filed its challenge to the Federal Cartel Office reached agreementresolution proposal, together with an economic report as toproof of market structure. In March 2022, the CNMC decided on a 146 fine to be paid by ArcelorMittal Commercial Long Deutschland GmbH. The fine was paid in August 2018 ending the investigationsanction for AMABH of 14 (€12.1 million based on a turnover which CNMC determined as concerns the ArcelorMittal entities.
In August 2017, the German Federal Cartel Office carried out unannounced investigations of ArcelorMittal Bremen, ArcelorMittal Eisenhüttenstadt GmbH and ArcelorMittal Berlin Holding GmbH principallyrelating to alleged breaches of antitrust rules concerning (i) agreement between flat steel producers regarding extras€226.6 million). AMABH has 2 months from June 2006 - March 2016 (ii) impermissible exchanges of sensitive information between competitors from 1986 - 2016 and (iii) agreement to continue market and price structure introduced by the European Coal and Steel Community from 2002-2016. ArcelorMittal has not, to the date of this annual report, received subsequent communications fromdecision to appeal to the German Federal Cartel Office in this respect.Spanish Court.
Other Legal Claims
ArcelorMittal is a party to various other legal claims. As of December 31, 2018,2021, ArcelorMittal had recorded provisions of 249244 for other legal claims in respect of which it considers the risk of loss to be probable. Set out below is a summary description of the other legal claims (i) in respect of which ArcelorMittal had recorded a provision as of December 31, 2018,2021, (ii) that constitute a contingent liability, (iii) that were resolved in 2018,2021, or (iv) that were resolved and had a financial impact in 20172020 or 2016,2019, in each case involving amounts deemed material by ArcelorMittal. The Company is vigorously defending against each of the claims discussed below that remain pending.
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| Consolidated financial statements 350 |
| (millions of U.S. dollar, except share and per share data) |
Argentina
Over the course of 2007 to 2018,2021, the Argentinian Customs Office Authority (Aduana)(“Aduana”) notified Acindar, the Company's Argentinian subsidiary, of certain inquiries that it was conducting with respect to prices declared by Acindar related to iron ore imports. The Customs Office Authority was seeking to determine whether Acindar incorrectly declared prices for iron ore imports from several different Brazilian and Bolivian suppliers and from ArcelorMittal Sourcing originally on 39 different claims concerning several shipments made between 2002 and 2014. The investigations are subject to the administrative procedures of the Customs Office Authority and are at different procedural stages depending on the filing date of the investigation. In March 2018, the Customs Office Authority issued a general instruction that ordersordered customs to withdraw current claims related to the difference between import prices in Argentina and export prices of iron ore when exiting Brazil. This will haveBrazil, which has led to a material impact onreduction in the number of claims madeand amounts claimed against Acindar although the exact impact cannot be quantified at this stage.Acindar. As of February 2019,December 2021, the aggregate amount claimed by the Customs Office Authority in respect of all iron ore shipments is 139119 in 2622 different cases. Of these 2622 cases, 87 are still in the administrative branch of the Customs Office Authority and the other 1815 cases, in which the administrative branch of the Customs Office Authority ruled against Acindar, have been appealed to the Argentinian National Fiscal Court.
Brazil
In 2015, the SINDIMETAL (employees’ union) filed a lawsuit against ArcelorMittal Brasil to annul all the collective labor agreements related to 12-hour work shifts. In 2018, at the Labor Court of Vitória/ES, the case was dismissed. SINDIMETAL subsequently appealed to the Regional Labor Court of Appeals, which in 2019 reversed the ruling of the first judicial instance and ordered the payment of overtime wages, based on the argument that the 12-hour working day was unconstitutional. In September 2019, ArcelorMittal Brasil filed an appeal with the Superior Labor Court on the grounds of (i) the constitutionality of collective labor agreements; (ii) ArcelorMittal Brasil was obliged to maintain the 12-hour work shift in the period between November 2011 and November 2012 by another judicial decision; and (iii) the Supreme Court has ordered the suspension of legal proceedings in which there is a discussion about the validity of collective labor agreements due to a pending decision in a case not involving ArcelorMittal Brasil with binding precedential value on similar cases. This decision impacts a group of approximately 2,500 employees.
In April 2017, a shareholder in Siderúrgica Três Lagoas (“SITREL”) (of which ArcelorMittal Brasil is the other shareholder), commenced an arbitration against Votorantim Siderurgia S.A. (which subsequently merged into ArcelorMittal Brasil) and SITREL with the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM-CCBC). The
dispute concerns a provision in SITREL’s joint venture agreement relating to the formula used to determine the selling price for steel billets supplied by ArcelorMittal Brasil to SITREL from January 2013 onwards. The shareholder has alleged that the steel billets were overpriced and is seeking compensation for overpaid amounts on both a retrospective and prospective basis, with the initial amount claimed totaling 33. In October 2021, the CAM-CCBC decided against ArcelorMittal Brasil and awarded damages that are likely to exceed 50. In November 2021, ArcelorMittal Brasil filed a motion for clarification and disqualification request to the CAM-CCBC in relation to a conflict of interest concerning the other party's appointed arbitrator. The CAM-CBCC issued a stay on the clarification request, pending resolution on the disqualification challenge. In December 2021, an Independent Arbitrators Committee was formed to decide on the disqualification claim.
Canada
In April 2011, a proceeding was commenced before the Ontario (Canada) Superior Court of Justice under the Ontario Class Proceedings Act, 1992, against ArcelorMittal, Baffinland, and certain other parties relating to the January 2011 take-over of Baffinland by ArcelorMittal, Nunavut Iron Ore Holdings and 1843208 Ontario Inc. The action alleges that the tender offer document contained certain misrepresentations and seeks damages in an aggregate amount of 734764 (CAD 1 billion) or rescission of the transfer of the Baffinland securities by members of a class comprised of all Baffinland securities holders who tendered their Baffinland securities, and whose securities were taken up, in connection with the take-over between September 22, 2010 and February 17, 2011, or otherwise disposed of their Baffinland securities on or after January 14, 2011. The class certification hearings were held in January 2018, and the court certified the class in a decision dated May 18, 2018. The court also certified the statutory circular misrepresentation, insider trading, unjust enrichment and oppression claims. The court included in the class persons who tendered their Baffinland securities to the take-over bid and, for purposes of the oppression claims only, persons who sold their Baffinland securities in the secondary market after January 13, 2011. The court excluded from the class those persons who disposed of their Baffinland securities pursuant to a court ordered plan of arrangement. In June 2019, the parties entered into a settlement agreement in which the defendants agreed to pay 5 (CAD 6.5 million) to the class subject to the approval of the court. The settlement contained a threshold for opt outs which, if exceeded, gave any of the defendants the right to terminate the settlement. The settlement was approved by the Ontario Court in September 2019 and, following the expiry of the period for any appeal, is now final.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| 351 Consolidated financial statements |
Italy
In January 2010, ArcelorMittal received notice of a claim filed by Finmasi S.p.A. relating to a memorandum of agreement (“MoA”) entered into between ArcelorMittal Distribution Services France (“AMDSF”) and Finmasi in 2008. The MoA provided that AMDSF would acquire certain of Finmasi’s businesses for an amount not to exceed 106,114, subject to the satisfaction of certain conditions precedent, which, in AMDSF’s view, were not fulfilled. Finmasi sued for (i) enforcement of the MoA, (ii) damages of 1617 to 2729 or (iii) recovery costs plus quantum damages for Finmasi’s alleged lost opportunity to sell to another buyer. In September 2011, the court rejected Finmasi’s claims other than its second claim. The court appointed an expert to determine the quantum of damages. In May 2013, the expert’s report was issued and valued the quantum of damages in the range of 4746 to 68.73. ArcelorMittal appealed the decision on the merits. In May 2014, the Court of Appeal issued a decision rejecting ArcelorMittal’s appeal. On June 20, 2014, ArcelorMittal filed an appeal of the Court of Appeal’s judgment with the Italian Court of Cassation. On April 11, 2018, the Court of Cassation rejected the appeal on the merits and upheld the Court of Appeal’s decision. On December 18, 2014, the Court of Milan issued a decision on the quantum of the damages and valued the quantum of damages in the sum of 2729 plus interest. In June 2015, both parties served appeals of the decision on the quantum, with ArcelorMittal also seeking the suspension of the enforceability of the decision. On July 1, 2015, Finmasi formally notified to AMDSF the declaration of enforcement of the decision of December 18, 2014. On July 28, 2015, AMDSF filed an appeal against such declaration with the Court of Appeal of Reims in France. At a hearing on December 1, 2015, the Italian Court of Appeal accepted the suspension of the enforcement of the decision of December 18, 2014, following the agreement of AMDSF to provide a guarantee for its value. In March 2016, on the joint application of the parties, the Court of Appeal of Reims ordered the suspension of the proceedings. On July 19, 2018, the Court of Appeal upheld the Court of Milan’s decision on quantum dated December 18, 2014. In September 2018, ArcelorMittal filed an appeal to the Court of Cassation. In January 2019, Finmasi called on the AMDSF guarantee issued in the context of the enforcement proceedings that were suspended in 2015. In August 2020, the Court of Cassation quashed the Court of Appeal decision on quantum and referred the case back to the Court of Appeal for further review of the quantum in respect of which Finmasi formally served their writ of summons in October 2020 asking the Court of Appel to confirm the first instance judgment on quantum. Following the decision of the Court of Cassation, Finmasi has repaid half of the amount of the guarantee that was called and has agreed to provide a bank guarantee for the remainder.
On November 4, 2019, ArcelorMittal sent to the Commissioners governing the Ilva insolvency procedure (the “Commissioners”)
a notice to withdraw from or terminate the lease agreement with a conditional obligation to purchase the business of Ilva and certain of its subsidiaries. This notice was based, among other things, on provisions of the agreement that allow withdrawal in the event that a new law affects it’s environmental plan for the Taranto plant in such a way that materially impairs the ability of ArcelorMittal Italia to operate the plant or implement its industrial plan; these provisions were triggered following the Italian Parliament’s removal, on November 3, 2019, of the legal protection necessary for ArcelorMittal Italia to implement its environmental plan without risk of criminal liability. In response, the Commissioners filed suit in Milan seeking an injunction to prevent ArcelorMittal's withdrawal and termination of the agreement. Following negotiation between the parties, on March 4, 2020, ArcelorMittal and the Commissioners entered into a settlement agreement whereby ArcelorMittal agreed to revoke its notice to withdraw from the original Ilva lease agreement and the Ilva Commissioners agreed to withdraw their request for an injunction.
In addition, following a complaint filed by the Commissioners, in mid-November 2019, prosecutors in Milan and Taranto opened investigations into potential violations of numerous criminal laws. Following the (i) search decrees issued by the Milan and Taranto Prosecution Offices and ensuing seizures of documents in November 2019, and (ii) restitution decree issued by the Milan Prosecution Office in September 2020. The Milan Public Prosecutors closed one of the investigations which began in November 2019 concluding that there was no evidence to support allegations of violations of numerous criminal laws relating principally to ArcelorMittal's withdrawal from the lease agreement for the Ilva plants and asked the judge for preliminary investigations to close the case. ArcelorMittal Italia (renamed Acciaierie d’Italia in April 2021 after the formation of a partnership with Invitalia see note 2.3.1) has not been notified of further developments in the other pending criminal cases. It is not possible to predict the timing or outcome and is not possible to foresee any charges for Acciaierie d'Italia.
In February 2020, the Mayor of Taranto issued an order to ArcelorMittal Italia related to certain emissions events that appear to have occurred in August 2019 and on February 22 and 23, 2020 and that allegedly concern the Taranto plant. The order required ArcelorMittal Italia to identify the responsible installations in 30 days and eliminate any anomalies within the subsequent 30 days or, if necessary, shut down certain installations relating to such emissions events (provided that, if no such identification was completed, the shut down would extend to substantially the entire "hot area" of the plant). The Mayor of Taranto further alleged that adequate responses concerning such emissions were not received from the Ministry of the Environment. In response to this order, ArcelorMittal Italia filed an appeal on the merits and an application for interim
| | |
| Consolidated financial statements 352 |
| (millions of U.S. dollar, except share and per share data) |
measures to stay the order with the Regional Administrative Court in Lecce. In April 2020, the court upheld ArcelorMittal Italia’s application for interim measures and suspended the Mayor of Taranto’s order until a further hearing in October 2020. The interim order further required the Ministry of the Environment to file reports concerning the emissions events which served as the basis for the Mayor of Taranto’s order. After the Ministry provided such reports, the October 2020 hearing was postponed until December 15, 2020, at which hearing the Court confirmed the suspension of the order and scheduled the hearing for the discussion of the merits for January 27, 2021. On February 13, 2021, the Court rejected ArcelorMittal Italia’s appeal. On February 18, 2021, ArcelorMittal Italia filed an appeal with the State Council (the highest appellate body in this case) on the merits and also requested an ex parte order to suspend the judgment pending a ruling on the merits. On February 19, 2021, the State Council (i) found that the 30-day period during which ArcelorMittal Italia would have to shut down installations has not yet started and would commence only on March 16, 2021, i.e., after the hearing to discuss the request for interim measures (which it set for March 11, 2021) and therefore found a lack at the time of demonstrable “extreme gravity and urgency” necessary for interim measures, and (ii) set a hearing date of May 13, 2021 in respect of the merits. On June 23, 2021, the judgment of the Council of State was published, upholding Acciaierie d'Italia’s appeal, setting aside the Mayor of Taranto’s order as unlawful on various grounds, and thereby enabling Acciaierie d'Italia to continue operating the Taranto plant.
Luxembourg
In June 2012, the Company received writs of summons in respect of claims made by 59 former employees of ArcelorMittal Luxembourg. The claimants allege that they are owed compensation based on the complementary pension scheme that went into effect in Luxembourg in January 2000. The aggregate amount claimed by such former employees (bearing in mind that other former employees may bring similar claims) is 68.67. Given the similarities in the claims, the parties agreed to limit the pending proceedings to four4 test claims. In April 2013, the Esch-sur-Alzette labor court rejected two2 of these test claims. The relevant plaintiffs are appealing these decisions. In November 2013, the Luxembourg city labor court rejected the two2 other test claims, which are also being appealed.were appealed but were terminated by the court in November 2021.
France
Certain subsidiaries of the ArcelorMittal group arewere parties to proceedings, dating from 2010, against Engie and Engie Thermique France which claimclaimed damages in the amount of 156 or alternatively 165187 for an alleged wrongful termination of a contract for the transformation of steel production gas into electricity. The ArcelorMittal subsidiaries havehad filed a counterclaim in the amount
of 139.232. The contract had been entered into in 2006 for a term of 20 years. ArcelorMittal Méditerranée terminated it in July 2010 on the basis that Engie was solely responsible for the delay in the commissioning of the power plant (which suffered from significant malfunctions) constructed for the transformation of steel production gas into electricity. Engie claimsclaimed that ArcelorMittal was in breach of the contract at the time of the termination due to certain alleged issues with the furnishing and quality of its steel production gas, and therefore unable to terminate the contract based on the sole breaches of Engie. The case iswas heard before the Commercial Court of Nanterre. In November 2019, the Appeals Court of Versailles determined (having been asked to decide whether a decision by the Commercial Court of Nanterre was in fact an official, formal judgment) that the earlier decision of the Commercial Court of Nanterre was the official first instance decision of the court. As a result, ArcelorMittal is vigorously defending itselfwas ordered to pay damages of 3 plus interest. In February 2020, Engie filed an appeal. A settlement agreement was signed in this matter and vigorously pursuing its counterclaim.July 2021, bringing the litigation to an end.
Retired and current employees of certain French subsidiaries of the former Arcelor have initiated lawsuits to obtain compensation for asbestos exposure in excess of the amounts paid by French social security (“Social Security”). Asbestos claims in France initially are made by way of a declaration of a work-related illness by the claimant to the Social Security authorities resulting in an investigation and a level of compensation paid by Social Security. Once the Social Security authorities recognize the work-related illness, the claimant, depending on the circumstances, can also file an action for inexcusable negligence (faute inexcusable) to obtain additional compensation from the company before a special tribunal. Where procedural errors are made by Social Security, it is required to assume full payment of damages awarded to the claimants. Due to fewer procedural errors made by Social Security, changes in the regulations and, consequently, fewer rejected cases, ArcelorMittal has been required to pay some amounts in damages since 2011.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The number of claims outstanding for asbestos exposure at December 31, 20182021 was 367300 as compared to 404324 at December 31, 2017.2020. The range of amounts claimed for the year ended December 31, 20182021 was $35,000$22,000 to $745,000.$680,000. The aggregate costs and settlements for the year ended December 31, 20182021 were 7.67,5.48, of which 0.270.22 represented legal fees and 7.45.26 represented damages paid to the claimant. The aggregate costs and settlements for the year ended December 31, 20172020 were 6.4,4.79, of which 0.250.2 represented legal fees and 6.14.59 represented damages paid to the claimant.
| | |
| 353 Consolidated financial statements |
Minority Shareholder Claims Regarding the Exchange Ratio in the Second-Step Merger of ArcelorMittal into Arcelor
ArcelorMittal is the company that results from the acquisition of Arcelor by Mittal Steel N.V. in 2006 and a subsequent two-step merger between Mittal Steel and ArcelorMittal and then ArcelorMittal and Arcelor. Following completion of this merger process, several former minority shareholders of Arcelor or their representatives brought legal proceedings regarding the exchange ratio applied in the second-step merger between ArcelorMittal and Arcelor and the merger process as a whole.
ArcelorMittal believes that the allegations made and claims brought by such minority shareholders are without merit and that the exchange ratio and merger process complied with the requirements of applicable law, were consistent with previous guidance on the principles that would be used to determine the exchange ratio in the second-step merger and that the merger exchange ratio was relevant and reasonable to shareholders of both merged entities.
Set out below is a summary of ongoing matters in this regard. Several other claims brought before other courts and regulators were dismissed and are definitively closed.
On January 8, 2008, ArcelorMittal received a writ of summons on behalf of four hedge fund shareholders of Arcelor to appear before the civil court of Luxembourg. The summons was also served on all natural persons sitting on the Board of Directors of ArcelorMittal at the time of the merger andincluding Mr. Lakshmi Mittal, as well as on Mrs. Usha Mittal, among other parties.the Significant Shareholder. The plaintiffs alleged in particular that, based on Mittal Steel’s and Arcelor’s disclosure and public statements, investors had a legitimate expectation that the exchange ratio in the second-step merger would be the same as that of the secondary exchange offer component of Mittal Steel’s June 2006 tender offer for Arcelor (i.e., 11 Mittal Steel shares for 7 Arcelor shares), and that the second-step merger did not comply with certain provisions of Luxembourg company law. They claimed, inter alia, the cancellation of certain resolutions (of the Board of Directors and of the Shareholders meeting) in connection with the merger, the grant of additional shares, or damages in an amount of 216.221. By judgment dated November 30, 2011, the Luxembourg civil court declared all of the plaintiffs’ claims inadmissible and dismissed them. The judgment was appealed in May 2012. By judgment dated February 15, 2017, the Luxembourg Court of Appeal declared all but one of the plaintiffs’ claims inadmissible, remanded the proceedings on the merits to the lower court with respect to the admissible claimant and dismissed all other claims. In June 2017, the plaintiffs filed an appeal of this decision to the Court of Cassation. The Court of Cassation confirmed the Court of Appeal’s judgment on May 18, 2018. The proceedings remain pendingadmissible claimant finally withdrew its claims before the lower court withand by judgment dated January 5, 2022, the admissible claimant who claims inter alia,civil court of Luxembourg acknowledged the cancellation of certain resolutions (of the Board of Directors andwithdrawal of the Shareholders meeting) in connection withclaims without prejudice and ended the merger, the grant of additional shares, or damages in an amount of 25.procedure.
On May 15, 2012, ArcelorMittal received a writ of summons on behalf of Association Actionnaires d'Arcelor (“AAA”), a French association of former minority shareholders of Arcelor, to appear before the civil court of Paris. In such writ of summons, AAA claimed (on grounds similar to those in the Luxembourg proceedings summarized above) inter alia damages in a nominal amount and reserved the right to seek additional remedies including the cancellation of the merger. The proceedings before the civil court of Paris have beenwere stayed, pursuant to a ruling of such court on July 4, 2013, pending a preparatory investigation (instruction préparatoire) by a criminal judge magistrate (juge d’instruction) triggered by the complaints (plainte avec constitution de partie civile) of AAA and several hedge funds (who quantified their total alleged damages at 282), including those who filed the claims before the Luxembourg courts described (and quantified) above. The dismissal of charges (non-lieu) ending the preparatory investigation became final in March 2018. On March 6, 2020 AAA revived its claim before the civil court of Paris on grounds similar to those of the Luxembourg civil claims summarized above, on its behalf and on behalf of the hedge funds who had also filed a criminal complaint, as well as 2 new plaintiffs.The complaint filed by AAA quantifies the total damages claimed at 442 (€390 million) (including the claims before the Luxembourg courts described above).
9.4 Commitments
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Purchase commitments | 13,509 | | | 13,047 | |
| Guarantees, pledges and other collateral | 8,003 | | | 8,632 | |
| | | |
| Capital expenditure commitments | 330 | | | 354 | |
| Other commitments | 1,576 | | | 3,143 | |
| Total | 23,418 | | | 25,176 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
8.4 Commitments |
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Purchase commitments | 24,594 |
| | 24,734 |
|
| Guarantees, pledges and other collateral | 5,527 |
| | 5,021 |
|
| Non-cancellable operating leases | 1,869 |
| | 1,311 |
|
| Capital expenditure commitments | 697 |
| | 878 |
|
| Other commitments | 3,516 |
| | 1,206 |
|
| Total | 36,203 |
| | 33,150 |
|
Purchase commitments
Purchase commitments consist primarily of major agreements for procuring iron ore, coking coal, coke and hot metal. The Company also has a number of agreements for electricity, industrial and natural gas, scrap and freight. In addition to those purchase commitments disclosed above, the Company enters into purchasing contracts as part of its normal operations which have minimum volume requirements but for which there are no take-or-pay or penalty clauses included in the contract. The Company does not believe these contracts have an adverse effect on its liquidity position.
Purchase commitments includeincluded commitments given to associates for 4051,562 and 5201,276 as of December 31, 20182021 and 2017,2020, respectively. Purchase commitments includegiven to associates included 819 and 561 as of December 31, 2021 and 2020, respectively, related to the gas supply agreement with Kryvyi
| | |
| Consolidated financial statements 354 |
| (millions of U.S. dollar, except share and per share data) |
Rih Industrial Gas. Purchase commitments included commitments given to joint ventures for 2,2461,140 and 1,5501,570 as of December 31, 20182021 and 2017,2020, respectively. CommitmentsPurchase commitments given to joint ventures include 1,489included 611 and 1,481737 related to purchase of the output from Tameh as of December 31, 2018 and 2017 respectively,515 and 711604 related to purchase of the output from Enerfos as of December 31, 2018.2021 and 2020, respectively.
Purchase commitments include commitments given by Ilva remedies classified as held for sale for 910 as of December 31, 2018.
Guarantees, pledges and other collateral
Guarantees related to financial debt and credit lines given on behalf of third parties were 235146 and 266150 as of December 31, 20182021 and 2017,2020, respectively. Additionally, 7guarantees of 12 and 13nil were related to guarantees given on behalf of associates asand guarantees of December 31, 20184,295 and 2017, respectively. Guarantees of 1,079 and 1,0224,477 were given on behalf of joint ventures as of December 31, 20182021 and 2017,2020, respectively.
Guarantees given on behalf of joint ventures included 279 and 226 on behalf of Calvert, 175 and 347 on behalf of Al Jubail and 323 and 242 in relation to outstanding lease liabilities for vessels operated by Global Chartering as of December 31, 2021 and 2020, respectively. Guarantees given on behalf of joint ventures include 348 and 406 for the guarantees issued on behalf of Calvert and 397 and 382 for the guarantees issued on behalf of Al Jubailalso included 3,088 as of December 31, 20182021 and 2017, respectively. Due2020 corresponding to ArcelorMittal's 60% guarantee of the failure5,146 ten-year term loan agreement entered into by the AMNS India joint venture with various Japanese banks on March 16, 2020.
As of other shareholders to provide requisite equity funding by December 31, 2018, the Al Jubail joint venture’s indebtedness became technically in default as of such date. ArcelorMittal’s guarantee of such indebtedness has not been called by the lenders, and ArcelorMittal does not currently expect it to be called. ArcelorMittal is working with the other shareholders in the joint venture to resolve the situation through their contribution of the requisite equity and currently expects the technical default to be cured in the near term. The technical default relates only to the indebtedness of the joint venture and is not expected to affect the availability or maturity of any borrowings of ArcelorMittal.
Pledges2021, pledges and other collateral mainly relaterelated to (i) mortgages entered into by the Company’s operating subsidiaries and (ii) inventories and receivables pledged to secure the South African Rand revolving borrowing base finance facility for the amount drawn of 21,113 and ceded bank accounts to secure environmental obligations, true sale of receivables programs and the revolving borrowing base finance facility in South Africa of 122 and mortgages entered into by the Company’s operating subsidiaries.89. Pledges of property, plant and equipment were 225111 and 282136 as of December 31, 20182021 and 2017,2020, respectively. Other sureties, first demand guarantees, letters of credit, pledges and other collateral included 380406 and 419407 of commitments given on behalf of associates as of December 31, 20182021 and 2017, respectively. Other sureties, first demand guarantees, letters of credit, pledges2020, respectively, and other collateral included 154452 and 164173 of commitments given on behalf of joint ventures as of December 31, 20182021 and 2017,2020, respectively. The increase in commitments given on behalf of joint ventures is mainly due to guarantees of 241 given on behalf of Acciaierie d'Italia, which is accounted for as a joint venture since April 14, 2021 (see note 2.4.1).
In addition,As of December 31, 2020, other sureties, first demand guarantees, letters of credit, pledges and other collateral included 567 in relation260 with respect to a performance guaranteepledged cash collateral provided by the Company for the executionuntil collection of the ESIL resolution plan asTSR receivables retained in ArcelorMittal USA after disposal. As of December 31, 2018.2021, the cash collateral was released.
Other sureties, first demand guarantees, letters of credit, pledges and other collateral include commitments given by Ilva remedies classified as held for sale for 18 as of December 31, 2018.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Non-cancellable operating leases
The Company leases various facilities, land and equipment under non-cancellable lease arrangements. Future minimum lease payments required under operating leases that have initial or remaining non-cancellable terms as of December 31, 2018 and 2017 according to maturity periods are as follows:
|
| | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Less than 1 year | 322 |
| | 315 |
|
| 1-3 years | 414 |
| | 412 |
|
| 4-5 years | 262 |
| | 252 |
|
| More than 5 years | 871 |
| | 332 |
|
| Total | 1,869 |
| | 1,311 |
|
Non-cancellable operating leases include time charter arrangements for shipping activities and usufruct of land in Poland. The operating leases expense was 564, 542 and 521 in 2018, 2017 and 2016, respectively out of which 77, 42 and 98 are related to contingent rents. The non-cancellable operating leases commitments at December 31, 2018 are related to plant, machinery and equipment (778), buildings (181), land (871) and other (39).
Capital expenditure commitments
Capital expenditure commitments mainly relate to commitments associated with investments in expansion and improvement projects by various subsidiaries.
In 2016, AMSA committed to an investment program in connection with the competition commission settlement. The remaining capital expenditure commitment was 171100 and 126 as of December 31, 2018.2021 and 2020, respectively.
Capital expenditure commitments also include 413included 158 and 196 as of December 31, 2021 and 2020, respectively, for the 1,000 three-year1 billion investment program at the Company's Mexican operations, announced in 2017, which is focused on building ArcelorMittal Mexico’s downstream capabilities. The main investment will beis related to the construction of a new hot strip mill with capacity of approximately 2.5 million tonnes.
Other commitments
Other commitments given comprise mainly commitments incurred for gas supply to electricity suppliers.
As of September 21, 2018 an Environmental Commitment Agreement ("ECA") has been executed between ArcelorMittal Brasil, local government and the Brazilian environmental authorities. ArcelorMittal Brasil committed to carry out, over the next 5 years, a series of environmental operational and capital investments with the aim to reduce atmospheric emissions from the Company's Tubarão site. To comply with the ECA requirements, ArcelorMittal Brasil may need to acquire new equipment and change some of its current operating methods and processes. TheAs of December 31, 2021, ArcelorMittal Brasil estimated the underlying costs to implement those investments are still being estimated by ArcelorMittal Brasil and the outcome of this estimate could be material.at 87. The non-compliance with ECA would lead to fines amounting to a maximum of 26.18 and 19 as of December 31, 2021 and 2020, respectively. On November 19, 2021, following a protocol of intent agreed between the Minas Gerais State Government, ArcelorMittal Brasil and BMB Belgo Mineira Bekaert Artefatos De Arame Ltd ("BMB"), other commitments increased by 442 as a result of ArcelorMittal Brasil's commitment to carry out capital expenditures at the Monlevade industrial plant to complete the expansion project by the second half of 2024.
The agreement relating toOther commitments decreased by 1,940 in 2021 following the Ilva acquisition includes 1,439 industrialderecognition of 1,357 capital expenditure commitments over a seven-year period focused onrelating to blast furnaces, steel shops and finishing lines and 917583 environmental capital expenditure commitments.commitments as of December 31, 2020 with respect to Acciaierie d'Italia.
Commitments to sell
In addition to the commitments presented above, the Company has firm commitments to sell for which it also has firm commitments to purchase included in purchase commitments
| | |
| 355 Consolidated financial statements |
for 201292 and 286211 as of December 31, 20182021 and 2017,2020, respectively, and mainly related to natural gas and electricity.
NOTE 9:10: INCOME TAXES
The current tax payable (recoverable) is based on taxable profit (loss) for the year. Taxable profit differs from profit as reported in the consolidated statements of operations because it excludes items of income or expense that are taxable or deductible in other years or are never taxable or deductible. The Company’s current income tax expense (benefit) is calculat
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
edcalculated using tax rates that have been enacted or substantively enacted as of the date of the consolidated statements of financial position.
Tax is charged or credited to the consolidated statements of operations, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the tax is recognized in other comprehensive income or in equity.
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities, in the consolidated financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the statements of financial position liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences and net operating loss carry forwards to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the taxable temporary difference arises from the initial recognition of non-deductible goodwill or if the differences arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the profit reported in the consolidated statements of operations.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except if the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which the benefits of the temporary differences can be utilized and are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted at the consolidated statements of financial position date. The
measurement of deferred tax assets and liabilities reflects the tax consequences that would result from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
The carrying amount of deferred tax assets is reviewed at each consolidated statements of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to enable all or part of the asset to be recovered. The Company reviews the deferred tax assets in the different jurisdictions in which it operates to assess the possibility of realizing such assets based on projected taxable profit, the expected timing of the reversals of existing temporary differences, the carry forward period of temporary differences and tax losses carried forward and the implementation of planning strategies. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the deferred tax assets are subject to substantial uncertainties. In case a history of recent losses is present, the Company considers whether convincing other evidence exists, such as the character of (historical) losses and planning opportunities, to support the deferred tax assets recognition.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and when the Company intends to settle its current tax assets and liabilities on a net basis.
9.110.1 Income tax expense (benefit)
The components of income tax expense (benefit) are summarized as follows:
| | | | | | | | Year ended December 31, |
| | Year Ended December 31, | | 2021 | | 2020 | | 2019 |
| | 2018 | | 2017 | | 2016 | |
| Total current tax expense (benefit) | 928 | | 583 | | 255 | |
| | Total current tax expense | | Total current tax expense | 2,953 | | | 839 | | | 786 | |
| | Total deferred tax expense (benefit) | (1,277) | | (151) | | 731 | Total deferred tax expense (benefit) | (493) | | | 827 | | | (327) | |
| Total income tax expense (benefit) | (349) | | 432 | | 986 | Total income tax expense (benefit) | 2,460 | | | 1,666 | | | 459 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 356 |
| (millions of U.S. dollar, except share and per share data) |
The following table reconciles the expected tax expense (benefit) at the statutory rates applicable in the countries where the Company operates to the total income tax expense (benefit) as calculated:
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Net income (loss) (including non-controlling interests) | 5,330 |
| | 4,575 |
| | 1,734 |
|
| Income tax expense (benefit) | (349 | ) | | 432 |
| | 986 |
|
| Income (loss) before tax | 4,981 |
| | 5,007 |
| | 2,720 |
|
Tax expense (benefit) at the statutory rates applicable to profits (losses) in the countries1 | 1,043 |
| | 1,407 |
| | 677 |
|
| Permanent items | (421 | ) | | (522 | ) | | (5,940 | ) |
| Rate changes | — |
| | (94 | ) | | 593 |
|
| Net change in measurement of deferred tax assets | (1,301 | ) | | (281 | ) | | 5,344 |
|
| Tax effects of foreign currency translation | (47 | ) | | (157 | ) | | 73 |
|
| Tax credits | (17 | ) | | (66 | ) | | (21 | ) |
| Other taxes | 151 |
| | 90 |
| | 126 |
|
| Others | 243 |
| | 55 |
| | 134 |
|
| Income tax expense (benefit) | (349 | ) | | 432 |
| | 986 |
|
| |
1. | Tax expense (benefit) at the statutory rates is based on income (loss) before tax excluding income (loss) from investments in associates and joint ventures.
|
| | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Net income (loss) (including non-controlling interests) | 15,565 | | | (578) | | | (2,391) | |
| Income tax expense | 2,460 | | | 1,666 | | | 459 | |
| Income (loss) before tax | 18,025 | | | 1,088 | | | (1,932) | |
Tax expense (benefit) at the statutory rates applicable to income (losses) in the countries1 | 4,146 | | | 136 | | | (468) | |
| Permanent items | 500 | | | 714 | | | (993) | |
| Rate changes | 12 | | | — | | | 340 | |
| Net change in measurement of deferred tax assets | (2,956) | | | 454 | | | 1,201 | |
| Tax effects of foreign currency translation | — | | | 41 | | | 14 | |
| Tax credits | (24) | | | (13) | | | (9) | |
| Other taxes | 688 | | | 267 | | | 160 | |
| Others | 94 | | | 67 | | | 214 | |
| Income tax expense | 2,460 | | | 1,666 | | | 459 | |
1.Tax expense (benefit) at the statutory rates is based on income (loss) before tax excluding income (loss) from investments in associates and joint ventures.
ArcelorMittal’s consolidated income tax expense (benefit) is affected by the income tax laws and regulations in effect in the various countries in which it operates and the pre-tax results of its subsidiaries in each of these countries, which can change from year to year. ArcelorMittal operates in jurisdictions, mainly in Eastern Europe and Asia, which have a structurally lower corporate income tax rate than the statutory tax rate as enacted in Luxembourg (26.01%(24.94%), as well as in jurisdictions, mainly in Brazil and Mexico, which have a structurally higher corporate income tax rate.
| | | | | | | | | | | | | | | | | |
| Permanent items | Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Taxable reversals of (tax deductible) write-downs on shares and receivables | 735 | | | 630 | | | (922) | |
| Juros sobre o Capital Próprio | (323) | | | (37) | | | (32) | |
| | | | | |
| | | | | |
| Other permanent items | 88 | | | 121 | | | (39) | |
| Total permanent items | 500 | | | 714 | | | (993) | |
Permanent items |
| | | | | | | | |
| Year Ended December 31, |
| 2018 |
| 2017 |
| 2016 |
| Tax deductible write-downs on shares and receivables | (498 | ) |
| (652 | ) |
| (5,971 | ) |
Juros sobre o Capital Próprio (“JSCP”)
| (73 | ) |
| (4 | ) |
| (2 | ) |
| Non taxable gain on bargain purchase | (60 | ) |
| — |
|
| — |
|
| Taxable income (tax loss) of AMTFS | 47 |
|
| (34 | ) |
| 20 |
|
| Taxable dividends | — |
|
| 65 |
|
| 19 |
|
| Other permanent items | 163 |
|
| 103 |
|
| (6 | ) |
| Total permanent items | (421 | ) |
| (522 | ) |
| (5,940 | ) |
Tax deductibleTaxable reversals of (tax deductible) write-downs on shares and receivables: in connection with the Company's impairment test for goodwill and property, plant and equipment, (“PP&E”), the recoverability of the carrying amounts of investments in shares and intragroup receivables is also reviewed annually, resulting in
tax deductible write-downs, or taxable reversals of previously recorded write-downs, of the values of loans and shares of consolidated subsidiaries in Luxembourg.
Juros sobre o Capital Próprio (“JSCP”): Corporate taxpayers in Brazil, which distribute a dividend can benefit from a tax
deduction corresponding to an amount of interest calculated as a yield on capital. The deduction is determined as the lower of the interest as calculated by application of the Brazilian long term interest rate on the opening balance of capital and reserves, and 50% of the income for the year or accumulated profits from the previous year. For bookaccounting purposes, this distribution of interest on capital is regarded as a dividend distribution, while for Brazilian tax purposes it is regarded as tax deductible interest.
Non taxable gain on bargain purchase: in 2018 ArcelorMittal recognized a 209 gain on bargain purchase upon acquisition of Ilva (see note 2.2.4).
Taxable income of AMTFS: ArcelorMittal Treasury Financial Services S.à r.l. (“AMTFS”), a subsidiary of ArcelorMittal Treasury Americas LLC (“AMTAUS”), is a limited liability company organized under the laws of Luxembourg
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
subject to taxation in Luxembourg on its worldwide income. AMTFS has filed an election to be treated as a disregarded entity for United States federal income tax purposes.
Taxable dividends: the dividends received from some of the ArcelorMittal subsidiaries are subject to tax in the receiving countries with the corresponding (foreign) tax credits available.
Rate changes
The 2017 tax benefit from rate changes of (94) is mainly due to the impact of the decrease in the future income tax rate on deferred tax liabilities in Belgium (60), France (31), Argentina and USA.
The 20162019 tax expense from rate changes of 593340 is mainly due to the impact of the decrease in the future income tax rate on deferred tax assets in Luxembourg resulting in tax expense of 647, partly offset by a tax benefit of (50) in France.Luxembourg.
Net change in measurement of deferred tax assets
The 20182021 net change in measurement of deferred tax assets of (1,301) primarily(2,956) mainly consists of recognition of deferred tax benefitassets in Luxembourg of (1,842) due to(1,166) following higher profitability of the current year and increase of the available deferred tax liabilities, recognition of deferred tax assets on current year taxable reversal of write-downs of the value of shares and receivables of consolidated subsidiaries in Luxembourg (735), and (1,055) net recognition and utilization of deferred tax assets on losses and temporary differences in USA and other tax jurisdictions, following significant profits generated during the year.
The 2020 net change in measurement of deferred tax assets of 454 mainly consists of derecognition and utilization of deferred tax assets in Luxembourg of 709 following lower income expectation mainly as a result of the disposal of ArcelorMittal USA, recognition of deferred tax assets on current year taxable reversal of write-downs of the value of shares and receivables of consolidated subsidiaries in Luxembourg (630), and 375 net non-recognition and derecognition of deferred tax assets on losses and temporary differences in other tax jurisdictions.
The 2019 net change in measurement of deferred tax assets of 1,201 mainly consists of non-recognition of deferred tax assets on write-downs of the value of shares of consolidated subsidiaries in Luxembourg and other non-recognition and derecognition of deferred tax assets in certain tax jurisdictions, partially offset by an additional recognition of deferred tax assets for losses and other deductible temporary differences of previous years and a tax expense of 5410.6 billion due to non-recognition and derecognition of other deferred tax assets in other tax jurisdictions. In 2018, the Company recognized 1.3 billion of previously unrecognized deferred tax assets relating to the Luxembourg tax integration. The recognition in Luxembourg includes a 0.8 billion increase in projections of future taxable income in Luxembourg driven primarily by the higher operational and financial income, and 0.6 billion effect of the elimination of the current USD exposure of Luxembourgish deferred tax assets denominated in euro.lower external borrowing costs.
The 2017 net change in measurement of deferred tax assets of (281) primarily consists of tax expense of 652 due to the unrecognized part of deferred tax assets on write-downs of the value of shares and loans of consolidated subsidiaries in Luxembourg, tax expense of 364 due to non-recognition and derecognition of other deferred tax assets in other tax jurisdictions, partially offset by an additional recognition of deferred tax assets for losses and other deductible temporary differences of previous years of (1,297). In 2017, the Company recognized 1.1 billion of previously unrecognized deferred tax assets relating to the Luxembourg tax integration. The recognition in Luxembourg includes a 0.3 billion increase in projections of future taxable income in Luxembourg driven primarily by the improved market conditions of the steel industry and higher financial income mainly from further reduction in the forecasted interest expense following improved credit rating.
| | |
| 357 Consolidated financial statements |
The 2016 net change in measurement of deferred tax assets of 5,344 primarily consists of tax expense of 5,971 due to the unrecognized part of deferred tax assets on write-downs of the value of shares and loans of consolidated subsidiaries in Luxembourg, tax expense of 285 due to non-recognition and derecognition of other deferred tax assets in other tax jurisdictions, partially offset by additional recognition of deferred tax assets for losses and other deductible temporary differences of previous years of (912). In 2016, the Company recognized 0.4 billion of previously unrecognized deferred tax assets relating to the Luxembourg tax integration. The recognition in Luxembourg includes a 0.8 billion increase in projections of future taxable income in Luxembourg driven primarily by the improved market conditions of the steel industry and higher interest income from favorable foreign exchange rate relating to the funding of the Group subsidiaries as well as further reduction in the forecasted interest expense following debt repayment. This recognition is partially offset by a derecognition of 0.7 billion related to revised expectations of euro denominated deferred tax assets recoverability in U.S. dollars terms.
Tax effects of foreign currency translation
The tax effects of foreign currency translation of (47), (157)nil, 41 and 7314 at December 31, 2018, 20172021, 2020 and 20162019 , respectively, refer mainly to deferred tax assets and liabilities of certain entities with a different functional currency than the currency applied for tax filing purposes. The 2018 effect is impacted by the elimination of the currency exposure on the deferred tax assets in ArcelorMittal parent company following the change in the currency denomination of the tax losses. In 2017, the effects are mainly due to the depreciation of the U.S. dollar against the euro.
Tax credits
The tax credits are mainly attributable to the Company’s operating subsidiaries in Brazil, Mexico and Spain.Brazil. They relate to credits claimed on foreign investments, credits for research and development and tax sparingother credits.
Other taxes
Other taxes mainly include withholding taxes on dividends, services, royalties and interests as well as mining duties in Canada and Mexico, and state tax and Base Erosion and Anti-Abuse Tax ("BEAT") in the United States.States, and Cotisation sur la Valeur Ajoutée des Entrepris
ARCELORMITTAL AND SUBSIDIARIESes
Notes to Consolidated Financial Statements("CVAE'') in France. Other taxes increased in 2021 mainly as a result of higher mining taxes in Canada.
(millions | | | | | | | | | | | | | | | | | |
| Others | Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Tax contingencies/settlements | 137 | | | 87 | | | 225 | |
| Prior period taxes | (31) | | | (15) | | | (20) | |
| Others | (12) | | | (5) | | | 9 | |
| Total | 94 | | | 67 | | | 214 | |
Tax contingencies/settlements of U.S. dollars, except share137, 87, and per share data)
Others |
| | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Tax contingencies/settlements | 183 |
| | 7 |
| | 149 |
|
| Prior period taxes | 21 |
| | (7 | ) | | (18 | ) |
| Others | 39 |
| | 55 |
| | 3 |
|
| Total | 243 |
| | 55 |
| | 134 |
|
In 2018225 at December 31, 2021, 2020 and 2016, Others of 243 and 134 primarily2019, respectively, consist of uncertain tax positions respectively for 183,(see note 10.3) mainly related to Europe,North America and 149, mainly related to Europe and North America. ACIS.
9.210.2 Income tax recorded directly in equity and/or other comprehensive income
|
| | | | | | | | | |
| | | Year Ended December 31, |
| | | 2018 | | 2017 | | 2016 |
| Recognized in other comprehensive income on: | | | | | | |
| Deferred tax expense (benefit) | | |
| | |
| | |
|
| Unrealized gain (loss) on derivative financial instruments | | 380 |
| | (77 | ) | | (1 | ) |
| Recognized actuarial gain (loss) | | (228 | ) | | (42 | ) | | (1 | ) |
| Foreign currency translation adjustments | | (106 | ) | | (90 | ) | | 27 |
|
| | | 46 |
| | (209 | ) | | 25 |
|
| Recognized directly in equity on: | | | | | | |
| Deferred tax expense (benefit) | | | | | | |
| Others | | — |
| | 9 |
| | — |
|
| | |
|
| |
|
| |
|
|
| Total | | 46 |
| | (200 | ) | | 25 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| | | 2021 | | 2020 | | 2019 |
| Recognized in other comprehensive income on: | | | | | | |
| Deferred tax expense (benefit) | | | | | | |
| Unrealized gain on investments in equity instruments at FVOCI | | 167 | | | 56 | | | — | |
| Gain (loss) on derivative financial instruments | | 648 | | | (28) | | | (244) | |
| Recognized actuarial gain (loss) | | 144 | | | (69) | | | 32 | |
| Foreign currency translation adjustments | | 59 | | | (335) | | | (35) | |
| | 1,018 | | | (376) | | | (247) | |
| Recognized directly in equity on: | | | | | | |
| Current tax expense (benefit) | | | | | | |
| Realized gain on investments in equity instruments at FVOCI | | — | | | 4 | | | — | |
| Deferred tax expense (benefit) | | | | | | |
| Loss related to repurchase of MCNs | | (185) | | | — | | | — | |
| Realized gain on investments in equity instruments at FVOCI | | — | | | 9 | | | — | |
| | (185) | | | 13 | | | — | |
| | | | | | | |
| Total | | 833 | | | (363) | | | (247) | |
9.310.3 Uncertain tax positions
The Company operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, ArcelorMittal has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer pricing matters and the interpretation of income tax laws applied in complex transactions. The Company periodically reassesses its tax positions. Changes to the financial statement recognition, measurement and disclosure of tax positions are based on management’s best judgment given any changes in the facts, circumstances, information available and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, the Company believes that the ultimate resolution of such matters will not have a material effect on the Company’s financial position, statements of operations or cash flows (see note 8 “Provisions, contingencies and commitments”)9.3).
| | |
| Consolidated financial statements 358 |
| (millions of U.S. dollar, except share and per share data) |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
9.410.4 Deferred tax assets and liabilities
The origin of the deferred tax assets and liabilities is as follows: | |
| Assets | | Liabilities | | Net | | Assets | | Liabilities | | Net |
| 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| Intangible assets | 29 |
| | 63 |
| | (744 | ) | | (869 | ) | | (715 | ) | | (806 | ) | Intangible assets | 15 | | | 15 | | | (487) | | | (538) | | | (472) | | | (523) | |
| Property, plant and equipment | 271 |
| | 235 |
| | (5,098 | ) | | (5,334 | ) | | (4,827 | ) | | (5,099 | ) | Property, plant and equipment | 150 | | | 73 | | | (4,076) | | | (4,064) | | | (3,926) | | | (3,991) | |
| Inventories | 286 |
| | 291 |
| | (251 | ) | | (179 | ) | | 35 |
| | 112 |
| Inventories | 273 | | | 277 | | | (40) | | | (77) | | | 233 | | | 200 | |
| Financial instruments | 124 |
| | 129 |
| | (424 | ) | | (559 | ) | | (300 | ) | | (430 | ) | Financial instruments | 82 | | | 13 | | | (799) | | | (124) | | | (717) | | | (111) | |
| Other assets | 460 |
| | 203 |
| | (572 | ) | | (336 | ) | | (112 | ) | | (133 | ) | Other assets | 152 | | | 162 | | | (486) | | | (306) | | | (334) | | | (144) | |
| Provisions | 1,728 |
| | 1,577 |
| | (512 | ) | | (424 | ) | | 1,216 |
| | 1,153 |
| Provisions | 1,083 | | | 1,240 | | | (253) | | | (276) | | | 830 | | | 964 | |
| Other liabilities | 461 |
| | 359 |
| | (331 | ) | | (225 | ) | | 130 |
| | 134 |
| Other liabilities | 531 | | | 458 | | | (31) | | | (120) | | | 500 | | | 338 | |
| Tax losses and other tax benefits carried forward | 10,384 |
| | 9,381 |
| | — |
| | — |
| | 10,384 |
| | 9,381 |
| Tax losses and other tax benefits carried forward | 9,530 | | | 9,168 | | | — | | | — | | | 9,530 | | | 9,168 | |
| Tax credits carried forward | 104 |
| | 127 |
| | — |
| | — |
| | 104 |
| | 127 |
| Tax credits carried forward | 134 | | | 133 | | | — | | | — | | | 134 | | | 133 | |
| Untaxed reserves | — |
| | — |
| | (2 | ) | | (68 | ) | | (2 | ) | | (68 | ) | Untaxed reserves | — | | | — | | | — | | | — | | | — | | | — | |
| Deferred tax assets / (liabilities) | 13,847 |
| | 12,365 |
| | (7,934 | ) | | (7,994 | ) | | 5,913 |
| | 4,371 |
| |
| Deferred tax assets (liabilities) | | Deferred tax assets (liabilities) | 11,950 | | | 11,539 | | | (6,172) | | | (5,505) | | | 5,778 | | | 6,034 | |
| Deferred tax assets | | | | | | | | | 8,287 |
| | 7,055 |
| Deferred tax assets | | 8,147 | | | 7,866 | |
| Deferred tax liabilities | | | | | | | | | (2,374 | ) | | (2,684 | ) | Deferred tax liabilities | | (2,369) | | | (1,832) | |
The deferred
Deferred tax assets recognized by the Company as of December 31, 2018 are analyzed as follows:2021 included the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gross amount | | Total deferred tax assets | | Recognized deferred tax assets | | Unrecognized deferred tax assets |
| Tax losses and other tax benefits carried forward | 133,107 | | | 33,236 | | | 9,530 | | | 23,706 | |
| Tax credits carried forward | 671 | | | 671 | | | 134 | | | 537 | |
| Other temporary differences | 11,695 | | | 3,033 | | | 2,286 | | | 747 | |
| Total | | | 36,940 | | | 11,950 | | | 24,990 | |
|
| | | | | | | |
| | Gross amount | | Total deferred tax assets | | Recognized deferred tax assets | | Unrecognized deferred tax assets |
| Tax losses and other tax benefits carried forward | 110,769 | | 28,642 | | 10,384 | | 18,258 |
| Tax credits carried forward | 722 | | 722 | | 104 | | 618 |
| Other temporary differences | 16,923 | | 4,117 | | 3,359 | | 758 |
| Total | | | 33,481 | | 13,847 | | 19,634 |
The deferredDeferred tax assets recognized by the Company as of December 31, 2017 are analyzed as follows:2020 included the following:
| | | | Gross amount | | Total deferred tax assets | | Recognized deferred tax assets | | Unrecognized deferred tax assets | | Gross amount | | Total deferred tax assets | | Recognized deferred tax assets | | Unrecognized deferred tax assets |
| Tax losses and other tax benefits carried forward | 111,880 | | 28,569 | | 9,381 | | 19,188 | Tax losses and other tax benefits carried forward | 114,266 | | | 28,554 | | | 9,168 | | | 19,386 | |
| Tax credits carried forward | 778 | | 778 | | 127 | | 651 | Tax credits carried forward | 745 | | | 745 | | | 133 | | | 612 | |
| Other temporary differences | 17,417 | | 3,978 | | 2,857 | | 1,121 | Other temporary differences | 12,029 | | | 3,072 | | | 2,238 | | | 834 | |
| Total | | 33,325 | | 12,365 | | 20,960 | Total | | 32,371 | | | 11,539 | | | 20,832 | |
As of December 31, 2018,2021, the majority of theunrecognized deferred tax assets not recognized relates to tax losses carried forward attributable to various subsidiaries located in different jurisdictions (primarily Germany, Luxembourg, Spain, South Africa and the United States)USA) with different statutory tax rates. As ofAt each reporting date, ArcelorMittal considers existing evidence, both positive and negative, including the earnings history and results of recent operations, reversals of deferred tax liabilities, projected future taxable
income, and planning strategies, that could impact the view with regard to future realization of these deferred tax assets. Given the current and anticipated future earnings of the ArcelorMittal U.S. operations, there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow ArcelorMittal to reach a conclusion that a significant portion of the unrecognized deferred tax assets of the U.S. operations, related to tax losses and temporary differences, may be recognized.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
The amount of the total deferred tax assets is the aggregate amount of the various recognized and unrecognized deferred tax assets recognized and unrecognized at the various subsidiaries and not the result of a computation with a given blended rate. The utilization of tax losses carried forward is restricted to the taxable income of the subsidiary or tax consolidation group to which it belongs. The
| | |
| 359 Consolidated financial statements |
utilization of tax losses carried forward may also may be restricted by the character of the income, expiration dates and limitations on the yearly use of tax losses against taxable income.
As atAt December 31, 2018,2021, the total amount of accumulated tax losses in Luxembourg with respect to the ArcelorMittal S.A. tax integration amounted to approximately 115.6 billion, of which 34.1 billion is considered realizable, resulting in the recognition of 8.5 billion of deferred tax assets at the applicable income tax rate in Luxembourg. At December 31, 2020, the total amount of accumulated tax losses in Luxembourg with respect to the main tax consolidation amounted to approximately 80.691.3 billion, of which 34.131.5 billion was considered realizable, resulting in the recognition of 8.9 billion of deferred tax assets at the applicable income tax rate in Luxembourg. As at December 31, 2017, the total amount of accumulated tax losses in Luxembourg with respect to the main tax consolidation amounted to approximately 80.8 billion, of this amount 30.8 billion was considered realizable, resulting in the recognition of 7.67.9 billion of deferred tax assets at the applicable income tax rate in Luxembourg. Under the Luxembourg tax legislation, tax losses generated before 2017 can be carried forward indefinitely and are not subject to any specific yearly loss utilization limitations. The tax losses carried forward relate primarily to tax deductible write-down charges taken on investments in shares of consolidated subsidiaries recorded by certain of ArcelorMittal’s holding companies in Luxembourg. Of the total tax losses carried forward, 28.854.3 billion may be subject to recapture in the future if the write-downs that caused them are reversed creating taxable income unless the Company convertscrystallizes them to permanent through sales or other organizational restructuring activities.
The Company believes that it is probable that sufficient future taxable profits will be generated to support the recognized deferred tax asset for tax losses carried forward in Luxembourg. As part of its recoverability assessment the Company has taken into account (i) its most recent forecast approved by management and the Board of Directors, (ii) the likelihood that the factors that have contributed to past losses in Luxembourg will not recur, (iii) the fact that ArcelorMittal in Luxembourg is the main provider of funding to the Company’s consolidated subsidiaries, leading to significant amounts of taxable interest income on outstanding and future loans as updated based on most recent funding strategy, (iv) the implementationexpected level of an Industrial Franchising Arrangement betweeninterest expenses in Luxembourg driven by the Group net debt level, (v) the industrial franchise agreement whereby ArcelorMittal S.A. licenses its business model for manufacturing, processing and numerous worldwide operatingdistributing steel to group subsidiaries, and (v)(vi) other significant and reliable sources of operational income earned from ArcelorMittal’s European and worldwide operating subsidiaries for centralized distribution and procurement activities performed in Luxembourg. The Company has also considered the implications of the net-zero path and its carbon emissions intensity reduction targets on its future taxable profits expectations in relation to the existing business models and the potential future financing of such projects, resulting in no major impact on the estimated level of future taxable profit. In performing the assessment, the Company estimates at which
point in time its earnings projections are no longer reliable, and thus taxable profits are no longer probable. Accordingly, the Company has established consistent forecast periods for its different income streams for estimating probable future taxable profits, against which the unused tax losses can be utilized in Luxembourg.
At December 31, 2018,2021, based upon the level of historical taxable income and projections for future taxable income over the periods in which the deductible temporary differences are anticipated to reverse, management believes it is probable that ArcelorMittal will realize the benefits of the recognized deferred tax assets of 8.3 billion recognized.8.1 billion. The amount of future taxable income required to be generated by ArcelorMittal’s subsidiaries to utilize the deferred tax assets of 8.38.1 billion is at least 3232.9 billion. Historically, the Company has been able to generate sufficient taxable income and believes that it will generate sufficient levels of taxable income in the coming years to allow the Company to utilize tax benefits associated with tax losses carried forward and other deferred tax assets that have been recognized in its consolidated financial statements. Where the Company has had a history of recent losses, it relied on convincing other evidence such as the character of (historical) losses and planning opportunities to support the deferred tax assets recognized.
For the period ended December 31, 20182021, ArcelorMittal recorded approximately 80 (December 31, 2017: 59)225 of deferred income tax liabilities in respect of deferred taxation that would arise if temporary differences on investments in subsidiaries, associates and interests in joint ventures were to be realized in the foreseeable future.future as compared to 90 as of December 31, 2020. No deferred tax liability has been recognized in respect of other temporary differences on investments in subsidiaries, associates and interests in joint ventures because the Company is able to control the timing of the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future. The amount of these unrecognized deferred tax liabilities is approximately 938.796.
9.510.5 Tax losses, tax credits and other tax benefits carried forward
At December 31, 2018,2021, the Company had total estimated tax losses carried forward and other tax benefits of 110.8133.1 billion.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
This includes net operating losses and other tax benefits of 7.55.8 billion primarily related to subsidiaries in the Basque Country in Spain, Liberia, Luxembourg Switzerland and the United States, which expire as follows:
|
| | | | | | |
| Year expiring | | Recognized | | Unrecognized | | Total |
| 2019 | | 32 | | 68 | | 100 |
| 2020 | | 46 | | 268 | | 314 |
| 2021 | | 4 | | 872 | | 876 |
| 2022 | | 2 | | 628 | | 630 |
| 2023 | | 6 | | 490 | | 496 |
| 2024 - 2038 | | 90 | | 5,021 | | 5,111 |
| Total | | 180 | | 7,347 | | 7,527 |
| | |
| Consolidated financial statements 360 |
| (millions of U.S. dollar, except share and per share data) |
| | | | | | | | | | | | | | | | | | | | |
| Year expiring | | Recognized | | Unrecognized | | Total |
| 2022 | | 9 | | | 3 | | | 12 | |
| 2023 | | 59 | | | 3 | | | 62 | |
| 2024 | | 253 | | | 35 | | | 288 | |
| 2025 | | 35 | | | 44 | | | 79 | |
| 2026 | | — | | | 6 | | | 6 | |
| 2027 - 2039 | | 711 | | | 4,627 | | | 5,338 | |
| Total | | 1,067 | | | 4,718 | | | 5,785 | |
The remaining tax losses carried forward and other tax benefits for an amount of 103.3127.3 billion (of which 39.337.1 billion are recognized and 6490.2 billion are unrecognized) are carried forward for unlimited period of time and primarily relate to the Company’s operations in Brazil, France, Germany, Luxembourg, Spain and Spain.in the US.
At December 31, 2018,2021, the Company also had total estimated tax credits carried forward of 722. 671.
Such amount includes tax credits of 568565 (of which 69 recognized and 496 unrecognized) and primarily attributable to subsidiaries in the Basque Countrycountry in Spain of which 49 recognized and 519 unrecognized, which expire as follows: |
| | | | | | |
| Year expiring | | Recognized | | Unrecognized | | Total |
| 2019 | | — | | 5 | | 5 |
| 2020 | | — | | 3 | | 3 |
| 2021 | | — | | 2 | | 2 |
| 2022 | | — | | 2 | | 2 |
| 2023 | | — | | 1 | | 1 |
| 2024 - 2038 | | 49 | | 506 | | 555 |
| Total | | 49 | | 519 | | 568 |
| | | | | | | | | | | | | | | | | | | | |
| Year expiring | | Recognized | | Unrecognized | | Total |
| 2022 | | — | | | 2 | | | 2 | |
| 2023 | | — | | | 2 | | | 2 | |
| 2024 | | — | | | 1 | | | 1 | |
| 2025 | | — | | | 1 | | | 1 | |
| 2026 | | — | | | 2 | | | 2 | |
| 2027 - 2039 | | 69 | | | 488 | | | 557 | |
| Total | | 69 | | | 496 | | | 565 | |
The remaining tax credits for an amount of 154106 (of which 5566 are recognized and 9940 are unrecognized) are indefinite and primarily attributable to the Company’s operations in Brazil, Spain and the United States.US.
Tax losses, tax credits and other tax benefits carried forward are denominated in the currency of the countries in which the respective subsidiaries are located and operate.operate, except for Luxembourg where the tax losses are mainly denominated in U.S. dollar. Fluctuations in currency exchange rates could reduce
impact the U.S. dollar equivalent value of these tax losses carried forward in future years.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
NOTE 10:11: EQUITY
10.111.1 Share details
On May 22, 2017, ArcelorMittal14, 2020, the Company completed the consolidationan offering of each three existingcommon shares, in ArcelorMittal without nominal value into onefor 750 at a price of $9.27 per share. The Significant Shareholder participated in the offerings by contributing an amount of 100 for the shares.
Following the offering of common shares described above with net proceeds of 740 (net of transaction costs of 10), on May 14, 2020, the Company issued 80,906,149 fully paid up shares. The Company allocated 29 to share without nominal value. As a resultcapital, which increased from 364 at December 31, 2019 to 393 at December 31, 2020 and the remainder of this reverse stock split,711 to additional paid-in-capital.
Under the number of issued shares decreased from 3,065,710,869 to 1,021,903,623 and all prior periods have been recast in accordance with IFRS.
The Company’s shares consistterms of the following: |
| | | | | | | | | | | | | | |
| | December 31, 2016 | | Movement in year | | December 31, 2017 | | Movement in year | | December 31, 2018 |
| Issued shares | 1,021,903,623 |
| | — |
| | 1,021,903,623 |
| | — |
| | 1,021,903,623 |
|
| Treasury shares | (2,407,480 | ) | | 420,644 |
| | (1,986,836 | ) | | (6,348,529 | ) | | (8,335,365 | ) |
| Total outstanding shares | 1,019,496,143 |
| | 420,644 |
| | 1,019,916,787 |
| | (6,348,529 | ) | | 1,013,568,258 |
|
On January 15, 2016, following the maturity of the mandatorily convertible notes (see 10.2 below),offerings, there is a 180-day lock-up period for the Company increasedon issuances or sales of shares and securities exchangeable for or convertible into shares, subject to customary exceptions.
Following the approval by the extraordinary general meeting of shareholders on June 8, 2021 to cancel all the shares repurchased by the Company under its share buyback programs up to a maximum of 165 million shares, the Company decreased issued share capital by €570 million (622) from €6,883 million (10,011) to €7,453 million (10,633)on August 4, 2021 and September 22, 2021 through the issuancecancellation of 137,967,116 (45,989,039 after reverse stock split) new70 million and 50 million treasury shares, fully paid up. Therespectively. Accordingly, the aggregate number of shares issued and fully paid up increaseddecreased from 1,102,809,772 to 1,803,359,338 (601,119,779 after reverse stock split).
Following the extraordinary general meeting held on March 10, 2016, ArcelorMittal decreased982,809,772 and share capital decreased by €7,27343 from 393 at December 31, 2020 to 350 at December 31, 2021.
On January 14, 2022, ArcelorMittal cancelled 45 million (10,376) from €7,453 million (10,633)treasury shares to €180 million (257) through a reductionkeep the number of treasury shares within appropriate levels. This cancellation took into account the accounting par value pershares already purchased under the 1,000 share to €0.10 without any distribution to shareholders,buyback program announced on November 17, 2021 which was completed on December 28, 2021. Following these cancellations, the balance being allocated to additional paid-in capital.
On April 8, 2016, ArcelorMittal completed an equity offering with net proceeds of 3,115 (net of transaction costs of 40) by way of the issuance of 1,803,359,338 (601,119,779 after reverse stock split) non-statutory preferential subscription rights with a subscription price of €2.20 per share at a ratio of 7 shares for 10 rights subsequently to the adoption of enabling resolutions by the extraordinary general meeting of shareholders on March 10, 2016. The Company increased share capital by €126 million (144) from €180 million (257) to €306 million (401) through the issuance of 1,262,351,531 (420,783,844 after reverse stock split) new shares fully paid up. The aggregate number of shares issued and fully paid up increaseddecreased from 982,809,772 to 3,065,710,869 (1,021,903,623 after reverse stock split).937,809,772 and share capital decreased from 350 at December 31, 2021 to 334.
The Company’s shares consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | Movement in year | | December 31, 2020 | | Movement in year | | December 31, 2021 |
| Issued shares | 1,021,903,623 | | | 80,906,149 | | | 1,102,809,772 | | | (120,000,000) | | | 982,809,772 | |
| Treasury shares | (9,824,202) | | | (12,251,157) | | | (22,075,359) | | | (49,841,211) | | | (71,916,570) | |
| Total outstanding shares | 1,012,079,421 | | | 68,654,992 | | | 1,080,734,413 | | | (169,841,211) | | | 910,893,202 | |
| | |
| 361 Consolidated financial statements |
The number of issued shares was 1,021,903,623 at December 31, 2019, 1,102,809,772 at December 31, 2020 and 982,809,772 at December 31, 2021.
Authorized shares
AtOn June 13, 2020, at the Extraordinary General Meeting held on May 8, 2012,extraordinary general meeting of shareholders, the shareholders approved an increase of the authorized share capital of ArcelorMittal by €643 million represented by 156 million shares (52 after reverse stock split), or approximately 10% of ArcelorMittal’s outstanding capital. Following this approval, which is valid for 5 years, the total authorized share capital was €7.7 billion represented by 1,773,091,461 (591,030,487 after reverse stock split) shares without par value.
At the Extraordinary General Meeting held on May 8, 2013, the shareholders approved an increase of the authorized share capital of ArcelorMittal by €524 million represented by 223 million shares (74 after reverse stock split), or approximately 8% of ArcelorMittal’s outstanding capital. Following this approval, which is valid for five years, the total authorized share capital was €8.2 billion represented by 1,995,857,213 (665,285,738 after reverse stock split) shares without par value.
At the Extraordinary General Meeting held on March 10, 2016, the shareholders approved a decrease of the authorized share capital of the Company by €8,049 million through a reduction of the accounting par value per share to €0.10 and a subsequent increase by €3 billion. Following the completion of the equity offering on April 8, 2016, the Company’s authorized share capital was decreased by €2.9 billion. As a result of the approval given by the shareholders on March 10, 2016 and which is valid for five years, the total authorized share capital was €337 million represented by 3,372,281,956 (1,124,093,985 after reverse stock split) shares without par value.
At the Extraordinary General Meeting held on May 10, 2017, the shareholders approved a reverse stock split and an increase of the authorized share capital to €345 million. Following this approval, on May 22, 2017 ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into one share without nominal value.74. As a result, the authorized share capital increased with a decrease in representative shares from €337 million411 represented by 3,372,281,9561,151,576,921 ordinary shares without nominal value as of December 31, 20162019 to €345 million485 represented by 1,151,576,9211,361,418,599 ordinary shares without nominal value.value as of December 31, 2020.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millionsOn August 4, 2021, following the cancellation of U.S. dollars, except share and per share data)
At the Extraordinary General Meeting of shareholders held on May 16, 2018, the shareholders approved the change of currency of the Company's share capital from euro to U.S. dollar. Following this approval,70 million treasury shares, the authorized share capital amounts to 411decreased from 485 represented by 1,151,576,9211,361,418,599 ordinary shares without nominal value to 460 represented by 1,291,418,599 ordinary shares without nominal value. As a resultOn September 22, 2021, following the cancellation of this change,50 million treasury shares, the issuedauthorized share capital amountsdecreased further to 364 as442 represented by 1,241,418,599 ordinary shares without nominal value.
On January 14, 2022, following the cancellation of December 31, 2018, based on45 million treasury shares, the exchange rate publishedauthorized share capital decreased to 426 represented by the European Central Bank on May1,196,418,599 ordinary shares without nominal value.
Share buyback
On February 15, 2018. The difference has been transferred to additional paid-in capital. There was no change in the aggregate number of shares issued and fully paid up which continues to amount to 1,021,903,623 as of December 31, 2018 and December 31, 2017.
Share buyback
On March 26, 2018,2019, ArcelorMittal completed a share buyback program under the authorization given at the annual general meeting of shareholders held on May 5, 2015. ArcelorMittaland repurchased 74 million shares for a total value of €184€80 million (226)(90) at an average price per share of €26.34 (equivalent to $32.36)€19.89 ($22.42). The buyback shares as part of
On October 30, 2020, the Company completed a share buyback program are accounted asin connection with the partannounced sale of 100% of the shares of ArcelorMittal USA. ArcelorMittal repurchased 35,636,253 shares at an average price per share of €11.92 ($14.03) for a total value of €425 million (500).
The shares acquired through the buyback program were recognized as treasury share.shares. On December 15, 2020, ArcelorMittal signed separate, privately negotiated exchange agreements with a limited number of holders of the MCNs for which it delivered 22,653,933 shares out of treasury shares (see note 11.2).
On March 3, 2021, ArcelorMittal completed its first share buyback program in 2021 and repurchased 27.1 million shares for a total amount of €537 million (650) at an average price per share of €19.79 ($23.97).
On June 17, 2021, ArcelorMittal completed a second share buyback program and repurchased 17.8 million shares for a total amount of €469 million (570) at an average price per share of €26.27 ($31.94).
On July 5, 2021, ArcelorMittal completed a third share buyback program and repurchased 24.5 million shares for a total amount of €630 million (750) at an average price per share of €25.77 ($30.66).
On November 16, 2021, ArcelorMittal completed a fourth share buyback program and repurchased 67.4 million shares for a total value of €1,881 million (2,200) at an average price per share of €27.91 ($32.64).
On December 28, 2021, completed a fifth share buyback program and repurchased 34.1 million shares for a total value of €886 million (1,000) at an average price per share of €25.99 ($29.34).
During 2021, the Company repurchased 62.2 million shares from the Significant Shareholder under its five share buy back programs to maintain Significant Shareholder's current level of voting rights (pursuant to the Share Repurchase Agreement signed on February 12, 2021) for €1,600 million (1,878).
On February 11, 2022, ArcelorMittal announced a new share buyback program in the amount of 1,000 under the authorization given by the annual general meeting of shareholders of June 8, 2021. The program is expected to be completed during the first half of 2022, subject to market conditions. The shares acquired under the program are intended to meet ArcelorMittal’s obligations under debt obligations exchangeable into equity securities, reduce ArcelorMittal’s share capital, and/or meet ArcelorMittal’s obligations arising from employee share programs. As of March 10, 2022, ArcelorMittal had repurchased 7.1 million shares for a total value of €193 million (214) at an average price per share of €27.14 ($30.08).
Treasury shares
ArcelorMittal held, indirectly and directly, 8.371.9 million and 2.022.1 million treasury shares as of December 31, 20182021 and December 31, 2017,2020, respectively.
10.211.2 Equity instruments and hybrid instruments
Mandatorily convertible notes
Mandatorily convertible notes issued by the Company were accounted for as compound financial instruments. The net present value of the coupon payments at issuance date was recognized as a long-term obligation and carried at amortized cost. The value of the equity component was determined based upon the difference of the cash proceeds received from the issuance of the notes and the net present value of the financial liability component on the date of issuance and was included in equity.
On January 16, 2013, ArcelorMittal issued mandatorily convertible subordinated notes (“MCNs”) with net proceeds of 2,222. The notes had a maturity of 3 years, were issued at 100% of the principal amount and were mandatorily converted into ordinary shares of ArcelorMittal at maturity unless converted earlier at the option of the holders or ArcelorMittal or upon specified events in accordance with the terms of the MCNs. The MCNs paid a coupon of 6.00% per annum, payable quarterly in arrears. The minimum conversion price of the MCNs was set at $16.75 (prior to reverse stock split), corresponding to the placement price of shares in the concurrent ordinary shares offering as described above, and the maximum conversion price was set at approximately 125% of the minimum conversion price (corresponding to $20.94, prior to reverse stock split). The minimum and maximum conversion prices were subject to adjustment upon the occurrence of certain events, and were, as of December 31, 2015, $15.98 and $19.98, respectively (prior to reverse stock split). The Company determined the notes met the definition of a compound financial instrument and as such determined the fair value of the financial liability component of the bond was 384 on the date of issuance and recognized it as a long-term obligation. The value of the equity component of 1,838 was determined based upon the difference of the cash proceeds received from the issuance of the bond and the fair value of the financial liability component on the date of issuance and was included in equity.
During the fourth quarter of 2015, the Company delivered 2,275,026 treasury shares (758,342 after reverse stock split) against 1,817,869 notes converted at the option of their holders. As a result of such voluntary conversions, the carrying amount of MCNs decreased by 38. On January 15, 2016, upon final maturity of the MCNs, the remaining outstanding 88,182,131 notes were converted into 137,967,116 new common shares (45,989,039 after reverse stock split). Accordingly, share capital and additional paid-in-capital increased by 622 and 1,178, respectively and the carrying amount of MCNs decreased by 1,800.
Mandatory convertible bonds
On December 28, 2009, the Company issued through Hera Ermac, a wholly-owned subsidiary, 750 unsecured and unsubordinated bonds mandatorily convertible into preferred shares of such subsidiary. The bonds were placed privately with a Luxembourg affiliate of Crédit Agricole (formerly Calyon) and are not listed. The Company has the option to call the mandatory convertible bonds until 10 business days before the maturity date. Hera Ermac invested the proceeds of the bonds issuance and an equity contribution by the Company in notes issued by subsidiaries of the Company linked to the values of shares of Erdemir and China Oriental. On April 20, 2011, the Company signed an agreement for an extension of the conversion date of the mandatory convertible bonds to January
| | |
| Consolidated financial statements 362 |
| (millions of U.S. dollar, except share and per share data) |
31, 2013. On September 27, 2011, the Company increased the mandatory
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
convertible bonds from 750 to 1,000. The Company furtherhas extended the conversion date for the mandatory convertible bonds from time to time with the latest extension on December 18, 201222, 2020 (resulting in the extinguishment and January 17, 2014recognition of a new compound instrument) to January 31, 20142024.
On March 29, 2019 and January 29, 2016, respectively.
On November 20, 2015,December 18, 2019, the conversion dateCompany repaid notes issued by subsidiaries which were linked to the value of the 1,000shares of Erdemir. As of December 31, 2020, the remaining notes were linked to the value of the shares of China Oriental (see note 6.1.5).
On December 22, 2020, as described above the maturity of the mandatory convertible bonds was extended from January 29, 20162021 to January 31, 2018.2024. The other main features of the mandatory convertible bonds remained unchanged. The Company determined that this transaction led to the extinguishment of the existing compound instrument and the recognition of a new compound instrument including non-controlling interests for 880869 (net of cumulative tax and fees) and other liabilities for 106.131. The derecognition of the previous instrument and the recognition at fair value of the new instrument resulted in a 79178 expense included in financing costs-net in the consolidated statement of operations and a 20 decrease53 increase in non-controlling interests.
Mandatorily convertible subordinated notes
On December 14, 2017,May 18, 2020, following the offering of common shares described in note 11.1, the Company completed an offering of mandatorily convertible subordinated notes (“MCNs”) for 1,250. The MCNs have a three year maturity, were issued at 100% of the principal amount and will be mandatorily converted into common shares of the Company upon maturity unless converted earlier at the option of the holders or ArcelorMittal during the conversion dateperiod or upon occurrence of certain defined events.
In all cases, ArcelorMittal may exercise its right to convert early, taking precedent over the other options. In case of an early conversion, ArcelorMittal must deliver shares at the “Maximum Conversion Ratio.” The mandatorily convertible notes pay a coupon of 5.50% per annum, payable quarterly in arrears. The minimum conversion price of the 1,000 mandatorymandatorily convertible bonds was extended from January 31, 2018notes is equal to January 29, 2021. The other main features$9.18, corresponding to the offering price of the mandatory convertible bonds remained unchanged. shares as described above, and the maximum conversion price is 117.5% of the minimum conversion price or $10.79, subject to certain adjustments. ArcelorMittal intends to use the net proceeds from the offerings for general corporate purposes, to deleverage and to enhance liquidity, thereby building additional resilience going forward in what remains an uncertain environment.
The Significant Shareholder participated in the offerings by contributing an amount of 100 for the MCNs.
The Company determined that the MCNs are a hybrid instrument including an equity component and a debt component. The Company assessed whether there is actual economic or other business reasons that it would exercise its option to convert prior to maturity, whether the MCNs would have been priced differently if the early settlement option had not been included in the contractual terms and other factors such as the term of the instrument, the width of the range between the cap and the floor, ArcelorMittal’s share price and the volatility of the share price as important criterion in this conclusion. The early conversion right has economic substance with respect to maintaining the current credit rating if early conversion can help in preventing a rating downgrade. In this event, future savings of credit interest is expected to be more than the cost of early conversion. The debt component of 190 (net of transaction ledcosts of 2) at issuance corresponded to the extinguishmentnet present value of the existing compound instrumentfuture interest payments and the recognition of a new compound instrument including non-controlling interests for 797 (net of cumulative tax and fees)is included in accrued expenses and other liabilities and other long-term obligations. The remaining amount of 1,047 (net of transaction costs of 11) was the equity instrument.
On December 15, 2020, ArcelorMittal signed separate, privately negotiated exchange agreements with a limited number of holders of MCNs exchanging 247 in aggregate principal amount of MCNs for 184.an aggregate of 22,653,933 treasury shares at the minimum conversion ratio plus 25 paid in cash (including accrued interest on the exchanged MCNs up to, but excluding, the settlement date). The derecognition ofCompany allocated the previous instrumentshare consideration to the debt (30) and equity (207) components consistent with the recognition at fairoriginal allocation using net present value of the newfuture interest payments at the date of exchange. As of December 31, 2020 and following the exchange, the debt and equity components were 123 and 840 (presented separately in the statements of changes in equity), net of transaction fees respectively.
On December 23, 2021, ArcelorMittal completed separate, privately negotiated agreements with a limited number of holders of MCNs to repurchase 395 in aggregate principal amount of MCNs at the minimum conversion ratio for an aggregate cash consideration of 1,196. The Company allocated the cash consideration to the debt (30) and equity (331) components of the instrument resulted in a 92 expense includedand recognized in financing costs-netcosts - net a 61 loss relating to the liability component and a 774 (589 net of tax) decrease in retained earnings relating to the equity component consistent with the original allocation using net present value of the future interest payments at the date of exchange. As of December 31, 2021 and following the early redemption, the debt and equity components were 44 and 509
| | |
| 363 Consolidated financial statements |
(presented separately in the consolidated statementstatements of operations and a 83 decreasechanges in non-controlling interests.equity), net of transaction fees, respectively.
10.311.3 Earnings per common share
Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Net income (loss) attributable to ordinary shareholders takes into consideration dividend rights of preferred shareholders such as holders of subordinated perpetual capital securities. Diluted earnings per share
is computed by dividing income (loss) available to equity holders by the weighted average number of common shares andplus potential common shares from share unit plans and outstanding stock options as well as potential common shares from the conversion of certain convertible bonds whenever the conversion results in a dilutive effect.
On April 8, 2016, the Company issued 1,262,351,531 (420,783,844 after reverse stock split) new shares at a subscription price of €2.20 (prior to reverse stock split) per share representing a 35% discount compared to the theoretical ex-right price (“TERP”) of €3.40 (prior to reverse stock split) based on the closing price of ArcelorMittal’s shares on Euronext Amsterdam on March 10, 2016. In accordance with IFRS, such a rights issue includes a bonus element increasing the number of ordinary shares outstanding to be used in calculating basic and diluted earnings per share for all periods before the rights issue.
On May 22, 2017, ArcelorMittal completed the consolidation of each three existing shares in ArcelorMittal without nominal value into one share without nominal value. As a result of this reverse stock split, the number of outstanding shares for the prior periods have been recast in accordance with IFRS.
The following table provides the numerators and a reconciliation of the denominators used in calculating basic and diluted earnings per common share for the years ended December 31, 2018, 20172021, 2020 and 2016. |
| | | | | | | | |
| Year Ended December 31, |
| 2018 |
| 2017 |
| 2016 |
| Net income (loss) attributable to equity holders of the parent | 5,149 |
|
| 4,568 |
|
| 1,779 |
|
| Weighted average common shares outstanding (in millions) for the purposes of basic earnings per share | 1,015 |
|
| 1,020 |
|
| 953 |
|
| Incremental shares from assumed conversion of restricted share units and performance share units (in millions) | 6 |
|
| 4 |
|
| 2 |
|
| Weighted average common shares outstanding (in millions) for the purposes of diluted earnings per share | 1,021 |
|
| 1,024 |
|
| 955 |
|
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) attributable to equity holders of the parent | 14,956 | | | (733) | | | (2,454) | |
| Weighted average common shares outstanding (in millions) for the purposes of basic earnings per share | 1,105 | | | 1,140 | | | 1,013 | |
| Incremental shares from assumed conversion of restricted share units and performance share units (in millions) | 3 | | | — | | | — | |
| Weighted average common shares outstanding (in millions) for the purposes of diluted earnings per share | 1,108 | | | 1,140 | | | 1,013 | |
For the purpose of calculating earnings per common share, diluted weighted average common shares outstanding excludes nil, 9 million and 7 million potential common shares from share unit plans for the year ended December 31, 2021, 2020 and 2019, respectively; and 1 million potential common shares from stock options outstanding for the year ended December 31, 2019, because such share unit plans and stock options are anti-dilutive.
10.411.4 Dividends
Calculations to determine the amounts available for dividends are based on ArcelorMittal’s financial statements (“ArcelorMittal SA”
S.A.”) which are prepared in accordance with IFRS, as endorsed by the European Union. ArcelorMittal SAS.A. has no significant manufacturing operations of its own and generates its own profit mostly from financing activities and the management fees / fees/industrial franchise agreements withinwith Group Companies.companies. Accordingly, it can only pay dividends or distributions to the extent it is entitled to receive cash dividend distributions from its subsidiaries’ recognized gains, profit generated by its own activities, from the sale of its assets or records share premiumpremiums from the issuance of common shares.
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Dividends are declared in U.S. dollarsdollar and are payable in either U.S. dollarsdollar or in euros. |
| | | | | | | |
| Description | Approved by |
| Dividend per
share (in $) |
| Payout date |
| Total (in
millions of $) |
| Dividend for financial year 2015 | Annual General Shareholders’ meeting on May 4, 2016 |
| — |
| — |
| — |
| Dividend for financial year 2016 | Annual General Shareholders’ meeting on May 4, 2017 |
| — |
| — |
| — |
| Dividend for financial year 2017 | Annual General Shareholders’ meeting on May 9, 2018 |
| 0.10 |
| June 13, 2018 |
| 101 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Description | Approved by | | Dividend per
share (in $) | | Payout date | | Total (in
millions of $) |
| Dividend for financial year 2018 | Annual general shareholders’ meeting on May 7, 2019 | | 0.20 | | | June 13, 2019 | | 203 | |
| Dividend for financial year 2019 | Annual general shareholders’ meeting on June 13, 2020 | | — | | | — | | | — | |
| Dividend for financial year 2020 | Annual general shareholders’ meeting on June 8, 2021 | | 0.30 | | | June 15, 2021 | | 312 | |
On June 8, 2021 at the annual general meeting of shareholders, the shareholders approved the Company’s dividend of $0.30 per share. The dividend amounted to 325 (312 net of dividends paid to subsidiaries holding treasury shares), and was paid on June 15, 2021.
In February 2022, the Board has agreed on a newof Directors recommended an increase of the base annual dividend policy which willto $0.38 per share, from
$0.30 per share, to be proposedpaid in June 2022, subject to the approval of shareholders at the annual general meeting of shareholders in May 2019, dividends will begin at $0.20 per share in 2019 (paid from 2018 results).2022.
| | |
| Consolidated financial statements 364 |
| (millions of U.S. dollar, except share and per share data) |
10.511.5 Non-controlling interests
10.5.111.5.1 Non-wholly owned subsidiaries that have material non-controlling interests
The tables below provide a list of the principal subsidiaries which include significant non-controlling interests at December 31, 20182021 and 20172020 and for the years ended December 31, 2018, 20172021, 2020 and 2016.2019. |
| | | | | | | | | | | | | | | | | | | | | |
| Name of Subsidiary | | Country of incorporation and operation | | % of non-controlling interests and non- controlling voting rights at December 31, 2018 | | % of non-controlling interests and non- controlling voting rights at December 31, 2017 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2018 | | Non-controlling interests at December 31, 2018 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2017 | | Non-controlling interests at December 31, 2017 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2016 |
| AMSA | | South Africa | | 30.78% | | 30.78% | | 29 |
| | 170 |
| | (124 | ) | | 195 |
| | (103 | ) |
Sonasid1 | | Morocco | | 67.57% | | 67.57% | | 2 |
| | 107 |
| | 3 |
| | 107 |
| | (5 | ) |
| ArcelorMittal Kryvyi Rih | | Ukraine | | 4.87% | | 4.87% | | 15 |
| | 182 |
| | 10 |
| | 164 |
| | 5 |
|
| Belgo Bekaert Arames ("BBA") | | Brazil | | 45.00% | | 45.00% | | 28 |
| | 136 |
| | 25 |
| | 146 |
| | 23 |
|
Hera Ermac2 | | Luxembourg | | — | | — | | — |
| | 797 |
| | — |
| | 797 |
| | — |
|
AMMIC3 | | Canada | | 15.00% | | 15.00% | | 91 |
| | 484 |
| | 91 |
| | 479 |
| | 28 |
|
Arceo4 | | Belgium | | 62.86% | | 62.86% | | 4 |
| | 158 |
| | 4 |
| | 168 |
| | 5 |
|
| ArcelorMittal Liberia Ltd | | Liberia | | 15.00% | | 15.00% | | (2 | ) | | (268 | ) | | (11 | ) | | (266 | ) | | (5 | ) |
| Other | | | | | | | | 14 |
| | 256 |
| | 9 |
| | 276 |
| | 7 |
|
| Total | | | | | | | | 181 |
| | 2,022 |
| | 7 |
| | 2,066 |
| | (45 | ) |
| |
1. | Sonasid - ArcelorMittal holds a controlling stake of 50% in Nouvelles Sidérurgies Industrielles. ArcelorMittal controls Nouvelles Sidérurgies Industrielles on the basis of a shareholders’ agreement which includes deadlock arrangements in favor of the Company. Nouvelles Sidérurgies Industrielles holds a 64.86% stake in Sonasid. The total non-controlling interests in Sonasid of 67.57% are the result of ArcelorMittal’s indirect ownership percentage in Sonasid of 32.43% through its controlling stake in Nouvelles Sidérurgies Industrielles.
|
| |
2. | Hera Ermac - The non-controlling interests correspond to the equity component of the mandatory convertible bonds maturing on January 29, 2021 (see note 10.2).
|
| |
3. | AMMIC - On March 15, 2013 and May 30, 2013, a consortium led by POSCO and China Steel Corporation acquired a 15% non-controlling interest in joint venture partnerships holding ArcelorMittal’s Labrador Trough iron ore mining and infrastructure assets.
|
| |
4. | Arceo - On June 1, 2015, the Company signed an agreement with Sogepa, an investment fund of the Walloon Region in Belgium, to restructure the research and development activities of their combined investment in Arceo, an investment previously accounted for under the equity method by the Company. On June 11, 2015, Sogepa made a capital injection into Arceo, decreasing the Company’s percentage ownership from 50.1% to 37.7%. Following the signed agreement to restructure the activities of Arceo, the Company obtained control and fully consolidated the investment, which resulted in an increase in non-controlling interests by 148. Additionally, on December 13, 2016, Sogepa made a capital injection into Arceo, decreasing the Company's percentage ownership from 37.7% to 37.1%.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name of Subsidiary | | Country of incorporation and operation | | % of non-controlling interests and non- controlling voting rights at December 31, 2021 | | % of non-controlling interests and non- controlling voting rights at December 31, 2020 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2021 | | Non-controlling interests at December 31, 2021 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2020 | | Non-controlling interests at December 31, 2020 | | Net income (loss) attributable to non- controlling interests for the year ended December 31, 2019 |
| AMSA | | South Africa | | 30.78 | % | | 30.78 | % | | 151 | | | 160 | | | (34) | | | 24 | | | (98) | |
Société Nationale de Sidérurgie S.A. ("Sonasid")1 | | Morocco | | 67.57 | % | | 67.57 | % | | 9 | | | 118 | | | — | | | 114 | | | — | |
| ArcelorMittal Kryvyi Rih | | Ukraine | | 4.87 | % | | 4.87 | % | | 45 | | | 187 | | | (1) | | | 151 | | | (5) | |
| Belgo Bekaert Arames ("BBA") | | Brazil | | 45.00 | % | | 45.00 | % | | 127 | | | 187 | | | 33 | | | 116 | | | 28 | |
Hera Ermac2 | | Luxembourg | | — | | | — | | | — | | | 855 | | | — | | | 855 | | | — | |
| AMMC | | Canada | | 15.00 | % | | 15.00 | % | | 257 | | | 527 | | | 127 | | | 466 | | | 114 | |
| Arceo | | Belgium | | 62.86 | % | | 62.86 | % | | 2 | | | 153 | | | 2 | | | 167 | | | 3 | |
| ArcelorMittal Liberia Ltd | | Liberia | | 15.00 | % | | 15.00 | % | | 4 | | | (218) | | | 28 | | | (222) | | | 18 | |
| Other | | | | | | | | 14 | | | 269 | | | — | | | 286 | | | 3 | |
| Total | | | | | | | | 609 | | | 2,238 | | | 155 | | | 1,957 | | | 63 | |
ARCELORMITTAL AND SUBSIDIARIES1.Sonasid - ArcelorMittal holds a controlling stake of 50% in Nouvelles Sidérurgies Industrielles ("NSI"). ArcelorMittal controls NSI on the basis of a shareholders’ agreement which includes deadlock arrangements in favor of the Company. NSI holds a 64.86% stake in Sonasid. The total non-controlling interests in Sonasid of 67.57% are the result of ArcelorMittal’s indirect ownership percentage in Sonasid of 32.43% through its controlling stake in NSI.
Notes2.Hera Ermac - The non-controlling interests correspond to Consolidated Financial Statementsthe equity component net of transaction fees of the mandatory convertible bonds maturing on January 31, 2024 (see note 11.2).
(millions of U.S. dollars, except share and per share data)
The tables below provide summarized statements of financial position for the above-mentioned subsidiaries of financial position as of December 31, 20182021 and 20172020 and the summarized statements of operations and summarized statements of cash flows for the yearyears ended December 31, 2018, 20172021, 2020 and 2016.2019.
Summarized statements of financial position | | | | | | | | | | | | | | | | | | | December 31, 2021 |
| | December 31, 2018 | |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia | |
| Summarized statements of financial position | | Summarized statements of financial position | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| Current assets | 1,307 |
| | 194 |
| | 1,408 |
| | 240 |
| | 251 |
| | 1,144 |
| | 93 |
| | 113 |
| Current assets | 1,229 | | | 232 | | | 1,657 | | | 392 | | | 685 | | | 2,058 | | | 196 | | | 176 | |
| Non-current assets | 672 |
| | 100 |
| | 2,947 |
| | 158 |
| | 2,492 |
| | 3,113 |
| | 166 |
| | 114 |
| Non-current assets | 554 | | | 107 | | | 3,043 | | | 124 | | | 976 | | | 3,038 | | | 53 | | | 158 | |
| Total assets | 1,979 |
| | 294 |
| | 4,355 |
| | 398 |
| | 2,743 |
| | 4,257 |
| | 259 |
| | 227 |
| Total assets | 1,783 | | | 339 | | | 4,700 | | | 516 | | | 1,661 | | | 5,096 | | | 249 | | | 334 | |
| Current liabilities | 1,056 |
| | 106 |
| | 535 |
| | 109 |
| | 84 |
| | 331 |
| | 2 |
| | 1,816 |
| Current liabilities | 901 | | | 124 | | | 787 | | | 149 | | | 55 | | | 640 | | | — | | | 1,559 | |
| Non-current liabilities | 372 |
| | 34 |
| | 308 |
| | 28 |
| | 335 |
| | 539 |
| | 1 |
| | 41 |
| Non-current liabilities | 362 | | | 43 | | | 284 | | | 23 | | | 54 | | | 623 | | | — | | | 46 | |
| Net assets | 551 |
| | 154 |
| | 3,512 |
| | 261 |
| | 2,324 |
| | 3,387 |
| | 256 |
| | (1,630 | ) | Net assets | 520 | | | 172 | | | 3,629 | | | 344 | | | 1,552 | | | 3,833 | | | 249 | | | (1,271) | |
Summarized statements of operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Revenue | 3,440 |
| | 396 |
| | 2,497 |
| | 771 |
| | — |
| | 2,396 |
| | — |
| | 132 |
|
| Net income (loss) | 95 |
| | 4 |
| | 340 |
| | 59 |
| | (555 | ) | | 636 |
| | 6 |
| | (12 | ) |
| Total comprehensive income (loss) | (40 | ) | | 5 |
| | 331 |
| | 62 |
| | (555 | ) | | 642 |
| | 6 |
| | (12 | ) |
| | |
| 365 Consolidated financial statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Summarized statements of operations | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| Revenue | 2,695 | | | 480 | | | 4,015 | | | 1,021 | | | — | | | 3,997 | | | — | | | 372 | |
| Net income (loss) | 489 | | | 15 | | | 920 | | | 272 | | | (4) | | | 1,713 | | | 3 | | | 63 | |
| Total comprehensive income (loss) | 491 | | | 17 | | | 918 | | | 273 | | | (4) | | | 1,796 | | | 3 | | | 63 | |
ARCELORMITTAL AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| Summarized statements of cash flows | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | |
| Net cash provided by / (used in) operating activities | 180 | | | 23 | | | 778 | | | 90 | | | 5 | | | 2,310 | | | 8 | | | 214 | |
| Net cash provided by / (used in) investing activities | (85) | | | (6) | | | (313) | | | (5) | | | 8 | | | (844) | | | 19 | | | (78) | |
| Net cash provided by / (used in) financing activities | (49) | | | (4) | | | (449) | | | (72) | | | (13) | | | (1,375) | | | (5) | | | (135) | |
| Impact of currency movements on cash | (16) | | | (6) | | | 1 | | | (2) | | | — | | | — | | | (6) | | | — | |
| Cash and cash equivalents: | | | | | | | | | | | | | | | |
| At the beginning of the year | 173 | | | 92 | | | 31 | | | 20 | | | — | | | 125 | | | 73 | | | 1 | |
| At the end of the year | 203 | | | 99 | | | 48 | | | 31 | | | — | | | 216 | | | 89 | | | 2 | |
| Dividend to non-controlling interests | 0 | | (2) | | | (17) | | | (22) | | | 0 | | (202) | | | (3) | | | 0 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Summarized statements of financial position | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | |
| Current assets | 853 | | | 214 | | | 1,050 | | | 200 | | | 694 | | | 1,566 | | | 182 | | | 153 | |
| Non-current assets | 572 | | | 114 | | | 2,871 | | | 112 | | | 1,044 | | | 2,987 | | | 89 | | | 150 | |
| Total assets | 1,425 | | | 328 | | | 3,921 | | | 312 | | | 1,738 | | | 4,553 | | | 271 | | | 303 | |
| Current liabilities | 875 | | | 115 | | | 619 | | | 93 | | | 54 | | | 515 | | | — | | | 1,583 | |
| Non-current liabilities | 471 | | | 48 | | | 354 | | | 9 | | | 113 | | | 633 | | | — | | | 55 | |
| Net assets | 79 | | | 165 | | | 2,948 | | | 210 | | | 1,571 | | | 3,405 | | | 271 | | | (1,335) | |
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
Summarized statements of cash flows |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Net cash provided by / (used in) operating activities | 69 |
| | 22 |
| | 313 |
| | 47 |
| | 38 |
| | 735 |
| | 10 |
| | (18 | ) |
| Net cash provided by / (used in) investing activities | 132 |
| | (5 | ) | | (346 | ) | | (14 | ) | | (38 | ) | | (134 | ) | | 14 |
| | (29 | ) |
| Net cash provided by / (used in) financing activities | (260 | ) | | — |
| | 50 |
| | (27 | ) | | — |
| | (579 | ) | | (9 | ) | | 47 |
|
| Impact of currency movements on cash | (10 | ) | | — |
| | (4 | ) | | — |
| | — |
| | — |
| | (1 | ) | | — |
|
| Cash and cash equivalents: | | | | | | | | | | | | | | | |
| At the beginning of the year | 141 |
| | 38 |
| | 60 |
| | 5 |
| | — |
| | 158 |
| | 13 |
| | — |
|
| At the end of the year | 72 |
| | 55 |
| | 73 |
| | 11 |
| | — |
| | 180 |
| | 27 |
| | — |
|
| Dividend to non-controlling interests | — |
| | — |
| | — |
| | (18 | ) | | — |
| | (87 | ) | | (7 | ) | | — |
|
Summarized statements of financial position |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Current assets | 1,457 |
| | 181 |
| | 1,228 |
| | 220 |
| | 210 |
| | 1,050 |
| | 56 |
| | 107 |
|
| Non-current assets | 1,047 |
| | 108 |
| | 2,801 |
| | 190 |
| | 3,350 |
| | 3,135 |
| | 213 |
| | 93 |
|
| Total assets | 2,504 |
| | 289 |
| | 4,029 |
| | 410 |
| | 3,560 |
| | 4,185 |
| | 269 |
| | 200 |
|
| Current liabilities | 1,399 |
| | 100 |
| | 598 |
| | 93 |
| | 67 |
| | 316 |
| | 2 |
| | 1,783 |
|
| Non-current liabilities | 470 |
| | 34 |
| | 266 |
| | 21 |
| | 616 |
| | 555 |
| | 1 |
| | 35 |
|
| Net assets | 635 |
| | 155 |
| | 3,165 |
| | 296 |
| | 2,877 |
| | 3,314 |
| | 266 |
| | (1,618 | ) |
Summarized statements of operations |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Revenue | 2,926 |
| | 371 |
| | 2,486 |
| | 698 |
| | — |
| | 1,943 |
| | — |
| | 56 |
|
| Net income (loss) | (403 | ) | | 6 |
| | 209 |
| | 52 |
| | 1,130 |
| | 617 |
| | 6 |
| | (71 | ) |
| Total comprehensive income (loss) | (421 | ) | | 4 |
| | 210 |
| | 52 |
| | 1,130 |
| | 613 |
| | 6 |
| | (71 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Summarized statements of operations | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | | |
| Revenue | 1,526 | | | 324 | | | 2,348 | | | 650 | | | — | | | 2,746 | | | — | | | 361 | |
| Net income (loss) | (110) | | | (1) | | | 17 | | | 75 | | | (208) | | | 849 | | | 4 | | | 192 | |
| Total comprehensive income (loss) | (138) | | | 3 | | | 14 | | | 79 | | | (208) | | | 747 | | | 4 | | | 192 | |
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
| | |
| Consolidated financial statements 366 |
| (millions of U.S. dollar, except share and per share data) |
Summarized statements of cash flows | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Summarized statements of cash flows | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | |
| Net cash provided by / (used in) operating activities | 30 | | | 39 | | | 697 | | | 86 | | | (209) | | | 922 | | | 8 | | | 223 | |
| Net cash provided by / (used in) investing activities | (13) | | | (5) | | | (212) | | | (12) | | | 208 | | | (137) | | | 20 | | | (19) | |
| Net cash provided by / (used in) financing activities | 77 | | | (1) | | | (485) | | | (65) | | | 1 | | | (870) | | | (6) | | | (204) | |
| Impact of currency movements on cash | 19 | | | 6 | | | (11) | | | (2) | | | — | | | — | | | 5 | | | — | |
| Cash and cash equivalents: | | | | | | | | | | | | | | | |
| At the beginning of the year | 60 | | | 53 | | | 42 | | | 13 | | | — | | | 210 | | | 46 | | | 1 | |
| At the end of the year | 173 | | | 92 | | | 31 | | | 20 | | | — | | | 125 | | | 73 | | | 1 | |
| Dividend to non-controlling interests | 0 | | 0 | | 0 | | (27) | | | 0 | | (126) | | | (3) | | | 0 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Net cash provided by / (used in) operating activities | (119 | ) | | (7 | ) | | 194 |
| | 63 |
| | (12 | ) | | 947 |
| | 10 |
| | (69 | ) |
| Net cash provided by / (used in) investing activities | (193 | ) | | (3 | ) | | (234 | ) | | (9 | ) | | 12 |
| | (301 | ) | | 3 |
| | (63 | ) |
| Net cash provided by / (used in) financing activities | 330 |
| | (4 | ) | | — |
| | (61 | ) | | — |
| | (656 | ) | | (8 | ) | | 132 |
|
| Impact of currency movements on cash | 13 |
| | 1 |
| | (2 | ) | | — |
| | — |
| | — |
| | 1 |
| | — |
|
| Cash and cash equivalents: | | | | | | | | | | | | | | | |
| At the beginning of the year | 110 |
| | 51 |
| | 102 |
| | 12 |
| | — |
| | 168 |
| | 7 |
| | — |
|
| At the end of the year | 141 |
| | 38 |
| | 60 |
| | 5 |
| | — |
| | 158 |
| | 13 |
| | — |
|
| Dividend to non-controlling interests | — |
| | (2 | ) | | — |
| | (26 | ) | | — |
| | (98 | ) | | (5 | ) | | — |
|
Summarized statements of operations |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 | | | | |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| Revenue | 2,228 |
| | 300 |
| | 2,068 |
| | 627 |
| | — |
| | 1,472 |
| | — |
| | 56 |
|
| Net income (loss) | (335 | ) | | (7 | ) | | 98 |
| | 53 |
| | 402 |
| | (66 | ) | | 7 |
| | (29 | ) |
| Total comprehensive income (loss) | (349 | ) | | (8 | ) | | 106 |
| | 49 |
| | 402 |
| | (74 | ) | | 7 |
| | (29 | ) |
Summarized statements of cash flows |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 | | | | |
| | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMIC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | | |
| Net cash provided by / (used in) operating activities | 11 |
| | 28 |
| | 159 |
| | 63 |
| | 28 |
| | 279 |
| | 4 |
| | (45 | ) |
| Net cash provided by / (used in) investing activities | (149 | ) | | (6 | ) | | (156 | ) | | (15 | ) | | (28 | ) | | (283 | ) | | (78 | ) | | (73 | ) |
| Net cash provided by / (used in) financing activities | 80 |
| | (32 | ) | | — |
| | (50 | ) | | — |
| | (24 | ) | | 80 |
| | 117 |
|
| Impact of currency movements on cash | 29 |
| | — |
| | (5 | ) | | 2 |
| | — |
| | — |
| | — |
| | — |
|
| Cash and cash equivalents: | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| At the beginning of the year | 139 |
| | 61 |
| | 104 |
| | 12 |
| | — |
| | 196 |
| | 1 |
| | 1 |
|
| At the end of the year | 110 |
| | 51 |
| | 102 |
| | 12 |
| | — |
| | 168 |
| | 7 |
| | — |
|
| Dividend to non-controlling interests | — |
| | (6 | ) | | — |
| | (25 | ) | | — |
| | (30 | ) | | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2019 |
| Summarized statements of operations | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| | | | | | | | | | | | | | | |
| Revenue | 2,864 | | | 366 | | | 2,420 | | | 761 | | | — | | | 2,655 | | | — | | | 257 | |
| Net income (loss) | (319) | | | (1) | | | (100) | | | 63 | | | 144 | | | 766 | | | 5 | | | 115 | |
| Total comprehensive income (loss) | (312) | | | — | | | (141) | | | 64 | | | 144 | | | 761 | | | 5 | | | 115 | |
10.5.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2019 |
| Summarized statements of cash flows | AMSA | | Sonasid | | AM Kryvyi Rih | | BBA | | Hera Ermac | | AMMC | | Arceo | | AM Liberia |
| Net cash provided by / (used in) operating activities | (35) | | | 9 | | | 163 | | | 76 | | | 857 | | | 1,045 | | | 9 | | | 84 | |
| Net cash provided by / (used in) investing activities | (79) | | | (5) | | | (270) | | | (12) | | | (114) | | | (332) | | | 17 | | | (18) | |
| Net cash provided by / (used in) financing activities | 97 | | | (6) | | | 68 | | | (62) | | | (743) | | | (683) | | | (7) | | | (65) | |
| Impact of currency movements on cash | 5 | | | — | | | 8 | | | — | | | — | | | — | | | — | | | — | |
| Cash and cash equivalents: | | | | | | | | | | | | | | | |
| At the beginning of the year | 72 | | | 55 | | | 73 | | | 11 | | | — | | | 180 | | | 27 | | | — | |
| At the end of the year | 60 | | | 53 | | | 42 | | | 13 | | | — | | | 210 | | | 46 | | | 1 | |
| Dividend to non-controlling interests | — | | | (4) | | | — | | | (18) | | | — | | | (102) | | | (5) | | | — | |
11.5.2 Transactions with non-controlling interests
Acquisitions of non-controlling interests, which do not result in a change of control, are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result of such transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in thei
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
rtheir relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the parent.
Transactions with non-controlling interests in 2018 were as follows:also include the mandatory convertible bonds (see note 11.2).
Put option liabilities
On November 9,April 1, 2018, ArcelorMittal completed the acquisition of Marcegaglia's 15% non-controlling interestVotorantim Siderurgia (subsequently renamed ArcelorMittal Sul Fluminense "AMSF"), Votorantim S.A.'s long steel business in AM InvestCo and 11% non-controlling interest in BRE.M.A Warmwalz GmbH & Co KG forBrazil pursuant to which Votorantim Siderurgia became a 28 and 40 consideration, respectively.wholly-owned subsidiary of ArcelorMittal Brasil. The Company recorded a decrease of 55 directly in equity.
Transactions with non-controlling interests in 2016 were as follows:
AMSA
On January 15, 2016, AMSAacquisition was completed a rights offering fully underwritten by ArcelorMittal. The total cash proceeds amounted to ZAR 4.5 billion. ArcelorMittal subscribed the capital increase through repayment of an outstanding intragroup loan of ZAR 3.2 billion and an additional cash injection of ZAR 0.5 billion. As a result of the rights issue, ArcelorMittal’s shareholding in AMSA increased from 52% to 70.55% and non-controlling interests decreased by 80.
Effective October 17, 2016, ArcelorMittal’s interest in AMSA decreased to 69.22%. In the framework of AMSA’s transformation initiatives in order to maximize its score under the Broad-Based Black Economic Empowerment (“B-BBEE”) Codes of Good Practice, it launched on October 1, 2015 an employee share ownership plan following which the Ikageng Broad-Based Employee Share Trust obtained an ownership interest of 1.33% in AMSA to be attributed to qualifying employees upon vesting date of the plan.
In addition, on September 28, 2016, AMSA announced that it had entered into agreements to implement a transaction which includes the issuance of a 17% shareholding in AMSA using a new class of notionally fundedpreferred shares to Votorantim S.A. representing a special purpose vehicle owned by Likamva Resources Proprietary Limited (“Likamva”). Likamva has undertaken to introduce broad-based social and community development organizations as shareholders to hold an effective 5%2.99% interest (of the 17%, leaving Likamva with a 12% shareholding) within 24 months. The transaction also includes the issuance of a 5.1% shareholding in AMSA using another new class of notionally funded sharesArcelorMittal Brasil. Pursuant to the shareholders' agreement, such preferred shares are subject to put and call option arrangements exercisable by Votorantim S.A. and ArcelorMittal South Africa Employee Empowerment Share Trust for the benefit of AMSA employeesBrasil between July 1, 2019 and AMSA management. All the shares have certain restrictions on disposal for a period of 10 years thereby promoting long-term sustainable B-BBEE in AMSA. The shares were issued on December 7, 2016. The Company concluded that the transaction does not correspond to a share issue but qualifies as an in substance option (resulting in the recognition of an expense of 63, which is recognized in financing costs - net31, 2022 and corresponds to the fair value at inception). The shares give the holders rights to notional dividends which will be used to repay the notional funding and voting rights for up to 10 years, resulting in a decrease of ArcelorMittal's voting rights to 53.92%. The Company will recognize non-controlling interests at the end of the 10 year period depending on the value of the shares based on a pre-defined formula.between January 1,
|
| | | |
| 2016 |
Non-controlling interests | 80 | |
Purchase price (selling price), net 1
| (56 | ) |
Adjustment to equity attributable to the equity holders of the parent | 136 | 367 Consolidated financial statements |
| |
1. | Amount paid in by non-controlling shareholders in AMSA following the rights issue
|
2023 and December 31, 2024, respectively. The Company determined that it has a present ownership interest in the preferred shares subject to the put option. Accordingly, it recognized at acquisition date a 328 financial liability at amortized cost and measured at the present value of the redemption amount based on past and future EBITDA projections adjusted by certain terms of the contract. At December 31, 2021 and December 31, 2020, the liability amounted to 252 (see note 4.8) and 235 (see note 9.2), respectively.
Transactions withOn June 3, 2021, following an amendment to the shareholders' agreement signed between the Company and non-controlling interests include alsoin NSI, an entity in which ArcelorMittal holds a 50% controlling stake and which holds a 64.86% interest in Sonasid in Morocco, the mandatory convertible bonds (see note 10.2).Company granted to such non-controlling interests a put option to buy the totality of their shares in NSI exercisable by its holders during three periods between December 5, 2022 to December 4, 2024 (or from March 5, 2023 to March 4, 2025), December 5, 2027 to December 4, 2029 and December 5, 2032 to December 4, 2034. The Company recognized a financial liability at amortized cost against equity of
119 and measured at the present value of the redemption amount.
NOTE 11:12: RELATED PARTIES
The related parties of the Group are predominately subsidiaries, joint operations, joint ventures, associates and key management personnel (see note 7.1)8.1) of the Group. Transactions between the parent company, its subsidiaries and joint operations are eliminated on consolidation and are not disclosed in this note. Related parties include the Significant Shareholder, which is a trust of which Mr. Lakshmi N. Mittal, Mrs. Usha Mittal and their children are the beneficiaries and which owns, 37.4% together with shares owned directly by Mr. and Mrs. Mittal, 33.67% of ArcelorMittal’s issued ordinary shares.
Transactions with related parties of the Company mainly relate to sales and purchases of raw materials and steel products and were as follows:
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
11.112.1 Sales and trade receivables |
| | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | | December 31, |
| | | | Sales | | Trade receivables |
| Related parties and their subsidiaries where applicable | Category | | 2018 | | 2017 | | 2016 | | 2018 | | 2017 |
| Calvert | Joint Venture | | 2,207 |
| | 2,030 |
| | 1,400 |
| | 33 |
| | 13 |
|
Gonvarri Steel Industries1 | Associate | | 2,022 |
| | 1,666 |
| | 1,210 |
| | 78 |
| | 92 |
|
Macsteel4 | Other | | 470 |
| | 521 |
| | 399 |
| | 2 |
| | 38 |
|
| ArcelorMittal CLN Distribuzione Italia S.r.l. | Joint Venture | | 511 |
| | 472 |
| | 414 |
| | 38 |
| | 18 |
|
| Borçelik | Joint Venture | | 536 |
| | 426 |
| | 240 |
| | 20 |
| | 11 |
|
| Bamesa | Associate | | 383 |
| | 397 |
| | 371 |
| | 27 |
| | 35 |
|
| I/N Kote L.P. | Joint Venture | | 329 |
| | 321 |
| | 346 |
| | 10 |
| | 7 |
|
| Aperam Société Anonyme ("Aperam") | Other | | 278 |
| | 262 |
| | 189 |
| | 29 |
| | 32 |
|
| AM RZK | Joint Venture | | 136 |
| | 235 |
| | 163 |
| | 5 |
| | 15 |
|
| C.L.N. Coils Lamiere Nastri S.p.A. | Associate | | 265 |
| | 233 |
| | 203 |
| | 6 |
| | 5 |
|
Tuper S.A.2 | Joint Venture | | 155 |
| | 154 |
| | 13 |
| | 45 |
| | 45 |
|
WDI3 | Associate | | 148 |
| | 127 |
| | 151 |
| | 1 |
| | 4 |
|
| Tameh | Joint Venture | | 110 |
| | 67 |
| | 51 |
| | 4 |
| | 3 |
|
| Al Jubail | Joint Venture | | 115 |
| | 66 |
| | 38 |
| | 1 |
| | 11 |
|
| Other | | | 594 |
| | 526 |
| | 446 |
| | 67 |
| | 77 |
|
| Total | | | 8,259 |
| | 7,503 |
| | 5,634 |
| | 366 |
| | 406 |
|
| |
1. | Gonvarri Steel Industries includes ArcelorMittal Gonvarri Brasil Productos Siderúrgicos which is a joint venture.
|
| |
2. | The joint venture Tuper S.A. was acquired on October 6, 2016.
|
| |
3. | WDI includes Westfälische Drahtindustrie Verwaltungsgesellschaft mbH & Co. KG and Westfälische Drahtindustrie GmbH.
|
| |
4. | Macsteel was sold on October 31, 2018.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, | | December 31, |
| | | Sales | | Trade receivables |
| Related parties and their subsidiaries where applicable | Category | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 |
| Calvert | Joint Venture | | 3,549 | | | 1,488 | | | 2,518 | | | 48 | | | 18 | |
Gonvarri Steel Industries 1 | Associate | | 2,234 | | | 1,395 | | | 1,728 | | | 72 | | | 67 | |
Acciaierie d'Italia 2 | Joint Venture | | 1,193 | | | — | | | — | | | 363 | | | — | |
| ArcelorMittal CLN Distribuzione Italia | Joint Venture | | 499 | | | 304 | | | 483 | | | 35 | | | 6 | |
| Borçelik | Joint Venture | | 484 | | | 312 | | | 474 | | | 105 | | | 15 | |
| Aperam | Other | | 478 | | | 155 | | | 172 | | | 67 | | | 19 | |
| Bamesa | Associate | | 370 | | | 226 | | | 365 | | | 53 | | | 27 | |
| Tuper | Joint Venture | | 326 | | | 128 | | | 147 | | | 60 | | | 36 | |
WDI 3 | Associate | | 195 | | | 106 | | | 105 | | | 2 | | | 1 | |
| ArcelorMittal RZK Çelik Servis Merkezi | Joint Venture | | 154 | | | 167 | | | 225 | | | 67 | | | 14 | |
| Coils Lamiere Nastri (C.L.N.) | Associate | | 150 | | | 146 | | | 247 | | | 8 | | | 7 | |
| Tameh | Joint Venture | | 107 | | | 64 | | | 109 | | | 19 | | | 6 | |
Condesa 4 | Joint Venture | | 106 | | | 46 | | | 69 | | | — | | | 11 | |
| ArcelorMittal BE Group | Joint Venture | | 81 | | | 37 | | | 56 | | | 7 | | | — | |
| SSC Tanger | Associate | | 78 | | | 49 | | | 55 | | | 1 | | | 1 | |
| Stalprofil | Associate | | 64 | | | 47 | | | 58 | | | 12 | | | 2 | |
| Alkat | Associate | | 56 | | | 32 | | | 27 | | | 14 | | | 6 | |
I/N Kote 5 | Other | | — | | | 226 | | | 321 | | | — | | | — | |
| Other | | | 395 | | | 214 | | | 283 | | | 151 | | | 33 | |
| Total | | | 10,519 | | | 5,142 | | | 7,442 | | | 1,084 | | | 269 | |
ARCELORMITTAL AND SUBSIDIARIES1.
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except shareGonvarri Steel Industries include mainly the joint ventures ArcelorMittal Gonvarri Brasil Productos Siderúrgicos and per share data)
11.2 Purchases and trade payables ArcelorMittal Gonvarri SSC Slovakia.
|
| | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | | December 31, |
| | | | Purchases | | Trade payables |
| Related parties and their subsidiaries where applicable | Category | | 2018 | | 2017 | | 2016 | | 2018 | | 2017 |
| Tameh | Joint Venture | | 344 |
| | 286 |
| | 236 |
| | 2 |
| | 45 |
|
Baffinland1 | Associate | | 28 |
| | 142 |
| | 75 |
| | 16 |
| | 22 |
|
| Aperam | Other | | 85 |
| | 94 |
| | 65 |
| | 6 |
| | 11 |
|
| Calvert | Joint Venture | | 107 |
| | 65 |
| | 15 |
| | 23 |
| | 11 |
|
| CFL Cargo S.A. | Associate | | 59 |
| | 60 |
| | 58 |
| | 9 |
| | 13 |
|
| Exeltium S.A.S. | Associate | | 54 |
| | 53 |
| | 71 |
| | — |
| | — |
|
| Baycoat Limited Partnership | Joint Venture | | 43 |
| | 42 |
| | 41 |
| | 5 |
| | 5 |
|
EIMP2 | Other | | — |
| | 36 |
| | 310 |
| | — |
| | — |
|
Gonvarri Steel Industries3 | Associate | | 35 |
| | 19 |
| | 146 |
| | 31 |
| | 51 |
|
| Other |
| | 361 |
| | 236 |
| | 373 |
| | 109 |
| | 102 |
|
| Total |
| | 1,116 |
| | 1,033 |
| | 1,390 |
| | 201 |
| | 260 |
|
| |
1. | Baffinland was classified as an associate as of October 31, 2017 (see note 2).
|
| Consolidated financial statements 368 |
2. | In addition to trade payables(millions of U.S. dollar, except share and purchases with related parties as defined by IAS 24, the Company also discloses this information for EIMP due to the close relationship with this entity. The Company's per share data)21% stake in the EIMP was disposed of on August 7, 2017.
|
| |
3. | Gonvarri Steel Industries includes ArcelorMittal Gonvarri Brasil Productos Siderúrgicos which is a joint venture. |
11.32.On April 14, 2021, ArcelorMittal completed an investment agreement with Invitalia, an Italian state-owned company, forming the joint venture Acciaierie d’Italia (see note 2.3.1). On September 30, 2021, the raw material supply agreement between Acciaierie d’Italia and the Company expired without renewal.
3.WDI includes Westfälische Drahtindustrie Verwaltungsgesellschaft mbH & Co. KG and Westfälische Drahtindustrie GmbH.
4.On November 19, 2021, the Company completed the acquisition of Condesa, a joint venture in which it already held a 33% interest, through the acquisition of the remaining 67% shares (see note 2.2.4).
5.I/N Kote was divested on December 9, 2020 upon completion of ArcelorMittal USA sale (see note 2.3.1).
12.2 Purchases and trade payables
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, | | December 31, |
| | | Purchases | | Trade payables |
| Related parties and their subsidiaries where applicable | Category | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 |
| Tameh | Joint Venture | | 404 | | | 171 | | | 273 | | | 178 | | | 37 | |
| Global Chartering | Joint Venture | | 286 | | | 138 | | | — | | | 20 | | | 8 | |
| Integrated Metal Recycling | Joint Venture | | 167 | | | — | | | — | | | — | | | — | |
| AMNS India | Joint Venture | | 166 | | | 18 | | | — | | | 1 | | | — | |
| Sitrel | Joint Venture | | 88 | | | 29 | | | 49 | | | 2 | | | — | |
| Aperam | Other | | 86 | | | 56 | | | 47 | | | 15 | | | 8 | |
| CFL Cargo | Associate | | 71 | | | 54 | | | 63 | | | 26 | | | 16 | |
| Exeltium | Associate | | 71 | | | 50 | | | 52 | | | 12 | | | 12 | |
| Alkat | Associate | | 68 | | | 53 | | | 36 | | | 10 | | | 8 | |
| Calvert | Joint Venture | | 63 | | | 124 | | | 127 | | | 6 | | | 9 | |
| Baycoat | Joint Venture | | 53 | | | 46 | | | 47 | | | 6 | | | 7 | |
Gonvarri Steel Industries 1 | Associate | | 45 | | | 19 | | | 22 | | | 19 | | | 17 | |
| Al Jubail | Joint Venture | | 21 | | | 16 | | | 53 | | | 7 | | | 7 | |
| Other | | | 284 | | | 377 | | | 323 | | | 129 | | | 143 | |
| Total | | | 1,873 | | | 1,151 | | | 1,092 | | | 431 | | | 272 | |
1.Gonvarri Steel Industries include mainly the joint ventures ArcelorMittal Gonvarri Brasil Productos Siderúrgicos and ArcelorMittal Gonvarri SSC Slovakia.
12.3 Other transactions with related parties
At December 31, 2018,2019, subsequent to the ArcelorMittal's sale of a 50% controlling interest in Global Chartering to DryLog (see note 2.3.1), the Company signed a 10 year freight contract with Global Chartering, whereby ArcelorMittal agreed to provide cargo up to 16.8 million tonnes annually for shipping, representing 80% of the capacity of Global Chartering at that time. As of December 31, 2019, the Company also had an outstanding short-term loan of 127 granted to Global Chartering, which was repaid in 2020 following the sale-and-lease back of three vessels owned by Global Chartering.
At December 31, 2020, the shareholder loans granted by the Company to Al Jubail, with various maturity dates, had a carrying value of 131109. They were fully converted into equity in 2021 (see note 2.4.3)2.4.1).
As of March 13, 2017, the Company granted a credit facility to AMTBA bearing compound interest (Libor 3 months + margin) maturing on February 28, 2018 for a maximum aggregated amount of 35. The facility was fully repaid during the year.
As of December 3, 2014, ArcelorMittal Calvert LLC signed a member capital expenditure loan agreement with the joint venture Calvert and as of December 31, 2018,2021, the loans amounted to 149195 including accrued interest. The loans bear
interest from 3%2.28% to 3.95%4.77% and have various maturity dates rangeranging from less than 1 to 25 years.
In May 2014, ArcelorMittal entered into a 5-year off take agreement with its associate Baffinland (the "AM Sourcing Contract"), whereby it will buy the lesser of 50% of the annual quantity of iron ore produced by Baffinland or 2 million tonnes of iron ore per year. The AM Sourcing Contract has been extended to December 31, 2021 and the maximum quantity shall increase to the lesser of 50% of the annual quantity of iron ore produced by Baffinland or 4 million tonnes per contract year, after completion of the Rail Expansion project. The purchase price includes a premium to reference prices based on high iron ore content. ArcelorMittal paid advances to Baffinland for an amount equivalent to the value of iron ore stockpiled by Baffinland outside the salable season until August 31, 2017. From September 1, 2017 to December 31, 2021, ArcelorMittal will not pay advances to Baffinland anymore as payments for the purchases will occur upon loading on vessel for shipment at port of Milne.
In May 2014, ArcelorMittal also entered into an additional contract with Baffinland whereby it agreed to act as a sales agent (“Marketing agreement”) for all of Baffinland’s iron ore (excluding the shipments subject to the offtake agreement mentioned above). The Company also entered into an agreement to advance 80% of the lesser of 50% of the annual quantity of iron ore produced by Baffinland or 1.5 million tonnes of iron ore per year. The contract expired on the extended maturity at April 30, 2016. On August 24, 2016,November 8, 2019, Baffinland entered into an agreement with a bank to finance an amount which does not exceed the lesser of 50% of iron ore stockpiled by Baffinland outside the salable season and 2.3 million tonnes in any contract year. This agreement expired on the extended maturity at October 20, 2017. On December 1, 2017, Baffinland entered into a new agreement with a bank to finance up to 4 million tonnes at 78% of the value of the iron ore produced and hauled to the por
ARCELORMITTAL AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(millions of U.S. dollars, except share and per share data)
t by Baffinland (the "EXW Purchase Contract"). The EXW Purchase Contract matured on October 20, 2018. Under this agreement, the bank purchased product from Baffinland up to 50% which was then sold to ArcelorMittal under a separate back-to-back contract (“AM Purchase Contract”). ArcelorMittal contracted with third-party steel mills for onward sale of the product purchased from the bank under the AM Purchase Contract. The remaining 50% of product purchased by the bank under the EXW Purchase Contract was sold to ArcelorMittal under the AM Sourcing Contract as a result of Baffinland assigning its rights under that contract to the bank on December 22, 2017. On December 4, 2018, Baffinland entered into a new agreement with a bank to finance up to 6 million tonnes at 78% of the value of the iron ore produced and hauled to the port of Milne Inlet by Baffinland up to a limit of 400.450. This arrangement was renewed on December 1, 2020. On December 7, 2021, Baffinland signed a new agreement with a bank to finance up to 6 million tonnes at 82% of the value of the iron ore produced and hauled to the port of Milne Inlet by Baffinland up to a limit of 600.
ArcelorMittal's shared operator rights terminated on June 30, 2018 and the Company retained marketing rights until December 31, 2019. For the duration of 2020, ArcelorMittal provided transitional marketing services to Baffinland. NOTE 12: SUBSEQUENT EVENTS
On March 2,Following the Indian Supreme Court ruling dated October 4, 2018, ArcelorMittal signedcompleted a joint venture formation agreement with NSSMC in relationseries of payments to its offerthe financial creditors of KSS Petron to acquire ESIL, which was subsequently amended and restated on January 22, 2019. On April 2, 2018, ArcelorMittal submitted an offer inclear overdue debts (see note 4.6). AMNS India has the re-bidding process for ESIL. The offer has faced various legal challenges atright to enforce the National Company Law Tribunal and more recently at the National Company Law Appellate Tribunal ("NCLAT"). KSS Petron
On October 26, 2018, ArcelorMittal announced that ESIL Committee of Creditors (‘CoC’) has voted to approve the Company’s acquisition of ESIL. ESIL’s Resolution Professional, | | |
| 369 Consolidated financial statements |
debt on behalf of the CoC, issuedCompany for an outstanding amount of 136 as of December 31, 2021.
NOTE 13: SUBSEQUENT EVENTS
On March 3, 2022, ArcelorMittal announced its decision to idle its steelmaking operations in Kryvyi Rih, Ukraine in order to ensure the Company with a Lettersafety and security of Intent (''LOI'') stating that theits employees and assets. The Company has been identified asevaluating the ‘Successful Applicant’. Further to ArcelorMittal being named the H1 Resolution Applicant (the preferred bidder)situation on October 19, 2018, ESIL’s CoC approved the Company’s acquisition plan for ESIL (the "Resolution Plan"),a daily basis and production had previously been reduced with the ''LOI'' identifying it as the ‘Successful Resolution Plan’plant operating at a technical minimum (approximately one-third of its normal production levels). The Resolution Plan set out a detailed industrial plan for ESIL aimed at improving its performance and profitability and ensuring it can participate in the anticipated growth of steel demand in India. It includes an upfront payment of 42,000 crore rupees (approx. $5.7 billion) towards ESIL’s debt resolution, with a further 8,000 crore rupees (approx. $1.1 billion) of capital injection into ESIL to support operational improvement, increase production levels and deliver enhanced levels of profitability.
The process to restore ESIL would involveidle all blast furnaces commenced on the same day.
The Company's operations in Ukraine consist of a multi-staged approach: initial steps would be to stabilize the operations and increase production of finished steel goods to 6.5 million tonnes per annum in the medium-term followed by an increase to 8.5plant, which produced 4.9 million tonnes per annum byof steel in 2021, and (captive) mines that produced 11.7 million tonnes of iron ore in 2021; the endrelated property, plant and equipment had a carrying value of 2024 and ultimately have long-term aspirations2.3 billion on the Company’s statement of financial position at December 31, 2021. In 2021, the Company’s Ukrainian operations (and in particular its Kryvyi Rih steel plant) recorded 4.6 million of steel shipments, generating 4.1 billion of sales including 0.9 billion of sales to produce between 12-15 million tonnes per annum. customers located in Ukraine.
In line with ESIL’s corporate insolvency process, ArcelorMittal’s Resolution Plan must now be formally accepted by India’s NationalThe Company Law Tribunal (“NCLT”) before completion. The NCLT has completed hearing the CoC's application for the approvalcannot predict duration of the Resolution Plan,idling as it will depend on the remaining course of the conflict and the establishment of safe and stable operating and logistical conditions thereafter, as well as objectionspotential repairs of any damages sustained. More generally the conflict between Russia and challenges from different parties, including creditors of ESILUkraine could have a material adverse effect on the overall macroeconomic environment, potentially affecting steel and the current shareholder. While it is difficult to predict the timing of an NCLT approval, a decision is expected in the first quarter of 2019iron ore demand and the amounts of debt payment and capital injection specified in the Resolution Plan would become payable promptly after such approval is obtained. prices as well as increasing energy costs.
On February 19, 2019, ArcelorMittal announced the completion of its share buyback program on February 15, 2019 (the "2019 Program"). The Company repurchased 4 million shares for a total value of approximately 90 (€80 million) at an approximate average price per share of €19.89 ($22.42) pursuant to the 2019 Program that was announced on February 7, 2019. The 2019 Program was completed under the authorization given by the annual general meeting of shareholders held on May 5, 2015 and applicable market abuse regulations. The shares acquired under the 2019 Program are intended to meet ArcelorMittal's obligations arising from employee share programs.
