1. Transforming the stainless steel industry
Malay Mukherjee - Member of the GMB
11-13 September 2007 – Investor day – Paris
2. Disclaimer
Forward-Looking Statements
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risks and uncertainties include those discussed or identified in the filings with the Netherlands Authority for the Financial
Markets, the Commission de Surveillance du Secteur Financier (“CSSF”), the Luxembourg securities regulator and the
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Additional Information
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5. Stainless steel is still a highly attractive
market by its growth potential…
Stainless a competitive product
Stainless worldwide market (mt) • High durability
– High resistance to corrosion, extreme atmospheric conditions
and changes in pH
24
– Withstand high magnitudes of temperature in both directions,
high pressure and highly malleable and ductile material
22
• Diversity of application : from fashion to capital goods giving
HR
20
value through its aesthetic, hygienic, corrosion and resistance
properties
18
• High recycling products: in Europe 100% of stainless steel is
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produced from scraps
14
• Stainless, a continuous positive substitution effect thanks to it
properties
12
10
Annual average growth 1985-2006 in % p.a.
CR
8
World Industrial 2.80%
6
Production
4
4.70%
Stainless Steel
2
2.70%
0 Carbon Steel
98
04
06
00
02
97
99
01
03
05
P
P
E
P
P
Aluminium 3.10%
08
10
07
09
11
19
20
20
20
20
19
19
20
20
20
20
20
20
20
20
Attractive market with strong growth potential
Source CRU Stainless Steel Flat Products Quarterly
4
6. …but rapid expansion of small Asian
producers has deteriorated fundamentals
Fragmentation of the stainless steel industry Stainless worldwide slab capacity
(Million tonnes, capacity utilization in %)
80%
75.5%
40.0 100%
75% 72.5%
71.8%
90%
35.0
70%
80%
64.3%
65% 30.0
Top 10 70%
% Global crude capacity
producers
25.0
60% 60%
55% 20.0 50%
40%
50% 15.0
30%
45% 10.0
53.5%
20%
Top 5 producers:
46.0% -ArcelorMittal
40% 45.0% 5.0
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Acerinox
39.4% %
Posco
35% 0.0 0%
Outokumpo
1990 2000 2005 2010 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
ThyssenKrupp
Consolidation Period Asian Production Growth
Assuming no consolidation
The industry needs further consolidation
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Source: CRU, ArcelorMittal estimates
7. The increase and extreme volatility of
nickel has benefited Ferritics products…
Consolidation of the nickel industry and nickel price Impact of Nickel appreciation from 17,000 USD/t to
evolution (USD/t) 40,000 USD/t over raw material costs (USD/t)
Norilsk
60000
21%
Other
50000
Extra 2,100 USD/ton
42% 4500
cost difference
4000
28%
CVRD
40000
19%
3500
30000 3000
BHP
Xstrata
10%
8%
2500
20000
2000
1500
10000
1000
500
0
0
2001 2002 2003 2004 2005 2006 2007 200 Series 300 Series 400 Series
Austenitics Stainless
Low Ni Stainless Ferritics Stainless
(high nickel) (no nickel)
Nickel prices expected to remain high due to recent consolidation of the nickel industry
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Source: LME, CRU
8. …and created a significant shift in
stainless steel markets
Austenitics x Ferritics price difference (base 100) Industry sales mix Ratio austenitics x low/no Ni grades
100%
350
90%
300
28%
80%
57%
59%
70%
64%
65%
250 68%
71%
72% 73%
60%
Austenitics Stainless CR304
200 50%
(high nickel) CR430
40%
150
30%
43%
41%
20%
100 36%
35%
32%
29%
Ferritics Stainless 28% 27%
10%
(no nickel)
50
0%
01 02 03 04 05 06 07 08
2002 2005 2007 (01-06)
1994 1997 1999 F F
Ferritics and speciality producers appear to be the main winners in the new environment
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Source: CRU and ArcelorMittal estimates
10. One of the most global industrial and
commercial networks in the industry
ArcelorMittal stainless steel network
Genk (1mt)
Carinox (1mt)
Imphy Alloys
Uginox Sanayi
Arcelor stainless processing Uginox Changzhou
Arcelor Stainless Vietnam
Kantzen Stainless processing
(Malaysia)
Timoteo (0.9mt)
Melt shop
Service centre
Sales office Stainless Steel International
An industrial leader in Europe and South America
benefiting from a global distribution network
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11. A high portion of Ferritics and long term
contracts answering market needs
End-application markets* ArcelorMittal Product mix 2006
Electrical steel Stainless CR
Welded tubes
(Acesita)
Construction and
10% Transport
Stainless
14% 14%
semis
24%
4%
22%
26% 18% 64%
36%
Stainless
Catering and
HR
household
Industrial
products
equipment
Relative to the industry, ArcelorMittal has a larger Note that ArcelorMittal Stainless strong presence in the
exposure with long term contract to the automotive electrical steel business which is expected to growth by
and white goods industries more than 7% per year over for the next 5/10 years
Ferritics products represented more than 30% of Group shipments in 2006
and long-term contracts 15%
10
*CRU
12. One of the most cost competitive
industrial networks
A focus on Flat Stainless steel Creating the most competitive hot phase in Europe
Black coil operating cost*
ASI
Flat Mercosur
Acesita
Flat Europe
Ugine & Alz
Industeel Imphy
Alloys
IUP
Meusienne
Matthey
ArcelorMittal Stainless
In ArcelorMittal
Ambition to maintain cost leadership by pursuing aggressive management gains targets
ArcelorMittal operates the most profitable plant in the world in Brazil (Acesita)
Consolidation remains the most powerful answer to the industry’s new challenges
and the most competitive hot phase in Europe (Carinox)
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*ArcelorMittal estimates
14. Targets and strategy
Targets Strategy
Product
Achieving market • Leverage global presence of ArcelorMittal group for
leadership stainless activities
Geography
• Leverage multiregional positioning in Europe and
Value Chain
South-America
Reinforcing product • Build on strong products: ferritics, electrical steel
leadership in low Ni
Products • Brownfield organic growth plan to support this product
and Ferritics stainless strategy in Europe and Brazil
• Build up Brazilian assets to grow electrical steel
Mastering integration/ • Leverage ArcelorMittal global sourcing capability
purchase of raw
Value Chain • TCO
materials • Leverage group Mining expertise
Raw material
Capturing value • Distribution and tubes consolidate clear leadership in
Value Chain through Distribution core areas (Europe, South-America)
leadership in core
Distribution
geographic markets
Leveraging ArcelorMittal strength to outperform industry
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15. Growth plan in Ferritics
Evolution of Ferritics Mix 2007
Ferritics targets (000t)
(%) 48
41
39
37
34 33
High Volume 32
High Volume
Ambition >900
Ambition >700
~600
<500
Jan Feb Mar Apr May Jun Jul
2005 2007F 2008 2010
Share of ferritics in
stainless (excl. 30% 35% >40% 50%
30% 35% >40% 50%
semis)
* Others: include alloys, carbon, stainless semis
Industrial • Strong know-how (spec. products, BA…)
Industrial
development • Increase ferritics and BA capacity to sustain commercial growth
development
• Commercial development plan: offer products matching consumer needs (430, 409,
Commercial
Commercial stabilized ferritics)
development
development • Launch of a ferritic brand KARA
Impressive growth in ferritics considering current market circumstances
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16. Growth plan in distribution
Distribution shipments (ex-SSC) in Europe and South-America (000t)
High Volume
High Volume
Ambition
Ambition
>1000
>850
>700
~600
2006 2008 2010 2012
Integrated
Integrated • Higher value/service for customers
distribution will
distribution will • Better access to market and proximity with customers
bring
bring • Overall contribution to profitability and to growth of our stainless steel activities
An ambitious growth plan
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17. Growth projects under review
China
Leveraging
North America Europe existing
Leveraging partnership with
Answering growth
existing carbon Hunan Valin
demand through
facilities brownfield
India
Leveraging
existing carbon
projects and/or
develop through
South America
partnership
Leading market
development
Ambition of leadership
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19. Transforming the stainless steel industry
A low cost stainless steel producer with a global footprint
A strategic position in ferritics offering strong growth opportunities
An ambition to become a global leader
Question 4
Do you believe ArcelorMittal has the basis to become the
global reference in stainless steel?
1 – Yes
2 – No
3 – Don’t know
Transforming tomorrow
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