Amy Ebben ArcelorMittal USA December 13, 2019 U.S. Steel Market Update
Agenda
• ArcelorMittal introduction
• U.S. steel industry performance and trade
• Review of steel markets and 2020 outlook
1
About ArcelorMittal
2
• An industrial presence in 19 countries
exposes the company to all major
markets, from emerging to mature
• Values geographical breadth, product
diversity and raw material security
• 2018 crude steel production of 92.M
metric tons
24%
14%
48%
14%
ACIS
North AmericaBrazil
Europe
• World's leading steel and mining company with about 209,000 employees in
more than 60 countries
• Recognized leader in all major global steel markets, including automotive,
construction, household appliances and packaging, with leading R&D and
technology, as well as sizeable captive supplies of raw materials and outstanding
distribution networks
Crude steel production by region
ArcelorMittal in the United States
• Operates 26 facilities including mines, integrated operations, mini-mills and
finishing facilities
• Industrial presence in 12 states
• Employs more than 18,000 in the United States
Steel demand in the U.S. has stagnated and remains below
pre-recession levels
4
U.S. apparent steel consumption: 1998-2019
Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018
110
60
140
70
130
120
90
80
100
01 1202
M tons
98 99 00 03 06 07 08 1309 10 11 14 15 16 17 19E180504
-11%
Steel consumption
1998-2007 avg
Shipments by U.S. steel mills have improved as market share has
been regained from imported steel
5
Steel shipments by U.S. mills
Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018
105
90
110
65
60
85
115
70
75
95
80
100
16 1808009998 01 03 04 05 06 1507 1409 10 11 12 13 17 19E02
M tons
-8%
U.S. mill steel shipments
1998-2007 avg
65%
5%
30%
Flat roll
Long products
Pipe and tube
2019
Trade restrictions have led to meaningful decline in steel imports to
lowest level since 2011
6
U.S. finished steel imports and share
Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018
25 15%
10
15
20
30
10%
35
40
0%
30%
25%
5%
20%
21%
29%
1308
25%
22%
07
23%
27%
10
21%
09
22%
11
24%
12
23% 23%
28%
14 16 1715 18
20%
M tons
19E
% share
-26%
Finished steel imports Share of U.S. demand
Section 232 update
7 Sources: Dept of Commerce, Customs & Border Protection, ArcelorMittal
• April 19, 2017: Commerce initiates 232
investigation
• March 23, 2018: 25% tariff on all steel product
categories applied to most countries; Canada,
Mexico, EU exempt temporarily while
negotiations continue (Turkey at 50% from Aug
2018-May 2019)
• June 1, 2018: 25% tariffs imposed on Europe,
Canada and Mexico
• Country-level exemptions:
• Korea, Argentina and Brazil agree to quotas in place of tariffs; Australia
given full exemption with no quota
• Canada and Mexico: May 17, 2019 announced that tariffs removed for
Canada and Mexico as well as retaliatory tariffs against the U.S.
• Product exemptions: process put in place for U.S. manufacturers to apply for
one-year waiver
Section 232 impact continues to fade as more tons are exempt from
the 25% tariff
8 Sources: US Department of Commerce Steel Import Monitor, ArcelorMittal USA Marketing
2019 Flat roll imports by country (carbon and alloy)
Share of volume from S232 exempt countries
15%
14%
4%
4%
4% 30%
40%
10%
7%
38%Jan-May
2%32%Jun-Sep
OtherAustralia
Korea* Brazil*
Canada
Mexico
23%
68%
Note: Canada and Mexico exemption on 5/17/19
*Quota in place
Some portion of this
volume not subject
to 25% tariff from
granted product
exclusions to
individual
companies.
Global steel supply continues to grow at a strong pace
9 Sources: World Steel Association, ArcelorMittal USA Marketing
in M metric tons Delta
Jan-Oct YTD 2018 2019 Tons %
World 1,493 1,541 48 3%
China 770 828 58 8%
India 91 93 3 3%
Japan 87 84 -3 -4%
USA 72 74 2 3%
S. Korea 60 60 0 0%
Russia 59 59 0 0%
Lower export opportunities have impacted domestic mill shipments
10
U.S. steel exports and share
Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018
14%
15%15% 15% 14%
13%
12%12%
11%12%
9%
0%
5%
10%
15%
10
2
20
24
22
18
0
16
14
12
8
6
4
M tons % share
17 1815
8%
1413121110090807 19E
10%
16
-34%
Steel exports Share of U.S. mill shipments
Lowest
since
2002
Steel trade balance has improved but has failed to return to pre-
2014 import surge position
11
U.S. steel trade balance
Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018
5
0
20
-25
10
15
25
-15
-10
-5
-35
-30
-20
-17
10 13 14 15 171612
-15
19E11
-12
-22
M tons
-5-7
-8-12 -12
-22
-17-19
-15
07 08 09 18
Steel exports
Trade balance
Finished steel imports
Capacity utilization has not sustained 80% threshold given in
Section 232 report
12 Sources: AISI, ArcelorMittal USA Marketing
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
06 19130905 1107 1208 10 14 15 16 17 18
U.S. monthly raw steel capacity utilization
Jan 2005-Oct 2019
Flat roll product shipments, the biggest segment for U.S. mills, are
worse this year than before Section 232 was introduced
13
Shipments by U.S. steel mills – carbon flat roll
201920182017
14.4 14.5 14.2 13.5 14.2 14.514.6 14.5 13.7 14.0 14.1
1Q 3Q
2Q 4Q
56.6
2016 2017 2018 2019F
55.4 57.0 55.9
2019F vs 2017:-1%M tons
Sources: AISI, AMUSA Marketing; 19F based on YTD September comparison to same period 2018
Quarterly actuals
Weaker manufacturing environment weighs heavily on steel demand
and buyer behavior in 2019
14 Sources: FRED
100
101
102
103
104
105
106
107
108
109
110
2017
2014
2015
2016
2018
2019
U.S. Industrial Production Index:
Durable manufacturing
Jan 2014- Oct 2019Index 2012=100, seasonally adjusted
Manufacturers’ new orders:
Core capital goods
Jan 2014- Oct 2019% change y/y, seasonally adjusted
-10%
-5%
0%
5%
10%
15%
2015
2014
2016
2017
2018
2019
Steel service centers have significantly destocked in 2019; inventory
volume is lowest since 2010
15
Steel service centers inventories – Flat rollin millions of tons
Sources: MSCI, ArcelorMittal USA Marketing
-0.1
0.7
-0.4
-0.3
0.0
5.0
0.1
0.2
0.4
0.6
5.4
4.2
4.4
4.6
4.8
0.5
5.2
5.6
-0.2
5.8
6.0
6.2
0.3
-0.6
-0.5
1918162014 17
m/m changeTotal inventory
15
Inventory (LHS) m/m change (RHS)
Steel consuming markets
17 Source: AISI Profile 2019, ArcelorMittal USA Marketing
44%
28%
9%
6%
5%
3%3%
Containers
Construction
Energy
Automotive
Machinery
Appliance
Defense
2%
All other
Estimated 2018 U.S. steel consumption by end-use market
Construction and
automotive industries
are the top consumers
of steel in the U.S.
About 35% of steel
shipments flow through
distribution before
reaching the final
customer.
Construction sector is slowing but is not expected to drop sharply as
suggested by recent forward-looking indicators
18 Sources: FRED, AIA
AIA Architecture Billings Index
$300
$800
$400
$500
$700
$600
2017
2014
2015
2016
2018
2019
Nonresidential
Residential
Nonres. Last Cycle Peak
Res. Last Cycle Peak
YTD Oct 2019
Total – 1.7%
Nonresidential +2.2%
Residential -7.1%
52.0
45
50
55
60
2017 2018 2019
1,100
1,200
1,300
1,400
1,500
201920182017
Construction spending
Billion $, SAAR >50 = increase in firm billings
Private housing building permits
SAAR, thousands of units
Auto sales step back from 2016 peak but remain at strong pace;
production cutbacks in 2019 support 2020 improvement
19 Sources: FRED, Marklines.com
U.S. light vehicle sales: SAAR
Jan 2010-Nov 2019
10
11
12
13
14
15
16
17
18
1210 13 1611 14 15 17 18 19
M Units
17
2019 YTD average
= 16.9M units
2019 light vehicle production
• USA: -4% YTD Oct
• Mexico: -2% YTD Oct
• October impacted by GM
strike (-15% y/y)
Machinery market has yet to turn around with continued uncertainty
from trade war threats
20 Sources: FRED
US machinery: New orders and industrial production
y/y % change: Jan 2014- Oct 2019
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
20182014 2015 2016 20192017
New orders IP
1.8
1.9
2.0
2.1
2.2
2.3
1815 1916 1714
Ratio of manufacturers’ total
inventories to shipments: Machinery
Jan 2014-Oct 2019
Oil and gas demand outlook is mixed, while wind and solar
installations soar due to expiration of tax credits
21 Sources: EIA, Baker Hughes, SEIA/Wood Mackenzie, ArcelorMittal USA Marketing
20
2,000
$30
$40
14
$50
$60
16
$70
17
$90
$100
$110
15
1,500
18 19
1,000
500
$80
Rig countWTI price ($/bbl)
WTI crude
Oil and gas rig count
U.S. oil and gas rig count and oil price
forecast (EIA)
Jan 2014-Dec 2020
U.S. P.V. installations
2020 Outlook
22 Sources: World Steel Association Short Range Outlook October 2019, ArcelorMittal USA Marketing
USA view:
• Despite the growing economy, U.S. steel
demand has deteriorated in 2019 given
mature consuming markets, buyer
uncertainty, and inventory destocking.
• Lean inventory position at distributors will
bring a better start to 2020. Although the
outlook remains cautious given weakness in
manufacturing data, major steel consuming
markets like automotive, construction, and
energy should support steel demand.
• The sharp decline in import volume since
2014 has benefited U.S. mills but under-
utilized domestic capacity, narrower Section
232 scope, and growing global supply warn
of difficult conditions ahead for the industry.
2000-2020 Global apparent steel use
(finished steel)
600
800
1,000
1,200
1,400
1,600
1,800
2,00015%
0%
10%
-10%
-5%
5%
02
05
14
Y/Y % Chg ASC (M mt)
00
01
03
04
06
07
08
20
F
09
12
10
11
13
15
18
16
17
19
F
ASC y/y change
World Steel 2020 outlook: Top 3 countries
1. China: + 1.0% (909.1M mt)
2. India: +7.0% (108.7M mt)
3. USA: +0.4% (101.2M mt)