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  • 1. Message from the chairman and CEO Dear shareholders, At the beginning of 2011 we excellent examples that held a special safety summit at demonstrate what can be achieved. ArcelorMittal Dofasco in Canada. Tubular products has reduced its Thank you for taking This summit concluded with a frequency rate by more than 50% the time to read commitment to embed health from 1.92 to 0.81 – an impressive ArcelorMittal’s 2011 and safety in our core values; achievement. Our mining division adapt our leadership style to better has improved its frequency rate annual report, address employee commitment from 1.63 to 1.18. Tubarão in Brazil ‘Core strengths, and engagement; ensure a stronger now has a frequency rate of 0.25 sustainable returns’. focus on fatality prevention; reduce and Temirtau in Kazakhstan a very contractor injuries and fatalities; impressive 0.17. This shows us that I will start with the result and finally, use leading indicators our overall group target of reaching to implement preventative 1.0 by 2013 can be achieved. So that is most important measures to avoid similar incidents valuable was the Canada meeting to us: health and safety. occurring again. that we held a repeat meeting at the We continue to put great end of the year to discuss how to emphasis on our Journey These commitments proved drive further improvement in 2012. valuable as we succeeded in to Zero program through reducing our LTIFR (lost time injury Although we still have some way to which we are aiming to frequency rate) for the year by the travel on our journey, I am very eradicate injuries and 20% target we set ourselves: from pleased with the progress made fatalities in the workplace. 1.77 to 1.42. Furthermore our throughout the year and must performance in the fourth quarter commend the employees of of 2011 – an LTIFR of 1.2 – was ArcelorMittal and our the best we have reported yet for a subcontractors for their efforts. single quarter. As is to be expected Safety is at the heart of everything in an organization of the size and we do and we truly believe that scale of ArcelorMittal, not all plants having a deeply embedded safety and sites are yet at the same culture can only have a positive standard. But we have some2
  • 2. Overvieweffect on ArcelorMittal’s Projects temporarily paused include possible we look to find solutions forIn this volatile economic Our businessperformance as a whole. the Monlevade and Vega do Sul everyone affected. But I am certain environment, it is imperative that expansion projects in Brazil. that to be a stronger and therefore businesses have a clear strategy,Turning to the financials, Ebitda Although Brazil has been affected more sustainable business in Europe underpinned by a set of corefor the full year was $10.1 billion, by currency appreciation, inflation we have to adapt to the realities of strengths. ArcelorMittal has manyan improvement of 18.7% and rising wage costs which have the operating environment. strengths but there are five inyear-on-year. Sales were $94.0 decreased competitiveness, it particular that we believe arebillion compared with $78.0 billion remains one of the fastest growing The US, although not without its fundamental to our continuedin 2010 while operating income economies, recently overtaking the challenges, provides a more positive success in responding to evolving Sustainabilityincreased by 36% from $3.6 billion UK to become the 6th largest picture. Demand at the beginning market conditions and deliveringto $4.9 billion. Net income economy in the world. It remains an of this year is strong and is sustainable returns.decreased from $2.9 billion to important market for ArcelorMittal being supported by energy$2.3 billion, due to $1.3 billion and our intention will be to re-start and automotive demand, which These are our quality coreof non-recurring charges which these projects when the economic continues to improve. In February assets; our ability to make costpartially offset an otherwise situation and the market permit. there were 15 million light vehicle improvements; our market-leadingimproved performance. Net sales on an annualized basis in automotive steel; our world-classdebt at the end of the year As we begin 2012, overall the US, the highest since February mining business; and a stronger Performancewas $22.5 billion. global sentiment is improving 2008. Indicators of underlying steel balance sheet. but downside risks remain. Steel demand continue to follow theWriting to you last year, I said will continue to remain a material economy on an upward trajectory ArcelorMittal’s portfolio of highthat we expected to continue to of choice and we expect worldwide supported by rising consumer and quality core steel assets is wellsee a gradual improvement in the demand to grow further. With business confidence. placed in terms of product qualityeconomy and that 2011 would be our global footprint, ArcelorMittal and production costs. The group isa stronger year than 2010. The is well positioned to benefit China has recently announced that well diversified and our productionyear started as we anticipated, from such continued growth. it expects slower GDP1 growth of facilities outside North America and Governancewith a continued albeit gradual Nevertheless, in a challenged approximately 7.5% this year. The Europe generated approximatelyimprovement in the overall environment it is necessary to main risk to the Chinese economy 40% of our steel-based Ebitda ineconomy. However the second make some structural changes is a further downturn in private 2011. As a result, despite lowhalf, and particularly the fourth to strengthen our presence in residential construction as the operating rates, particularly inquarter, was negatively affected weaker markets. This will also government has signaled its Europe, the group generatedby a deterioration of the economy, serve to enhance the positive unwillingness to relax its clampdown Ebitda of $118 a tonne in 2011.most specifically linked to the debt impact of our exposure to on the property market until pricescrisis in Europe. Fears that a collapse stronger regional markets. are more affordable. As a result, Financial statementsof the eurozone could push the China’s end-user demand continuesglobal economy back into recession Europe remains the biggest to remain relatively weak asaffected sentiment globally. challenge. Although the worst manufacturing exports slow andA combination of weak sentiment, case scenario seems to have been new construction in the private realslow underlying demand and falling avoided, demand is still substantially estate market falls, though withraw material prices triggered a below pre-crisis levels and is set some offset from public housingperiod of significant destocking that to remain so for some time. As projects. While industrial output isresulted in apparent steel demand a result, regretfully in 2011 we expected to show improvementsfalling by 5% in the final quarter. took the decision to propose the year-on-year and steel production permanent closure of the liquid is expected to pick up over the nextIn light of the changed phase in Liège. In a move to operate few months, the overall messageenvironment, ArcelorMittal as efficiently as possible, the liquid is that growth has slowed.re-considered its capital phase at a number of other facilities Nevertheless we expect Chineseexpenditure program and decided has also been temporarily idled GDP growth to remain at least into pause all growth projects in the while we concentrate slab line with government estimatessteel business. Capital expenditure production at a smaller number of and steel demand to expand closefor the year therefore, although our most competitive sites. Such to 5% this year.increasing to $4.8 billion compared decisions are always difficult toto $3.3 billion in 2010, was below take, especially due to their socialthe initially planned $5-5.5 billion. impact. ArcelorMittal is committed to strong social dialogue and where ArcelorMittal Annual Report 20111 Gross Domestic Product. 3
  • 3. Message from the chairman and CEO continued We have always focused Further resilience comes from the In 2011, we separated the financial group’s position as the industry results of our mining business to on cost competitiveness leader in value-added steel. With clearly show the contribution this as an important lever of a 40% share of major automotive segment is bringing to the overall our business. The group steel markets, ArcelorMittal is the business. For ArcelorMittal, our has a strong track record leading supplier to the automotive mining segment is a significant industry. This is a contract-based advantage. It ensures security of of delivering consistent business and compared to more raw materials supply to our steel cost improvements commodity-orientated businesses, business; it enables us to sell to through our management the margins are inherently more a growing list of third party gains program. Since stable and volumes less prone to customers; it allows optimization short-term stocking/destocking of supply and logistics savings 2008, we have identified cycles. This business performed and it provides the group with management gains of well in 2011 despite the volatility diversification and an effective $4 billion with a further in the broader market. We are at hedge against raw material $0.8 billion to be achieved the forefront of steel research and price changes. development, with our spend being before the end of this year. at least twice that of key European Mining is also a major source During 2011 we also and American competitors. We of growth. Production volumes announced a new asset work directly with our customers to increased 20% in coal and 10% in optimization plan, which stay ahead of the curve by offering iron ore in 2011 and this growth steel technologies that go beyond will continue as we remain on-track will deliver an additional the material itself. For example, our to produce 100 million tonnes of $1 billion of Ebitda on an advanced high-strength steels and iron ore by 2015. There are many annualized basis by the ‘S-in motion’ solutions are helping interesting projects underway, but end of 2012. automotive customers balance the the biggest highlight from our demands of improved safety with mining business in 2011 was the reduced fuel consumption. official launch and first shipment of our iron ore project in Liberia The group’s performance in 2011 in September. This project was was boosted by its world-class a major milestone not only for mining business. ArcelorMittal ArcelorMittal, but also for the has always pursued a strategy of country and people of Liberia. In owning our own mines. However, order to reach this stage, we had to we have now transformed from rebuild the entire infrastructure that being the world’s leading steel had been destroyed in the course of company with a strategy of vertical the country’s prolonged turmoil – integration, into the world’s leading including 240km of railway line steel and mining company with a and the port and material handling portfolio of high-quality growth facilities at Buchanan. mining assets that sell to both internal and external customers. The final core strength I would like This combination gives us a unique to highlight is our balance sheet, profile among our peers. which is far stronger today than it was at the onset of the global financial crisis in the third quarter of 2008. We have significantly reduced net debt by $10 billion, more than doubled the debt maturity profile to over six4
  • 4. Overviewyears and diversified the sources by the French Institute of Internal Finally, I would like to Our businessof funding. We have a plan to Assurance; and we have alsofurther reduce net debt through regained the top spot in the metals thank all ArcelorMittalEbitda growth, ensuring discipline sector in Fortune’s annual list of employees, my colleagueson capex plans, focusing on most admired companies. Again, on the managementworking capital management and these are achievements of which committee, the Groupgenerating cash through non-core the whole company is proud.asset divestments. ArcelorMittal is a company that can Management Board and be admired on a number of fronts: the board of directors, for SustainabilityThe combination of these five for the quality of the products we their support, hard workstrengths makes ArcelorMittal produce; for our dedication to and contribution to thea strong and unique company. finding the best solutions for ourAs a result, despite the ongoing customers; for our contribution company’s performancechallenges in the global economy, to the economies in which we in 2011.we are able to continue to adapt operate; and for our commitmentto the evolving market-place and to produce safe sustainable steel. We are all excited aboutprovide our customers with the high How we do business is as important Performancequality steel and raw materials they as what we do. We publish a 2012 – an Olympic yearrequire – fulfilling our purpose of separate corporate responsibility – when the ArcelorMittalgenerating sustainable returns while report which I would urge you all to Orbit will stand proud ashelping build the infrastructure of read. To mention a few highlights, a symbol of all that ourthe modern world. we retained our membership in the Dow Jones Sustainability and company is capable of.The people of our group are the FTSE4Good indices; implementedfoundation from which we build a human rights policy with over Governanceon our strengths. I have always 147,000 employees trained tobelieved that ArcelorMittal has a date; published a responsible Lakshmi N Mittalworld-class team and this was sourcing code; and significantly Chairman and CEO of ArcelorMittalconfirmed in 2011 when for the strengthened our stakeholderfirst time we featured in the Aon engagement plan.Hewitt ranking of top companiesfor leaders. This accolade is atestament to the quality of our Financial statementsleaders – and indeed all of our261,000 employees. I recognizethat these are challenging timesfor everyone and I would liketo thank all our employees fortheir continued hard workand commitment.This was not the only recognitionwe received during the year. Thereare too many to list them all. But anumber stand out. Our internalassurance team was honored forexcellence in the categories ofBest Internal Audit Contributionand Best Risk Mapping Approach ArcelorMittal Annual Report 2011 5
  • 5. Financial highlights Knowing your core strengths is important when faced with economic volatility and rapid change. At ArcelorMittal, having five core strengths at the heart of the business has helped to ensure we have effectively responded to evolving market conditions while maintaining a consistent strategy. Aditya Mittal CFO, member of the Group Management Board Financial highlights Sales ($1 million) 2011 93,973 2010 78,025 Ebitda2 ($ million) 2011 10,117 2010 8,525 Shipments (million tonnes) 2011 85.8 2010 85.0 Operating income ($ million) 2011 4,898 2010 3,605 Net income3 ($ million) 2011 2,263 2010 2,916 Basic earnings per share ($) 2011 1.46 2010 1.936
  • 6. Overview Our business2011 steel shipments by location (thousand tonnes)4Segment TotalFlat Carbon Americas: 22,249 North America 17,084 South America 5,165Flat Carbon Europe: 27,123 Europe 27,123 SustainabilityLong Carbon Americas and Europe: 23,869 North America 4,584 South America 5,660 Europe 12,547 Other5 1,078AACIS (Asia, Africa and CIS6): 12,516 Africa 4,624 Performance Asia, CIS and other 7,892Number of employees6 at December 31, 2011 according to segmentsSegment Total % Flat Carbon Americas 31,566 12 Governance Flat Carbon Europe 62,130 24 Long Carbon Americas and Europe 53,558 21 AACIS (Asia, Africa and CIS7) 57,774 22 Distribution Solutions 16,998 7 Mining 36,873 14 Other activities 1,624 —Total 260,523 100 Financial statementsAllocation of employees6 at December 31, 2011 according to geographic locationRegion Total % EU278 97,619 37 Other European countries9 41,611 16 North America 36,662 14 South America 22,679 9 Asia 41,565 16 Middle East and Africa 20,387 8Total 260,523 100Own annual coal production (million tonnes)10 Own annual iron ore production (million tonnes)10 2011 8.3 2011 54.1 ArcelorMittal Annual Report 2011 2010 7.0 2010 48.9 2009 7.1 2009 37.71 ‘US$’, ‘$’, ‘dollars’, ‘USD’ or ‘US dollars’ are to United States dollars, the official 7 Commonwealth of Independent States. currency of the United States. 8 EU27 includes Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia,2 Ebitda is defined as operating income plus depreciation, impairment expenses Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, and exceptional items. Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden3 Excluding non-controlling interests. and the United Kingdom.4 Shipments originating from a geographical location. 9 Other European countries include Bosnia, Croatia, Macedonia, Norway, Russia, Serbia,5 Includes tubular products business. Switzerland, Turkey and Ukraine.6 Full-time equivalent. 10 Own iron ore and coal production excluding strategic long-term contracts. 7
  • 7. Steel and raw materials: market analysis Steel is at the core of In 2011, the global steel market late September, apparent steel continued to build on the slow demand remained stable over the infrastructure that recovery in demand witnessed in the second and most of the third surrounds us, completely, 2010, although destocking in quarter – even though leading in all aspects of everyday the latter part of 2011 – most economic indicators such as life. So infrastructure apparent in Europe and China – purchasing managers indices were limited the increase in apparent already turning down in the second growth plans – whether steel demand to 6.4% year-on- quarter in Europe, the US and China. government-backed year. Crude steel production, which or private – impact peaked in the first quarter of the Autumn shift in sentiment on demand for steel. year, increased by 6.8% to 1,527 The end of the third quarter million tonnes. Although this was saw a material shift in sentiment. a new record, average capacity With the eurozone sovereign crisis utilization at the world’s steel plants intensifying and stock markets remains significantly below the in decline, the iron ore price fell levels recorded in 2006 and 2007, sharply. This led to destocking at before the global economic crisis service centers, most markedly in caused world demand to contract Europe where inventories had risen sharply. This is particularly so to levels above historic norms. In in Europe. the US, where steel inventories were some 25% below 2008 peak Movements in raw material prices levels and auto inventories low by played a major role in shifts in past standards, destocking was apparent demand – which more limited – and had started combines both underlying real to reverse on the back of demand and changes in inventory strengthening real demand – over the course of the year. before the end of the year. The first quarter was marked by significant restocking by both steel These contrasting demand patterns service centers and end-users as were reflected in a sharp divergence a continuing increase in iron ore in steel prices between the US and prices, rising to a new peak of over Europe from November onwards. $190 a tonne in February 2011, By the end of the year, the price of 800 raised expectations of a continuing HRC in the US midwest was more rise in steel prices. than $120 a tonne higher than the equivalent steel in Germany. This This process was further boosted was the widest price divergence mt* by severe floods in Australia, which since the first half of 2008. At the inhibited coal production and same time, a number of European China’s estimated installed resulted in a rise of around one third steel producers scaled back on steel capacity in world coking coal prices to more their production. * millions of tonnes. than $300 a tonne. As a result of these factors in the first quarter, Globally, crude steel capacity apparent demand rose around utilization fell in December to its 10% year-on-year for the world, lowest level for two years, at excluding China. 71.7%. That compared with a peak for the year of 83.3% in February. Spot steel prices increased during The principal reason for this sharp Responsible sourcing program ArcelorMittal incorporates social, ethical the first quarter of 2011 to nearly decline was a sizeable cut in and environmental considerations into €630 a tonne for spot hot rolled Chinese production in the second sourcing decisions in order to positively coil (HRC) in Europe and about half of the year. contribute to our goal of producing Safe $970 a tonne in the US, from Sustainable Steel. To this end, we have launched our ‘responsible sourcing program’. €485 and $617 respectively. Despite the difficult end to the This sets out how we will work with our After prices peaked in April and year, apparent steel demand in suppliers and defines our minimum May 2011, all of the early 2011 both Europe and the US built on requirements from our responsible sourcing price gains were lost over the the recovery that started in 2010. principles, such as health and safety and human rights. These responsible sourcing following two quarters. In Europe, apparent demand grew principles will be given systematic by around 6.1% with particularly consideration alongside factors such With substantial purchases of steel strong off-take in Germany and as price and quality. having been brought forward, the Poland. In the US market, there was usual seasonal peak in demand in growth of 11.5%. The strongest the northern hemisphere failed to market of all was the CIS, which materialize in 2011. However, with recorded growth in apparent iron prices fluctuating within a demand of around 13% on the year. narrow range from February to8
  • 8. OverviewBrazil recorded reduced growth. In the first nine months of 2011, 120 million tonnes compared 2012 outlook Our businessIn 2010, the V-shaped economic China experienced consistent with the June peak. For reference,recovery had sucked in a large growth in apparent demand, a production cut on that scale isvolume of imports to leave the although inventory building peaked the equivalent of removing US and For 2012, we arecountry over-stocked in flat in early March and then leveled out. German production from the world forecasting a furtherproducts. With destocking in In June, domestic steel production marketplace. Despite the cutbacks, improvement in steelprogress through the second reached a new all-time high, Chinese steel production still rosehalf of 2011, apparent demand equivalent to more than by nearly 9% year-on-year. demand, compared withactually fell. 725 million tonnes a year. By 2011. However, that will Sustainability the start of the fourth quarter, Special factors in Japan still leave steel use inChina demand fluctuates however, government initiatives and North Africa the developed worldThe rise of China as the unequivocal to curb inflation and cool an The disruption caused by theleading steel producer is a relatively overheated private real estate Japanese earthquake and tsunami significantly below therecent phenomenon. At the start of market were having a negative in March 2011 caused a fall in pre-crisis level in 2007.the last decade, China was a net effect on underlying demand apparent steel demand in Japan Growth prospectsimporter of steel. In 2005, its steel for steel. over the spring and summer. should be brightestimports and exports were balanced. However, with a strong start to PerformanceBy 2007, it was the largest net Apparent demand fell severely the year and a recovery in the in the developing world,exporter at more than 50 million during the final quarter of the fourth quarter, apparent demand where the recovery hastonnes, having built its production year as economic factors combined stagnated despite production for been strongest andcapacity at breakneck speed. Today, with sharply falling iron ore prices the year falling 1.8%. In the Middle where the medium andChina is believed to have at least to encourage destocking. The East and North Africa, the events of800 million tonnes of installed steel response of many steel producers the ‘Arab Spring’ hit economic long-term outlook is thecapacity and regularly accounts for was dramatic. A number either activity in a number of countries most positive.nearly half the global output cut production or announced and apparent demand across the Governance(the figure for 2011 was 45.5%). production cuts for future months. region finished slightly lowerIn some sectors, such as rebar and By November, crude steel on the year-end.other long products used in the production was running at a levelconstruction industry, its share equivalent to around 600 millionof world production is even higher. tonnes a year – a reduction of Financial statements 1 billion peopleCrude steel production (million tonnes per month) consume 4008070 kg of steel each year on average60504030 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Dec 11 ArcelorMittal Annual Report 2011 China World excluding China Source: World Steel Association 9
  • 9. Market analysis continued In the US, there are growing In China, the pace of growth has By contrast, steel use in the signs of economic recovery. slowed but underlying demand developing world has recovered Demand for steel in key industries continues to grow, albeit slowly. strongly from the 2008 lows and in is rising, underpinning real demand. There are expectations of a pick-up many regions is at, or approaching, Automotive production continues in steel production by the second a new peak. Apparent demand in to recover. Energy and equipment quarter as the government Central and South America already investment remains strong. Rig continues to gradually relax policy set a new record in 2010. In the counts indicate that activity in the oil to stimulate demand. The property CIS, apparent demand is projected and gas industry is on a rising curve. sector is slowing as real estate to hit a new record in 2012. Service sector inventory, in terms developers suffer from falling prices Despite slowing growth rates in of months’ supply, is marginally and rising inventory of unsold 2011, both China and India are below historic norms. Construction buildings. However, the government expected to continue their upward however, is still depressed. is committed to supporting the trajectory in 2012. social housing program and this In Europe the outlook is more should support growth in steel Steel use in the developed world subdued, with still significant demand close to 5% in 2012 after is expected to show low growth uncertainty surrounding the almost 8% in 2011. to leave underlying demand around eurozone debt crisis and 20% below pre-crisis levels in government austerity measures Developing markets lead the way 20121. In the developing world, weighing on demand. Although For all the recovery in steel use the equivalent figure is 40% or automotive production in Europe witnessed over the past two years, more above pre-crisis levels, driven is helped by exports to emerging there has been a marked divergence mainly by China. As a result of this markets and the US, this is likely between the developed and the divergence, the World Steel to be more than offset by weak developing world. After allowing for Association estimates that domestic demand. In many other projected growth in North America developing economies will account sectors, underlying demand for in 2012, apparent demand will still for 73% of world steel demand in steel in Europe is at best flat but be more than 10% lower than in 2012, compared with 61% steel demand is supported as the 2007 before the credit crisis hit. in 2007. severe destocking that began in European demand will be 20% the final quarter of 2011 has run down on 2007 levels. Japanese its course, underpinning hopes for demand for steel is projected to a slow recovery during the year. be almost 20% lower than pre-crisis levels. ArcelorMittal ranks in 2011 Dow Jones Sustainability World Index After first gaining entry Global apparent steel consumption (million tonnes per month) in 2010, our company is proud to be included into the prestigious Dow Jones Sustainability World 60 Index (DJSI) for the second consecutive year. Scoring highly 55 in all dimensions (economic, environmental and social), 50 ArcelorMittal was recognized for our strong sustainability 45 performance. 40 35 30 25 10 15 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Dec 11 Developing excluding China China Developed Source: local sources (Eurofer, Aisi, Canacero, JISF) and ArcelorMittal estimates 1 Includes North America, EU27, Japan and Oceania.10
  • 10. OverviewLong-term growth in steel demand In the developed world, roughly By contrast, the rest of the Over the same period, global Our businessThe shift in demand from north one billion people consume an developing world (excluding China), seaborne iron ore consumptionto south and from the Organization average of 400kg of steel each with a population of more than has nearly doubled, to morefor Economic Co-operation (OECD) year. That figure is unlikely to 4 billion people, is today consuming than 1,000 million tonnes ato developing countries is set to steel at around one quarter the increase. Population growth is low year. Again, it is the need tocontinue. The rate of steel and many developed countries arerate of the developed world. In feed an ever-increasing numberconsumption per head of population becoming increasingly service- fast-developing India, the figure is of Chinese blast furnaces thathas long been a reliable indicator of based economies. The challenge even lower – at around 60kg per has driven much of this growth. for steelmakers in these marketshead. The scope for growth in steel China’s domestic production of Sustainabilitya country’s level of development.Steel is a vital element in the building is to add value by providing thedemand in these countries is iron ore has doubled over theof modern infrastructure, a key advanced steels industrial usersimmense. It has been estimated same period, but is nowhereindustrial material and the starting increasingly demand. that, between now and the end near sufficient to meet demandpoint for a host of consumer of the decade, steel demand in and the majority of domesticproducts – from household China and the rest of the developing India could more than double. mining is relatively high-cost.appliances to automotive. Service- world together account for around The ability of seaborne supplybased economies apart, steel use is 85% of the world’s population, and Cost management will be vital of iron ore to meet rising their share of world Gross Domestic for steelmakers demand in China and the rest Performancein many ways a proxy for prosperity. Product (GDP) is growing. Today, The ability to exploit these of the developing world will beAs developing countries invest China already consumes more opportunities will, for all one of the keys to steel marketin their power and transport steel per head of population – more steelmakers, require strict cost dynamics in the medium-term.infrastructure, and progressively than 450kg per head – than the controls. Rising iron ore andindustrialize, so their demand for developed nations’ average, though coal prices in recent years, drivensteel increases. Urbanization is much of that consumption reflects largely by ballooning demandanother driver of steel demand: infrastructure and real estate from China, have significantly construction. altered the balance of steelmaking Governancethe dawning of the 21st centurymarked the first time in history that costs. In 2003, raw materiala majority of the world’s population costs represented 40% of HRCwas living in cities. It is estimated manufacturing costs. Thethat a further 500 million people equivalent figure today iswill move to live in cities during around 65%.the present decade. Financial statements Developing countries will account for 73 % of global steel demand by 2012 according to the World Steel Association ArcelorMittal Annual Report 2011Above South Africa 11
  • 11. Our fivecore strengths Supported by our We have quality We are leaders in consistent strategy, core assets automotive steel we possess five core strengths that allow Our core steel plants We have around us to generate are cost competitive. one-fifth share of the sustainable returns We have a global global automotive through the economic presence, spanning market. As the automotive cycle. Because of those both developed and industry increasingly looks strengths, we remain developing markets, not for steel providers committed to our with 40% of steel Ebitda but solution providers, growth plans. now generated by our technical know-how Our core projects facilities outside Europe and leading position are not dependent and North America. in advanced high-strength on strong economic Our product range steels leaves us well conditions in order for is broad and we have placed to capitalize on us to create value for an outstanding our strong customer links. our shareholders. distribution network. Our knowledge base is unrivalled.
  • 12. OverviewWe have a world-class We have a stronger We are delivering Our businessmining business balance sheet cost improvementOur fast-growing Since December 2008, Since 2008,mining business spans we have reduced our managementthe globe. As most of our net debt by around gains program hasour mines are in close 15%. A further reduction delivered $4 billion Sustainabilityproximity to the group’s is planned for 2012. of cost savings,steel plants, having our We have also extended with a further $800 millionown production gives the maturity profile targeted for 2012.us a competitive of our debt from Our asset optimizationadvantage. Increasingly, 2.6 years to 6.3 years plan, announcedwe are marketing our and diversified the in 2011, is aimed Performanceiron ore and coal to sources of our funding. at concentratingexternal customers. ArcelorMittal remains production at ourWith iron ore production committed to maintaining lowest-cost plants toset to increase from its investment grade rating. optimize productivity.65 million tonnes to It is targeted to add100 million tonnes by annual savings2015 (including strategic of $1 billion by the Governancecontracts), mining end of 2012.is a key growth areafor the group. Financial statements ArcelorMittal Annual Report 2011 13
  • 13. We have qualitycore assets
  • 14. Overview Our business Sustainability Performance GovernancePerformance 2011 Financial statementsSales ($ million) 93,973Steel shipments (thousand tonnes) 85,757Crude steel production (liquid steel in thousand tonnes) 91,891Our core assets are competitive in terms of cost. This wasamply demonstrated in 2011 when, despite low operating rates,we generated group Ebitda of $118 a tonne of steel shipments.Geographic diversification plays its part. We have a balanced portfolioof assets in both the developed and developing markets and arethe leading steelmaker in the EU, North America, Africa, Latin Americaand the CIS. Facilities outside of Europe and North America accountfor around 40% of our steel Ebitda. We have important productdiversity that enables us to provide solutions to meet customerrequirements and needs, in all markets. We produce a broad rangeof high-quality products, and we operate an outstanding distribution ArcelorMittal Annual Report 2011network. Above all, we have an unrivalled knowledge base, whichallows us to benchmark best practice, and a commitment to researchand development (R&D) which keeps us ahead of the curve.Picture Port-Cartier, Canada 15
  • 15. Our business ArcelorMittal is the world’s With a total production capacity For many years, the group has of around 125 million tonnes of pursued a consistent strategy leading steel and mining crude steel, ArcelorMittal is a focusing on product diversity, company. With a presence highly efficient steel producer with geographic breadth and vertical in more than 60 countries, a diversified production process. integration, both upstream and we operate a balanced It has industrial operations in downstream. The aim of this 20 countries on four continents, three-dimensional strategy portfolio of cost- producing flat and long steels and is to reduce exposure to risk competitive steel plants tubular products. In January 2011, and cyclicality. across both the developed the group’s stainless steel operations and developing world. were spun off into a separate Our upstream integration, through company, Aperam. ArcelorMittal our investment in iron ore and coal We are the leader in all produced approximately 91.9 mining assets, gives us a major the main sectors – million tonnes of steel in 2011, competitive advantage, provides a automotive, household compared with 90.6 million tonnes measure of security of supply and is appliances, packaging in 2010. an important natural hedge against raw material price volatility. and construction. We are With our ongoing aim to develop also the world’s fourth a world-class mining business, our Our downstream integration, largest producer of iron mining operations have reported through our Distribution Solutions ore, with a global portfolio as a separate segment since segment, enables us to meet a wide January 2011. We produced around range of customer needs in virtually of 16 operating units with 54.1 million tonnes of iron ore and all steel-consuming industries and mines in operation or 8.3 million tonnes of coal (excluding markets. We sell into a total of development. In 2011, supplies under strategic long-term approximately 174 countries. we employed around contracts) in 2011. The exceptional breadth of this market reach improves our market 261,000 people. intelligence and helps us optimize working capital through the better management of our supply chain inventories. Above Port-Cartier, Canada
  • 16. OverviewSteel Our global footprint also gives furnace route, approximately In long products, we produce Our businessAs a global steel producer us a unique ability to serve our 22.6 million tonnes through the rebars, sections and beams in allwith a diversified product range, multinational customers by electric arc furnace route and sizes and qualities, and have helpedwe service a wide range of providing them with standard around 3.4 million tonnes of build many of the world’s tallestcustomers and markets. In 2011, solutions and consistent quality crude steel through the open structures. We are the biggestapproximately 38% of our steel around the globe. We have built hearth furnace. This gives us producer of the very high-strengthwas produced in the Americas, strong and deep relationships flexibility in raw material and steels needed for wind turbines,46% in Europe and 16% in other with our biggest customers and energy usage and our scale helps and the leader in sheet piles. The frequently work with them in us to optimize plant load factors. world energy industry relies on Sustainabilitycountries such as Kazakhstan,South Africa and Ukraine. committed co-engineering It also increases our ability to ArcelorMittal pipes and tubes. programs. We have a strong meet changing customer needs.With our global market reach and presence in the design centers Our Distribution Solutions businessproduct diversification, we are able of most global automotive In flat products, we are the clear sells both in local markets andboth to reduce risk, and benefit manufacturers and act as a leader in coated steels, from hot through a centralized marketingfrom the fast-growing demand strategic partner for many. dip to electro-galvanized and color organization. The service centersfor steel in developing economies coated. We continue to develop finish steels to suit individual We support this with one of the new grades of light but ultra-high applications, often providing Performance– which currently account foraround one-third of our shipments. largest research and development strength steels for the world customized solutions, and helpWhile demand in the developed budgets in the European steel automotive industry. Our technical the group service its customersworld is weighted towards flat industry, a worldwide network of know-how has given us an 18% more directly.products and a higher value-added laboratories, and a knowledge world market share in automotivemix, demand in the developing management program that actively steels. We also produce the biggestworld is higher for long products shares best practice around the plates in the world.and commodity grades. As these group’s operations. Governanceeconomies develop, their need forhigher value products will increase. We have a diversified productionWith our experience in developed process, producing approximatelymarkets, we are well placed to 65.9 million tonnes of our crudemeet that demand. steel through the basic oxygen Financial statements Left Belval, Luxembourg ArcelorMittal Annual Report 2011 17
  • 17. Our businesscontinued Mining the group’s own iron ore production Our total metallurgical coal reserves ArcelorMittal has built up a was sold to external customers. are estimated at 323 million tonnes. world-class resource base in The group’s coal mines are located iron and coking coal through In 2011, ArcelorMittal’s own mines in Kazakhstan, Russia and the US. a combination of acquisitions produced 54.1 million tonnes of and internal expansion. Our iron ore1; our own mines and A number of growth projects are geographically diverse portfolio strategic contracts produced under way – most notably in of mining assets gives us the 65.2 million tonnes of iron ore Canada and Liberia. The group is opportunity to supply the which was equivalent to 57%2 of on target to expand annual iron ore developing world as well as our the group’s requirements. A total production (including off-take from own steel facilities. Since January of 28.0 million tonnes was shipped long-term contracts) to 100 million 2011, the mining business has internally and externally at market tonnes by 2015. reported as a separate segment. price3. Production of metallurgical 1 Own iron ore production excluding This has enhanced our ability to coal hit 8.3 million tonnes4; this strategic long-term contracts. maximize returns, optimize the was an increase of 20%. 2 Assuming full production at Peña Colorada allocation of capital and pursue for own use. our growth plans – which involve Our ore reserve estimation 3 Market price tonnes represent amounts a material increase in production and reporting processes are now of iron ore and coal from ArcelorMittal mines that could be sold to third parties and sales to third parties. standardized and reserve estimates on the open market. Market priced tonnes will be updated and reported that are not sold to third parties are All raw materials that can practically annually. Following a full review of transferred from the Mining segment to be sold outside the group are now our life-of-mine plans, ore reserves the company’s steel producing segments at the prevailing market price. Shipments of either marketed to third parties or and mineral resource estimates, our raw materials that do not constitute market transferred to ArcelorMittal facilities iron ore reserves are now put at price tonnes are transferred internally on at market price. Production from 3.8 billion tonnes. Our principal iron a cost-plus basis. captive mines closely linked to one ore mining operations are located 4 Own coal production excluding strategic long-term contract. of our steel facilities is transferred in Canada, the US, Mexico, Brazil, internally on a cost-plus basis. In Algeria, Bosnia and Herzegovina, 2011, approximately 17%1 of Ukraine, Kazakhstan and Liberia. Mining business portfolio Key assets and projects 6 4 17ArcelorMittal is listed on 18 20 5the stock exchanges of 2 3 13 19New York (MT), Amsterdam(MT), Paris (MT), Luxembourg 12(MT) and on the Spanish stockexchanges of Barcelona, Bilbao, 9 1Madrid and Valencia (MTS). 21 22 10 11 7 Non ferrous mine 8 Iron ore mine 15 Coal mine 14 16 Existing mines New projects 1 Mexico Iron Ore 7 Brazil Iron Ore Serra Azul 100% 16 Coal of Africa 15.9% interest Las Truchas & Volcan 100%, 8 Brazil Iron Ore Andrade 17 Ukraine Iron Ore 95% Peña Colorada 50%* expansion 18 Kazakhstan Coal 2 US Iron Ore Minorca 100%, 9 Mauritania Iron Ore 8 mines 100% Hibbing 62.3%* 10 Liberia Iron Ore 70% 19 Kazakhstan Iron Ore 3 Princeton 7 mines 100% 11 Liberia Iron Ore phase two 4 mines 100% 4 Canada Iron Ore 100% 12 Algeria Iron Ore 2 mines 70% 20 Russian Coal 2 mines 98% 5 Canada Iron Ore expansion 13 Bosnia Iron Ore 51% 21 India Iron Ore project (Mont-Wright) 14 South Africa Iron Ore* 22 India Steam Coal 6 Canada Iron Ore Baffinland 70% 15 South Africa Manganese 50% * Includes share of production not controlled by ArcelorMittal.
  • 18. OverviewOur strategic priorities Our business1 Health and safety 2 Maintain and improve 3 Grow our mining resource our production facilities and Health and safety is our cost competitiveness base sustain R&D and product first priority across all sites, With $4.0 billion of Our mining business currently quality, acquisitions will be countries and levels of the management gains banked since accounts for around 30% of made only selectively and company, and is embedded 2008, ArcelorMittal is targeting group profitability. We have where they are strategically in all our values. We are driven a further $0.8 billion of savings ambitious growth plans important. We are committed Sustainability to create a safe and healthy by end of 2012. These will to increase our supply of iron to maintaining our investment workplace with no accidents come from operational ore to 100 million tonnes grade rating. We are also and fatalities. Journey to Zero, improvements, sales, general (including strategic contracts, considering some non-core our company-wide health and and administrative expenses but excluding the potential asset divestments. safety program to reduce (SG&A) and fixed cost savings. output from Baffinland) by workplace accidents and 2015, including doubling of 5 Execute organic growth occupational diseases, In addition, progress has been our market-priced tonnages opportunities in emerging embodies our health and safety made on the asset optimization over five years. markets Performance goals: to become the safest plan launched in September Although we have temporarily steel and mining company in 2011. By focusing production 4 Preserve balance sheet suspended steel growth the world. on our lowest-cost facilities strength expenditure due to current and better aligning our Since the 2008 crisis, we have uncertainties arising from the footprint to market demand, materially strengthened our eurozone sovereign debt crisis, we target $1 billion sustainable balance sheet, reducing debt depending on local market Ebitda run rate improvement and extending the average conditions and projected global by the end of 2012. maturity of our borrowings. and regional demand trends, we Governance While we will continue to will continue to target growth invest in order to maintain in key developing markets. Financial statements2011 highlightsJanuary group strategy, CTO, September NovemberArcelorMittal’s stainless research and development, ArcelorMittal commences As a first-time entrant toand specialty steels business global automotive and as a commercial iron ore the survey, ArcelorMittalis spun-off into Aperam. member of the investment production from its mining is listed in Aon Hewitt’s allocation committee. operations in Liberia. This European list of ‘TopMarch Christophe Cornier chooses launch is an important Companies for Leaders’ArcelorMittal and Nunavut to retire from the GMB and milestone in the recovery and ranks among theIron Ore Acquisition Inc. assumes the role of advisor of Liberia’s economy, which top seven companiescomplete the acquisition to the CEO and GMB; he was devastated by 14 years in Europe.of Baffinland Iron Mines retires on December 14, 2011 of civil war.Corporation shares as chairman of ArcelorMittal Decemberunder their joint offer France. The management After first gaining entry ArcelorMittal celebrates(70% ArcelorMittal and committee is extended from in 2010, ArcelorMittal its 4th annual International30% Nunavut). 12 to 24 members (more is included into the Volunteer Work Day: details on page 68). prestigious Dow Jones thousands of employeesMay Sustainability World Index volunteer in differentArcelorMittal plans to June (DJSI) for the second activities to improve theexpand its Mont-Wright ArcelorMittal received the consecutive year. lives of the people inmining complex and have Best Process Innovation the community.additional construction October ArcelorMittal Annual Report 2011 award in American Metalat Port-Cartier in Canada Market’s (AMM) 2011 Awards ArcelorMittal is given the(subject to environmental for Steel Excellence for our ‘Life Cycle Assessmentand other regulatory S-in motion concept and Leadership’ award byapprovals). the company’s continuous the World Steel Association commitment to producing the for the quality of the workArcelorMittal’s Group performed by the life cycleManagement Board and most ground-breaking steel for the automotive sector. analysis team of globalmanagement committee research and development,grow. Lou Schorsch joins based in Maizières, France.the GMB with responsibilityfor Flat Carbon Americas, 19
  • 19. Health and safety: our number one priority Health and safety is At ArcelorMittal, we are committed We sincerely regret the loss of to becoming the safest steel and 27 colleagues (20 in steel and ArcelorMittal’s number mining company in the world. Our seven in mining) in work-related one priority – across group-wide Journey to Zero safety incidents in 2011. While that is a all sites, in all countries program aims to achieve zero one-third reduction on the number and at every level. Our fatalities, accidents and of fatalities from the previous year, occupational illnesses. Launched in every fatality is one too many. We Journey to Zero safety 2008, it was followed by a global have been working hard to drive improvement process has agreement on occupational health the systematic application of our delivered four consecutive and safety with our trade unions, fatality prevention standards at all years of progress. Further setting a precedent in the industry. sites and at the same time focusing on improving contractor safety significant improvement In 2011, our safety performance performance. is targeted year by year. improved for the fourth consecutive year. Based on figures These were two of the key both for our own personnel plus outcomes of a global health and our contractors, our lost time injury safety summit held in Canada in frequency rate (LTIFR) fell from January 2011 involving all of our 1.8 per million hours worked in top management. The purpose 2010 to 1.4 now. Significant of the summit was to strengthen improvement was achieved in our our journey to zero by agreeing Mining operations, in Flat Carbon measures that would achieve a Europe, in Long Carbon Americas quick and sustainable reduction in and Europe, and in Asia, Africa and accidents and replicate the success CIS. The fourth quarter of the year of our top-performing sites across – the best performance achieved the rest of the group. to date – saw a further fall in the LTIFR to 1.2, with improvement in all our operations other than Flat Carbon Americas. Wellness projects In 2011, the group launched fact-finding communities for HIV/AIDS and certain types of addictions. The objective was to gather knowledge on their prevention to then be used to further educate on best practices within the company and therefore help to protect ArcelorMittal employees across other sites. Right Buchanan, Liberia20
  • 20. OverviewThe meeting drew on the examples It also noted that several sites had Joint health and safety committee In addition to health subjects, all Our businessof four of our larger sites – achieved a significant improvement As part of the global agreement sites organized physical activities.ArcelorMittal Dofasco in Canada, in their safety record. Major with our unions, forged in 2008, For example, several sites in nineArcelorMittal Bremen in Germany, improvements have been obtained we set up a joint health and safety countries participated in the firstArcelorMittal Bergara in Spain and by site in Temirtau, Monlevade, committee, which meets once a global race.our Andrade iron ore mines in Brazil Lázaro Cárdenas, Tubarão and quarter. In 2011, meetings were– to demonstrate how and why Asturias. The business units held in London (planning meeting), In 2011, more than 103,000they are succeeding in driving down Industeel and tubular products ArcelorMittal Acindar in Argentina, people participated in activities.or eliminating accidents. Andrade have also made great progress. The event received positive Sustainability ArcelorMittal Tubarão in Brazil,last year celebrated its 19th year ArcelorMittal Vinton and LaPlace reactions and will now be anwithout a lost time injury. At ArcelorMittal Tubarão in Brazil, (US sub-committee only), annual fixture with the new name a program to focus on contractor ArcelorMittal Zenica in Bosnia and ‘health awareness program’.The critical message that safety resulted in a 79% reduction Herzegovina and ArcelorMittalArcelorMittal leaders took from in the LTIFR compared with the Dąbrowa Górnicza in Poland. Health projectsthe summit was that the key is to previous year. Some operations have We aim at improving the preventionfoster a culture of shared vigilance in a long-term record of exemplary In August, we issued a report jointly of occupational diseases by variouswhich every employee is proactive safety performance. Our Al Jubail means in the long-term. In order Performance with the European Metalworkers’about and responsible for his/her project in Saudi Arabia has obtained Federation, the International to benefit both ArcelorMittalsafety of and those around them. more than 10 million hours worked Federation of Metalworkers and employees and the localAs part of that, it was agreed to without any lost time injury, despite the United Steel Workers, community, we are working withstrengthen ‘visible felt leadership’, the presence of four major examining how the company had Project CURE, a US non-profitwith leaders at every level contractors on the site employing worked together with its unions organization providing second-handencouraging employee engagement people of 14 different nationalities. across the world to improve safety medical equipment, consumablesin safety performance. We want our performance. The report concluded and material to improve localemployees and contractors not only Within our Mining operation, that the joint committee had helped hospitals and clinics. Three projects Governanceto comply but be committed to our Journey to Zero has had a to build a positive workplace culture have already been successfullyhealth and safety standards. significant impact on safety and improved collaboration and conducted in our Liberian hospitals; performance. The LTIFR has fallen coordination between unions similar projects are ongoing inOne other area of focus is to steadily since 2008, reducing from and management, both locally Romania and Kazakhstan.make better use of leading 3.4 to 1.2 in 2011. In the US, and globally.indicators. Managers must ArcelorMittal Princeton has been We are also focusing on educatingknow and understand the data on recognized for open-mine safety by Health and Safety Day our employees in the area of‘near hits’ and unsafe situations the Virginia Department of Mines, As in prior years, the group-wide ‘occupational hygiene’. Financial statementsso preventative measures can be Minerals and Energy. ‘Health and Safety Day’ was heldtaken. We are setting up advanced in all of ArcelorMittal’s sites to A lot of attention has been furthersafety monitoring systems to In order to create a culture where coincide with the International paid to increasingly standardizingbetter prevent accidents. all employees and contractors are Labor Organization’s World Day operations and medical emergency valued above all other priorities, for Safety and Health at Work. The improvement projects on a numberBased on the outcome of the the Mining team launched the theme was ‘from priority to value’. of sites, etc., as well as improvingJanuary summit, every business ‘courageous leadership’ set of showers, restrooms, dressing roomsunit was required to present an values. From top management to Health Week and canteens for several sites.updated health and safety plan the shop floor, it clearly sets the Our ‘Health Week’, launched as aby April 28, 2011 – the date of expectation that everyone has pilot project in 2010, was extended REACH legislationthe ArcelorMittal annual Health the authority, responsibility and across the entire group in 2011. We continued to file follow-upand Safety Day – at the latest. accountability to courageously Focusing on non-occupational data on all substances registeredA follow-up seminar was held speak up when someone is diseases and wellness, the event under the EU REACH legislationin London in December 2011, thought to be at risk. received positive reactions and will concerning the authorization andinvolving the GMB and now be an annual fixture. It has three restriction of chemicals, andmanagement committee members, The progress made to date confirms objectives: screening, detection of prepared for the registrationand action plans were discussed for that our Journey to Zero program high risk population and awareness of smaller volume products2012. That meeting agreed that has set us on the right path. In plus education. (< 1000 t), for which thetop priority sites (those that had 2012, the focus of our effort will registration deadline is in 2013.suffered two or more fatalities in be in further embedding a health During one week, all employeesthe last two years) would receive and safety culture in all our sites of ArcelorMittal sites couldcloser attention month-by-month and drastically reducing fatalities. receive education on healthand there would be focus on sites We have set ourselves the target matters through health fairs,having too high a LTIFR (‘red sites’). of achieving an LTIFR of 1.0 or less posters, stands, lectures, tests, ArcelorMittal Annual Report 2011 by 2013 at the latest. etc., assess their health risk factors (obesity, hypertension, diabetes, stress, etc.), and discover how to improve both their physical and mental health while lowering risks of some diseases. 21
  • 21. Our steel and mining operations In 2011, all of the group’s Safety There was a marked variation in the The safety performance improved performance of different segments, steel segments had to in 2011 in all segments of the reflecting the divergence in regional deal with challenging business except Flat Carbon and sectoral demand patterns. conditions. The final Americas and Distribution Solutions. While Flat Carbon Europe bore the quarter saw a fall in Overall, the group’s lost time injury brunt of European destocking and frequency rate (LTIFR) improved for a significant price-cost squeeze apparent steel demand the fourth year running, falling from towards the end of the year, Flat in a number of markets, 1.8 hours per million worked to 1.4. Carbon Americas benefited from most notably China. The A further significant improvement strengthening underlying demand European market was in the safety performance is in North America, offset in part by a targeted over the next two years. soft market in Brazil. Long Carbon hard hit as the eurozone Americas and Europe saw a crisis intensified and the Performance softening in demand and pricing in effect on steel demand In 2011 Ebitda rose by 18.7% to its major markets in the second half was amplified by $10.1 billion, with much of the of the year. improvement driven by our Mining significant inventory segment. Crude steel production Asia, Africa and CIS suffered a reduction on the part rose from 90.6 million tonnes to number of production problems in of customers. 91.9 million tonnes, while steel 2011 which constrained its output, shipments rose fractionally to but its financial performance 85.8 million tonnes. Ebitda per improved on the back of stronger tonne finished 18% higher than average selling prices. Our in 2010, at $118. Distribution Solutions segment achieved significantly higher selling prices in 2011 than in 2010, though inventory reduction in Europe in the final quarter resulted in a price-cost squeeze. Our Mining segment made strong progress in 2011, lifting Ebitda by around one-third. Now managed 2011 Ebitda split by segment and reporting separately, it delivered on its targets to increase iron ore and coal production by 2012 by 10%. By the fourth quarter, it was producing iron ore at an annualized rate of 60 million Health, Safety and Environment (HSE) Excellence Awards for tonnes as our greenfield venture ArcelorMittal Point Lisas in Liberia progressively ramped After more than one year with up production. zero lost time injuries and the inauguration of an improved health care facility for employees, As part of the move to manage our ArcelorMittal Point Lisas was Mining segment’s results separately, presented with the HSE Excellence where production of iron ore or Award by the American Chamber of coal is marketable, it is now either Commerce of Trinidad and Tobago (AmCham). transferred to the group’s internal customers at market price or sold on This site is making significant progress on the collective journey to zero. world markets. In 2011, just over half of our iron ore production was shipped at market price, an increase of 11.5% year-on-year. Increasingly, new iron ore and coal production will be marketed commercially to third Segment $ million parties. Iron ore and coal production Flat Carbon Americas 2,109 is targeted to increase by a further Flat Carbon Europe 1,500 10% in 2012. Long Carbon Americas and Europe 1,866 AACIS 1,238 Distribution Solutions 271 Mining 3,06322
  • 22. Overview Our businessFlat Carbon With 19 plants spanning Safety The lost time injury frequency rate “The year 2011 was a relatively solid one, but we have a long way Canada, the US, MexicoAmericas and Brazil, Flat Carbon remained flat in 2011 at around to go to recapture the position we 1.9 hours per million worked. One were in before the crisis,” stresses Americas (FCA) produces fatality was sustained at the Burns Mr Schorsch. a complete range of flat Harbor plant. “This was distressing rolled products. It is the and highly regrettable,” says Lou Investments Sustainability Schorsch, GMB member, Two substantial projects are due to largest plate producer in responsible for Flat Carbon complete in the first half of 2012. North America, a leader Americas, “but it represents our An upgrade to the hot strip mill at in tinplate and a major best performance on fatalities since Indiana Harbor will allow the plant the merger.” Two of the segment’s to meet growing demand for supplier to the automotive operations, ArcelorMittal Dofasco high-strength steel grades of market throughout the in Canada and ArcelorMittal Tubarão 20mm thickness or more. At Burns western hemisphere. Its in Brazil, typically figure among the Harbor, upgrades to the plate mill market share in the North Performance group’s top performing plants for are focused on improving product safety. The Brazilian operation made quality. Both projects will cost in American automotive substantial headway on contractor the region of $50 million. market exceeds 35%. safety in 2011. Two other projects, at “A major focus for FCA in terms ArcelorMittal Dofasco in Canada of safety is to sustain the positive and ArcelorMittal Vega do Sul in momentum in the US plants,” says Brazil, are on hold pending an Governance Mr Schorsch. “The commitment improvement in demand. During and the focus are there.” the first half we will also be commencing a major reline of blast Performance furnace no. 1 in Tubarão – its first Most areas of Flat Carbon Americas in 28 years, a world record. made a good recovery in 2011, with the North American operations Outlook buoyed by an upturn in the US US automotive production is Financial statements automotive, capital goods and forecast to increase to aroundFlat Carbon Americas energy sectors. There was a 13.8 million units in 2012. That continued strong performance from is around one million units more 36 ArcelorMittal Lázaro Cárdenas in than in 2011, but is still some Mexico, aided by low natural gas 15% below peak production levels. prices and strong operating With the capital goods and energy performance. sectors demonstrating a confident+ % The Brazilian operations were recovery, Mr Schorsch expects demand for flat steel in NorthRise in Ebitda as compared negatively impacted by an America to grow by around 5% inwith the year ended inventory overhang from 2010. 2012. Moreover, North AmericanDecember 31, 2010 “The combination of a high spot prices began to improve in Below Belval, Luxembourg currency, inflation, and a domestic mid-November and sustained market that had suffered a surge those gains into 2012. in imports the previous year made conditions challenging,” says Mr Elsewhere, the outlook is more Schorsch. Slab operations in both mixed. In Mexico, improved Brazil and Mexico were affected performance is dependent on an towards the end of the year by expansion in iron ore production, weakness in the international which is currently underway. Supply markets occasioned by the euro and demand are now in better crisis; Brazil exports roughly one balance in Brazil, but the underlying quarter of its production as slabs. rate of growth has slowed, at least temporarily. “We continue to look at ArcelorMittal Annual Report 2011 Overall, crude steel production ways to participate in the expected rose from 23.1 million tonnes longer-term growth in these to 24.2 million tonnes, while developing markets, by, for instance, shipments increased from 21.0 increasing our downstream million tonnes to 22.2 million footprint,” says Mr Schorsch. tonnes. With a substantial improvement in North American steel prices, Flat Carbon Americas lifted Ebitda by 36% to $2.1 billion on sales of $21 billion (2010: $17.7 billion). 23
  • 23. Our steel and mining operations continued Flat Carbon Europe Flat Carbon Europe Safety There was further good progress Flat Carbon Europe recorded an operating loss in both the third and is the largest flat steel in our safety performance in 2011. fourth quarters. The figures were producer in Europe and The lost time injury frequency rate impacted by impairment charges operates 15 integrated fell from 2.3 hours per million relating to the intended closures and mini-mill sites in worked to 1.6. It is still a matter of at Liège and costs associated with huge regret that there were four the implementation of the asset Belgium, France, fatalities in Flat Carbon Europe, optimization plan, primarily in Spain, Germany, Poland, for which we implemented very offset by a number of positive items. Romania and Spain, intensive fatality prevention with downstream activities standard programs. “At the end of Investments the day, our frequency rates in Flat Flat Carbon Europe invested in a further five countries. Carbon Europe are good but they $1 billion as capital expenditure in It produces hot-rolled need to be improved,” says Aditya 2011 ($792 million in 2010), of and cold-rolled coil, Mittal, GMB member, responsible which 12% was spent on health, coated products, tinplate, for Flat Carbon Europe. “Within Flat safety and environment, 30% on Carbon Europe, there is a list of maintenance and renewals and the laser-welded blanks, 15 mandatory actions that we want remaining major part was invested plate and slab. It sells to implemented, and there is a specific on efficiency and growth projects. a variety of industries, program to implement mandatory The key projects were the relining including packaging actions across the organization.” of blast furnace no. 2 in Fos-sur- Mer in the third quarter and the and general industry, Performance revamping of blast furnace no. 5 thanks to ArcelorMittal’s After a solid first half, market in Galati, Romania in the fourth high value-added conditions deteriorated with the quarter. Also, the proceeds of the products and steel onset of the euro crisis in the third carbon dioxide (CO2) sales will be quarter, leading to severe inventory entirely used to fund the energy solutions, which have reduction and a decline in average efficiency projects. contributed to major selling price per tonne in the fourth improvements to quarter. Against this backdrop, the In 2011, Flat Carbon Europe crash worthiness and company announced the intended acquired the 2 million tonne coke closure of the two blast furnaces, plant located in Bottrop, Germany weight reduction. sinter plant, steel shop and from Ruhrkohle AG, in order to continuous casters in Liège, Belgium. increase its coke self-sufficiency. We also temporarily idled some Flat Carbon Europe also acquired other plants in order to balance controlling stake in ATIC Services the production to market demand. (logistics and harbor company) in December 2011. ArcelorMittal Skopje: Over the year, crude steel Macedonia’s ‘Best Employer production fell from 30 million Outlook in the field of Health and tonnes to 29.5 million tonnes, while “While the economic indicators Safety 2010’ steel shipments were 0.4 million remain mixed, we expect some ArcelorMittal Skopje was recognized pick-up in demand from mid-year as ‘Best Employer in Macedonia tonnes lower at 27.1 million tonnes. in the field of Health and Safety’ Ebitda reduced from $2.0 billion to as the destocking initiated in the by the Macedonian Occupational $1.5 billion on sales of $31.1 billion fourth quarter runs its course,” Safety and Health Association, (2010: $25.6 billion). says Mr Mittal. Many of Europe’s under recommendation from automotive manufacturers continue the Federation of Macedonian Unions. On April 28, 2011, to enjoy strong export demand. ArcelorMittal’s Health and Safety The outlook for much of Central Day was further celebrated as and Eastern Europe and the CIS ArcelorMittal Skopje was announced is positive. the winner at a special ceremony held in Skopje. Since the start of 2012, European Right Poland steel prices have edged higher, but US prices still remain at $100 a tonne higher. “There is still not premium on import parity,” says Mr Mittal, “and we expect this gap to narrow further as we move through the first half of the year.” We anticipate a limited recovery of sales volumes for Flat Carbon Europe in 2012 with steady improvements thereafter. Prices and margins over raw materials are expected to marginally improve over 2012.24
  • 24. Overview Our businessLong Carbon Long Carbon is a global Long Carbon Americas. “These six fatalities are too many,” says Michel Investments Two new projects were started business operatingAmericas and 35 mills in 17 different Wurth, GMB member, responsible for Long Carbon. “We are putting in 2011. A new wire rod mill at ArcelorMittal Duisburg in GermanyEurope countries. It enjoys strong even more emphasis on the is expected to enter production at market penetration in implementation of our fatality the end of the first quarter of prevention standards and working 2012. With a capacity of 450,000 Europe, America and to change the mindset of our tonnes, its higher quality range of Sustainability Northern Africa. Long people to build in a sense of long products will take Long Carbon Carbon is the largest responsibility for others.” into new, value-added markets, producer of steel sections, including automotive, where Flat Performance Carbon Europe already has a offering the widest range After a solid first half, demand for strong presence. – from small and medium long products weakened from the to jumbo beams. It is third quarter as market sentiment A project to produce head- also a leader in wire rod, was affected by the European hardening of rails, for railway Performance sovereign debt crisis. The downturn systems with heavy loads, was rebars, special and was most marked in Europe but US initiated in Veriña, Spain. The new merchant bar. demand also softened. Appreciation plant has been operational since of the Brazilian Real had a negative January 2012. Plans to expand wire Increasingly, Long Carbon is a impact on the local market. rod capacity at Monlevade in Brazil provider of engineering support Construction markets in 2011 have been put on temporary hold, services. As the world leader in declined for the fourth year in a as sufficient capacity at other sites sheet piles, we provide technical row especially in Southern Europe. is available to serve our customers. Governance solutions to some of the world’s most challenging infrastructure Long Carbon shipments rose Outlook projects. With strong support from from 23.1 million tonnes in 2010 The outlook for the first quarter R&D, and a downstream presence in to 23.9 million tonnes in 2011. of 2012 is improving with better wire drawing and distribution, we Production was around one million economic indicators in the US are continuously adding to the tonnes higher, at 23.6 million and, to a lesser extent, in Europe. range of higher value services. tonnes. Sales rose from Demand in much of South America $21.3 billion to $25.2 billion. is firm. Brazil’s preparations for the Financial statementsLong Carbon Americas Safety However, with profitability per football World Cup in 2014 and theand Europe There was a marked improvement tonne falling sharply in the second Olympics in 2016 should positively in overall safety metrics in 2011, half of 2011, Long Carbon recorded impact demand for steel for with a 30% drop in the LTIFR in the an Ebitda of $1.9 billion compared construction and infrastructure 25.2 Americas and one of 20% in Europe. with $2.1 billion the previous year. from 2013. “Long Carbon is also However, there were five fatalities set to benefit from a progressive in Long Carbon Europe and one in For Long Carbon Americas, the shift towards higher value and$ bn market improved in the second part of 2011 compared with the quality products within its sales mix,” says Mr Wurth.Sales 2011 first semester; this improvement, Below Belval, Luxembourg combined with a strong cost- Tubular products cutting drive, enabled the segment ArcelorMittal is one of the to be close to the budget target. world’s major producers of tubular products, serving markets as The figures were also impacted by diverse as energy, mechanical, the restructuring costs associated construction and automotive. with the asset optimization plan. With 23 facilities in 11 countries, With demand levels more than we produce a complete range of 20% below pre-crisis levels, we products, spanning seamless, spiral have taken steps to idle higher cost welded and longitudinal welded. plants. In September, the decision was taken to temporarily idle the In 2011, our tubular products Rodange and Schifflange plants business produced just under in Luxembourg. In January 2012, 1.6 tonnes of steel tubes. ArcelorMittal Annual Report 2011 the Madrid section mill was put The Al Jubail joint venture in Saudi on indefinite idle. Arabia to produce seamless tubes is expected to start hot commissioning “The changes have improved by September 2012 and to enter cohesion within the management production in the second quarter teams and delivered early gains,” of 2013. Planned capacity is says Mr Wurth. Long Carbon 600,000 tonnes. Europe was reorganized into four business units in 2011 in order Safety performance in tubular to better align the operational products was good – with a LTIFR structure with the customer base. of 0.8, well below the group’s The new units are Europe North, average, and zero fatalities. East, South and North Africa. 25
  • 25. Our steel and mining operations continued AACIS Our Asia, Africa and Safety Overall safety metrics in AACIS In Kazakhstan, a new 6-strand billet continuous caster is being CIS segment operates showed a further improvement commissioned at Temirtau in the steelmaking facilities in in 2011, with the lost time injury first quarter of 2012. Built at a cost Ukraine, Kazakhstan and frequency rate falling from of $40 million, it takes the Kazakh South Africa. Kryviy Rih 0.9 hours per million worked to plant into long products with the 0.7, around half the average for the ability to produce 1.4 million tonnes in Ukraine is the world’s group as a whole. While this testifies of semis. A reline of the blast largest producer of long to the amount of effort invested in furnace no. 2 at Temirtau is due to products, specializing in improving safety in recent years, be completed in April 2012, at a rebars and wire rod, there were still seven fatalities, cost of $110 million. A gas cleaning including four in one plant in South project will also be completed later with 5.7 million tonnes Africa. “A renewed push, including this year and other safety projects of production in 2011. additional safety audits, more are under way. Temirtau in Kazakhstan training and moves to target produces flat products. sub-contractors in particular, is In South Africa, new sinter plant under way; management is fully dedusting equipment is being It is the largest integrated committed to the goal of zero installed at the Vanderbijlpark plant steelmaker in Kazakhstan fatalities,” says Gonzalo Urquijo, at a cost of around $40 million. with a production of GMB member, responsible It will be completed by mid-year. 3.6 million tonnes in 2011. for AACIS. A number of other safety and environmental projects are also Our four plants in South Performance under way. Africa produced Following production problems 5.3 million tonnes last in South Africa and Ukraine that Our development strategy in year. Around 65% of their resulted in the loss of around 2.3 India and China progressed in 2011. million tonnes of output, crude In both countries, we secured output is in flat products. steel production finished the year assets to provide the company marginally lower than before, at with options. Even though the 14.6 million tonnes. That compares investment environment is with 14.9 million in 2010. Steel challenging in India, especially in land shipments were down from acquisition, resource allocation for 13.3 million tonnes to 12.5 million industrial development, high interest tonnes. With average selling prices rate and high inflation environment, around 21% higher than in 2010, we are still interested and we hope Ebitda rose from $1.1 billion to $1.2 that this environment will improve billion on sales of $10.8 billion, up in coming years. from $9.7 billion the previous year. Outlook Community development Investments In the emerging economies that in South Africa A $600 million investment program AACIS mainly serves, demand is The ArcelorMittal is under way across AACIS plants to stable, although customers remain Foundation supports improve productivity, expand the wary of carrying excess stocks and ‘Collect a Can’ in South Africa, a product range and address safety there is a lack of forward visibility, project which aims and environmental issues. says Mr Urquijo. “The biggest to collect metal challenges we face for 2012 are cans, separate the In Ukraine, a new ladle furnace and improving our safety record and tin from steel and then sell the 6-strand billet continuous caster at dealing with the issue of reliability,” recuperated materials. Kryviy Rih is scheduled to come on he says. “That means investing in stream in the final quarter of 2012. training at all levels. We also need to Given that the recovery rate of Costing $93 million, it will add step up productivity to maintain our cans has risen from Above South Africa 1.2 million tonnes of capacity, competitiveness.” 18% to 67% in improve productivity and product the last 15 years, quality and take Kryviy Rih into protection of the environment is one smaller diameter products. of the project’s biggest achievements. It also helps to educate children, who are taught not to drop litter. ‘Collect a Can’ has also had a positive effect on community development, since it provides regular employment for around 37,000 people.26
  • 26. Overview Our businessDistribution Centered on Europe, In addition, the business acts as an international sales network for the Investments In May 2011, Distribution our Distribution SolutionsSolutions segment operates from group’s steel mills. Solutions acquired the Cognor distribution network in Poland. around 400 sites and Safety Comprising 12 warehouses, has more than 40,000 With a lost time injury frequency Cognor complements our existing rate of 3.2 hours per million worked, distribution network in the active customers. It enjoys including two fatalities, Distribution country and extends the sales Sustainability a 12.8% share of the Solutions’ safety performance in platform for our six steel mills in European steel market, 2012 fell a long way short of target. Poland. Greenfield investments with leading positions in “We benchmark our performance were made to extend distribution against competitors,” says Gonzalo facilities in Dubai and Turkey. France, Belgium, the Urquijo, GMB member, responsible Netherlands, Luxembourg, for Distribution Solutions. “But just Outlook Spain, Italy and Poland. being better than the industry Mr Urquijo says that, following Approximately 65% of its norm is not good enough. We are the destocking that has taken Performance redoubling our efforts, with now place, the outlook in Europe is sales are in flat products, more than 20% of all our managers’ stable, although underlying with most of the time dedicated to safety. We have demand is flat. “We have three remainder in long. everyone’s full involvement and challenges for 2012,” he says. Through its network of we are looking for a major “The first is to improve our safety improvement,” he says. performance; the second is to steel service centers, review our cost structure; and the Distribution Solutions is Performance third is to work more closely with Governance able to provide highly Distribution Solutions shipped the upstream businesses to better customized solutions to 18.4 million tonnes of steel in manage our stocks and reduce 2011, up from 18.2 million tonnes cyclical volatility.” Our aim is to even small customers. in 2010. Amidst destocking on the become the preferred supplier of part of customers, average selling our customers by accomplishing prices declined towards the latter the above. part of the year. With a severe price-cost squeeze, Ebitda fell to Financial statements Distribution Solutions $271 million from $456 million in 2010. Sales were $19.1 billion “Our competitive position 18.4 (2010: $15.7 billion). has been set as one of our priorities for 2012 with specific actions mt in terms of developing our high value-added Steel shipments in 2011 products. We aim to285 new apartments improve our customerIn December 2011, ArcelorMittal Kryviy Rihcommissioned new residential housing for service and to furtherits employees, thus fulfilling one of the key develop the cooperationinvestor obligations in the social area accordingto the sales and purchase agreement (SPA). between upstream,The plant invested around 64 million UAH downstream and ourinto the construction of two new modernnine-storied buildings in the 2nd and the distribution network3rd Vostochny microdistrict in Gutovsky street. which is very close toVV Vaideeswaran, the CEO of ArcelorMittal our end customer.”Kryviy Rih commented, “We are proud todayto finalize one of our main investment Michel Wurthobligations according to the SPA. Even in the Member of Group Managementmidst of the most severe crisis in the industry’s Board, responsible for Long Carbonhistory we continued fulfilling our social ArcelorMittal Annual Report 2011obligations and building apartments for ourworkers. We care about the safety of ourworkers and their overall well-being, as wellas the well-being of their families.”Right Kryvih Riy, Ukraine 27
  • 27. Our steel and mining operations continued Mining With major expansion Since the start of 2011, Mining has reported as a separate segment production, excluding ore sourced from strategic long-term contracts, and development within the group. This has facilitated increased by 11% to 54.1 million programs underway improved operating decisions and tonnes. Of that total, just over half in Canada, the US, the optimal allocation of capital. At (28 million tonnes) was shipped at Brazil and Liberia, the same time, all production that market price. That was an increase can practically be sold outside the of 12% year-on-year. and increasing tonnages group is now either transferred to of both iron ore and internal customers at market prices Coal production was lifted by 20% coal being marketed or sold to third parties through the year-on-year to 8.3 million tonnes. externally, Mining business’s global marketing arm. Of that total, 4.9 million tonnes was Production from captive mines – shipped at market price, an increase is an important growth where marketing to third parties of 46%. engine for the group. is limited by logistics or quality – continues to be transferred on Mining achieved an Ebitda a cost-plus basis to the group’s of $3.1 billion on sales of steel facilities. $6.3 billion. That compared with $2.3 billion on sales of The portfolio of mining assets $4.4 billion the previous year. stretches around the globe, from Mexico to Russia and from the Safety performance Arctic Circle to the southern tip of Safety is the number one priority Africa. With a geographically in the Mining business as in all diversified portfolio of operating ArcelorMittal operations. “Our assets and growth projects in iron target is to become the safest ore, coal and manganese, the metals and mining company in the mining business is strategically world,” says Mr Kukielski. Mining positioned to supply the emerging has made great strides in the past markets as well as its internal four years, reducing the lost time customers globally. injury frequency rate (LTIFR) from 4.0 per million hours worked in Mining responsibly Peter Kukielski, GMB member, 2007 to 1.2 in 2011. The latest In 2011, ArcelorMittal began iron chief executive of Mining, says figure represents an improvement ore mining in Liberia. Prior to this, ArcelorMittal launched the most the “vision within Mining is to of 23.5% on the 2010 outturn. comprehensive environmental study create value through operational ever undertaken in Liberia of the excellence and profitable growth, There have been some dramatic Nimba mountain range. This is home while caring for the environment improvements in safety to Liberia’s biggest iron ore deposits, and it is also one of West Africa’s few and our people, and maintaining performance. ArcelorMittal remaining wet-zone forests. safety first – always.” Princeton in the US has gone from being the worst performer among ArcelorMittal partnered with a number of international conservation In 2011, Mining achieved all the group’s mines in 2008 to groups to explore how the company demanding production targets. recording a LTIFR of zero in 2011. can help reverse the history of With the first shipments of ore from environmental damage in Nimba. As the new mine in Liberia, iron ore a result, ArcelorMittal found several new species including a fish, a frog and a dragonfly and confirmed that the Nimba mountains are home to animals that live nowhere else but Above Buchanan, Liberia in this part of Liberia. A biodiversity Right Kazakhstan conservation program has now been launched as the protection of the rainforest is crucial to ArcelorMittal’s plan for Liberia, and the future of rural livelihoods.28
  • 28. Overview Our businessRegrettably, there were still personnel and periodic validation 900 million tonnes, on which to Coal production is planned to rise toseven fatalities in the coal mining by external specialists. base future expansion. at least 11 million tonnes over theoperations in 2011. Efforts same period. In early 2011, Miningare being redoubled to drive home At the end of 2011, proven and For more details on reserves and completed the underground minethe message that safety is a shared probable reserves of iron ore resources, please see page 202. expansion program at Princetonresponsibility. “In developing our amounted to 3.8 billion tonnes Coal, increasing production capacityculture in Mining we emphasize of run-of-mine material. These Growth plans by 0.7 million tonnes a year.what we call ‘courageous reserves constitute the basis of Capital expenditure in Mining more Sustainabilityleadership’ in order to equip our 90% of the group’s long-term than doubled to around $1.3 billion Key projects underway include:leaders and our people with a set production forecasts. In addition, in 2011 and is set to remain at aof values,” says Mr Kukielski. “It we have measured and indicated high level as existing mines are Liberia: The first shipments fromempowers people to speak up resources of iron ore estimated expanded and new ones developed. our greenfield iron ore project inwhen something is not right. It is at approximately 8.2 billion tonnes, The focus is firmly on growing Liberia commenced in Septemberabout creating a culture in which with further inferred resources of marketable volumes. In 2012, 2011. This was the culmination ofpeople know they are valued, 4.1 billion tonnes. These resource production of both iron ore and four years’ development work thatwhere they bring a positive attitude estimates provide considerable coking coal is planned to increase included the rehabilitation of Performanceto work and accept the scope for growth and underpin by around 10%. 240km of railway and upgradesresponsibilities of leadership – the long-term sustainability of to the port and material handlingin safety as in everything else,” our operations. However, this increase is just one facilities at Buchanan. The minehe says. The mining business is stop on the growth journey. The was brought into production ontargeting a LTIFR of 1.0 or Proven and probable reserves of near-term target is to expand iron schedule and within budget. Inless by 2013. metallurgical coal were estimated ore production to 100 million 2012, production will be lifted at 323 million tonnes of run-of- tonnes by 2015. That includes ore to around 4 million tonnes.Management team mine coal with an average yield sourced from strategic contracts, GovernanceWith a number of key hires in of 52%. The life-of-mine plans forecast to be around 16 million2011, Mining now has a leadership of our coal operations are entirely tonnes by that date. Within Mining’steam with huge industry based on these reserves and own production, marketableexperience. Built up over two years, extend for 20 years or more. We tonnages are expected to doublethe team has a proven track record also have a substantial further coal on 2010 levels.of project execution, operational resource, estimated at more thanperformance and commercialmarketing. “Getting the right Financial statementspeople in the right place at theright time is one of the biggest “While our expansion plans are ambitious, we havechallenges,” says Mr Kukielski. “We rigorous controls in place to ensure that we arehave been able to cherry-pick,taking people from leading roles in not simply increasing production tonnage. Ourthe industry.” business plan envisages strong Ebitda growth even on flat iron ore price assumptions. In otherReserve and resource update words, we are well positioned to continue to deliverIn 2011, Mining carried out itscommitment to complete a full superior value whatever the economic backdrop.”review of all of its life-of-mine Peter Kukielskiplans, ore reserves and resource Member of the Group Management Board, chief executive of Miningestimates. Reserve estimationand reporting methods werestandardized to ensure bestpractice and alignment withSecurities & Exchange Commissionrequirements. We also standardizedour mineral resource estimates tomeet the Canadian Ni 43-101requirements. Ore reserveestimates will now be updatedand reported annually. ArcelorMittal Annual Report 2011All ore reserve and mineral resourceestimates are now subject to arigorous corporate governanceprocess with internal technicalreports, sign-off by qualified 29
  • 29. Our steel and mining operations continued Mining Engineering for the second phase of the project is now under way. If The Mont-Wright operations have more than 2.0 billion tonnes of iron Our commercial strategy will focus on building a customer base in both approved, this would lift production ore reserves – sufficient to support the Atlantic and Pacific growth of iron ore from 4 million tonnes a 28-year mine life at the markets to develop stable, a year of direct shipment ore to expanded production level. This is long-term demand. 15 million tonnes a year of before taking account of substantial concentrate from 2015. It includes additional resources, which could Other projects the construction of a concentrator form the basis of a further doubling While Baffinland is a key project and a further upgrade to the port of production over time. Scoping in the drive to sustain future facilities. Planned expenditure on studies are underway to confirm production growth beyond 2015, phase two amounts to $1.8 billion. the potential for further mine Mining has an internal pipeline of expansion in the Mont-Wright, Fire both brownfield and greenfield ArcelorMittal Mines Canada: Lake and Mont Reed areas. We are projects currently under Expansion of the Mont-Wright also actively exploring in areas of consideration. With our significant mine and concentrator capacity will inferred mineral resources. resource base, these projects offer increase annual production of iron the potential over the medium- ore concentrate from 16 million Andrade Mines, Brazil: Investment term for an expansion in our own tonnes to 24 million tonnes by in the Andrade Mines in Brazil will iron ore production up to and 2013. The project cost is lift production or iron ore from beyond 100 million tonnes, approximately $1.2 billion. This 1.5 million tonnes a year to before including strategic contracts. expansion capitalizes on existing 3.5 million tonnes. The expansion, rail and port facilities, the quality of which is set to cost $75 million, will Global marketing our product and our experienced be completed in 2012. With a highly experienced workforce. Its location offers easy marketing team now in place, access to US and European markets Baffinland, Canada: In March Mining is building a strong – an important consideration given 2011, ArcelorMittal, in partnership commercial presence in global that the additional production will with Nunavut Iron Ore Acquisition markets. Our goal is to be a be sold on world markets. Inc. (now WW Mines), acquired preferred supplier in an otherwise a 70% controlling interest in highly concentrated iron ore and Baffinland Iron Mines Corporation. coal industry with a broad customer Baffinland owns the Mary River base and a portfolio of long-term project, a high-grade iron ore contracts, thereby allowing us reserve in Northern Canada. to produce evenly through the The acquisition consolidated steel cycle. ArcelorMittal’s position as a major iron ore producer. Unlike many producers, we bring an understanding of our customers’ The existing feasibility study total feed requirements and we has been updated ahead of a have the ability to provide bundled board-level construction decision. deliveries of steelmaking raw In addition, a draft environmental materials to their mills. We are also impact statement has been able to leverage the group’s strong submitted to regulators, instituting shipping capability. In 2011, the process of environmental marketing trials were undertaken review. Constructive talks are in a number of markets. The focus proceeding with local stakeholders was on the growth markets of Asia, to finalize the Inuit impact benefits South America and the Middle East. agreement. The Baffinland product will be a high-quality, direct shipping mix of premium lump ore and premium fine ore sinter feed with only crushing and screening required. Above Baffinland, Canada30
  • 30. Overview Our businessCorporate responsibility pollution. We have also formed a Canada and the Liberian operations Safety is always aThe Mining team actively works to joint environmental management will materially reduce our global costminimize the environmental impact committee with the elders of the position in iron ore. By 2015, iron challenge for the companyof its operations and engages with local Inuit communities to gain ore cash costs are expected to be and especially for mining.local stakeholders to foster knowledge of their traditions as around 15% lower than today on To improve safety in thesustainable communities. hunters and fishermen. The a constant currency basis. group’s mines in committee will scrutinize and Ongoing capital investment in theWhile preparing to develop our iron approve all design aspects of coal mines will similarly improve Kazakhstan, ArcelorMittal Sustainabilityore mine in Liberia, we undertook the project. the cost position in coal. has invested $365 millionan extensive biodiversity study and in an extensiveare now working alongside local Competitive cost base “While our expansion plans are modernization programpeople to improve management of The Mining business strives to ambitious, we have rigorousthe local environment. We have achieve its planned organic growth controls in place to ensure that we since 2007. On Baffinbuilt schools, a training center and at an attractive cost per tonne. are not simply increasing production Island in the Canadianhospitals – all of which we fund and Compared with industry peers, tonnage,” says Mr Kukielski. “Our Arctic, site explorationoperate. And we have sunk and the estimated capital costs for business plan envisages strong requires people to work Performanceequipped wells to bring fresh water the major planned projects are Ebitda growth even on conservativeto isolated villages. competitive, offering the prospect iron ore price assumptions. In other on frozen ice. “To minimize of compelling returns even on flat words, we are well positioned to risks, our team trained in aAt our Baffinland development, assumptions of long-term iron ore continue to deliver superior value new operating procedurewe have now completed in-depth, and coal prices. whatever the economic backdrop.” for measuring thebase-line environmental studies.Ongoing monitoring continues. As production of both iron ore thickness of ice andGiven its exceptional quality, the and coking coal increases, Mining’s evaluating conditions on Governanceextracted ore will require no operating unit costs are expected floating ice covers,”processing and will leave behind to fall. The investments now being said Dave McCann,no tailings deposits or processing made in ArcelorMittal Mines responsible for mining project sites, Baffin Island. Financial statements Baffinland commitment Baffinland Iron Mines Corporation is committed throughout all phases of the Mary River project to plan and conduct operations in an environmentally responsible manner, one that is beneficial to all. Left Port-Cartier, Canada ArcelorMittal Annual Report 2011 31
  • 31. We are leadersin automotive steelPicture Belval, Luxembourg Our global share of the automotive steel market is around 18%. In all, the auto industry consumes around 15% of all the steel we produce. Long-term contracts add to the stability of our business. We have built close relationships with our customers, often working with them at the vehicle design stage. These relationships are founded on our continuing investment in R&D and our ability to provide highly engineered solutions that help make vehicles lighter, safer and more fuel-efficient. We are the leader in the fast-growing market for advanced high-strength steels. Together with a range of press-hardened steels, these steels form the basis of our revolutionary S-in motion solution, which opens the way to big CO2 savings over the life of the average vehicle. Ebitda 2011 10,117 $ m
  • 32. 33Business overview Our business Sustainability Performance Governance Financial statements ArcelorMittal Annual Report 2011
  • 33. Corporate responsibility At ArcelorMittal, corporate Our CR strategy focuses on The following pages provide an four areas: outline of the group’s CR strategy responsibility (CR) is about and performance. A separate embedding good practice • Transparent governance – our CR report, published alongside this business strategy, operations in every aspect of the and everyday practices are all annual report, provides additional group’s activities. By underpinned by transparent detail and analysis. It can be accessed at www.arcelormittal. aiming at all times to governance. com/corporateresponsibility act in a responsible and • Investing in our people – we want transparent manner, to make each and every person Transparent governance and to maintain good working on our behalf feel valued. CR has the committed support relations with our • Making steel more sustainable of both the board of directors, stakeholders, we are – we are using our expertise which formally oversees CR in steel and mining to develop better able to manage cleaner processes and greener across the company, and the Group social and environmental Management Board. The board of technologies. directors receives a consolidated risk and deliver long-term • Enriching our communities – we report on key CR topics for each shareholder value. play an important role in all the of its meetings (it met eight times communities where we operate. in 2011), enabling it to monitor performance and make In 2011, we made good progress assessments in key areas including in all four areas of the CR strategy. human resources, health and safety, Health and safety remained our social and the environment. With number one priority. In 2011, the diversity of their backgrounds, a report jointly issued by the the directors bring an exceptional company, the European breadth of experience to their Metalworkers’ Federation, the decision-making. International Federation of Metalworkers and the United The Group Management Board Steelworkers was published. reviews the CR program on a Below Chicago, US This report concluded that the quarterly basis. It also receives collaboration between the company in-depth subject matter reports and its unions had helped build a several times a year to permit positive workplace culture and more detailed analysis. With improved coordination between operational responsibilities that unions and management both engage them daily in health and locally and globally. safety, social, environmental and ethical issues, all Group Respecting human rights is Management Board members important for our business. In are able to bring key insights 2011, we commenced a training to the CR management process. program to raise awareness of our The group CR team is tasked human rights policy, both internally and throughout our supply chain. with promoting the CR strategy across the group and also to In September 2011, ArcelorMittal provide regular reports to other was reconfirmed as a member of board committees. In 2011, each the Dow Jones Sustainability World meeting of the audit committee Index following its annual review. The company is also a member of the FTSE4Good Index.34
  • 34. Business overviewreceived a statistical update Our business 147,000 employees, raising their Regrettably, there were still 27on the implementation of our awareness of what their human work-related fatalities amonghuman rights policy as part of rights are and how they are employees and contractors in 2011 “Clear reporting istheir responsibility for monitoring expected to behave. ArcelorMittal’s (20 in steel and 7 in mining). We one of the best waysthe compliance program. The risk human rights policy is now available mount a thorough investigation of engaging withmanagement committee also in the 19 most commonly spoken following each such accident.assesses risks from a social, languages within the group. The findings are discussed at the our global and localenvironmental or ethical A guidance manual was published Group Management Board level and stakeholders. Inperspective. addition to the group Sustainability to assist employees in dealing with action plans are drawn up to ensure any issues they encounter in their the lessons are systematically corporate responsibilityThe implementation of the CR day-to-day operations and a shared throughout the group.strategy is advised by the CR governance framework was set up report, 10 localcoordination group which reviews to ensure that we can effectively Journey to Zero focuses on corporate responsibilitystandards, assesses risks and deal with any violations of the preventative action and improved reports were publishedmonitors the implementation of policy. In 2012, we will continue standards through the sharing of in 2011 – all alignedCR strategy. It is comprised of impact assessments in priority best practice and group-widesenior managers from a variety of to the group-wide Performance countries and our training program benchmarking. A number ofother corporate areas and meets to support human rights in line initiatives designed to reinforce corporate responsibilityregularly. In 2011, there were with the United Nations Guiding the program were introduced in priorities.”eleven meetings, including a Principles on Business and 2011 following a company-internalsite visit to South Africa. Human Rights. Health and Safety Summit held Gonzalo Urquijo in Canada in January 2011. A Member of theAll business units are in the process We also continue to make progress follow-up meeting was held in Group Management Board,of implementing CR governance on our code for responsible sourcing London in December 2011 for responsible forstructures at a local level. These corporate responsibility Governance launched in December 2010. The the Group Management Boardare designed to promote effective code has started to be distributed and management committeeCR management, reinforce to all our main suppliers together members. Significant improvementscross-functional collaboration and with a publicly available guidance were recorded at several priorityfoster good community relations. document on its implementation. sites. A major effort was madeClearly defined CR responsibility to reinforce safety proceduresforms part of the job description Investing in our people among contractors, whose safetyof all CEOs, plant managers and record lags behind that of ourdesignated CR coordinators. All Health and safety Financial statements direct employees.are accountable at their respective The safety of our employees is ourlevels. This activity is supported by top priority. Our company-wide The joint global health and safetyregular training events, courses and safety program, Journey to Zero, committee, set up with the group’sinformation sharing meetings on aims to make a continuous trade unions, meets once a quarter.key subjects that are held locally, improvement in our safety record As in prior years, our group-wideregionally or hosted at the and eliminate fatalities. In 2011, our annual Health and Safety Day washeadquarters. employee and contractor lost time held on a date chosen to coincide injury frequency rate (LTIFR) fell with the International LaborThe group compliance program from 1.8 per million hours worked Organization’s World Day for Safetyplays an important role in in 2010 to 1.4. This was in line and Health at Work on April 28.establishing a responsible and with our target for a further 20%ethical business culture. Compliance reduction in the injury rate and We view the health of ourtraining was expanded in 2011 to represents the fourth consecutive employees both as an importantencompass a group-wide training year of improvement. A target of contributor to safety standardsprogram on the human rights policy LTIFR of 1.0 has been set for the and as a key element in ourlaunched in 2010. Using both online end of 2013. success as a company. In 2011,and face-to-face training, we our ‘Health Week’, focusing ondelivered training to a total of non-occupational diseases and wellness, was extended to every site in the group.ArcelorMittal personnel and contractors – lost time injury frequency rate (LTIFR) ArcelorMittal Annual Report 2011 2010 2011Total mines 1.5 1.2Flat Carbon Americas 1.8 1.9Flat Carbon Europe 2.3 1.6Long Carbon Americas and Europe 2.0 1.4Asia, Africa and CIS 0.9 0.7Distribution Solutions 2.7 3.2Total steel 1.8 1.5Total (steel and mines) 1.8 1.4 35
  • 35. Corporate responsibility continued Human resources responsibility program. It will raise We are the largest recycler of scrap Against the backdrop of a awareness about our CR strategy steel in the world. Each year, we challenging marketplace, the and encourage employees to take recover and recycle more than human resources team has engaged action at work and at home. 30 million tonnes of scrap, saving actively with trade unions and 40 million tonnes of CO2. We have employees to maintain constructive Training and development a dedicated team to evaluate our employee relations and minimize ArcelorMittal University is at processes and products using a life the impact of the group’s the heart of the group’s training cycle assessment methodology. restructuring. ArcelorMittal and development activities, recognizes the right to collective offering programs for leadership We are a key member of the bargaining and approximately 85% development and technical training EU Ultra-Low CO2 Steelmaking of our employees are currently through online and classroom initiative (ULCOS). The program is covered by such agreements. delivery. In 2011, more than now in its second phase, which will 23,000 employees participated in include a demonstration project We believe in open and continuous a total of around 358,000 hours involving the recycling of blast dialogue with our employees. Our of courses and training linked to furnace gases and carbon capture employee relations policy, together the University. and storage at our operations with our guidelines on best practices in Florange, France, and and training ensure that our The University is constantly Eisenhüttenstadt, Germany. processes are implemented across evolving. In 2011, it introduced the business in a consistent manner. programs to address business Within our own operations, we We have established employee challenges in emerging economies continue our energy-saving efforts. relations diagnostics at key sites to align with the company’s growth Our industry-leading R&D expertise where groups of management and strategy in these markets. More has played a key role in delivering employee representatives together training was delivered locally, energy optimization models that monitor the implementation of through an expanding network of are now being deployed across the relevant policies. local and regional training centers. group. Our US operations have been In 2011, three new campuses awarded an Energy Star by the U.S. We attach great importance to were inaugurated in South Africa, Department of Energy for four the development of our people. Czech Republic and Spain. Tailored consecutive years. Our global executive development induction programs have been program (GEDP) is the foundation developed for both employees We monitor air, water, energy and of our performance and people and contractors at the group’s waste data at all of our facilities. management processes and a new greenfield operations. By the end of 2011, 98% of all key instrument for identifying main industrial sites had achieved and promoting talent. It is Making steel more ISO 14001 certification, the supported by a succession international standard for management process designed sustainable environmental management. to ensure talent development Addressing climate change Leadership award and to encourage individual Steel production has an To improve air quality, we have In November 2011, ArcelorMittal advancement and motivation. environmental impact that we finalized a new dedusting system was ranked seventh in the are committed to reduce. In 2011, at our sinter plant in Ostrava, ‘Top Companies for Leaders’ ranking Two other programs play greenhouse gas emissions from our Czech Republic, which will reduce in Europe. A first-time entrant to the survey, the company was an important role in talent steel operations remained broadly emissions of dust by 70%. Sulfur competing with 60 other big identification: the group engineers in line with the previous year. dioxide will also be reduced. European businesses and judged program to create a pool of A similar investment was made at on the strength of its leadership internationally mobile engineers We continue to invest in the sinter plant of Vanderbijlpark practices and culture, its leadership development, and its performance and the career accelerator program environmental solutions. In in South Africa which is now being and reputation. designed to develop key talents in a 2011, the ArcelorMittal investment commissioned. structured manner. These programs, allocation committee approved together with other workforce environmental projects with a total We are also targeting improved planning programs, are informed by value of $383 million and energy water management at plants with our diversity and inclusion policy. efficiency projects for a total of high consumption levels. A case $164 million. We have set study using best practice analysis Looking towards 2012, we are ourselves a target of reducing our of the water flows was successfully launching an employee engagement CO2 emissions by 170kg a tonne developed at our Bremen plant campaign across the group. Our aim of steel produced by 2020. That in Germany in 2011, leading to is to motivate employees to play is equivalent to an 8% reduction a significant reduction in potable their part in implementing in normalized emissions from our and industrial water usage. ArcelorMittal’s corporate 2007 base-line.36
  • 36. Business overviewIn Brazil, ArcelorMittal BioFlorestas Enriching our communities The Foundation’s main areas of Enhancing the lives Our businessis working on technology to activity are education, health andrecycle the waste gas emitted Wherever we operate, we community development. It also of older peopleduring charcoal carbonization contribute to the development has a standing commitment toand use its heat content in of strong and sustainable provide immediate help to In 2005 and as aelectricity generation. communities. We conduct local communities affected by proposal from assessments to define the key emergencies. ArcelorMittal volunteers,The need to sustain biodiversity is an areas for engagement that help the ArcelorMittalimportant part of our environmental us assign our resources and identify In addition to local projects, the Sustainabilitystrategy. Before establishing our iron new issues. We aim to engage Foundation takes on global projects Foundation startedore mining operation in the Nimba with our external stakeholders in through partnerships with Habitat a project to enhanceregion of Liberia, we conducted a transparent manner and work in for Humanity, International the quality of life for oldera long-term ecological study partnership with local organizations Baccalaureate, Junior Achievement people. ArcelorMittalwhich highlighted how the local as defined by our external and Bone Marrow Donation.environment might be impacted stakeholder engagement procedure, volunteers teach craftsin the future. This prompted us previously called ‘community The Foundation also works to older people waitingto work with international engagement standard’. to encourage ArcelorMittal for treatment at a health Performanceconservation groups and with local employees to invest their time center in Cariacica, Brazil.stakeholders to develop shared Four of the 12 policy aspects and expertise in communityplans for the management of the covered by the ArcelorMittal projects. Its initiatives include In 2010, the project wonforest and make conservation a human rights policy relate to our the international volunteer day, in an ArcelorMittalpriority. In Baffin Island, Canada, communities – ranging from topics which around 7,500 employees Excellence Award andwhere our new mining operation is such as access to land and water to participate each year, and the it is now a reference inplanned, an extensive environmental resettlement. As part of our work solidarity holidays program which enhancing the quality ofimpact assessment was carried out to implement the policy across the gives employees the opportunity Governanceto determine the necessary group, local grievance mechanisms to spend part of their annual leave life for the community’sconditions for future activities to are being strengthened. volunteering in a Foundation older people. In 2011be managed with respect for the project overseas. In 2011, the this life-changing workphysical environment. Our program of interactive Foundation carried out 10 training workshops designed to solidarity holidays projects in continued.We place great emphasis on helping build local community engagement Argentina, Brazil, Bosnia andour customers achieve greater capabilities was continued in 2011 Herzegovina, Haiti, Liberia,sustainability profiles for their in Bosnia and Herzegovina, Czech Macedonia, Mexico, Senegal, Financial statementsproducts. In 2011, our R&D team Republic, Kazakhstan, Poland South Africa and Ukraine.continued to pioneer new high- and Ukraine. “What makes thestrength steels that permit major The ArcelorMittal Foundation Foundation’s initiativesweight reductions, and therefore ArcelorMittal Foundation also provides ‘minigrants’ of up Created in 2007, the ArcelorMittal even more unique isfuel savings, in automotives. We to $5,000 to non-governmentalare developing advanced steel for Foundation develops projects to organizations with whom our that they do not onlyelectrical engines and rail transport benefit the communities where the employees are actively engaged benefit communities,which will help reduce CO2 company’s operations are located. as volunteers. In 2011, 73 but they also bringemissions. In the construction It operates in 30 countries and non-governmental organizations in supports around 580 projects each 17 countries received such a grant. value to our employeesindustry, the strength-to-weightratio of our Histar™ steel delivers year. These are aimed at maximizing and help to foster aCO2 savings of up to 30% in the the potential of each community sense of belonging.”construction of new buildings. while respecting its specific needs and empowering local people. The Lakshmi N Mittal Chairman and CEOTogether with our market-leading Foundation also promotesrole in areas such as steel sheets entrepreneurship by helping peoplefor flood barriers and a growing develop their own talents. In 2011,presence in supplying the bases, investment in the Foundation’stowers and many of the moving projects amounted to $35 million.parts of wind turbines, thisdemonstrates both the role steelwill play in a sustainable future andArcelorMittal’s ability to anticipateit. See research and development, ArcelorMittal Annual Report 2011page 38. 37
  • 37. Research and development Research and With 1,330 researchers and 11 We are already working on the next research centers, ArcelorMittal’s generation of MartINsite, M1900. development (R&D) 2011 expense for R&D was Increasingly, we are trialing new plays a key role in approximately $306 million. concepts and materials in the the sustainability and Just over half of that spending is search for ever greater strength long-term success on product and applications to weight ratios. development, either addressing or of the group. anticipating customer requirements. Packaging Continuous technological Around 40% is dedicated to R&D has collaborated with development helps process improvements within the ArcelorMittal Flat Carbon Europe, us maintain and grow group. A quarter of all spending is the leading provider of steel for on longer-term projects. packaging in Europe, to develop market share, sustain new, low-thickness grades of steel competitiveness and There is a strong strategic that combine high-strength and lead the way in energy orientation and customer alignment excellent formability, reducing costs and resource efficiency. to all we do. Representatives of the to the customer. Examples include business units, not scientists, chair the Maleis™ system for easy-open The influence of R&D the multiple committees that ends and a can-opening tab that permeates all parts define R&D priorities and allocate combines double cold-reduced of the business – fostering resources. A number of our material yield and tensile strengths innovative thinking scientists are located not in our with the formability of standard laboratories but at customer rolled cold-reduced material. As a at all levels. locations. For some key customers, result of this program, steels with we have research staff on-site, a thickness of 0.1mm have been engaged in design work and trialed and simulations for 0.09mm materials selection. are already underway. Product R&D focuses on four Research also focuses on increasing main areas: the formability of steel to make appealingly shaped cans, and Automotive ensuring that products meet We continue to set new standards increasingly stringent environmental for steel solutions that make and safety regulations. vehicles lighter, safer and more environmentally friendly. With the Construction deployment of our ground-breaking Much of our work focuses on S-in motion program, involving 60 thermal efficiency, acoustics, different press-hardened and fire resistance and earthquake advanced high-strength steels protection. Our new metallic coated solutions for weight saving, steel, Magnelis®, offers superior ArcelorMittal won the Best Process resistance to corrosion in harsh S-in motion is Innovation award in American Metal environments and has diverse Market’s 2011 awards for steel applications within the building something no other excellence. S-in motion allows a and civil engineering industries. steel company has weight reduction of 19% in the done before: a pioneering structural components of a vehicle In 2011, we launched a new range weight-saving solution (body-in-white and chassis). of sustainable organic coated steels, Progress does not stop there: new Nspired by Nature. The range offers that produces a big products now in development will high corrosion resistance and is advance in vehicle allow a further 7% reduction. 100% compliant with both current energy-efficiency. and pending European regulations In 2011, a new steel for bumper on the restriction of chemical We have now applications, MartINsite M1700, substances. Other new solutions, shared it with nearly was released. With a strength of such as our Flontec anti-graffiti all of the major automotive 1,700 megapascals (MPa), it coating, were showcased at the provides the weight savings of Batimat construction exhibition manufacturers in the aluminum with much greater in November 2011. developed countries strength and at lower-cost. and it has been a major success. Lou Schorsch Member of the Group Management Board, responsible for research and development38
  • 38. Business overviewIn structural long products, we Process R&D Optimizing raw material usage is a Internally, we have developed Our businesshave developed new applications, Process R&D has a dual mission – key element in the drive for cost energy optimization models thatproducts and technical solutions improving plant performance in efficiency. The volatility seen in the have been deployed at three of ourto facilitate the use of steel in terms of cost-efficiency and coal and iron ore markets makes it plants and will now be deployedconstruction. At the same time, product quality, and developing important to be able to respond to globally. We are working onwe continue to work towards innovative manufacturing variations in availability and quality breakthrough technologies withreducing CO2 consumption processes. while minimizing our environmental the potential to significantly reducein housing. impact. We are exploring the use of the amount of energy required to high pulverized coal injection (PCI) produce steel. Sustainability We are constantly developingIn heavy long products, process models that leverage ratios in our blast furnaces andArcelorMittal Belval & Differdange, our scale and inventory of best researching ways of using a high Fostering innovation throughouttogether with the R&D team, have practices. A new system for the proportion of non-coking coals to the groupcontinued the development of the real-time remote monitoring of produce coke. At ArcelorMittal, innovationlargest rolled sections in the world blast furnace conditions and means more than new productsthat are used for multistory performance (RMDS), piloted in Environmental impact or processes. It involves gettingbuildings such as New York’s 2010, is now being installed across Reducing environmental impact people to think about new andFreedom Tower. We also continued is a consistent theme in what we better ways of doing things. R&D Performance the group. It is expected to be in 18the development of new products blast furnaces by the end of 2012. do. We are increasingly applying holds workshops across the groupand applications for sheet piles to Tracking more than 500 data points the high-strength steels developed to help release innovative thinking.fight flooding, as used in the gating and 30 key performance indicators, for our automotive customers in For example, R&D conducted asystem to protect Venice. RMDS will provide early feedback areas such as pipe and metal creativity session for the groupAMLoCor™ is ArcelorMittal’s new on potential problems – so allowing processing. Our research into finance leaders in the framework‘low corrosion’ steel grade allowing major cost savings – while helping steels for electrical engineering of the finance academy program.design engineers and port to optimize performance and targets improved efficiency and The use of the tools and methodsauthorities to build more durable reduced core loss in electrical to leverage creative ideas Governance accelerate the standardization ofquay walls, breakwaters and jetties. best practices. The process R&D motors used in the appliances, demonstrated how these can beThe key advantage of AMLoCor™ team is now working on a similar household goods and increasingly gainfully deployed in finance as well.is a significant reduction of the system for our electric arc furnace automotive markets.corrosion rates in seawater, (EAF) operations.specifically in low water andpermanent immersion zones.AMLoCor™ also leads toconsiderable savings in steel weight Financial statementscompared to an unprotectedstandard structural steel, which is amajor advantage against alternativesolutions that use concrete. Thisnew steel grade will allow engineersto design safe and even morecost-effective structures that will ArcelorMittal awarded Steelylast for over 50 years without any Award for its LCA activityadditional surface protection. The World Steel Association (WSA) announced its 2010 Steelies Awards at its annual meeting in Paris,Energy market October 13, 2011. ArcelorMittal wasOur innovative product program awarded the ‘Life Cycle Assessmentfor the energy market, dealing with Leadership’ Steely.renewable energy sources, fossil It recognizes the quality of workfuels or nuclear applications, is performed by the life cycle analysis (LCA)rapidly growing. We wish to help team of global R&D, based in Maizières,the global society move forward France, but also the way in which ArcelorMittal uses LCA to develop newin a direction where energy does steel solutions, new steel grades andnot become a scarcity. new production processes. As a first recognition of the work done in thisIn 2011, we developed a range field, Jean-Sébastien Thomas, head of the Maizières team, was appointedof high-performance and high- chairman of the World Steel LCA Expertdurability pipes, plates and electrical Group mid-2011.steels for the energy market. The ArcelorMittal Annual Report 2011 Left Maizières, Francefocus of R&D is on developmentof heavy gauge, high-strength,corrosion resistance andimproved welding. 39
  • 39. We have aworld-classmining business Picture Baffinland, CanadaWe have a fast-growing and geographically spread portfolio of mining assets,focused on iron ore and coking coal. Managed and reported as a separate segmentsince the start of 2011, our mining business represents both a source of strengthand future growth to ArcelorMittal. While Mining supplies many of the group’ssteel facilities, new production is increasingly being marketed externally. Our spreadof assets leaves us well placed to supply the emerging markets. In the near-term,our growth plans center on three projects in Canada, Liberia and Brazil whichare expected to lift our production of iron ore from 65 million tonnes in 2011to 100 million tonnes by 2015 (including strategic contracts). Beyond that date,our Baffinland project in the Canadian Arctic promises to contribute a newsource of high-grade iron ore to sustain Mining’s continued growth.
  • 40. Overview Our businessIron ore and coal production million tonnes SustainabilityIron ore 65.21 1Coal 8.91 Aggregate total of own mines and strategic long-term contracts. Performance Governance Financial statements ArcelorMittal Annual Report 2011 41
  • 41. Key performance indicators (KPIs) The key performance indicators that ArcelorMittal’s management uses to analyze operations are provided below. Health and safety (lost time injury frequency rate for steel and mining) 2011 1.4 2010 1.8 2009 1.9 2008 2.3 2007 3.3 ArcelorMittal has a clear and targets and monitors results Health and safety performance, Americas and Europe, and Asia, strong health and safety policy from every business unit and site. based on own personnel figures Africa and CIS operations, only aimed at reducing the severity We have also implemented an and contractors’ lost time injury partially offset by deterioration in and frequency of accidents on a injury tracking and reporting frequency rate, improved to the Flat Carbon Americas and the continuing basis across the entire database to track all information 1.4 for the year 2011 from 1.8 Distribution Solutions segments. organization. The corporate health on injuries, lost man-days and for the year 2010 with significant and safety department defines other significant events. improvement in Mining operations, and follows-up performance Flat Carbon Europe, Long Carbon Sales1 ($ million) 2011 93,973 2010 78,025 2009 61,021 2008 116,942 2007 96,293 The majority of steel sales from either at the business unit or manufactured in different This 20% increase was due to ArcelorMittal are destined for at the production unit level. For production units around the world. higher average steel selling prices domestic markets; these sales some specific markets, such as In 2011, sales approximated (+18%) and marginally higher are usually approached as a automotive, there is a global $94.0 billion, compared with steel shipments (+1%). decentralized activity, managed approach offering similar products 2010 sales of $78.0 billion. Steel shipments2 (thousand tonnes) 2011 85,757 2010 84,952 2009 69,624 2008 99,733 2007 107,789 ArcelorMittal had steel shipments 85.0 million tonnes in 2010. Steel shipments increased in the of 85.8 million tonnes for 2011, Group shipments remain some Flat Carbon Americas and Long representing an increase of 1% 20% below pre-crisis levels. Carbon segments and declined from steel shipments of in the Flat Carbon Europe and AACIS segments.42
  • 42. Overview Our business SustainabilityCrude steel production(liquid steel in thousand tonnes) 2011 91,891 2010 90,582 2009 71,620 Performance 2008 101,129 2007 114,190In 2011, around 65.9 million electric arc furnace route and greater flexibility in raw material crude steel was produced intonnes of crude steel were approximately 3.4 million tonnes and energy use, and increased the Americas, 46% in Europeproduced through the basic of crude steel through the open ability to meet varying customer and 16% in other countriesoxygen furnace route, around hearth furnace route. This requirements in the markets we such as Kazakhstan, South Governance22.6 million tonnes through the provides ArcelorMittal with serve. In 2011, about 38% of Africa and Ukraine.Ebitda Financial statements($ million) 2011 10,117 2010 8,525 2009 5,600 2008 23,653Ebitda is defined as operating Ebitda a tonne shipped increasedincome plus depreciation, to $118 a tonne in 2011,impairment expenses and compared with $100 a tonne inexceptional items. ArcelorMittal 2010, $80 a tonne in 2009 andgenerated Ebitda of $10.1 billion $242 a tonne in 2008.in 2011, 19% higher than 2010.1 Including $4,767 million, $6,405 million, $3,169 million, $4,873 million and $5,875 2 Shipment volumes of steel products for the operations of the company include certain million of sales to related parties for the years ended December 31, 2007, 2008, 2009, inter-segment shipments. ArcelorMittal Annual Report 2011 2010 and 2011 respectively. 43
  • 43. Key performance indicators (KPIs) continued Average steel selling prices1 ($ a tonne) Flat Carbon Americas 2011 892 2010 781 2009 698 2008 920 2007 701 Flat Carbon Europe 2011 982 2010 821 2009 799 2008 1,018 2007 831 Long Carbon Americas and Europe 2011 937 2010 802 2009 743 2008 1,055 2007 774 AACIS 2011 736 2010 608 2009 506 2008 804 2007 585 Distribution Solutions 2011 993 2010 832 2009 767 2008 1,155 2007 961 Over the last years, the impact of model for iron ore shifting from has impacted buying behavior Average steel selling price for the changes in raw material spot prices yearly benchmark pricing to of our customers leading to group in 2011 increased 18% on the steel pricing has been quarterly and lately even spot more pronounced stocking and compared with 2010, following the significantly increased.This is due pricing. As customers anticipate destocking cycles, which again increase in key raw material prices. to a sharp increase in the absolute changes in raw material costs affect steel prices. value of raw material prices, but feeding into steel prices, this also due to a changing pricing raw material price volatility44
  • 44. Overview Our business SustainabilityIron ore production(million tonnes) 2011 54.1 11.1 65.2 5 2010 48.9 19.6 68.55 Performance 2009 37.7 15.0 52.7 5 Total own mines2 Total strategic long-term contracts3,4ArcelorMittal sources significant supplies of ArcelorMittal. We are In 2012, the company is ArcelorMittal had ownportions of its iron ore needs from also expanding capacity of existing targeting an increase of iron ore production ofits own mines in Kazakhstan, mines in Canada, Liberia and approximately 10% in its 54.1 million tonnesUkraine, Bosnia and Herzegovina, Brazil. Several of our steel plants iron ore production, in 2011, an increase GovernanceAlgeria, Canada, the United States, also have in place off-take compared with 2011. of 11%, compared withMexico and Brazil. During 2011, arrangements with mineral 48.9 million tonnes in 2010.the company’s iron ore mining suppliers located near itscomplex in Liberia became production facilities, some ofoperational and contributed to the which are considered strategic long-term contracts. Financial statementsCoal production(million tonnes) 2011 8.3 0.6 8.9 2010 7.0 0.4 7.4 2009 7.1 0.5 7.6 Total own mines Total strategic long-term contracts6,7As with iron ore, ArcelorMittal States. Our mines in Kazakhstan Temirtau, while our mines in Russia ArcelorMittal had own cokingsources a percentage of its coking supply substantially all the and the US supply other steel plants coal production of 8.3 millioncoal from its own coal mines in requirements for steelmaking within the group. tonnes in 2011, an increase ofKazakhstan, Russia and the United operations at ArcelorMittal 19%, compared with 7.0 million tonnes in 2010.1 Average steel selling prices are calculated as steel sales divided by steel shipments. 4 Includes purchases made under the July 2010 interim agreement with Kumba, Steel sales exclude sales of coke, coal, direct reduced iron, pig iron, hot metal, slag, South Africa. by-products, energy, etc. 5 Total of all finished production of fines, concentrate, pellets and lumps (includes2 North America: includes ArcelorMittal’s share of production from Hibbing (US, 62.30%) ArcelorMittal’s shares of production of less than wholly-owned mines and strategic and Peña Colorada (Mexico, 50%). long-term contracts). ArcelorMittal Annual Report 20113 North America: consists of long-term supply contracts with Cliffs Natural Resources Inc. 6 North America: strategic agreement – prices on a cost-plus basis. (‘Cliffs’). On April 8, 2011, ArcelorMittal announced that it had reached a negotiated 7 Africa: long-term lease – prices on a cost-plus basis. settlement with Cliffs regarding all pending contract disputes related to the procurement of iron ore pellets for certain facilities in the US. As part of the settlement, Cliffs and ArcelorMittal agreed to specific pricing levels for 2009 and 2010 pellet sales and related volumes and, beginning in 2011, agreed to replace the previous pricing mechanism in one of the parties’ two iron ore supply agreements with a world market-based pricing mechanism. Accordingly, beginning first quarter of 2011, this excludes the long-term supply contract for which the market-based pricing mechanism was reached. 45
  • 45. Financial review ArcelorMittal reports Sales, steel shipments, increase from sales of $40.4 billion average steel selling prices in the second half of 2010, its operations in six and mining production primarily driven by higher average segments: Flat Carbon The table opposite provides a steel selling prices as well as higher Americas, Flat Carbon summary of ArcelorMittal’s sales, sales of mining products. Europe, Long Carbon steel shipments, average steel selling prices and mining production ArcelorMittal had steel shipments Americas and Europe, by reportable segment for the year of 85.8 million tonnes for the Asia, Africa and CIS ended December 31, 2011, year ended December 31, 2011, (AACIS), Distribution compared with the year ended representing an increase of Solutions and Mining. December 31, 2010. 1% from steel shipments of 85.0 million tonnes for the year The information in this ArcelorMittal had sales of $94.0 ended December 31, 2010. section relates to the year billion for the year ended Average steel selling price for the ended December 31, 2011, December 31, 2011, representing year ended December 31, 2011 compared with the year an increase of 20% from sales of increased 18% compared with the $78.0 billion for the year ended year ended December 31, 2010 ended December 31, 2010. December 31, 2010. In the first following the increase in key raw half of 2011, sales of $47.3 billion material prices. Average steel represented a 26% increase from selling price in the first half of 2011 sales of $37.6 billion in the first was up 23% from the same period half of 2010, due to a strong rise in in 2010, while average steel selling steel prices and a more modest rise price in the second half of the year in steel shipments, resulting from was up 13% from the same period the global economic recovery and in 2010 (notwithstanding a 6% improved steel demand compared decrease in average steel selling with the same period a year earlier. price in the fourth quarter of 2011 In the second half of 2011, sales of compared with the third quarter $46.7 billion represented a 15% of 2011). Flat Carbon Americas Sales to external customers performance by segment year ended December 31, 2011 +19% Increase in sales for Flat Carbon Americas in 2011, as compared with the year ended December 31, 2010 ArcelorMittal Temirtau During 2011, ArcelorMittal Termirtau renovated the aspiration system at blast furnace no. 4 and installed two new electric filters, which replaced the old multi-cyclone dust collectors. The project eliminated fugitive emissions at the cast house, with dust concentration in emissions falling to under 50 mg/m3 (from around 140 mg/m3). The project budget was $10.3 million. A closed-circuit cooling system was Segment $ billion also introduced for coke gas. Prior Flat Carbon Americas 21.0 to this project, contaminated water Flat Carbon Europe 31.1 was cooled in open cooling towers, which resulted in permanent air Long Carbon 25.2 emission of toxic substances. Now AACIS 10.8 the water is cooled in a closed-circuit Distribution Solutions 19.1 heat-exchange unit, which eliminates all emissions of about 300 tonnes of Mining 6.3 contaminants a year. The budget for this project was $3.4 million.46
  • 46. OverviewArcelorMittal had own iron ore Total steel shipments were 22.2 Flat Carbon Europe 12.6 million tonnes, down 4% Our businessproduction of 54.1 million tonnes million tonnes for the year ended Sales in the Flat Carbon Europe from the same period in 2010.for the year ended December 31, December 31, 2011, an increase segment were $31.1 billion for the The decrease in the second half2011, an increase of 11% of 6% from steel shipments for the year ended December 31, 2011, of 2011 resulted in particularcompared with 48.9 million tonnes year ended December 31, 2010. representing an increase of 22% from market weakening andfor the year ended December 31, Shipments were 11.1 million tonnes compared with $25.6 billion for the strong destocking activity in2010. ArcelorMittal had own in the first half of 2011, up 4% year ended December 31, 2010. the fourth quarter.coking coal production of 8.3 from the same period in 2010, The increase was primarily due tomillion tonnes for the year ended while shipments in the second a 20% increase in average steel Average steel selling price SustainabilityDecember 31, 2011, an increase half of the year were 11.2 million selling price, while steel shipments increased 20% for the year endedof 20% compared with 7.0 million tonnes, up 7% from the same decreased by 1%. Sales in the first December 31, 2011 comparedtonnes for the year ended period in 2010. Shipments half of 2011 were $16.4 billion, up with the year ended December 31,December 31, 2010. nonetheless declined in the 31% from the same period in 2010. Average steel selling price fourth quarter of 2011 compared 2010, and in the second half of the in the first half of 2011 was upFlat Carbon Americas with the third quarter of 2011. year sales were $14.7 billion, up 27% from the same period inSales in the Flat Carbon Americas 12% from the same period in 2010. 2010, while average steel sellingsegment were $21.0 billion for the Average steel selling price price in the second half of the Performanceyear ended December 31, 2011, increased 14% for the year ended Total steel shipments reached year was up 12% from the samerepresenting an increase of 19% December 31, 2011 compared 27.1 million tonnes for the year period in 2010 (notwithstandingcompared with $17.7 billion for the with the year ended December 31, ended December 31, 2011, a a 7% decrease in average sellingyear ended December 31, 2010. 2010. Average steel selling price in decrease of 1% from steel price in the fourth quarter of 2011Sales increased primarily due to a the first half of 2011 was up 17% shipments for the year ended compared with the third quarter6% increase in steel shipments and from the same period in 2010, December 31, 2010. Shipments of 2011).a 14% increase in average steel while average steel selling price in were 14.6 million tonnes in the firstselling price. Sales in the first half of the second half of the year was up half of 2011, up 1% from the same Governance2011 were $10.5 billion, up 21% 12% from the same period in 2010 period in 2010, while shipments infrom the same period in 2010, and (notwithstanding a 5% decrease in the second half of the year werein the second half of the year sales average selling price in the fourthwere also $10.5 billion, up 17% quarter of 2011 compared withfrom the same period in 2010. the third quarter of 2011). Financial statements Sales for the year Steel shipments for the year ended December 311 ended December 311 Changes in Steel 2010 2011 2010 2011 sales shipments Average steelSegment ($ million) ($ million) (thousand tonnes) (thousand tonnes) (%) (%) selling price (%)Flat Carbon Americas 17,684 21,035 21,028 22,249 19 6 14Flat Carbon Europe 25,550 31,062 27,510 27,123 22 (1) 20Long Carbon Americas and Europe 21,315 25,165 23,148 23,869 18 3 17AACIS 9,706 10,779 13,266 12,516 11 (6) 21Distribution Solutions2 15,744 19,055 18,173 18,360 21 1 19Mining 4,380 6,268 N/A N/A 43 N/A N/ATotal 78,025 93,973 84,952 85,757 20 1 18 Year ended Year endedMining shipments (million tonnes)3 December 31, 2011 December 31, 2010Total iron ore shipments4 51.6 46.7Iron ore shipped externally and internally at market price5 28.0 25.2Iron ore shipped internally at cost-plus5 23.6 21.6Total coal shipments6 8.2 6.6Coal shipped externally and internally at market price5 4.9 3.4Coal shipped internally at cost-plus5 3.3 3.21 Amounts are prior to inter-segment eliminations except for total. 4 Total of all finished products of fines, concentrate, pellets and lumps and includes shipped2 Distribution Solutions shipments are eliminated in consolidation as they primarily externally and internally at market price as well as shipped internally at cost-plus basis. represent shipments originating from other ArcelorMittal operating subsidiaries. 5 Market-priced tonnes represent amounts of iron ore and coal from ArcelorMittal mines ArcelorMittal Annual Report 20113 There are three categories of sales: (1) ‘External sales’: mined product sold to third that could practically be sold to third parties. Market-priced tonnes that are not sold to parties at market price; (2) ‘Market-priced tonnes’: internal sales of mined product to third parties are transferred from the Mining segment to the company’s steel producing ArcelorMittal facilities at prevailing market prices; (3) ‘Cost-plus tonnes’: internal sales segments at the prevailing market price. Shipments of raw materials that do not of mined product to ArcelorMittal facilities on a cost-plus basis. The determinant of constitute market-priced tonnes are transferred internally on a cost-plus basis. whether internal sales are transferred at market price or cost-plus is whether or not 6 Total of all finished products of coal and includes those shipped externally and internally the raw material could practically be sold to third parties (i.e. there is a potential market at market price as well as those shipped internally on a cost-plus basis. for the product and logistics exist to access that market). 47
  • 47. Financial review continued Long Carbon Americas same period in 2010, while AACIS and Europe shipments in the second half of In the AACIS segment, sales were In the Long Carbon Americas and the year were 11.8 million tonnes, $10.8 billion for the year ended Europe segment, sales were up 3% from same period in 2010. December 31, 2011, representing $25.2 billion for the year ended Steel shipments nonetheless an increase of 11% from sales of December 31, 2011, representing decreased in the fourth quarter $9.7 billion for the year ended an increase of 18% from sales of of 2011 compared with the third December 31, 2010. The increase $21.3 billion for the year ended quarter, particularly due to the was primarily due to a 21% December 31, 2010. The increase summer holiday period in Brazil increase in average selling price. was primarily due to a 17% and lower demand in North Sales in the first half of 2011 were increase in average steel selling America and Europe. $5.4 billion, up 17% from the same price along with a 3% increase in period in 2010, while sales in the steel shipments. Sales in the first Average steel selling price second half of the year were half of 2011 were $12.6 billion, increased 17% for the year ended $5.4 billion, up 6% from the same up 23% from the same period in December 31, 2011 compared period in 2010. 2010, while sales in the second with the year ended December 31, half of the year were $12.6 billion, 2010. Average steel selling price in Total steel shipments reached up 14% from the same period the first half of 2011 was up 22% 12.5 million tonnes for the year in 2010. from the same period in 2010, ended December 31, 2011, a while average steel selling price in decrease of 6% from steel Total steel shipments reached the second half of the year was up shipments for the year ended 23.9 million tonnes for the year 12% from the same period in 2010 December 31, 2010. Shipments ended December 31, 2011, (notwithstanding a 6% decrease in were 6.4 million tonnes in the first an increase of 3% from steel average selling price in the fourth half of 2011, down 3% from the shipments for the year ended quarter of 2011 compared with same period in 2010, while December 31, 2010. Shipments the third quarter of 2011). shipments in the second half of the were 12.0 million tonnes in the year were 6.1 million tonnes, down first half of 2011, up 3% from the 9% from the same period in 2010, due primarily to operational issues at ArcelorMittal South Africa and ArcelorMittal Kryviy Rih. Road and rail safety in Liberia ArcelorMittal’s iron ore mining operations began in September 2011 in Nimba County, North East Liberia. One of the most important preparations for this activity has been to upgrade local transport infrastructure that had been severely neglected during 14 years of civil war and upheaval. Rehabilitation of the 240km railway and service road that connects the mine in Yekepa to the port of Buchanan was done in close collaboration with the local communities along these routes. Many local residents and especially children have never seen the railway in operation, so a key element of the activity has been a high-profile road and rail safety campaign. Right Vitória, Brazil48
  • 48. Overview Our businessAverage steel selling price increased average steel selling price in the ArcelorMittal’s operating income21% for the year ended December second half of the year was up for the year ended December 31, Long Carbon31, 2011 compared with the year 14% from the same period in 2010 2011 was $4.9 billion, compared performanceended December 31, 2010. (notwithstanding a 6% decrease in with an operating income of $3.6 +18%Average steel selling price in the average selling price in the fourth billion for the year ended Decemberfirst half of 2011 was up 24% from quarter of 2011 compared with 31, 2010. The rise in operatingthe same period in 2010, while the third quarter of 2011). income in 2011 was primarilyaverage steel selling price in the driven by a profitability improvement Mining Sustainabilitysecond half of the year was up in Flat Carbon Americas and the19% from the same period in 2010 In the Mining segment, sales Mining segment.(notwithstanding an 8% decrease were $6.3 billion for the year endedin average selling price in the fourth December 31, 2011, representing Operating income was higher in Increase in sales for Long Carbonquarter of 2011 compared with the an increase of 43% from sales of the first half of 2011 than in the Americas and Europe in 2011,third quarter of 2011). $4.4 billion for the year ended second half of the year, due mainly compared with the year ended December 31, 2010. The increase to a price-cost squeeze in the December 31, 2010Distribution Solutions was primarily due to higher selling second half resulting from an PerformanceIn the Distribution Solutions prices of iron ore and coal in line overhang of high-cost raw materialsegment, sales were $19.1 billion inventories from the first half of the with increase in international prices,for the year ended December 31, as well as higher shipments from year and a time lag in passing along2011, representing an increase of own mines for both iron ore and increases in costs to customers.21% from sales of $15.7 billion coal. Sales in the first half of 2011Cost of sales consists primarilyfor the year ended December 31, were $2.8 billion, up 41% from the of purchases of raw materials2010. The increase was primarily same period in 2010, while sales necessary for steelmaking (irondue to a 19% increase in average in the second half of the year were ore, coke and coking coal, scrap Governancesteel selling price. Sales in the first $3.5 billion, up 45% from the same and alloys), electricity, repair andhalf of 2011 were $9.3 billion, up period in 2010. maintenance costs, as well as direct24% from the same period in labor costs. Cost of sales for the2010, while sales in the second half Total iron ore shipments were year ended December 31, 2011of the year were $9.8 billion, up 51.6 million tonnes for the year was $85.5 billion compared with18% from the same period in 2010. ended December 31, 2011, $71.1 billion for the year ended representing an increase of 10% December 31, 2010. The increaseTotal steel shipments reached 18.4 from 46.7 million tonnes for the was primarily due to higher prices Financial statementsmillion tonnes for the year ended year ended December 31, 2010. of raw materials in 2011, inDecember 31, 2011, an increase Marketable iron ore shipments particular iron ore and coal. Selling,of 1% from steel shipments for the were 28 million tonnes for the general and administrative expensesyear ended December 31, 2010. year ended December 31, 2011, (‘SG&A’) for the year endedShipments were 8.8 million tonnes representing an increase of 11% December 31, 2011 werein the first half of 2011, down 2% from 25.2 million tonnes for the $3.6 billion compared withfrom the same period in 2010, year ended December 31, 2010. $3.3 billion for the year endedwhile shipments in the second half December 31, 2010. SG&Aof the year were 9.6 million tonnes, Operating income (loss) represented 3.8% of sales for theup 4% from the same period The table below provides a summary year ended December 31, 2011in 2010. of operating income (loss) and compared with 4.3% for the year operating margin of ArcelorMittal ended December 31, 2010. ThisAverage steel selling price increased for the year ended December 31, reduction resulted from higher sales19% for the year ended December 2011, compared with operating in 2011 compared with 2010.31, 2011 compared with the year income and operating margin for theended December 31, 2010. year ended December 31, 2010.Average steel selling price in thefirst half of 2011 was up 26% fromthe same period in 2010, while ArcelorMittal Annual Report 2011 Operating income (loss) year ended December 31 Operating margin 2010 2011 2010 2011Segment1 ($ million) ($ million) (%) (%)Flat Carbon Americas 691 1,198 4 6Flat Carbon Europe 534 (324) 2 (1)Long Carbon Americas and Europe 1,004 646 5 3AACIS 680 721 7 7Distribution Solutions 164 52 1 –Mining 1,624 2,568 37 411 Amounts are prior to inter-segment eliminations and include non-steel sales. 49
  • 49. Financial review continued Operating income for the year Flat Carbon Americas (the proceeds of which will be ended December 31, 2011 Operating income for the Flat re-invested in energy saving included impairment losses of Carbon Americas segment projects) and a non-cash gain of $331 million, which compared with amounted to $1.2 billion for the $600 million relating to unwinding impairment losses of $525 million year ended December 31, 2011, of hedges on raw material for the year ended December 31, compared with operating income purchases. Operating income for 2010. These impairment losses of $0.7 billion for the year ended the year ended December 31, included a charge of $178 million December 31, 2010. The rise in 2010 had been negatively for the Long Carbon segment, of operating income in 2011 generally impacted by impairment losses which $151 million related to the reflected higher steel shipments of $78 million primarily relating to extended idling of the ArcelorMittal and a higher average steel selling idled downstream assets, offset by Madrid electric arc furnace and a price, which were positively a net gain of $140 million recorded charge of $141 million related to impacted by product mix on the sale of carbon dioxide credits various idled facilities in the Flat improvement. Operating income and a non-cash gain of $354 million Carbon Europe segment, including for the segment amounted to relating to unwinding of hedges on $85 million for the primary facilities $0.2 billion for the second half of raw material purchases. of ArcelorMittal Liège Upstream, the year, compared with $1.0 billion Belgium in connection with its in the first half. The decrease in In addition, operating income intended closure. In determining operating income in the second half for the year ended December 31, these expenses, the company took of 2011 reflected the effect of a 2011 (in particular in the second into account permanently idled price-cost squeeze, especially in the half of 2011) was negatively AACIS performance assets, and with respect to other fourth quarter in which operating impacted by restructuring costs assets, analyzed the recoverable income decreased substantially, associated with the implementation +11% amount of these facilities based on driven primarily by a 5% decrease of the Asset Optimization Plan, their value in use and determined in average selling price compared totaling $143 million, primarily that the recoverable amount from with the third quarter of 2011. relating to Spanish entities. these facilities was less than their carrying amount. Flat Carbon Europe Long Carbon Americas Increase in sales for AACIS in Operating loss for the Flat Carbon and Europe 2011, compared with the year Operating income for the year Europe segment for the year Operating income for the Long ended December 31, 2010 ended December 31, 2011 was ended December 31, 2011 was Carbon Americas and Europe positively impacted by a net gain $0.3 billion compared with segment for the year ended of $93 million recorded on the operating income of $0.5 billion December 31, 2011 was sale of carbon dioxide credits for the year ended December 31, $0.6 billion compared with (the proceeds of which will be 2010. The decrease in operating $1.0 billion for the year ended re-invested in energy saving income in 2011 reflected the effect December 31, 2010. The decrease projects), a non-cash gain of of a significant price-cost squeeze in operating income in 2011 $600 million relating to unwinding and lower steel shipments primarily generally reflected the effect of a of hedges on raw material in the second half of 2011, as price-cost squeeze primarily from purchases and $104 million customers destocked and then South American operations and related to the reversal of provisions adopted a ‘wait and see’ attitude particularly in the second half of for litigation. Operating income for in light of market conditions and the year. Operating income for the the year ended December 31, macro-economic uncertainty. segment amounted to $0.1 billion 2010 had been positively impacted Operating loss for the segment for the second half of the year, by a gain of $140 million recorded amounted to $0.7 billion for the compared with $0.6 billion in the on the sale of carbon dioxide credits second half of the year, compared first half of the year, primarily and a non-cash gain of $354 million with operating income of driven by lower steel shipment relating to unwinding of hedges $0.4 billion in the first half of the volumes and lower average on raw material purchases. year, primarily driven by lower steel selling price. shipment volumes and a significant Operating income for the year price-cost squeeze. Operating income for the year ended December 31, 2011 ended December 31, 2011 was negatively impacted by Operating income for the year (in particular in the second half of restructuring costs associated with ended December 31, 2011 2011) was negatively impacted by the implementation of the Asset (in particular in the second half of impairment losses of $178 million Optimization Plan, totaling $219 2011) was negatively impacted by of which $151 million related to the million, primarily affecting Flat impairment losses of $141 million extended idling of the ArcelorMittal Carbon Europe and Long Carbon relating to various idled facilities Madrid electric arc furnace. Europe operations, as well as various (including $85 million for the Distribution Solutions entities. primary facilities of ArcelorMittal In addition, operating income Liège Upstream, Belgium). These for the year ended December 31, charges were offset by a gain of 2011 was negatively impacted by $93 million recorded on the sale restructuring costs associated with of carbon dioxide credits the implementation of the Asset Optimization Plan, totaling $37 million.50
  • 50. OverviewAACIS income of $1.6 billion for the year obligations and other long-term Standards (‘IFRS’), with certain Our businessOperating income for the AACIS ended December 31, 2010. The liabilities). Net financing costs components of the contractssegment for the year ended rise in operating income in 2011 were 29% higher for the year being embedded derivatives inDecember 31, 2011 remained flat generally reflected higher iron ended December 31, 2011, accordance with IAS 39 andat $0.7 billion, compared with the ore and coal prices and higher at $2.8 billion, compared with requiring, at each reporting period,year ended December 31, 2010. shipments from own mines for $2.2 billion for the year ended changes in the fair value of theOperating income in 2011 was both iron ore and coal. Operating December 31, 2010. embedded derivatives (recordedpositively affected by higher income for the segment amounted at $597 million at inception) toaverage steel selling prices, offset to $1.4 billion for the second half Net interest expense (interest be recorded in the consolidated Sustainabilityby lower steel shipments primarily of the year, compared with expense less interest income) statements of operations, resultingdriven by loss of production at $1.2 billion in the first half. The was $1.8 billion for the year ended in gains or losses depending onSouth African and Ukrainian increase in the second half of 2011 December 31, 2011 compared marking to market. In Octoberoperations due to operational was primarily driven by higher iron with $1.4 billion for the year ended 2009 and December 2010,issues. Operating income for the ore shipments from own mines, December 31, 2010. Interest respectively, the company waivedsegment amounted to $0.3 billion tempered in the fourth quarter expense increased to $1.9 billion the cash settlement option withfor the second half of the year, by lower average selling prices for the year ended December 31, respect to its $800 million UScompared with $0.5 billion in the following the change to the 2011, compared with interest dollar-denominated convertible Performancefirst half. The decrease in operating seaborne benchmarking pricing expense of $1.6 billion for the bonds and undertook hedgingincome in the second half of 2011 system impacting a substantial year ended December 31, 2010, transactions with respect to itsreflected primarily lower shipments proportion of marketable volumes primarily due to the higher level of euro-denominated convertiblefor ArcelorMittal South Africa due compared with the third quarter borrowing and the higher cost of bonds, each of which actionsto loss of production following of 2011. bond financing compared to bank had the effect of offsetting theoperational issues as well as loans. Interest income for the year mark-to-market adjustmentsseasonality effects. Operating income for the year ended December 31, 2011 on such bonds. As a result, no ended December 31, 2010 had amounted to $0.1 billion, the additional mark-to-market gains GovernanceDistribution Solutions been negatively impacted by same as the year ended or losses on the convertible bondsOperating income for the impairment losses of $305 million December 31, 2010. issued in April/May 2009 wereDistribution Solutions segment relating to the company’s coal recorded in 2011 or are expectedfor the year ended December 31, mines in Russia (including the Foreign exchange and other net going forward. The company’s2011 was $0.1 billion, compared disposal of the Anzherskaya mine). financing costs (which include call option on the mandatorywith operating income of bank fees, interest on pensions convertible bond issued in$0.2 billion for the year ended Income from investment in and impairments of financial December 2009 remains subjectDecember 31, 2010. The decrease associates and joint ventures instruments) were $1 billion for to mark-to-market adjustments. Financial statementsin operating income in 2011 ArcelorMittal recorded income the year ended December 31,generally reflected the effect of $0.6 billion from investments 2011 compared with $1.2 billion Loss related to the fair valueof a price-cost squeeze in the in associates and joint ventures for the year ended December 31, of freight, commodity anddistribution business. Operating loss for the year ended December 31, 2010, reflecting primarily foreign other non-foreign exchange andfor the segment amounted to 2011, compared with income from exchange impacts (in particular, interest rate-related derivative$0.1 billion for the second half of investments in associates and joint the impact of dollar appreciation instruments not qualifying forthe year, compared with operating ventures of $0.5 billion for the year and depreciation on euro- hedge accounting, amounted toincome of $0.2 billion in the first ended December 31, 2010. denominated debt). $10 million for the year endedhalf of 2011, primarily reflecting Income for the year ended December 31, 2011, comparedsignificant price-cost squeeze. December 31, 2011 included an Mark-to-market adjustments on with a gain of $43 million for the impairment loss of $107 million, the call option of the mandatory year ended December 31, 2010.Operating income for the year reflecting the reduction of the convertible bonds for the yearended December 31, 2010 had carrying amount of the investment ended December 31, 2011 were Income tax expense (benefit)been negatively impacted by in Macarthur Coal to the net a gain of $42 million, compared ArcelorMittal recorded aimpairment losses of $113 million proceeds from the sale, as a result with a gain of $0.4 billion for the consolidated income tax expenserelating to impairment on certain of the company’s withdrawal from year ended December 31, 2010. of $0.9 billion for the year endedsubsidiaries, primarily reflecting the joint venture with Peabody The 2011 effect related to the December 31, 2011, comparedthe weak construction market. Energy to acquire ownership of company’s mandatory convertible with a consolidated income tax Macarthur Coal. bond while the 2010 effect related benefit of $1.5 billion for the yearOperating income for the year to convertible bonds issued by the ended December 31, 2010. Theended December 31, 2011 Financing costs-net company in the spring of 2009. higher income tax of $0.9 billion forwas negatively impacted by Net financing costs include net On April 1, 2009 and May 6, 2009, full year 2011 was primarily due torestructuring costs associated interest expense, revaluation of the company issued approximately lower recognition of deferredwith the implementation of the financial instruments, net foreign $2.5 billion of bonds convertible tax assets following dividend ArcelorMittal Annual Report 2011Asset Optimization Plan, totaling exchange income/expense into its shares (€1.25 billion upstreaming preventing interest$40 million across various entities. (i.e. the net effects of transactions euro-denominated convertible deductibility in Luxembourg, partial in a foreign currency other than the bonds due 2014 (OCEANEs) reversal of deferred tax assets inMining functional currency of a subsidiary) and $800 million US dollar- our Belgian operations triggered byOperating income for the Mining and other net financing costs denominated convertible bonds due changes in local tax law and partialsegment for the year ended (which mainly include bank fees, 2014), which were determined to reversal of deferred tax assets inDecember 31, 2011 was $2.6 accretion of defined benefit be hybrid instruments as defined by Spain imposed by time limitationsbillion, compared with operating International Financial Reporting 51
  • 51. Financial review continued for utilization of tax losses. For The statutory income tax expense shareholders in the first quarter additional information related (benefit) and the statutory income of 2011) for the year ended to ArcelorMittal’s income taxes, tax rates of the countries that December 31, 2011 amounted to see Note 19 to ArcelorMittal’s most significantly resulted in the $461 million, including $42 million consolidated financial statements. tax expense (benefit) at statutory of the post-tax net results rate for each of the years ended contributed by the stainless steel ArcelorMittal’s consolidated income December 31, 2010 and 2011 business prior to the completion tax expense (benefit) is affected by are set forth below. of the spin-off on January 25, the income tax laws and regulations 2011. The balance of $419 million in effect in the various countries Non-controlling interest represents a one-time income in which it operates and on the Net loss attributable to non- from the recognition through pre-tax results of its subsidiaries controlling interests was $4 million the consolidated statements of in each of these countries, which for the year ended December 31, operations of gains/losses relating can vary from year to year. 2011, compared with net income to the demerged assets previously ArcelorMittal operates in attributable to non-controlling recognized in equity. jurisdictions, mainly in Eastern interests of $89 million for the year Europe and Asia, that have a ended December 31, 2010. The Net income attributable to structurally lower corporate income decrease relates to lower income in equity holders of the parent tax rate than the statutory tax rate subsidiaries with non-controlling ArcelorMittal’s net income as in effect in Luxembourg (28.8%), interests, particularly ArcelorMittal attributable to equity holders and enjoys, mainly in Western South Africa, due to the weakening of the parent for the year ended Europe, structural (permanent) tax of market conditions in 2011. December 31, 2011 decreased advantages such as notional interest to $2.3 billion from net income deduction and tax credits. The Discontinued operations attributable to equity holders of income reported through the Net income from discontinued $2.9 billion for the year ended company’s finance centers located operations (i.e. the company’s December 31, 2010, for the principally in Belgium and Dubai is stainless steel business, which was reasons discussed above. not taxable. spun-off into a separate company, Aperam, whose shares were distributed to ArcelorMittal 2010 2011 Statutory Statutory Statutory income tax Statutory income tax income tax rate income tax rate United States (191) 35.00% 116 35.00% Argentina 46 35.00% 30 35.00% France 52 34.43% (141) 34.43% Brazil 270 34.00% (15) 34.00% Belgium 817 33.99% 617 33.99% Germany (66) 30.30% (136) 30.30% Spain (190) 30.00% (261) 30.00% Luxembourg (2,249) 28.80% (534) 28.80% Mexico 49 28.00% 110 28.00% South Africa 62 28.00% 9 28.00% Canada 127 26.90% 259 26.90% Algeria (29) 25.00% (26) 25.00% Courageous leadership The concept of ‘courageous leadership’ Russia (43) 20.00% 7 20.00% is being introduced through a series Kazakhstan 55 20.00% 114 20.00% of workshops, training sessions Czech Republic 30 19.00% 2 19.00% and ongoing communications programs Poland 6 19.00% (4) 19.00% throughout the many ArcelorMittal Mining sites around the world. Romania (21) 16.00% (29) 16.00% At its core is a belief that courageous Ukraine 12 16.00% 28 16.00% leadership – standing up and speaking Dubai – 0.00% – 0.00% out about a potentially dangerous situation – can play a major role Others (47) (113) in safeguarding employees and Total (1,310) 33 contractors at our mines and plants. During 2011, we introduced employees to courageous leadership in Brazil, West Virginia, US, ArcelorMittal Mines Canada and Kuzbass, Russia. In 2012 they are in turn passing down their knowledge to their team members. Opposite Liberia52
  • 52. Overview Our businessSafety for the people of Liberia SustainabilityMarcus Wleh, corporate responsibilitymanager for ArcelorMittal Liberiacommented: “In April 2011, we launcheda new community safety program,blending international best practice Performancewith local solutions to ensure thatcommunity safety is not compromisedby ArcelorMittal operations.”Going forward, the program aimsto build on the successes ofArcelorMittal’s road and rail safety Governancecampaign. Public awareness will beincreased through the use of radioand street theatre, and the supportof safety education in schools.ArcelorMittal will provide more safetytraining workshops and continue Financial statementsto partner with the police andtransport unions in order to keepLiberia’s people safe. ArcelorMittal Annual Report 2011 53
  • 53. Liquidity and capital resources ArcelorMittal’s principal sources as of December 31, 2011 of credit facility entered into on of liquidity are cash generated from compared with $11.3 billion as of September 30, 2010, contain its operations, its credit facilities at December 31, 2010. ArcelorMittal restrictive covenants. Among other the corporate level and various also has a €2 billion (approximately things, these covenants limit working capital credit lines at $2.6 billion) commercial paper encumbrances on the assets of its operating subsidiaries. program (of which €0.5 billion or ArcelorMittal and its subsidiaries, approximately $0.6 billion was the ability of ArcelorMittal’s Because ArcelorMittal S.A. is a outstanding as of December 31, subsidiaries to incur debt and the holding company, it is dependent 2011), and its policy has been to ability of ArcelorMittal and its upon the earnings and cash flows maintain availability under its credit subsidiaries to dispose of assets of, and dividends and distributions facilities as back-up for its in certain circumstances. These from, its operating subsidiaries to commercial paper program. agreements also require pay expenses and meet its debt compliance with a financial service obligations. Significant As of December 31, 2011, covenant, as summarized below. cash or cash equivalent balances ArcelorMittal’s total debt, which may be held from time to time at includes long-term debt and The company must ensure that the company’s international short-term debt, was $26.4 billion, the ratio of ‘consolidated total net operating subsidiaries, including in compared with $26.0 billion as of borrowings’ (consolidated total particular those in France, where December 31, 2010. Net debt borrowings less consolidated the company maintains a cash (defined as long-term debt plus cash and cash equivalents) to management system under short-term debt, less cash and cash ‘consolidated Ebitda’ (the which most of its cash and cash equivalents and restricted cash) consolidated net pre-taxation equivalents are centralized, and in was $22.5 billion as of December profits of ArcelorMittal for a Algeria, Argentina, Brazil, China, 31, 2011, up from $19.7 billion at measurement period, subject to Kazakhstan, Morocco, South Africa, December 31, 2010. Most of the certain adjustments as set out in Ukraine and Venezuela. Some of external debt is borrowed by the the facilities) does not, at the end these operating subsidiaries have parent company on an unsecured of each ‘measurement period’ debt outstanding or are subject basis and bears interest at varying (each period of 12 months ending to acquisition agreements that levels based on a combination of on the last day of a financial impose restrictions on such fixed and variable interest rates. half-year or a financial year of the operating subsidiaries’ ability to pay Gearing (defined as net debt company), exceed a certain ratio, dividends, but such restrictions are divided by total equity) at currently 3.5 to one. not significant in the context of December 31, 2011 was 37% ArcelorMittal’s overall liquidity. compared with 30% at December The company refers to this ratio as Repatriation of funds from 31, 2010. Total debt increased the leverage ratio. As of December operating subsidiaries may also period-on-period primarily due to 31, 2011, the ‘leverage ratio’ be affected by tax and foreign the bond issuances made during stood at approximately 2.2 to one, exchange policies in place from the year and debt drawn under constant compared with 2.2 to time to time in the various credit lines. Net debt increased one as of December 31, 2010. countries where the company period-on-period primarily due The financial covenant in the above operates, though none of these to increases in working capital referenced principal credit facilities policies are currently significant resulting from higher levels of would permanently fall away were in the context of ArcelorMittal’s steel production, essentially in the company to meet certain overall liquidity. the first half, and notwithstanding defined rating criteria. a substantial working capital In management’s opinion, reduction in the fourth quarter. Non-compliance with the ArcelorMittal’s credit facilities covenants in the facilities described are adequate for its present ArcelorMittal’s principal credit above would entitle the lenders requirements. facilities, which are the $6 billion under such facilities to accelerate revolving credit facility entered into the company’s repayment As of December 31, 2011, on March 18, 2011 (the ‘$6 billion obligations. The company was ArcelorMittal’s cash and cash facility’), the $4 billion revolving in compliance with the financial equivalents, including restricted credit facility entered into on May covenants in the agreements cash and short-term investments, 6, 2010 (the ‘$4 billion facility’), related to all of its borrowings amounted to $3.9 billion compared the revolving credit bilateral facility as of December 31, 2010 and with $6.3 billion as of December of $300 million entered into on December 31, 2011. 31, 2010. In addition, ArcelorMittal June 30, 2010 (the ‘$300 million had available borrowing capacity of facility’) and the $500 million $8.6 billion under its credit facilities multi-currency revolving letter54
  • 54. OverviewThe following table summarizes the repayment schedule of ArcelorMittal’s outstanding indebtedness, which Our businessincludes short-term and long-term debt, as of December 31, 2011: Repayments amount per year ($ billion)Type of indebtedness as of December 31, 2011 2012 2013 2014 2015 2016 >2016 TotalTerm loan repayments– Convertible bonds1 – 0.1 2.1 – – – 2.2– Bonds – 3.4 1.3 1.7 1.8 9.2 17.4 SustainabilitySubtotal – 3.5 3.4 1.7 1.8 9.2 19.6Long-term revolving creditfacilities– $6 billion facility – – – – 1.7 – 1.7– $4 billion facility – – – – – – –– $300 million facility – – – – – – –Commercial paper2 0.6 – – – – – 0.6Other loans 2.2 0.5 0.3 0.3 0.7 0.5 4.5 PerformanceTotal gross debt $2.8 $4.0 $3.7 $2.0 $4.2 $9.7 $26.4The following table summarizes the amount of credit available as of December 31, 2011 under ArcelorMittal’sprincipal credit facilities: FacilityCredit lines available amount Drawn Available Governance$6 billion facility $6.0 $1.7 $4.3$4 billion facility $4.0 – $4.0$300 million facility $0.3 – $0.3Total committed lines $10.3 $1.7 $8.61 Represents the financial liability component of the approximately $250 million to a total outstanding principal amount of $1 billion. $2.5 billion of convertible bonds issued on April 1, 2009 and May In December 2010, ArcelorMittal acquired certain call options on 6, 2009, respectively, as well as of the $750 million mandatory its own shares in order to hedge its obligations arising out of the convertible bond issued by a wholly owned Luxembourg subsidiary potential conversion of its euro-denominated 7.25% convertible Financial statements of the company to a Luxembourg affiliate of Crédit Agricole bonds due 2014 and its US dollar-denominated 5% convertible (formerly Calyon S.A.) in December 2009. In April 2011, the bonds due 2014. conversion date of the mandatory convertible bond was extended 2 Commercial paper is expected to continue to be rolled over in to January 31, 2013. On September 27, 2011, the company the normal course of business. increased the amount of the mandatory convertible bond by Supporting House of Hope The ArcelorMittal Foundation supports House of Hope (‘Dar el Amal’), an association which helps children living in the streets of El Jadida, south of Casablanca. Children are provided with food as well as workshops to improve school results and psychological support. ArcelorMittal Annual Report 2011 55
  • 55. Liquidity and capital resources continued As of December 31, 2011, Financings On June 30, 2010, ArcelorMittal ArcelorMittal had guaranteed The principal financings of entered into a bilateral three-year approximately $1.0 billion of ArcelorMittal and its subsidiaries are revolving credit facility of $300 debt of its operating subsidiaries summarized below by category. million. On July 12, 2010, and $1.3 billion of total debt ArcelorMittal entered into an of ArcelorMittal Finance. Principal credit facilities additional bilateral three-year ArcelorMittal’s debt facilities have On March 18, 2011, ArcelorMittal revolving credit facility of $300 provisions whereby the acceleration entered into the $6 billion facility, million, which was retroactively of the debt of another borrower which may be utilized for general effective as of June 30, 2010. within the ArcelorMittal group corporate purposes and which Each of these facilities was to be could, under certain circumstances, matures in 2016. The $6 billion used for general corporate purposes lead to acceleration under such facility replaced the company’s and was originally scheduled to facilities. Pursuant to amendment previous €17 billion credit facility mature in 2013. As of December agreements entered into on March dated November 30, 2006 31, 2011, one facility was 18, 2011, the above referenced (the ‘€17 billion facility’) after cancelled and the other facility principal credit facilities no longer it was fully repaid and cancelled remained fully available. contain covenants involving on March 31, 2011. As of restrictions on dividends, capital December 31, 2011, $1.7 billion On September 30, 2010, expenditures or acquisitions. of principal was outstanding under ArcelorMittal entered into the the $6 billion facility. $500 million revolving multi- The average debt maturity currency letter of credit facility of the company was 6.3 years On May 6, 2010, ArcelorMittal (the ‘letter of credit facility’), as of December 31, 2011, entered into the $4 billion facility, a which replaced an $800 million compared with 5.1 years as three-year revolving credit facility multi-currency letter of credit of December 31, 2010. for general corporate purposes facility entered into on December which replaced the company’s 30, 2005. The letter of credit Further information regarding previous $4 billion revolving credit facility is used by the company ArcelorMittal’s outstanding facility dated May 13, 2008 and the and its subsidiaries for the issuance long-term indebtedness as of related $3.25 billion forward-start of letters of credit and other December 31, 2011 is set forth facility dated February 13, 2009. instruments. The terms of the in Note 15 to ArcelorMittal’s These facilities were cancelled on letters of credit and other consolidated financial statements. May 12, 2010 (following this instruments contain certain cancellation, neither of the restrictions as to duration. On forward-start facilities entered into September 30, 2011, the maturity by the company during the first of the letter of credit facility was half of 2009 remain in effect). On extended from September 30, September 30, 2011, the maturity 2015 to September 30, 2016. date of the $4 billion facility was extended to May 6, 2015. As of December 31, 2011, the $4 billion facility remains fully available.56
  • 56. Overview2011 capital markets On November 7, 2004, 5.375%, and the $1.5 billion Our businesstransactions ArcelorMittal Finance issued notes due 2018 bear interestOn March 7, 2011, ArcelorMittal €500 million principal amount at the rate of 6.125%.completed an offering of three of unsecured and unsubordinatedseries of US dollar-denominated fixed-rate bonds bearing interest In 2009, ArcelorMittal completednotes, consisting of $500 million at 4.625% due November 7, 2014. several capital markets transactions,aggregate principal amount of the proceeds of which were3.75% notes due 2016, $1.5 billion The company has entered into principally used to refinance existingaggregate principal amount of five separate agreements with the indebtedness. The transactions Sustainability5.50% notes due 2021 and European Bank for Reconstruction included the issuance of the$1 billion aggregate principal and Development (‘EBRD’) for following instruments thatamount of 6.75% notes due 2041. on-lending to the following remain outstanding:The proceeds were used to prepay subsidiaries: ArcelorMittal Galati onthe last two term loan installments November 18, 2002, ArcelorMittal • an offering of €1.25 billionunder the €17 billion facility. Kryviy Rih on April 4, 2006, (approximately $1.6 billion) of ArcelorMittal Temirtau on 7.25% bonds convertible intoOn April 20, 2011, the conversion June 15, 2007, and ArcelorMittal and/or exchangeable for new Performancedate of the $750 million mandatory Skopje and ArcelorMittal Zenica or existing ArcelorMittal sharesconvertible bond was extended from on November 10, 2005. The last (OCEANEs) due 2014 whichMay 25, 2011 to January 31, 2013. repayment installment under closed on April 1, 2009; these loans is in January 2015. • an offering of US dollar-On September 27, 2011, the The amount outstanding under denominated 5% convertiblecompany increased the size of the these loans in the aggregate as bonds due 2014 for $800 million$750 million mandatory convertible of December 31, 2011 was which closed on May 6, 2009;bond by $250 million to $1 billion. $118 million, compared with Governance $178 million as of December 31, • an offering of two series of USOn December 9, 2011, 2010. The loan relating to dollar-denominated bonds (9%ArcelorMittal completed a private ArcelorMittal Galati was fully notes due 2015 and 9.85% notesplacement of €125 million of repaid on November 23, 2009. due 2019) totaling $2.25 billion6.20% notes due in 2016, under which closed on May 20, 2009;its wholesale EMTN program On July 24, 2007, ArcelorMittal • an offering of two seriesestablished on September 29, 2011. Finance and a subsidiary signed of euro-denominated notes a €500 million five-year loan Financial statements (8.25% notes due 2013 andPlease refer to note 27 of the agreement due 2012 that bears 9.375% notes due 2016) totalingconsolidated financial statements interest based on EURIBOR plus a €2.5 billion ($3.5 billion) whichfor capital market transactions margin, the proceeds of which may closed on June 3, 2009;completed in 2012. be used by other entities within ArcelorMittal. • an offering of $1 billion of USOther outstanding loans and dollar-denominated 7% notesdebt securities On May 27, 2008, the due 2039 which closed on ArcelorMittal Jubail celebratesOn July 15, 2004, ArcelorMittal company issued unsecured October 1, 2009; and On February 21, 2012, our JubailFinance issued €100 million and unsubordinated fixed rate project in Saudi Arabia celebrated • a private placement of a $750principal amount of unsecured and US dollar-denominated notes in a significant health and safety million, 17-month mandatory milestone in the ongoing constructionunsubordinated fixed rated notes two tranches totaling $3 billion. convertible bond by a wholly of the new seamless tubular productsbearing interest at 5.50% due The $1.5 billion notes due 2013 facility. More than ten million hours owned Luxembourg subsidiary ofJuly 15, 2014. bear interest at the rate of have been worked on the construction site without any lost time injuries as of mid-January 2012 – a special moment on our journey to zero. To commemorate this accomplishment, more than 2,000 employees, contractors, suppliers and special guests gathered in Jubail to celebrate. Nearly 30 special awards were given to employees and contractors recognizing outstanding individual ArcelorMittal Annual Report 2011 achievements and efforts. 57
  • 57. Liquidity and capital resources continued the company to a Luxembourg True sale of receivables Earnings distribution affiliate of Crédit Agricole (‘TSR’) programs Considering the worsening (formerly Calyon S.A.), with the The company has established sales global economic conditions since proceeds invested in notes linked without recourse of trade accounts September 2008, ArcelorMittal’s to shares of Erdemir of Turkey receivable programs with financial board of directors recommended and Macarthur Coal Limited of institutions for a total amount as on February 10, 2009, a reduction Australia, both of which were of December 31, 2011 of €2,540 of the annual dividend in 2009 to publicly listed companies in which million, $900 million and CAD 215 $0.75 per share (with quarterly ArcelorMittal held a minority million, referred to as true sale of dividend payments of $0.1875) stake. In ArcelorMittal’s receivables (‘TSR’) programs. from $1.50 per share previously. consolidated financial statements Through the TSR programs, The dividend policy was approved for the year ended December 31, certain operating subsidiaries of by the annual general meeting of 2009, the mandatory convertible ArcelorMittal surrender the control, shareholders on May 12, 2009, bond was recorded as non- risks and benefits associated with and was also maintained in 2010 controlling interests of $695 the accounts receivable sold; and 2011. Quarterly dividend million ($684 million net of fees therefore, the amount of payments took place on March and tax) and $55 million as debt. receivables sold is recorded as a sale 14, 2011, June 14, 2011, As a result of the completion of of financial assets and the balances September 12, 2011 and the sale of the shares in are removed from the consolidated December 12, 2011. Macarthur on December 21, statements of financial position at 2011, the notes linked to the the moment of sale. The total The board of directors will submit Macarthur shares were subject to amount of receivables sold under to the approval of the shareholders an early redemption for $1,208 TSR programs and derecognized in at the annual general meeting of million. The proceeds from the accordance with IAS 39 for the shareholders to be held in May redemption of the notes were years ended December 31, 2009, 2012, a proposal to maintain the placed with Crédit Agricole until 2010 and 2011 was $21.8 billion, quarterly dividend at $0.1875 per January 17, 2012. On that date, $29.5 billion and $35.3 billion, share, with dividends payments to notes linked to China Oriental respectively (with amounts of occur on a quarterly basis in 2012. Group Company Limited receivables sold in euros and The dividend payment calendar is were issued by a subsidiary Canadian dollars converted to available on www.arcelormittal.com of ArcelorMittal. US dollars at the monthly average exchange rate). Expenses incurred ArcelorMittal held 12.0 million Commercial paper program under the TSR programs (reflecting shares in treasury as of ArcelorMittal has a €2.0 billion the discount granted to the December 31, 2011, compared commercial paper program in acquirers of the accounts with 12.4 million shares as of the French market, which had receivable) recognized in the December 31, 2010. As of approximately €0.5 billion consolidated statements of December 31, 2011, the number ($0.6 billion) outstanding as of operations for the years ended of treasury shares was equivalent December 31, 2011 compared December 31, 2010 and 2011 to approximately 0.77% of with €1.7 billion ($2.2 billion) as were $110 and $152 million, the total issued number Health and safety day around of December 31, 2010. the world respectively. of ArcelorMittal shares. At Baffinland Iron Ore Corporation in the Arctic Circle, one of the key safety aspects to consider is outdoor sun safety. The team received classes and a review of the appropriate controls including the use of clothing, hats, sun block lotion and industrial safety sunglasses. In these harsh conditions this must be taken seriously as for some parts of the year, there is 24 hour sunlight. A lip balm of SPF 30 was handed out to all as a reminder to keep in their pockets.58
  • 58. Overview Our businessThe following table presents a summary of cash flow of ArcelorMittal: Summary of cash flow “Our strategy for year ended December 31 2010 2011 2012 will include the ($ million) ($ million) disposal of selectedNet cash provided by operating activities 4,015 1,777 and targeted non-Net cash used in investing activities (3,438) (3,678) core non-consolidatedNet cash used in financing activities (7) (540) assets and we will Sustainability work closely with ourSources and uses of cash Net cash used in Net cash used in investing activities financing activities rating agencies inNet cash provided by Net cash used in investing activities Net cash used in financing activities order to preserve ouroperating activities was $3.7 billion for the year ended was $0.5 billion for the year ended investment grading.For the year endedDecember 31, 2011, net cash December 31, 2011 compared December 31, 2011, compared Furthermore, we will with $3.4 billion in 2010, primarily with $7 million in 2010. Theprovided by operating activities aim to institutionalize Performance due to higher capital expenditures, increase in cash used in financingdecreased to $1.8 billion, compared as well as inflows of $796 million activities was primarily due to an the risk managementwith $4.0 billion for the year ended from the sale of the company’s increase in debt repayments, offset culture.”December 31, 2010, mainly stake in Macarthur Coal and by proceeds of long-term debt,because of operating working $129 million from the sale of the primarily due to bond issuances Sudhir Maheshwaricapital deployment. The net cash company’s 12% stake in Baosteel- and drawdowns on credit facilities. Member of the Groupprovided by operating activities Management Board, responsible NSC/Arcelor (BNA) Automotive Co. Net cash used in financing activitieswas negatively impacted by a for corporate finance, M&A and also included outflow for purchases$3.8 billion increase (excluding risk management Governance Capital expenditures totaled of non-controlling interests, offsetdiscontinued operations) in $4.8 billion for the year ended by proceeds from the increase inworking capital (consisting of December 31, 2011 compared the outstanding amount of theinventories plus trade accounts with $3.3 billion for the year ended mandatory convertible bonds.receivable less trade accounts December 31, 2010. The companypayable) as inventories increased currently expects that capital Dividends paid during the yearby $3.1 billion; accounts receivable expenditures for the year ended ended December 31, 2011 wereincreased by $0.7 billion and December 31, 2012 will amount to $1.2 billion, including $1,162 millionaccounts payable decreased Financial statements approximately $4.0 to $4.5 billion, paid to ArcelorMittal shareholdersby $0.1 billion. The increase in most of which relates to the and $32 million paid to non-inventories was largely attributable maintenance and improvement of controlling shareholders into higher raw material prices and existing sites (including health and subsidiaries. Dividends paid in thehigher levels of steel production safety investments). Growth year ended December 31, 2010compared with 2010. The year-on- capital expenditure is expected were $1.3 billion.year decrease in net cash provided to target mainly mining projects.by operating activities was reduced Equitysomewhat by strong operating ArcelorMittal’s major capital Equity attributable to the equitycash flow generation in the fourth expenditures in the year ended holders of the parent decreasedquarter ($2.9 billion) driven by a December 31, 2011 included the to $56.7 billion at December 31,$1.8 billion release of working following major projects: Liberia 2011, compared with $62.4 billioncapital (itself resulting largely greenfield mining project; Andrade at December 31, 2010, primarilyfrom lower inventories), which capacity expansion plan in Andrade due to the stainless spin-off forwas a reversal of the trend of an mine in Brazil; capacity expansion $4.0 billion on January 25, 2011investment in working capital in plan in ArcelorMittal Mines in and the dividend distribution forthe first three quarters of 2011. Canada; optimization of galvanizing $1.2 billion. See Note 17 to and galvalume operations in ArcelorMittal’s consolidated Dofasco, Canada; Baffinland financial statements for the year project in Canada; and a capacity ended December 31, 2011. expansion plan in Monlevade, Brazil. ArcelorMittal Annual Report 2011 59
  • 59. Disclosures about market risk Quantitative and All financial market risks are All counterparties and their managed in accordance with respective limits require the prior qualitative disclosures the treasury and financial risk approval of the corporate finance about market risk management policy. These risks and tax committee. Standard ArcelorMittal is exposed to a are managed centrally through agreements, such as those number of different market risks group treasury by a group published by the International arising from its normal business specializing in foreign exchange, Swaps and Derivatives Association, activities. Market risk is the interest rate, commodity, internal Inc. (ISDA) are negotiated with all possibility that changes in raw and external funding and cash and ArcelorMittal trading counterparties. materials prices, foreign currency liquidity management. exchange rates, interest rates, Derivative instruments base metal prices (zinc, nickel, All financial market hedges are ArcelorMittal uses derivative aluminum and tin) and energy governed by ArcelorMittal’s treasury instruments to manage its exposure prices (oil, natural gas and power) and financial risk management to movements in interest rates, will adversely affect the value of policy, which includes a delegated foreign exchange rates and ArcelorMittal’s financial assets, authority and approval framework, commodity prices. Changes in the liabilities or expected future sets the boundaries for all hedge fair value of derivative instruments cash flows. activities and dictates the required are recognized in the consolidated approvals for all treasury activities. statements of operations or in The fair value information presented Trading activity and limits are equity according to nature and below is based on the information monitored on an ongoing basis. effectiveness of the hedge. available to management as of ArcelorMittal enters into the date of the consolidated transactions with numerous Derivatives used are conventional statements of financial position. counterparties, mainly banks and exchange-traded instruments such Although ArcelorMittal is not financial institutions, as well as as futures and options, as well as aware of any factors that would brokers, major energy producers non-exchange-traded derivatives significantly affect the estimated and consumers. such as over-the-counter swaps, fair value amounts, such amounts options and forward contracts. have not been comprehensively As part of its financing and revalued for the purposes of this cash management activities, Currency exposure annual report since that date, and ArcelorMittal uses derivative ArcelorMittal seeks to manage therefore, the current estimates of instruments to manage its exposure each of its entities’ exposure to its fair value may differ significantly to changes in interest rates, foreign operating currency. For currency from the following amounts exchange rates and commodity exposure generated by activities, presented. The estimated fair prices. These instruments are the conversion and hedging of values of certain financial principally interest rate and revenues and costs in foreign instruments have been determined currency swaps, spots and currencies is typically performed using available market information forwards. ArcelorMittal may also using currency transactions on the or other valuation methodologies use futures and options contracts. spot market and forward market. that require considerable judgment For some of its business segments, in interpreting market data and Counterparty risk ArcelorMittal hedges future developing estimates. The fair ArcelorMittal has established cash flows. value estimates presented below detailed counterparty limits to are not necessarily indicative of mitigate the risk of default by its Because a substantial portion the amounts that ArcelorMittal counterparties. The limits restrict of ArcelorMittal’s assets, liabilities, could realize in current market the exposure ArcelorMittal may sales and earnings are denominated transactions. have to any single counterparty. in currencies other than the US Counterparty limits are calculated dollar (its reporting currency), Risk management taking into account a range of ArcelorMittal has exposure to ArcelorMittal has implemented strict factors that govern the approval fluctuations in the values of these policies and procedures to manage of all counterparties. The factors currencies relative to the US dollar. and monitor financial market risks. include an assessment of the These currency fluctuations, Organizationally, supervisory counterparty’s financial soundness especially the fluctuation of the functions are separated from and its ratings by the major rating value of the US dollar relative to operational functions, with proper agencies, which must be of a high the euro, the Canadian dollar, the segregation of duties. Financial quality. Counterparty limits are Brazilian real and the South African market activities are overseen by monitored on a periodic basis. rand, as well as fluctuations in the the CFO, the corporate finance and currencies of the other countries in tax committee and the Group which ArcelorMittal has significant Management Board. operations and/or sales, could have a material impact on the result of its operations.60
  • 60. OverviewArcelorMittal faces transaction risk, where its businesses generate sales in one currency but incur costs Our businessrelating to that revenue in a different currency. For example, ArcelorMittal’s non-US subsidiaries maypurchase raw materials, including iron ore and coking coal, in US dollars, but may sell finished steel productsin other currencies. Consequently, an appreciation of the US dollar will increase the cost of raw materials,thereby negatively impacting the company’s operating margins.Based on high-level estimates for 2011, the table below reflects the impact of a 10% depreciation ofthe functional currency on budgeted cash flows expressed in the respective functional currencies of thevarious entities: Sustainability Transaction impact of move of foreign currency on cash flowsEntity functional currency in $ equivalent (in millions)US dollar (39)Euro (900)Other (145) PerformanceArcelorMittal faces translation risk, which arises when ArcelorMittal translates the consolidated statements ofoperations of its subsidiaries, its corporate net debt and other items denominated in currencies other than theUS dollars for inclusion in ArcelorMittal’s consolidated financial statements.Based on high-level estimates for 2011, the table below, in which it is assumed that there is no indexationbetween sales prices and exchange rates, illustrates the impact of an appreciation of 10% of the US dollar. Governance Translation impact of appreciation of dollar on cash flowsEntity functional currency in $ equivalent (in millions)Euro (179)Other (166)The table below illustrates the impact of exchange rate fluctuations on the conversion of the net debt of Financial statementsArcelorMittal into US dollars (sensitivity taking derivative transactions into account): Impact of 10% move of the US dollar on net debt translationCurrency in $ equivalent (in millions)Brazilian real 16Canadian dollar (14)Euro (940)US dollar –Other (3) ArcelorMittal Annual Report 2011 61
  • 61. Disclosures about market risk continued Interest rate sensitivity Short-term interest rate exposure and cash Cash balances, which are primarily composed of euros and US 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 interest rate swaps and 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 US 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. The estimated fair values of ArcelorMittal’s short-term and long-term debt are as follows: 2010 2011 ($ million) Carrying value Estimated fair value Carrying value Estimated fair value Instruments payable bearing interest at variable rates 5,386 5,378 4,156 3,743 Instruments payable bearing interest at fixed rates 17,714 21,337 20,731 21,675 Long-term debt, including current portion 23,100 26,715 24,887 25,418 Short-term debt 2,908 2,769 1,531 1,561 Commodity price sensitivity ArcelorMittal utilizes a number of exchange-traded commodities in the steelmaking 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 through surcharges. The residual exposures are managed as appropriate. Financial instruments related to commodities (base metals, energy and freight) 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. The table below reflects commodity price sensitivity. Impact of 10% move of market prices as at December 31, 2011 Local corporate Commodities in $ equivalent (in millions) responsibility reporting Zinc 75 In 2011, 10 local corporate Nickel 14 responsibility reports were published, in Ukraine, Kazakhstan, Tin 12 Mexico, the US, Luxembourg, Aluminum 6 Czech Republic, Brazil, Gas 49 South Africa, Poland and Argentina (Mexico, Poland Brent 112 and Ukraine were first Freight 19 time reporters). In respect of non-exchange traded commodities, ArcelorMittal is exposed to possible increases 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 managed through long-term contracts.62
  • 62. OverviewSummary of risksand uncertaintiesThe following factors, • A prolonged period of weak • the fact that ArcelorMittal’s • economic policy, political, social Our business economic growth, either globally reserve and resource estimates and legal risks and uncertaintiesamong others, could or in ArcelorMittal’s key markets; could materially differ from in certain countries in whichcause ArcelorMittal’s mineral quantities that it may be ArcelorMittal operates or • the risk that excessive capacityactual results in the steel industry globally and able to actually recover, that its proposes to operate;to differ materially particularly in China may hamper mine life estimates may prove • fluctuations in currency exchange inaccurate and the fact thatfrom those discussed the steel industry’s recovery market fluctuations may render rates, particularly the euro to USin the forward-looking and weigh on the profitability certain ore reserves uneconomical dollar exchange rate, and the risk Sustainability of steel producers; of impositions of exchangestatements included to mine; controls in countries wherethroughout this • the risk of protracted weakness in • drilling and production risks in ArcelorMittal operates; steel prices or of price volatility;annual report. relation to mining; • the risk of disruptions to • any volatility in the supply or • rising extraction costs in relation ArcelorMittal’s manufacturing prices of raw materials, energy to mining; operations; or transportation, or mismatches of raw material and steel price • failure to manage continued • the risk of damage to Performance trends; growth through acquisitions; ArcelorMittal’s production facilities due to natural disasters; • increased competition in the steel • a Mittal family trust’s ability to industry; exercise significant influence over • the risk that ArcelorMittal’s the outcome of shareholder voting; insurance policies may provide • the risk that unfair practices in inadequate coverage; steel trade could negatively • any loss or diminution in the affect steel prices and reduce services of Mr Lakshmi N Mittal, • the risk of product liability claims; ArcelorMittal’s profitability, or that ArcelorMittal’s chairman of the • the risk of potential liabilities from Governance national trade restrictions could board of directors and chief investigations, litigation and fines hamper ArcelorMittal’s access to executive officer; regarding antitrust matters; key export markets; • the risk that the earnings and cash • the risk that ArcelorMittal’s • increased competition from other flows of ArcelorMittal’s operating governance and compliance materials, which could significantly subsidiaries may not be sufficient processes may fail to prevent reduce market prices and demand to meet future funding needs at regulatory penalties or for steel products; the holding company level; reputational harm, both at Financial statements • legislative or regulatory changes, • the risk that changes in operating subsidiaries and including those relating to assumptions underlying joint ventures; protection of the environment the carrying value of certain • the risk of unfavorable changes to, and health and safety; assets, including as a result or interpretations of, the tax laws of adverse market conditions, • laws and regulations restricting and regulations in the countries in could result in impairment of greenhouse gas emissions; which ArcelorMittal operates; tangible and intangible assets, • the risk that ArcelorMittal’s high including goodwill; • the risk that ArcelorMittal may level of indebtedness could not be able to fully utilize its • the risk that significant capital make it difficult or expensive to deferred tax assets; and expenditure and other refinance its maturing debt, incur commitments ArcelorMittal • the risk that ArcelorMittal’s new debt and/or flexibly manage has made in connection with reputation and business could its business; acquisitions may limit its be materially harmed as a result • risks relating to greenfield and operational flexibility and add of data breaches, data theft, brownfield projects; to its financing requirements; unauthorized access or successful hacking. • risks relating to ArcelorMittal’s • ArcelorMittal’s ability to fund mining operations; under-funded pension liabilities; These factors are discussed in • the risk of labor disputes; more detail in this annual report on page 192. ArcelorMittal Annual Report 2011 63
  • 63. We have a strongerbalance sheet Picture Vitória, BrazilSince the onset of the global financial crisis three years ago,we have significantly strengthened our balance sheet. Over thatperiod, we have reduced our net debt by $4 billion, to $22.5 billion,and we expect to go on reducing it in 2012. As importantly,we have extended the maturity profile of our debt from an averageof 2.6 years to 6.3 years. We have also diversified the sourcesof our funding. In 2008, bank debt was the main source of fundingfor ArcelorMittal; today it is limited primarily to our liquidity lines,of which we have drawn just $1.7 billion. The business remains highlycash generative. In 2011, operating cash flow excluding workingcapital was $5.8 billion. Our debt is rated investment grade bythe ratings agencies, maintaining that credit rating remains a keypriority for ArcelorMittal.Cash flow summary$1,777 mNet cash provided by operating activities,year ended December 31, 2011
  • 64. 65Overview Our business Sustainability Performance Governance Financial statements ArcelorMittal Annual Report 2011
  • 65. Board of directors ArcelorMittal’s annual Lakshmi N Mittal Narayanan Vaghul Antoine Spillmann general meeting of Lakshmi N Mittal, 61 and an Indian Narayanan Vaghul, 75 and an Indian Antoine Spillmann, 48 and a Swiss shareholders on May 10, citizen, is the chairman and CEO of citizen, has over 50 years’ citizen, worked for leading 2011 acknowledged the ArcelorMittal. Mr Mittal founded experience in the financial sector investment banks in London from expiration of the terms Mittal Steel in 1989, and guided its and was the chairman of ICICI 1986 to 2000. He is now an asset of office of the following strategic development,with Arcelor. Group,in India from 1985services managerBruellan Wealthpartner at in the merger in 2006 culminating group a leading financial to 2009. the firm and executive directors: Mr Lakshmi He is a member of various boards Mr Vaghul is chairman of the Indian Management, an independent asset N Mittal, Mr Antoine and trusts and also of the Indian Institute of Finance Management management company based in Spillmann, Mr Lewis Prime Minister’s Global Advisory & Research and is also a board Geneva. Mr Spillmann studied in Council, Kazakhstan’s Foreign member of Wipro Limited, Switzerland and London, receiving B Kaden and Investors’ Council, World Economic Mahindra & Mahindra, Piramal diplomas from the London Business HRH Prince Guillaume Forum’s International Business Healthcare and Apollo Hospitals. School in Investment Management de Luxembourg. Council and World Steel and Corporate Finance. Association’s (WSA) Executive Wilbur L Ross, Jr At the same meeting, the Committee. He has received HRH Prince Guillaume shareholders re-elected numerous awards and honors such Wilbur L Ross, Jr, 74 and a US as Fortune’s 2004 ‘European de Luxembourg Mr Lakshmi N Mittal, Mr Antoine citizen, is the chairman and CEO Spillmann, Mr Lewis B Kaden Businessman of the Year’, Financial of WL Ross & Co. LLC, a merchant HRH Prince Guillaume de and HRH Prince Guillaume Times’ 2006 ‘Person of the Year’, banking firm, a position that he has Luxembourg, 48 and a Luxembourg de Luxembourg for a new term 2007 Dwight D Eisenhower Global held since April 2000. WL Ross & citizen, worked for five years at the of three years. The board of Leadership Award and Forbes 2008 Co is part of Invesco Private Capital, International Monetary Fund in directors proposed to elect ‘Lifetime Achievement Award’. In a listed company, of which Mr Ross Washington, D.C., and spent two Mr Bruno Lafont as a new board October 2010, he was awarded is Chairman. Mr Ross is also the years working for the Commission member, and the shareholders WSA’s medal for services to the Chairman and CEO of Invesco of European Communities in elected him for a three-year term Association and for contributing subsidiaries WLR Recovery Fund Brussels. Prince Guillaume headed a on May 10, 2011. Mr Bruno to the sustainable development L.P., WLR Recovery Fund II L.P., WLR governmental development agency, Lafont is considered an of the global steel industry. Recovery Fund III, WLR Recovery Lux-Development, for 12 years. independent director. Fund IV, WLR Recovery Fund V, Asia Lewis B Kaden Recovery Fund, Asia Recovery Fund Suzanne P Nimocks As a result of these changes, Co-Investment, Absolute Recovery the board of directors is Lewis B Kaden, 69 and a US citizen, Hedge Fund and American Home Suzanne P Nimocks, 52 and a US composed of ten directors, of is the lead independent director of Mortgage Servicing Inc., none of citizen, was a director (senior whom nine are non-executive ArcelorMittal. He has approximately which are listed. Mr Ross is the partner) with McKinsey & Company directors and seven are 39 years of experience in corporate Chairman of Ohizumi from 1999 to 2010 and was with independent directors. The governance, financial services, Manufacturing Company in Japan, the firm in various other capacities directors are: Mr Lakshmi N dispute resolution and economic International Textile Group and since 1989. Ms Nimocks is Mittal, Ms Vanisha Mittal Bhatia, policy. He is currently vice chairman Diamond Shipping, which are currently a board member for Mr Antoine Spillmann, Mr Wilbur of Citigroup. Mr Kaden served as unlisted companies. Mr Ross is a Encana Corporation and Rowan L Ross, Mr Lewis B Kaden, a director of Bethlehem Steel director of International Automotive Companies, Inc. both listed Mr Narayanan Vaghul, Mr Jeannot Corporation for ten years and is Components and Compagnie companies, and Valerus, a private Krecké, HRH Prince Guillaume currently chairman of the board of Européenne de Wagons SARL company. In the non-profit sector, de Luxembourg, Ms Suzanne directors of the Markle Foundation (Luxembourg), both non-listed she serves on the board of directors P Nimocks and Mr Bruno Lafont. and vice chairman of the Board of companies. Mr Ross is also a of the Houston Zoo and she is The board of directors comprises Trustees of Asia Society. director of the Yale School of expected to assume the one executive director, Management. chairmanship of its board of Mr Lakshmi N Mittal, the chairman Vanisha Mittal Bhatia directors on July 1, 2012. and chief executive officer of Jeannot Krecké ArcelorMittal. Mr Lewis B Kaden Vanisha Mittal Bhatia, 31 and an Bruno Lafont is the lead independent director. Indian citizen, was appointed as Jeannot Krecké, 61 and a a member of the LNM Holdings Luxembourg citizen, was appointed Bruno Lafont, 55 and a French None of the members of the board of directors in June 2004. as Luxembourg’s Minister of the citizen, started his career at Lafarge board of directors, including Ms Vanisha Mittal Bhatia was Economy and Foreign Trade and in 1983. On January 1, 2006, he the executive director, have appointed to Mittal Steel’s board Minister of Sport in 2004. As of became chief executive officer and entered into service contracts of directors in December 2004. July 2004, he represents the in May 2007, he was appointed with ArcelorMittal or any of She has a Bachelor of Arts degree Luxembourg government at the chairman and chief executive its subsidiaries providing for in Business Administration from the Council of Ministers of the officer of the group. Mr Lafont is benefits upon the termination European Business School and has European Union in the internal Special Adviser to the Mayor of of their terms. worked at Mittal Shipping Ltd, market and industry sections of its Chongqing (China), President of the Mittal Steel Hamburg GmbH, an competitiveness configuration. On EPE French Association (‘Enterprises Internet-based venture capital fund, February 1, 2012, Jeannot Krecké for Environment’), a board member within the procurement department retired from government and of EDF and a board member of Mittal Steel, in charge of a decided to end his active political of ArcelorMittal. cost-cutting project, and is currently career in order to pursue a range head of strategy for Aperam. of different projects.66
  • 66. Overview Our business Sustainability Performance Governance Financial statements Left to right ArcelorMittal Annual Report 2011 Lakshmi N Mittal Lewis B Kaden Vanisha Mittal Bhatia Narayanan Vaghul Wilbur L Ross, Jr Jeannot KreckéLeft to rightAntoine SpillmannHRH Prince Guillaume de LuxembourgSuzanne P NimocksBruno Lafont 67
  • 67. Senior management The strategic direction Lakshmi N Mittal Davinder Chugh Lou Schorsch of ArcelorMittal is the Lakshmi N Mittal is the chairman Davinder Chugh, member of Lou Schorsch, member of responsibility of the and CEO of ArcelorMittal. Mr Mittal the Group Management Board, the Group Management Board, Group Management founded Mittal Steel in 1989, and responsible for shared services, responsible for Flat Carbon Board (GMB). The GMB guided its strategic development, has over 33 years of experience Americas, group strategy, CTO, culminating in the merger in 2006 in the steel industry in general research and development, members are elected with Arcelor. He is a member of management, materials purchasing, commercial coordination, global by the board of directors various boards and trusts and also marketing, logistics, warehousing automotive and member of the IAC. and the GMB is headed of the Indian Prime Minister’s Global and shipping. Mr Chugh is a Dr Schorsch was elected to the by Lakshmi N Mittal as Advisory Council, Kazakhstan’s member of the Investment Group Management Board in May Foreign Investors’ Council, World Allocation Committee (‘IAC’). 2011. Prior to this appointment he chief executive officer Economic Forum’s International Before becoming a senior executive had been president and chief (CEO). The GMB is Business Council and World Steel vice president of ArcelorMittal, he executive officer of Flat Carbon supported by a strong Association’s (WSA) Executive served as the CEO of Mittal Steel Americas, a position established team of 24 management Committee. He has received South Africa until 2006. Mr Chugh with the 2006 merger of Arcelor numerous awards and honors was involved in the turnaround and and Mittal Steel, as well as a committee members, such as Fortune’s 2004 ‘European consolidation of the South African member of the ArcelorMittal working towards Businessman of the Year’, Financial operations of ArcelorMittal. management committee. delivering the best Times’ 2006 ‘Person of the Year’, possible performance 2007 Dwight D Eisenhower Global Peter Kukielski Gonzalo Urquijo to all stakeholders while Leadership Award and Forbes 2008 Peter Kukielski, member of the ‘Lifetime Achievement Award’. In Gonzalo Urquijo, member of continuously working October 2010, he was awarded Group Management Board, chief the Group Management Board, to improve health and WSA’s medal for services to the executive of Mining, was appointed responsible for AACIS (excluding safety results. Association and for contributing senior executive vice president and China and India), Distribution head of Mining in December 2008. Solutions, Tubular Products, to the sustainable development of the global steel industry. Mr Kukielski was previously corporate responsibility, IAC executive vice president and chief chairman, was previously senior Aditya Mittal operating officer at Teck Cominco executive vice president and CFO Limited. Prior to joining Teck of Arcelor, with responsibility for Aditya Mittal is CFO of Cominco, he was chief operating finance, purchasing, IT, legal affairs, ArcelorMittal, and a member of officer of Falconbridge Limited investor relations, Arcelor the Group Management Board before which he held senior Distribution Solutions, and other with additional responsibility for engineering and project activities. Prior to that, Mr Urquijo Flat Carbon Europe, investor management positions with BHP also held several other positions relations and communications. Billiton and Fluor Corporation. within Arcelor, including deputy Prior to the merger to create senior executive vice president and ArcelorMittal, Aditya Mittal held Sudhir Maheshwari head of the functional directorates the position of President and CFO of distribution. of Mittal Steel from October 2004 Sudhir Maheshwari, member of to 2006. In 2008, Mr Aditya Mittal the Group Management Board, Michel Wurth was awarded ‘European Business responsible for corporate finance, Leader of the Future’ by CNBC M&A and risk management and Michel Wurth, member of the Europe. In 2011, he was also India and China operations, is also Group Management Board, ranked 4th in the ‘40 under 40’ alternate chairman of the corporate responsible for Long Carbon list of Fortune magazine. He is a finance and tax committee and worldwide, was previously in charge member of the World Economic chairman of the risk management of Flat Carbon Europe and Global Forum’s The Forum of Young committee. Mr Maheshwari was R&D between 2006 and June 2011 Global Leaders, the Young previously a member of the as well as Distribution Solutions Presidents’ Organization, a board management committee of between 2009 and June 2011. member at the Wharton School ArcelorMittal, responsible for Prior to this he was vice president and PPR. finance and M&A. Prior to this, he of the Group Management Board was managing director, business of Arcelor and Deputy CEO, with development and treasury at Mittal responsibility for Flat Carbon Steel Steel from January 2005 until its including auto, coordination Brazil, merger with Arcelor in 2006. R&D and NSC alliance. The creation Mr Maheshwari also serves on of Arcelor in 2002 led to Mr Wurth’s From left to right Lakshmi N Mittal, Aditya Mittal, Davinder Chugh, the board of directors of various appointment as senior executive Peter Kukielski, Sudhir Maheshwari, subsidiaries of ArcelorMittal. vice president and CFO of Arcelor. Lou Schorsch, Gonzalo Urquijo, Michel Wurth68
  • 68. Overview Our business Sustainability Performance Governance Financial statementsManagement committeeName Age1 PositionBhikam Agarwal 59 Executive vice president, head of financeVijay Bhatnagar 64 Executive vice president, CEO India and ChinaDavinder Chugh 55 Member of the Group Management Board, responsible for shared services and member of the investment allocation committeeJefferson de Paula 53 Executive vice president, CEO Long Carbon AmericasPhil du Toit 59 Executive vice president, head of mining projects and explorationRobrecht Himpe 53 Executive vice president, CEO Flat Carbon EuropePeter Kukielski 55 Member of the Group Management Board, head of MiningSudhir Maheshwari 48 Member of the Group Management Board, responsible for corporate finance, M&A and risk management and India and China operationsAditya Mittal 35 CFO, member of the Group Management Board, with additional responsibility for Flat Carbon Europe, investor relations and communicationsLakshmi N Mittal 61 Chairman and chief executive officerMichael Pfitzner 62 Executive vice president, head of marketing and commercial coordinationArnaud Poupart-Lafarge 46 Executive vice president, CEO Long Carbon Europe (including Annaba, Bosnia and Herzegovina, Ostrava and Sonasid)Michael Rippey 54 Executive vice president, CEO USALou Schorsch 62 Member of the Group Management Board, responsible for Flat Carbon Americas, group strategy, CTO, research and development, global automotive and member of the investment allocation committee ArcelorMittal Annual Report 2011Bill Scotting 53 Executive vice president, head of strategyWillie Smit 54 Executive vice president, head of human resourcesGonzalo Urquijo 50 Member of the Group Management Board, responsible for AACIS (excluding China and India), Distribution Solutions, Tubular Products, corporate responsibility, investment allocation committee chairmanMichel Wurth 57 Member of the Group Management Board, responsible for Long Carbon worldwide1 Age on December 31, 2011Additional members of the management committee include Augusto Espeschit de Almeida (CEO Long Carbon Central and South America),Brian Aranha (chief marketing officer, global automotive and Flat Carbon Americas, commercial coordination), Benjamin Baptista (CEO Flat SouthAmerica), Bill Chisholm (CEO ArcelorMittal Mexico), Gregory Ludkovsky (global research and development), Jean-Luc Maurange (CEO Flat CarbonEurope, business division south west), Nku Nyembezi-Heita (CEO ArcelorMittal South Africa), Geert Van Poelvoorde (CEO Flat Carbon Europe,business division north), Sanjay Samaddar (CEO Flat Carbon Europe, business division east and CEO ArcelorMittal Poland), Juergen Schachler(CEO ArcelorMittal Dofasco), Kleber Silva (mining operations), PS Venkat (CEO Long Carbon North America), Marc Vereecke (chief technologyofficer, with additional responsibility for in-house manufacturing services) and Alain Le Grix (CEO Distribution Solutions). 69
  • 69. Group structure ArcelorMittal Flat Carbon Americas Flat Carbon Europe Long Carbon Americas and Europe ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal Acindar ArcelorMittal Brasil USA Atlantique et Belgium Belval & Lorraine Differdange ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal Lázaro Dofasco España Flat Carbon Brasil Hamburg Cárdenas Europe ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal Galati Poland Duisburg Las Truchas ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal Méditerranée Bremen Gipuzkoa Montreal ArcelorMittal Industeel ArcelorMittal ArcelorMittal Eisenhüttenstadt Belgium Point Lisas Ostrava Industeel ArcelorMittal Sonasid France Warszawa ArcelorMittal Annaba70
  • 70. Overview Our business SustainabilityAACIS Mining Distribution Solutions PerformanceArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittal ArcelorMittalKryviy Rih South Africa Mines Canada Kuzbass International Luxembourg GovernanceArcelorMittal Minorca Mines ArcelorMittalTemirtau Lázaro Cárdenas Mining Assets Financial statements Hibbing ArcelorMittal Taconite Mines Princeton ArcelorMittal ArcelorMittal Mineração Kryviy Rih Serra Azul Mining Assets ArcelorMittal Temirtau Mining Assets ArcelorMittal Annual Report 2011 71
  • 71. Corporate governance This section provides a summary of Board of directors for foreign private issuers (the the corporate governance practices ‘NYSE standards’), (b) he or she is Composition of the board of ArcelorMittal. unaffiliated with any shareholder of directors owning or controlling more than 2% The board of directors is in charge Board of directors, Group of the overall governance and of the total issued share capital of ArcelorMittal, and (c) the board Management Board and direction of ArcelorMittal. It is of directors makes an affirmative management committee responsible for the performance of determination to this effect. For all acts of administration necessary these purposes, a person is deemed ArcelorMittal is governed by or useful in furtherance of the affiliated to a shareholder if he a board of directors and managed corporate purpose of ArcelorMittal, or she is an executive officer, a by a Group Management Board. except for matters reserved by director who also is an employee, The Group Management Board Luxembourg law or the articles of a general partner, a managing is assisted by a management association to the general meeting member or a controlling shareholder committee. of shareholders. The articles of of such shareholder. The 10 association provide that the board Principles of Governance of the A number of corporate governance of directors is composed of a Luxembourg Stock Exchange, which provisions in the articles of minimum of three and a maximum constitute ArcelorMittal’s domestic association of ArcelorMittal reflect of 18 members, all of whom, corporate governance code, require provisions of the Memorandum of except the chief executive officer, ArcelorMittal to define the Understanding signed on June 25, must be non-executive directors. independence criteria that 2006 (prior to Mittal Steel’s merger None of the members of the board apply to its directors. with Arcelor), amended in April of directors, except for the chief 2008 and which mostly expired executive officer, may hold an In line with Luxembourg practice, on August 1, 2009. executive position or executive the articles of association do not mandate within ArcelorMittal or any require directors to be shareholders entity controlled by ArcelorMittal. of the company. Mr Lakshmi N Mittal was elected The articles of association provide chairman of the board of directors that directors are elected and on May 13, 2008. Mr Mittal is removed by the general meeting also ArcelorMittal’s chief executive of shareholders by a simple majority officer. Mr Mittal was re-elected of votes cast. Other than as set to the board of directors for a out in the company’s articles of three-year term by the annual association, no shareholder has any general meeting of shareholders specific right to nominate, elect or on May 10, 2011. remove directors. Directors are elected by the general meeting of The board of directors is comprised shareholders for three-year terms. of 10 members, of which nine are In the event that a vacancy arises non-executive directors and one on the board of directors for any is an executive director. The chief reason, the remaining members executive officer of ArcelorMittal of the board of directors may by a is the sole executive director. simple majority elect a new director Ms Suzanne P Nimocks was elected to temporarily fulfill the duties to the board of directors on January attached to the vacant post 25, 2011, and Mr Bruno Lafont until the next general meeting was elected to the board of of the shareholders. directors in May 2011. Mr François Pinault resigned in 2011. The board None of the members of the board of directors now therefore has one of directors, including the executive additional member. director, have entered into service contracts with ArcelorMittal or any Seven of the ten members of the of its subsidiaries that provide for board of directors are independent. any form of remuneration or for A director is considered benefits upon the termination of ‘independent’ if (a) he or she is their term. The remuneration of the independent within the meaning members of the board of directors of the Listed Company Manual of is determined on a yearly basis the New York Stock Exchange, as by the annual general meeting amended from time to time, or any of shareholders. successor manual or provisions, subject to the exemptions available72
  • 72. OverviewOperation of the board Each director has one vote and Annual self-evaluation Our businessof directors none of the directors, including The board of directors decided in the chairman, has a casting vote. 2008 to start conducting an annualGeneral Decisions of the board of directors self-evaluation of its functioning inThe board of directors may engage are made by a majority of the order to identify potential areasthe services of external experts or directors present and represented for improvement. The firstadvisers as well as take all actions at a validly constituted meeting. self-evaluation process was carriednecessary or useful to implement out in early 2009. The 2011the company’s corporate purpose. Lead independent director self-evaluation process was SustainabilityThe board of directors (including In April 2008, the board of implemented through structuredits three committees) has its own directors created the role of lead interviews between the leadbudget, which covers functioning independent director. His or her independent director and eachcosts such as external consultants, function is to: director and covers the overallcontinuing education activities for performance of the board ofdirectors and travel expenses. • coordinate the activities of the directors, its relations with senior independent directors, management, the performanceMeetings • liaise between the chairman of of individual directors, and the PerformanceThe board of directors meets when the board of directors and the performance of the committees.convened by the chairman of the independent directors, The process is supported by theboard or any two members of the company secretary under theboard of directors. The board of • call meetings of the independent supervision of the chairman anddirectors holds physical meetings directors when he or she the lead independent director.at least on a quarterly basis as five considers it necessary or The findings of the self-evaluationregular meetings are scheduled per appropriate, and process are examined by theyear. The board of directors holds • perform such other duties appointments, remuneration and Governanceadditional meetings if and when as may be assigned to him corporate governance (‘ARCG’)circumstances require, in person or her by the board of directors committee and presented withor by teleconference and can take from time to time. recommendations from thedecisions by written circulation, ARCG committee to the boardprovided that all members of the Mr Lewis B Kaden was elected of directors for adoption andboard of directors agree. by the board of directors as implementation. Suggestions ArcelorMittal’s first lead for improvement of the board ofThe board of directors held eight independent director in April 2008 directors’ process based on the Financial statementsmeetings in 2011. The average and remains lead independent prior year’s performance andattendance rate of the directors at director, having been re-elected as functioning are implementedthe board of directors’ meetings a director for a three-year term on during the following year.was 96.6%. May 10, 2011. The 2011 board of directors’In order for a meeting of the board The agenda of each meeting of the self-evaluation was completedof directors to be validly held, a and discussed by the board in early board of directors is decided jointlymajority of the directors must be by the chairman of the board of February 2012. Overall satisfactionpresent or represented, including at directors and the lead independentwith the quality of the boardleast a majority of the independent director. process increased compared withdirectors. In the absence of the the previous year, based on highchairman, the board of directors will Separate meetings of participation levels by directorsappoint by majority vote a chairman independent directors in the board of directors as wellfor the meeting in question. The The independent members of the as its committees in 2011 and thechairman may decide not to board of directors may schedule successful integration of the twoparticipate in a board of directors’ meetings outside the presence of new directors who joined the boardmeeting, provided he has given a non-independent directors. Four in 2011. The balance of the timeproxy to one of the directors who meetings of the independent spent by the board of directorswill be present at the meeting. For directors outside the presence of on strategic and other specificany meeting of the board of management and non-independent issues compared with the reviewdirectors, a director may designate directors were held in 2011. of financial and operationalanother director to represent him results and performance wasor her and vote in his or her name, an issue identified to meritprovided that the director so further consideration. ArcelorMittal Annual Report 2011designated may not represent morethan one of his or her colleagues atany time. 73
  • 73. Corporate governance continued The board of directors believes that In 2011, the directors attended a • ArcelorMittal’s system of internal its members have the appropriate total of four presentations made control regarding finance, range of skills, knowledge and to them by internal specialists accounting, legal compliance and experience, as well as the degree on specific areas of activity or ethics that the board of directors of diversity, necessary to enable it corporate functions (e.g. human and senior management have to effectively govern the business. resources, the Flat Carbon Europe established; and Board composition is reviewed on segment) to enhance the directors’ • ArcelorMittal’s auditing, a regular basis and additional skills knowledge in these areas and give accounting and financial reporting and experience are actively searched them the opportunity to ask processes generally. for in line with the expected questions directly to line managers. development of ArcelorMittal’s Site visits in France and Luxembourg The audit committee’s primary business as and when appropriate. were also conducted by members duties and responsibilities are to: of the board of directors. Continuing education program • be an independent and objective To further bolster the skills of its Board of directors’ committees party to monitor ArcelorMittal’s members, the board of directors The board of directors has three financial reporting process and launched a continuous education committees: internal controls system; program in 2009. The topics to • the audit committee; • review and appraise the be addressed through the program audit efforts of ArcelorMittal’s include areas of importance for the • the appointments, remuneration independent auditors and internal future growth and development and corporate governance auditing department; of the company (e.g. strategy, committee; and marketing, human resources, • provide an open avenue of • the risk management committee. industrial development, corporate communication among the governance, corporate responsibility, independent auditors, senior Audit committee legal and regulatory). Additional management, the internal audit The audit committee must be topics may be added at the request department and the board of composed solely of independent of the members of the board of directors; members of the board of directors. directors. The education program The members are appointed by the • review major legal and compliance usually consists of an introduction board of directors each year after matters and their follow up; by recognized experts in the the annual general meeting of relevant fields, who may be • approve the appointment and shareholders. All of the audit practitioners or academics, followed fees of the independent auditors; committee members must be by a facilitated discussion between and independent as defined in the the presenter and the board of Rule 10A-3 of the US Securities • monitor the independence of the directors. The members of the Exchange Act of 1934, as independent auditors. board of directors also have the amended. The audit committee opportunity to participate in makes decisions by a simple Since May 10, 2011, the audit specific programs designed for majority with no member having committee consists of four directors of publicly listed a casting vote. The primary functionmembers: Mr Narayanan Vaghul companies at reputable academic of the audit committee is to assist (chairman), Mr Wilbur L Ross, institutions and business schools. the board of directors in fulfilling Mr Antoine Spillmann, and its oversight responsibilities by Mr Bruno Lafont, each of whom is reviewing: an independent director according to the NYSE standards and the • the financial reports and other 10 Principles of Corporate financial information provided by Governance of the Luxembourg ArcelorMittal to any governmental Stock Exchange. The chairman of body or the public; the audit committee is Mr Vaghul. Mr Bruno Lafont joined the board of directors on May 10, 2011 and was appointed by the board of directors to the audit committee on the same date.74
  • 74. OverviewAccording to its charter, the audit • consider any candidate for The ARCG committee performs Our businesscommittee is required to meet at appointment or reappointment an annual self-evaluation, which wasleast four times a year. During to the board of directors at the completed in February 2012 with2011, the audit committee met six request of the board of directors respect to its 2011 performance.times. The average attendance rate and provide advice andof the directors at the audit recommendations to it regarding Risk management committeecommittee meetings held in 2011 the same; In June 2009, the board ofwas 90.0%. directors created a risk • evaluate the functioning of the management committee to assist it Sustainability board of directors and monitorThe audit committee performs an with risk management, in line with the board of directors’ self-annual self-evaluation, which was recent developments in corporate assessment process; andcompleted in February 2012 with governance best practices and inrespect to its 2011 performance. • develop, monitor and review parallel with the creation of a group corporate governance risk management committeeAppointments, remuneration and principles and corporate (‘GRMC’) at the executive level.corporate governance committee responsibility policies applicableThe appointments, remuneration to ArcelorMittal, as well as The members are appointed by Performanceand corporate governance their application in practice. the board of directors each yearcommittee (the ‘ARCG committee’) after the annual general meeting ofis comprised since May 10, 2011 The ARCG committee’s principal shareholders. The risk managementof four directors, each of whom criteria in determining the committee must be comprised ofis independent under the NYSE compensation of executives at least two members. At leaststandards and the 10 Principles is to encourage and reward half of the members of the riskof Corporate Governance of the performance that will lead to management committee mustLuxembourg Stock Exchange. long-term enhancement of be independent under the NYSE Governance shareholder value. The ARCG standards and the 10 PrinciplesThe members are appointed by committee may seek the advice of Corporate Governance of thethe board of directors each year of outside experts. Luxembourg Stock Exchange.after the annual general meeting The risk management committeeof shareholders. The ARCG The four members of the ARCG consists of three members:committee makes decisions by a committee are Mr Lewis B Kaden, Mr Jeannot Krecké, Mr Antoinesimple majority with no member HRH Prince Guillaume de Spillmann and Ms Suzanne Phaving a casting vote. Luxembourg, Mr Narayanan Vaghul, Nimocks. Ms Nimocks joined Financial statements and Ms Suzanne P Nimocks, each of the risk management committeeThe board of directors has whom is independent in accordance on May 10, 2011. Mr Sudhirestablished the ARCG committee to: with the NYSE standards and the Maheshwari, a member of the 10 Principles of Corporate Group Management Board who• determine, on its behalf and Governance of the Luxembourg chairs the GRMC, is an invitee on behalf of the shareholders Stock Exchange. The chairman of to the meetings of the risk within agreed terms of reference, the ARCG committee is Mr Kaden, management committee. ArcelorMittal’s compensation Ms Nimocks joined the ARCG framework, including short and committee on May 10, 2011. The risk management committee long-term incentives for the held a total of five meetings in chief executive officer, the chief The ARCG committee is required 2011. According to its charter, it is financial officer, the members of to meet at least twice a year. required to meet at least four times the Group Management Board During 2011, this committee met per year on a quarterly basis or and the members of the six times. The average attendance more frequently if circumstances management committee; rate at the ARCG committee so require. The average attendance• review and approve succession meetings held in 2011 was 100%. rate at the risk management and contingency plans for key committee meetings held in 2011 managerial positions at the level was 100%. of the Group Management Board and the management committee; ArcelorMittal Annual Report 2011 75
  • 75. Corporate governance continued The members of the risk • the review of proposals for Group Management Board management committee may assessing, defining and reviewing The Group Management Board decide to appoint a chairman the risk appetite/tolerance level is entrusted with the day-to-day by majority vote. Mr Spillmann of the group and ensuring that management of ArcelorMittal and currently acts as chairman. appropriate risk limits/tolerance the implementation of the levels are in place, with the aim of company’s strategy. Mr Lakshmi N Decisions and recommendations helping to define the group’s risk Mittal, the chief executive officer, of the risk management committee management strategy; is the chairman of the Group are adopted by a simple majority. Management Board. On June 1, • the review of the group’s internal The chairman or, in the absence of 2011, Mr Louis Schorsch joined and external audit plans to ensure the chairman, any other member the Group Management Board. that they include a review of the of the risk management committee, Mr Schorsch is in charge of Flat major risks facing the will report to the board of directors Carbon Americas, group strategy, ArcelorMittal group; and at each of the latter’s quarterly CTO, global automotive and meetings or more frequently if • making recommendations within research and development. circumstances so require. The risk the scope of its charter to management committee conducts ArcelorMittal’s senior The members of the Group an annual self-evaluation of its own management and to the board of Management Board are appointed performance and the review of its directors about senior and dismissed by the board of 2011 performance was completed management’s proposals directors. As the Group in February 2012. concerning risk management. Management Board is not a corporate body created by The purpose of the risk Transition committee Luxembourg law or ArcelorMittal’s management committee is to Following the spin-off of articles of association, it may support the board of directors in ArcelorMittal’s stainless and exercise only the authority granted fulfilling its corporate governance specialty steels business into to it by the board of directors. and oversight responsibilities by Aperam on January 25, 2011, an assisting with the monitoring and ad hoc transition committee was In implementing ArcelorMittal’s review of the risk management formed in order to monitor the strategic direction and corporate framework and process of implementation of the transitional policies, the chief executive officer ArcelorMittal. Its main agreements entered into with is supported by members of responsibilities and duties are Aperam. The transition committee ArcelorMittal’s senior management, to assist the board of directors reviewed the terms and conditions who have substantial experience in by making recommendations of the transitional services provided the steel and mining industries regarding the following matters: to Aperam in the course of 2011 at worldwide: the members of the the sole meeting of the transition Group Management Board and • the oversight, development committee, which took place in the members of the management and implementation of a risk November 2011. The transition committee. identification and management committee members are Mr Vaghul, process and the review and Mr Ross and Mr Kaden, with Management committee reporting on the same in a Mr Kaden acting as chairman. The The Group Management Board consistent manner throughout transition committee met once in is assisted by a management the ArcelorMittal group; 2011. The transition committee will committee comprised of 24 • the review of the effectiveness of remain in place for a maximum of members. The management the group-wide risk management three years. The decision has been committee discusses and prepares framework, policies and process at taken that the transition committee group decisions on matters of corporate, segment and business will be reconducted in 2012 and group-wide importance, integrates unit levels, and the proposing of will meet at the time of the review the geographical dimension of the improvements, with the aim of the third quarter 2012 results. group, ensures in-depth discussions of ensuring that the group’s with ArcelorMittal’s operational and management is supported by resources leaders, and shares an effective risk management information about the situation system; of the group and its markets. • the promotion of constructive and open exchanges on risk identification and management among senior management (through the GRMC), the board of directors, the internal assurance department, the legal department and other relevant departments within the ArcelorMittal group;76
  • 76. OverviewSuccession planning Other corporate Ethics and conflicts of interest Our businessSuccession management at governance practices Ethics and conflicts of interest areArcelorMittal is a systematic and ArcelorMittal is committed to applygoverned by ArcelorMittal’s code ofdeliberate process for identifying best practice standards in terms ofbusiness conduct, which establishesand preparing employees with the standards for ethical behavior corporate governance in its dealingspotential to fill key organizational with shareholders and aims to that are to be followed by allpositions should the current ensure good corporate governance employees and directors ofincumbent’s term expire. This by applying rules on transparency, ArcelorMittal in the exercise of theirprocess applies to all ArcelorMittal duties. They must always act in the quality of reporting and the balance Sustainabilityexecutives up to and including best interests of ArcelorMittal and of powers. ArcelorMittal continuallythe Group Management Board. monitors US, European Union and must avoid any situation in whichSuccession management aims to Luxembourg legal requirements their personal interests conflict, orensure the continued effective and best practices in order to could conflict, with their obligationsperformance of the organization make adjustments to its corporate to ArcelorMittal. Employees areby providing for the availability of governance controls and prohibited from acquiring anyexperienced and capable employees procedures when necessary. financial or other interest in anywho are prepared to assume these business or participate in any Performanceroles as they become available. ArcelorMittal complies with the 10 activity that could deprive Principles of Corporate Governance ArcelorMittal of the time or theFor each position, candidates are of the Luxembourg Stock Exchange attention needed to devote to theidentified based on performance in all respects except for the performance of their duties. Anyand potential and their ‘years to recommendation to separate the behavior that deviates from thereadiness’ and development needs posts of chairman of the board of code of business conduct is toare discussed and confirmed. directors and chief executive be reported to the employee’sRegular reviews of succession officer. The nomination of the supervisor, a member of the Governanceplans are conducted to ensure that same person to both positions management, the head of thethey are accurate and up to date. was approved in 2007 by the legal department or the head ofSuccession management is a shareholders (with the significant the internal assurance department.necessary process to reduce risk, shareholder abstaining) of Mittalcreate a pipeline of future leaders, Steel Company N.V., which was at Code of business conduct trainingensure smooth business continuity that time the parent company of is offered throughout ArcelorMittaland improve employee motivation. the combined ArcelorMittal group. on a regular basis in the form ofAlthough ArcelorMittal’s Since that date, the rationale for face-to-face trainings, webinars Financial statementspredecessor companies each combining the positions of chief and online trainings. All newhad certain succession planning executive officer and chairman of employees of ArcelorMittal mustprocesses in place, the process has the board of directors has become acknowledge the code of businessbeen reinforced, widened and made even more compelling. The board conduct in writing upon joining andmore systematic since 2006. The of directors is of the opinion that are periodically trained about theresponsibility to review and approve Mr Mittal’s strategic vision for the code of business conduct in eachsuccession plans and contingency steel industry in general and for location where ArcelorMittal hasplans at the highest level rests ArcelorMittal in particular in his operations. The code of businesswith the board’s appointments, role as CEO is a key asset to the conduct is available in theremuneration and corporate company, while the fact that he is ‘corporate governance – codegovernance committee. fully aligned with the interests of of business conduct’ section the company’s shareholders means of ArcelorMittal’s website at that he is uniquely positioned to www.arcelormittal.com lead the board of directors in his role as chairman. The combination In addition to the code of business of these roles was revisited at conduct, ArcelorMittal has the annual general meeting of developed a human rights policy shareholders of the company held and a number of other compliance in May 2011, when Mr Lakshmi N policies in more specific areas, such Mittal was re-elected to the board of directors for another three year term by a strong majority. ArcelorMittal Annual Report 2011 77
  • 77. Corporate governance continued as anti-trust, anti-corruption, Internal assurance list of insiders as required by the economic sanctions and insider ArcelorMittal has an internal Luxembourg market manipulation dealing. In all these areas, assurance function that, through (abus de marché) law of May 9, specifically targeted groups of its head of internal assurance, 2006. The IDR compliance officer employees are required to undergo reports to the audit committee. may assist senior executives and specialized compliance training. The function is staffed by full-time directors with the filing of notices Furthermore, ArcelorMittal’s professional staff located within required by Luxembourg law to be compliance program also includes a each of the principal operating filed with the Luxembourg financial quarterly compliance certification subsidiaries and at the corporate regulator, the CSSF (Commission de process covering all business level. Recommendations and Surveillance du Secteur Financier). segments and entailing reporting matters relating to internal control Furthermore, the IDR compliance to the audit committee. and processes are made by the officer has the power to conduct internal assurance function and investigations in connection with Process for handling complaints their implementation is regularly the application and enforcement of on accounting matters reviewed by the audit committee. the IDR, in which any employee or As part of the procedures of the member of senior management or board of directors for handling Independent auditors of the board of directors is required complaints or concerns about The appointment and determination to cooperate. accounting, internal controls and of fees of the independent auditors auditing issues, ArcelorMittal’s is the direct responsibility of the Selected new employees of anti-fraud policy and code of audit committee. The audit ArcelorMittal are required to business conduct encourage all committee is further responsible participate in a training course employees to bring such issues to for obtaining, at least once each about the IDR upon joining the audit committee’s attention on year, a written statement from ArcelorMittal and every three a confidential basis. In accordance the independent auditors that years thereafter. The individuals with ArcelorMittal’s anti-fraud and their independence has not been who must participate in the IDR whistleblower policy, concerns impaired. The audit committee training include the members of with regard to possible fraud or has also obtained a confirmation senior management, employees irregularities in accounting, auditing from ArcelorMittal’s principal who work in finance, legal, sales, or banking matters or bribery independent auditors to the effect mergers and acquisitions and other within ArcelorMittal or any of its that none of its former employees areas that the company may subsidiaries or other controlled are in a position within ArcelorMittal determine from time to time. In entities may also be communicated that may impair the principal addition, ArcelorMittal’s code of through the ‘corporate responsibility auditors’ independence. business conduct contains a section - ethics and governance – on ‘trading in the securities of the whistleblower’ section of the Measures to prevent insider company’ that emphasizes the ArcelorMittal website at dealing and market manipulation prohibition to trade on the basis www.arcelormittal.com where The board of directors of of inside information. An online ArcelorMittal’s anti-fraud policy ArcelorMittal has adopted insider interactive training tool based on and code of business conduct are dealing regulations (‘IDR’), which the IDR was developed in 2010 also available on the ArcelorMittal are updated when necessary and and deployed across the group in intranet in each of the main working in relation to which training is different languages in 2011 languages used within the group. In conducted throughout the group. through ArcelorMittal’s intranet, recent years ArcelorMittal has The IDR’s most recent version is with the aim of enhancing the implemented local whistleblowing available on ArcelorMittal’s website, staff’s awareness of the risks facilities, as needed. www.arcelormittal.com of sanctions applicable to insider dealing. During 2011, a total of 100 The IDR apply to the worldwide complaints relating to accounting operations of ArcelorMittal. The fraud were referred to the company secretary of ArcelorMittal company’s internal assurance team is the IDR compliance officer and (described below). Following review answers questions that members of by the audit committee, none of senior management, the board of these complaints was found to directors, or employees may have be significant. about the IDR’s interpretation. The IDR compliance officer maintains a78
  • 78. Overview There are inherent limitations to • provide reasonable assurance Our businessControls and procedures the effectiveness of any system of that unauthorized acquisition, useDisclosure controls and procedures disclosure controls and procedures, or disposition of ArcelorMittal’s “Of all the stakeholdersWe maintain disclosure controls including the possibility of human assets that could have a material we work in partnershipand procedures that are designed error and the circumvention or effect on the financial statements with, some of the mostto ensure that information required overriding of the controls and would be prevented or detectedto be disclosed in our reports in procedures. Accordingly, even on a timely basis. crucial for supportingaccordance with applicable laws effective disclosure controls and our commitment tois properly recorded, processed, procedures can only provide Because of its inherent limitations, sustainability, are Sustainabilitysummarized and reported in a reasonable assurance of achieving internal control over financial our suppliers. For thistimely manner and is accumulated their control objectives. reporting is not intended toand communicated to management, provide absolute assurance that partnership to beincluding the chief executive officer Management’s annual report a misstatement of our financial successful, we needand chief financial officer, as on internal control over financial statements would be prevented to build trust, andappropriate, to allow timely reporting or detected. In addition, projections that can only comedecisions regarding required Management is responsible of any evaluation of effectivenessdisclosures. ArcelorMittal’s controlsfor establishing and maintaining to future periods are subject to with transparency Performanceand procedures are designed to adequate internal control over the risk that controls may become and goodprovide reasonable assurance of financial reporting. Internal control inadequate because of changes in communications.”achieving their objectives. over financial reporting is a process conditions, or that the degree of designed to provide reasonable compliance with the policies or Davinder ChughWe carried out an evaluation assurance regarding the reliability procedures may deteriorate. Member of the Groupunder the supervision, and with the of financial reporting and the Management Board,participation of our management, preparation of financial statements Management assessed the responsible for shared servicesincluding our chief executive officer for external purposes in accordance effectiveness of internal control Governanceand chief financial officer, of the with generally accepted accounting over financial reporting as ofeffectiveness of the design and principles. December 31, 2011 based uponoperation of our disclosure controls the framework in ‘Internal Controland procedures as of December 31, Our internal control over financial – Integrated Framework’ issued2011. Based on this evaluation, our reporting includes those policies by the Committee of Sponsoringchief executive officer and chief and procedures that: Organizations of the Treadwayfinancial officer concluded that our • pertain to the maintenance of Commission (‘COSO’). Based ondisclosure controls and procedures records that, in reasonable detail, this assessment, management Financial statementswere effective as of December 31, accurately and fairly reflect the concluded that ArcelorMittal’s2011 and provided reasonable transactions and dispositions of internal control over financialassurance that information required the assets of ArcelorMittal; reporting was effective as ofto be disclosed by us in the reports December 31, 2011.required to be published by • provide reasonable assuranceArcelorMittal is (1) recorded, that transactions are recorded, asprocessed, summarized and necessary, to permit preparationreported in a timely manner in of financial statements inaccordance with applicable laws, and accordance with IFRS;(2) accumulated and communicated • provide reasonable assuranceto our management, including our that receipts and expenditureschief executive officer and our chief of ArcelorMittal are made infinancial officer, as appropriate, to accordance with authorizationsallow timely decisions regarding of ArcelorMittal’s managementrequired disclosures. and directors; and ArcelorMittal Annual Report 2011 79
  • 79. Corporate governance continued Compensation Board of directors compensation The appointments, remuneration and corporate governance committee of ArcelorMittal’s board of directors prepares proposals on the remuneration to be paid annually to the members of the board of directors. The total annual compensation of the members of ArcelorMittal’s board of directors paid in 2010 and 2011 was as follows: 2010 2011 2010 2011 Short-term Short-term Long-term Long-term (Amounts in $ thousands except option performance performance number number information) 20101 20111 related related of options of RSUs Lakshmi N Mittal $1,651 $1,7397 $692 $2,074 56,500 12,500 Vanisha Mittal Bhatia 172 174 – – – – Narayanan Vaghul 219 220 – – – – Suzanne P Nimocks2 – 179 – – – – Wilbur L Ross, Jr 191 194 – – – – Lewis B Kaden 264 264 – – – – François Pinault3 159 11 – – – – José Ramón Álvarez Rendueles Medina4 71 – – – – – Bruno Lafont5 – 126 – – – – John Castegnaro6 63 – – – – – Antoine Spillmann 212 213 – – – – HRH Prince Guillaume de Luxembourg 180 186 – – – – Jeannot Krecké 184 187 – – – – Total 3,366 3,493 692 2,074 56,500 12,500 1 Compensation with respect to 2010 (paid after shareholder 3 Mr Pinault resigned effective as of January 25, 2011. approval at the annual general meeting held on May 10, 2011) 4 The term of Mr Álvarez Rendueles Medina ended on May 11, 2010. and attendance fees for 2010 amounting to approximately 5 Mr Lafont was elected to ArcelorMittal’s board of directors effective $0.3 million (paid in February 2011) are included in the 2010 May 10, 2011. column. Compensation with respect to 2011 will be paid in 6 The term of Mr Castegnaro ended on May 11, 2010. 2012 and is included in the 2011 column. 7 These sums include attendance fees of $13,000 paid in relation to 2 Ms Nimocks was elected to ArcelorMittal’s board of directors 2010. Payment of attendance fees has been suppressed in relation effective January 25, 2011. to 2011. The base salary of the CEO has been increased by 3% effective from April 2011.80
  • 80. OverviewAs of December 31, 2010 and 2011, ArcelorMittal did not have any outstanding loans or advances to members of its board of directors and, Our businessas of December 31, 2011, ArcelorMittal had not given any guarantees for the benefit of any member of its board of directors. None of themembers of the board of directors, including the executive director, benefit from an ArcelorMittal pension plan.The following table provides a summary of the Restricted Share Units (RSU) and the options outstanding and the exercise price of theoptions granted to ArcelorMittal’s board of directors as of December 31, 2011 (in 2003 and 2004, no options were granted to membersof ArcelorMittal’s board of directors; in 2011, RSUs were granted but no options): Sustainability Weighted Options granted in RSUs average granted Options exercise price 2002 2005 2006 2007 2008 2009 2010 2011 total1 of options1Lakshmi N Mittal 80,000 100,000 100,000 60,000 60,000 60,000 56,500 12,5001 516,500 $35.62Vanisha Mittal Bhatia – – – – – – – – – –Narayanan Vaghul – – – – – – – – – –Suzanne P Nimocks2 – – – – – – – – – –Wilbur L Ross – – – – – – – – – – PerformanceLewis B Kaden – – – – – – – – – –François Pinault3 – – – – – – – – – –Bruno Lafont4Antoine Spillmann – – – – – – – – – –HRH Prince Guillaumede Luxembourg – – – – – – – – – –Jeannot Krecké – – – – – – – – – –Total 80,000 100,000 100,000 60,000 60,000 60,000 56,500 12,5001 516,500 – GovernanceExercise price5 $2.15 $27.31 $32.07 $61.09 $78.44 $36.38 $30.66 – – $35.62Term (in years) 10 10 10 10 10 10 10 – – – Apr. 5, Aug. 23, Sep. 1, Aug. 2, Aug. 5, Aug. 4, Aug. 3,Expiration date 2012 2015 2016 2017 2018 2019 2020 – – –1 The RSUs granted are not included in the total or in the weighted average exercise price of 4 Mr Lafont was elected to ArcelorMittal’s board of directors effective May 10, 2011. options. The corresponding treasury shares will be transferred to the participant on 5 Due to the spin-off of Aperam on January 25, 2011, the strike price of outstanding options September 29, 2014. was reduced by 5% in line with the spin-off ratio. The table above reflects this adjustment.2 Ms Nimocks was elected to ArcelorMittal’s board of directors effective January 25, 2011. Financial statements3 Mr Pinault resigned effective as of January 25, 2011.Senior management During 2011, approximately $1.5 Compensation philosophy Compensation framework million was accrued by ArcelorMittal ArcelorMittal’s compensation The appointments, remunerationcompensation to provide pension benefits to philosophy for its senior managers and corporate governanceThe total compensation paid senior management. No loans or is based on the following principles: committee of ArcelorMittal’s boardin 2011 to members of advances to ArcelorMittal’s senior of directors draws up proposals • provide total compensationArcelorMittal’s senior management management were made during annually on senior management competitive with executive(including Mr Lakshmi N Mittal in 2011, and no such loans or compensation for the board of compensation levels of a peerhis capacity as CEO) was $16.2 advances were outstanding as directors’ consideration. Such group composed of a selectionmillion in base salary (including of December 31, 2011. proposals relating to compensation of industrial companies of acertain allowances paid in cash, such comprise the following elements: similar size and scope;as allowances relating to car, petrol, Compensation policy • fixed annual salary;lunch and financial services) and • encourage and reward$17.2 million in short-term Scope performance that will lead • short-term incentives:performance-related variable pay ArcelorMittal’s compensation to long-term enhancement performance bonus; andconsisting of a bonus linked to philosophy and framework apply of shareholder value; to the following group of senior • long-term incentives: stock2010 results. The bonus linked to • promote internal pay equity options (until May 2011),2010 results was paid fully in cash, managers: and provide ‘market’ median restricted share units andunlike the bonus linked to the 2009 • the chief executive officer; (determined by reference to its performance share unitsresults which was paid partly in identified peer group) base pay (after May 2011).2009 and partly in 2010, and • the seven members of the Group Management Board; and levels for ArcelorMittal’s seniorpartly in cash and partly in managers with the possibility Fixed annual salaryshare-based compensation. • the ten executive vice presidents. to move up to the third quartile Base salary levels are reviewed ArcelorMittal Annual Report 2011The base salaries were increased of the market base pay levels annually to ensure that ArcelorMittalby an average percentage of 2.7% The compensation philosophy and depending on performance over remains competitive with market(promotions not included) effective governing principles also apply, with time; and median base pay levels.April 2011. certain limitations, to a wider group of employees that includes vice • promote internal pay equity and presidents, general managers and target total direct compensation managers. (base pay, bonus, and long-term incentives) levels for senior managers at the third quartile percentile of the market. 81
  • 81. Corporate governance continued Short-term incentives: • health and safety performance For executive vice presidents performance bonus at group level: 20%. in charge of shared services or ArcelorMittal has a short-term corporate departments, the 2011 incentive plan in place which Ebitda operating as a ‘circuit performance bonus formula is consists of a performance bonus breaker’ for financial measures based on: plan. The performance of the means that the 80% threshold • Ebitda at group level: 30% ArcelorMittal group as a whole, described above must be met for (acts as circuit breaker for the performance of the relevant Ebitda in order to trigger any bonus financial performance measures, business units, the achievement payment with respect to the Ebitda as explained above); of objectives specific to the and OFCF performance measures. department, and the individual • OFCF at group level: 20%; employee’s overall performance For the chief executive officer, • health and safety performance and potential determine the the performance bonus at 100% at group level: 10% on the outcome of the bonus calculation achievement of the business plan average group lost time injury for each employee. is equal to 100% of base salary. frequency rate; For the members of the Group The calculation of ArcelorMittal’s Management Board and the • budget of the department: 2011 performance bonus is aligned executive vice presidents, the 20%; and with ArcelorMittal’s strategic target is set at 80% and 60% • quantified specific measures: 20%. objectives of improving health and of base salary, respectively, with safety performance and our overall a few exceptions for individuals The different performance competitiveness: whose employment agreements measures are combined through provide for a higher percentage • no performance bonus will be a cumulative system: each measure for historical reasons. triggered if the achievement level is calculated separately and is added of the performance measures is up for the performance bonus For executive vice presidents less than the threshold of 80%; calculation. outside of the corporate • achievement of 100% of the departments and shared services, The individual performance and performance measure yields the 2011 bonus formula contains potential assessment ratings define 100% of the performance bonus the same measures as described the individual bonus multiplier that pay-out; and above, with more weight attributed will be applied to the performance to these measures at the level of • achievement of more than bonus calculated based on actual their respective business areas: 100% and up to a ceiling of 120% performance against the of the performance measures • Ebitda at group level: 20%; performance measures. Those generates a higher performance individuals who consistently • Ebitda at business unit level: bonus pay-out, except as perform at expected levels will 30% (this acts as circuit breaker explained below. have an individual multiplier of 1. with respect to the financial For outstanding performers, an performance measures, as The performance bonus for individual multiplier of up to 1.3 explained above); each individual is expressed as a may cause the performance bonus percentage of his or her annual base • OFCF at business unit level pay-out to be higher than 150% of salary. Performance bonus pay-outs (which is a function of Ebitda, the target bonus, up to 195% of may range from 50% of the target capex and operating working target bonus being the absolute bonus, for achievement of capital (‘OWC’); the OWC maximum. Similarly, a reduction performance measures at the average over the full year is factor will be applied for those at threshold (80%), to up to 150% taken into account): 30%; and the lower end. No bonus pay-out is for an achievement at or in excess a possible outcome for substandard • health and safety performance at of the ceiling of 120%. Between performance. business unit level: 20%. the 80% threshold and the 120% ceiling, the performance bonus The principles of the performance For the ArcelorMittal Distribution is calculated on a proportional, bonus plan, with different weight Services (‘AMDS’) and Mining straight-line basis. for performance measures and segments, the above mentioned different levels of target bonus, measures have been adapted to For the chief executive officer and are applicable to about 2,000 the specific characteristics of these the other members of the Group employees worldwide. businesses. For AMDS, the Ebitda Management Board, the 2011 at business level parameter (30% bonus formula is based on: weighting) is replaced by return • Ebitda at group level: 60% on capital employed (‘ROCE’). (this acts as ‘circuit breaker’ with Mining, OFCF and Ebitda at respect to group-level financial business level are reduced to a performance measures, as weighting of 15% each and an explained below); additional parameter is given a weighting of 30%: the Mining • operating free cash flow (‘OFCF’) total shipment volumes for iron at group level: 20%; and ore and coal.82
  • 82. OverviewOther benefits For the period from the May employment with the company Our businessIn addition to the compensation 2011 annual general shareholders’ and the fulfillment of targetselements described above, meeting to the annual general related to the followingother benefits may be provided meeting of shareholders to be performance measures: returnto members of the Group held in May 2012, a maximum of on capital employed (ROCE) andManagement Board, the 2,500,000 RSUs may be allocated total cost of employment (in $management committee and to eligible employees under the RSU a tonne) for the steel businessin certain cases other employees. plan. The RSU plan targets the 500 (TCOE) and the Mining volumeThese other benefits can include to 800 most senior managers plan 2011 for the Mining segment. Sustainabilityinsurance, housing (in cases across the ArcelorMittal group, Each performance measure has aof international mobility), car including the chief executive officer, weighting of 50%. In case theallowances, and tax assistance the other Group Management level of achievement of bothfor employees on international Board members and the executive performance targets togetherassignments. vice presidents. In September is below 80%, there is no 2011, a total of 1,303,515 shares vesting, and the rights areLong-term incentives: under the RSU plan were granted automatically forfeited.equity based incentives to a total of 772 employees. Performance The allocation of RSUs and PSUsShare unit plan: RSUs and PSUs The PSU plan to members of the GroupThe annual shareholders’ meeting The PSU plan’s main objective is Management Board and theon May 10, 2011 approved a new to be an effective performance- management committee underequity-based incentive plan to enhancing scheme based on the the RSU plan and the PSU plan isreplace the global stock option plan. employee’s contribution to the reviewed by the appointments,The new plan comprises a restricted eligible achievement of the remuneration and corporateshare unit plan (‘RSU plan’) and a company’s strategy. Awards governance committee, comprised Governanceperformance share unit plan (‘PSU under the PSU plan are subject of four independent directors,plan’) designed to incentivize the to the fulfillment of cumulative which makes a recommendationtargeted employees, to improve performance criteria over a to the full board of directors. Thethe long-term performance of three-year period from the date appointments, remuneration andthe company and to retain key of the PSU grant. The employees corporate governance committeeemployees. Both the RSU plan eligible to participate in the PSU also reviews the proposed grantsand the PSU plan are intended to plan are a sub-set of the group of RSUs and PSUs to eligiblepromote the alignment of interests of employees eligible to participate employees other than the members Financial statementsbetween the company’s in the RSU plan. The target group of the Group Management Boardshareholders and eligible employees for PSU grants is primarily the and the management committeeby allowing them to participate in chief executive officer, the and the principles governing theirthe success of the company. other members of the Group proposed allocation. The committee Management Board, the also decides the criteria forThe maximum number of restricted executive vice presidents granting PSUs and makes itsshare units (each, an ‘RSU’) and and the vice presidents. recommendation to the board ofperformance share units (each, a directors. These criteria are based‘PSU’) available for grant during any For the period from the May 2011 on the principle of rewardinggiven year is subject to the prior annual general shareholders’ performance upon the achievementapproval of the company’s meeting to the annual general of clear and measurable metrics forshareholders at the annual meeting of shareholders to be held shareholder value creation.general meeting. in May 2012, a maximum of 1,000,000 PSUs may be allocatedThe RSU plan to eligible employees under theThe aim of the RSU plan is to PSU plan.provide a retention incentive toeligible employees. It is subject The allocation of PSUs is expectedto ‘cliff vesting’ after three years, to take place in March 2012.with 100% of the grant vesting onthe third anniversary of the grant PSUs will vest three years aftercontingent upon the continued their date of grant subject to theactive employment of the eligible eligible employee’s continuedemployee within the ArcelorMittal ArcelorMittal Annual Report 2011group. The RSUs are an integral partof the company’s remunerationframework in which it serves thespecific objective of medium-termand long-term retention. 83
  • 83. Corporate governance continued The global stock option plan first three anniversaries of the The fair values for options and Prior to the adoption of the grant date, or, in total, upon theother share-based compensation share unit plan described above, death, disability or retirement are recorded as expenses in the ArcelorMittal’s equity based of the participant. consolidated statements of incentive plan took the form of operations over the relevant a stock option plan called the With respect to the spin-off vesting or service periods, adjusted global stock option plan. of Aperam, an addendum to the to reflect actual and expected levels ArcelorMittal global stock option of vesting. The fair value of each Under the terms of the plan 2009-2018 was adopted to option grant to purchase ArcelorMittal global stock option reduce by 5% the exercise prices of ArcelorMittal common shares is plan 2009-2018 (which replaced existing stock options. This change estimated on the date of grant the ArcelorMittal shares plan that is reflected in the information using the Black-Scholes-Merton expired in 2009), ArcelorMittal may given below. option pricing model with the grant options to purchase common weighted average assumptions stock to senior management of On August 3, 2010, ArcelorMittal (based on year of grant and ArcelorMittal and its associates granted 5,864,300 options under recalculated at the spin-off date for up to 100,000,000 shares of the ArcelorMittal global stock of the stainless steel business) common stock. The exercise price option plan 2009-2018 to a group shown below. of each option equals not less of key employees at an exercise than the fair market value of price of $32.27 per share. The ArcelorMittal stock on the grant options expire on August 3, 2020. date, with a maximum term of No options were granted in 2011 10 years. Options are granted at (RSUs were granted; see ‘restricted the discretion of ArcelorMittal’s share units (RSUs) and performance appointments, remuneration and share units (PSUs)’ above). corporate governance committee, or its delegate. The options vest either ratably upon each of the Initial exercise prices New exercise prices Year of grant (per option) (per option) August 2008 $82.57 $78.44 December 2007 74.54 70.81 August 2007 64.30 61.09 June 2006 38.99 37.03 August 2009 38.30 36.38 September 2006 33.76 32.07 August 2010 32.27 30.66 August 2005 28.75 27.31 December 2008 23.75 22.56 November 2008 22.25 21.14 April 2002 2.26 2.15 2010 Exercise price $30.66 Dividend yield 2.02% Expected annualized volatility 50% Discount rate-bond equivalent yield 3.21% Weighted average share price $30.66 Expected life in years 5.75 Fair value per option $17.2484
  • 84. OverviewThe expected life of the options of the spin-off of Aperam, the Option activity with respect Our businessis estimated by observing general fair values of the stock options to ArcelorMittalShares andoption holder behavior and actual outstanding have been recalculated ArcelorMittal global stock optionhistorical lives of ArcelorMittal with the modified inputs of the plan 2009-2018 is summarizedstock option plans. In addition, the Black-Scholes-Merton option below as of and for each of theexpected annualized volatility has pricing model, including the years ended December 31, 2009,been set by reference to the implied weighted average share price, 2010 and 2011.volatility of options available on exercise price, expected volatility,ArcelorMittal shares in the open expected life, expected dividends, For RSUs, the fair value determined Sustainabilitymarket, as well as historical the risk-free interest rate and an at the grant date is expensed onpatterns of volatility. additional expense of $11 million a straight line method over the has been recognized in the year vesting period and adjusted for theThe compensation expense ended December 31, 2011 for effect of non-market-basedrecognized for stock option plans the current and past periods. vesting conditions. In 2011, thewas $176 million, $133 million and compensation expense recognized$73 million for each of the years for the RSUs granted was $2 million.ended December 31, 2009, 2010, Performanceand 2011, respectively. At the date Governance Financial statements Weighted Range of average Number of exercise prices exercise price options (per option) (per option)Outstanding, December 31, 2009 24,047,380 $2.26–82.57 $55.22Granted 5,864,300 32.27 32.27Exercised (371,200) 2.26–33.76 21.27Forfeited (223,075) 28.75–82.57 53.42Expired (644,431) 2.26–82.57 49.55Outstanding, December 31, 2010 28,672,974 2.26–82.57 50.95Exercised (226,005) 2.15–32.07 27.57Forfeited (114,510) 27.31–78.44 40.26Expired (662,237) 15.75–78.44 57.07Outstanding, December 31, 2011 27,670,222 2.15–78.44 48.35Exercisable, December 31, 2011 21,946,104 2.15–78.44 52.47Exercisable, December 31, 2010 16,943,555 2.26–82.57 56.59Exercisable, December 31, 2009 11,777,703 2.26–82.57 52.46The following table summarizes certain information regarding total stock options of the company outstandingas of December 31, 2011:Options outstanding Weighted Options average exercisableExercise prices Number of contractual life (number of(per option) options (in years) options) Maturity ArcelorMittal Annual Report 201178.44 6,468,150 6.60 6,468,150 August 5, 201870.81 13,000 5.95 13,000 December 11, 201761.09 4,753,137 5.59 4,753,137 August 2, 201737.03 1,268,609 1.50 1,268,609 June 30, 201336.38 5,889,296 7.60 3,988,364 August 4, 201932.07 2,040,380 4.67 2,040,380 September 1, 201630.66 5,772,634 8.60 1,949,448 August 3, 202027.31 1,244,936 3.65 1,244,936 August 23, 201522.56 32,000 6.96 32,000 December 15, 201821.14 20,585 6.87 20,585 November 10, 20182.15 167,495 0.26 167,495 April 5, 2012$2.15–78.44 27,670,222 6.51 21,946,104 85
  • 85. Corporate governance continued Share ownership RSUs, the corresponding shares will Pursuant to the ESPP 2010, eligible be transferred to the beneficiaries employees could apply to purchase As of December 31, 2011, on September 29, 2014. a number of shares not exceeding the aggregate beneficial share that number of whole shares equal ownership of ArcelorMittal In 2003 and 2004, no options to the lower of 200 shares and the directors and senior management were granted to members of Mittal number of whole shares that may (26 individuals) totaled 2,438,436 Steel’s senior management. be purchased for $15,000, rounded ArcelorMittal shares (excluding down to the nearest whole number shares owned by ArcelorMittal’s In accordance with the Luxembourg of shares. significant shareholder and including Stock Exchange’s 10 Principles of options to acquire 1,840,202 Corporate Governance, non- The purchase price was equal to ArcelorMittal common shares that executive members of the average of the opening and the are exercisable within 60 days of ArcelorMittal’s board of directors closing prices of the ArcelorMittal December 31, 2011), representing do not receive share options, share trading on the NYSE on 0.16% of the total issued share RSUs or PSUs. the exchange day immediately capital of ArcelorMittal. Excluding preceding the opening of the options to acquire ArcelorMittal Employee share purchase plan subscription period, which is common shares, these 26 (ESPP) referred to as the ‘reference price’, individuals beneficially own The annual general shareholders’ less a discount equal to: 598,234 ArcelorMittal common meeting held on May 11, 2010 shares. Other than the significant • 15% of the reference price for adopted an employee share shareholder, each director and a purchase order not exceeding purchase plan (the ‘ESPP 2010’) member of senior management the lower of 100 shares and the as part of a global employee beneficially owns less than 1% number of shares (rounded down engagement and participation of ArcelorMittal’s shares. to the nearest whole number) policy. As with the previous corresponding to an investment employee share purchase plans In 2009, the percentage of total of $7,500 (the first cap); and implemented in 2008 and 2009, common shares (including treasury thereafter, the ESPP 2010’s goal was to stock) in the possession of the strengthen the link between the • 10% of the reference price significant shareholder decreased group and its employees and to for any additional acquisition of from 43.05% to 40.84% as a result align the interests of ArcelorMittal shares up to a number of shares of an offering of new shares of employees and shareholders. The (including those in the first cap) which the significant shareholder main features of the plan, which not exceeding the lower of 200 acquired 10%. The ownership of was implemented in November shares and the number of shares the significant shareholder increased 2010, are outlined below: (rounded down to the nearest in 2010, and was 40.87% as of whole number) corresponding December 31, 2010. The ESPP 2010 was offered to an investment of $15,000 to 183,560 employees in 21 (the second cap). In 2010, the number of jurisdictions. ArcelorMittal offered ArcelorMittal options granted to a maximum total number of All shares purchased under the ESPP directors and senior management 2,500,000 shares (0.16% of the 2008, 2009 and 2010 are held (including the significant current issued shares on a fully in custody for the benefit of the shareholder) was 643,900 at an diluted basis). A total of 164,171 employees in global accounts with exercise price of $30.66. The shares were subscribed, 1,500 of BNP Paribas Securities Services, options vest either ratably upon which were subscribed by members except for shares purchased by each of the first three anniversaries of the Group Management Board Canadian and US employees, which of the grant date (or in total upon and the management committee are held in custody in one global the death, disability or retirement of the company. The subscription account with Computershare, which of the grantee) and expire ten years price was $34.62 before discounts. recently acquired the shareowner after the grant date. In 2011, the The subscription period ran from services business of The Bank of number of ArcelorMittal RSUs November 16, 2010 until New York Mellon. granted to directors and senior November 25, 2010 and was management (including the settled with treasury shares on significant shareholder) was January 10, 2011. 132,500; upon vesting of the86
  • 86. OverviewShares purchased under the plan During this period, and subject to that will be exclusively controlled Our businessare subject to a three-year lock-up the early exit events, dividends by Aperam, except in certainperiod as from the settlement date, paid on shares are held for the jurisdictions where terminationexcept for the following early exit account of the employee and of employment is not an earlyevents: permanent disability of accrue interest. Employee exit event; andthe employee, termination of the shareholders are entitled to any • the Aperam shares to beemployee’s employment or death dividends paid by ArcelorMittal received by ESPP participantsof the employee. At the end of after the settlement date and they will be blocked in line with thethis lock-up period, the employees are entitled to vote their shares. Sustainability lock-up period applicable to thewill have a choice either to sell their ArcelorMittal shares in relationshares (subject to compliance with With respect to the spin-off to which the Aperam shares areArcelorMittal’s insider dealing of ArcelorMittal’s stainless and allocated based on a ratio ofregulations) or keep their shares specialty steels business, an one Aperam share for 20and have them delivered to their addendum to the charter of the ArcelorMittal shares.personal securities account, or 2008, 2009 and 2010 ESPPsmake no election, in which case was adopted providing, amongshares will be automatically sold. other measures, that: PerformanceShares may be sold or released • the spin-off shall be deemedwithin the lock-up period in the an early exit event for thecase of early exit events. participants who will be employees of one of the entities GovernanceThe following table summarizes outstanding share options and RSUs, as of December 31, 2011, granted to the members of senior management Financial statementsof ArcelorMittal (or its predecessor company Mittal Steel, prior to 2007). Year of grant RSU year of Average weighted 2002 2005 2006 2007 2008 2009 2010 grant 2011 Total1,2 exercise price2Senior managers(includingsignificantshareholder) 105,000 247,180 333,372 471,000 529,000 588,000 568,450 132,500 2,984,717Exercise price3 $2.15 $27.31 $32.07 $61.09 $78.44 $36.38 $30.66 – – $44.08Term (in years) 10 10 10 10 10 10 10 – – – Apr. 5, Aug. 23, Sep. 1, Aug. 2, Aug. 5, Aug. 4, Aug. 3,Expiration date 2012 2015 2016 2017 2018 2019 2020 – – –1 The 110,715 options granted by Arcelor in 2006 for an exercise price of €28.62 2 The RSUs granted are not included in the total or in the weighted average exercise price of options. (at a conversion rate of 1 euro = 1.2939 US dollars) and 32,000 options granted on 3 Due to the spin-off of Aperam on January 25, 2011, the exercise price of outstanding options December 15, 2008 at an exercise price of $22.56 have been included in the total was reduced by 5% in line with the spin-off ratio. The table above reflects this adjustment. number of options and the average weighted exercise price. ArcelorMittal Annual Report 2011 87
  • 87. Major shareholders and related party transactions Major shareholders The following table sets forth ArcelorMittal by BNP Paribas information as of December 31, Securities Services in Amsterdam, As of December 31, 2011, 2011 with respect to the beneficial or directly on ArcelorMittal’s the authorized share ownership of ArcelorMittal Luxembourg shareholder common shares by each person register without being held capital of ArcelorMittal who is known to be the beneficial on ArcelorMittal’s local Dutch consisted of 1,617,000,000 owner of more than 5% of the shareholder register. Under common shares, without shares and all directors and senior Luxembourg law, the ownership of nominal value. At management as a group. registered shares is evidenced by the inscription of the name of the December 31, 2011, The ArcelorMittal common shares shareholder, the number of shares 1,560,914,610 common may be held in registered form only. held by such shareholder and the shares, compared to Registered shares may consist of (a) amount paid up on each share in 1,560,914,610 common shares traded on the NYSE, or New the shareholder register of York Shares, which are registered in ArcelorMittal. shares at December 31, a register kept by or on behalf of 2010, were issued and ArcelorMittal by its New York At December 31, 2011, there 1,548,951,866 common transfer agent, (b) shares traded on were 2,653 shareholders other shares, compared to Euronext Amsterdam by NYSE than the significant shareholder, Euronext, Euronext Paris by NYSE Mr Mittal and Mrs Mittal holding 1,548,561,690 common Euronext, the regulated market of an aggregate of 52,994,104 shares at December 31, the Luxembourg Stock Exchange ArcelorMittal common shares 2010, were outstanding. and the Spanish Stock Exchanges registered in ArcelorMittal’s (Madrid, Bilbao, Valencia and shareholder register, representing Barcelona), which are registered approximately 3% of the in ArcelorMittal’s shareholders’ common shares issued register, or (c) ArcelorMittal (including treasury shares). European Register Shares, which are registered in a local shareholder register kept by or on behalf of ArcelorMittal common shares1 Number % Significant shareholder2 638,063,696 40.88 Treasury stock3 9,663,709 0.62 Other public shareholders 913,187,205 58.50 Total 1,560,914,610 100.00 Of which: directors and senior management4,5 2,438,436 0.16 1 For purposes of this table, a person or group of persons is deemed to Lumen Investments S.à r.l. Accordingly, Mr Mittal is the beneficial have beneficial ownership of any ArcelorMittal common shares as of owner of 638,018,696 ArcelorMittal common shares, Mrs Mittal a given date on which such person or group of persons has the right is the beneficial owner of 637,383,263 common shares and the to acquire such shares within 60 days after December 31, 2011 significant shareholder is the beneficial owner of 638,063,696 upon exercise of vested portions of stock options. The first third of common shares. Excluding options, Mr Lakshmi N Mittal and the stock options granted on August 3, 2010 vested on August 3, Mrs Usha Mittal together beneficially own 637,604,863 2011 and the first and second third of the stock options granted on ArcelorMittal common shares. August 4, 2009 vested on August 4, 2010 and August 4, 2011 3 Represents ArcelorMittal common shares repurchased pursuant to respectively; all stock options of the previous grants have vested. share repurchase programs in prior years, fractional shares returned 2 Mr Lakshmi N Mittal and his wife, Mrs Usha Mittal, have direct in various transactions, and the use of treasury shares in various ownership of ArcelorMittal common shares and indirect ownership transactions in prior years; excludes (1) 164,171 shares used to of holding companies that own ArcelorMittal common shares. settle purchases under the ESPP 2010 offering that closed on Nuavam Investments S.à r.l., a limited liability company organized January 10, 2011, (2) 226,005 options that were exercised during under the laws of Luxembourg, is the owner of 112,338,263 the 12 months ended December 31, 2011, (3) 1,840,202 stock ArcelorMittal common shares. Lumen Investments S.à r.l., a limited options that can be exercised by directors and senior management liability company organized under the laws of Luxembourg, is the (other than Mr Mittal) and (4) 458,833 stock options that can be owner of 525,000,000 ArcelorMittal common shares. Mr Mittal is exercised by Mr Mittal, in each case within 60 days of December 31, the direct owner of 221,600 ArcelorMittal common shares and 2011. Holders of these stock options are deemed to beneficially holds options to acquire an additional 516,500 ArcelorMittal own ArcelorMittal common shares for the purposes of this table common shares, of which 458,833 are, for the purposes of this due to the fact that such options are exercisable within 60 days. table, deemed to be beneficially owned by Mr Mittal due to the fact 4 Includes shares beneficially owned by directors and members of that those options are exercisable within 60 days. Mrs Mittal is the senior management; excludes shares beneficially owned by direct owner of 45,000 ArcelorMittal common shares. Mr Mittal, Mr Mittal. Mrs Mittal and the significant shareholder share indirect beneficial 5 These 2,438,436 ArcelorMittal common shares are included in ownership of 100% of each of Nuavam Investments S.à r.l. and shares owned by the public shareholders indicated above.88
  • 88. OverviewAt December 31, 2011, there Memorandum of understanding Standstill Once the significant shareholder Our businesswere 188 US shareholders holding On June 25, 2006, Mittal Steel, the The significant shareholder agreed exceeds the threshold mentioned inan aggregate of 86,758,078 significant shareholder and Arcelor not to acquire, directly or indirectly, the first paragraph of this ‘standstill’New York Shares, representing signed a binding Memorandum of ownership or control of an amount subsection or the 45% limit, as theapproximately 5.56% of the Understanding (‘MoU’) to combine of shares in the capital stock of the case may be, as a consequence ofcommon shares issued (including Mittal Steel and Arcelor in order company exceeding the percentage any corporate event set forth intreasury shares). ArcelorMittal’s to create the world’s leading steel of shares in the company that it will (1) or (2) above, it shall not beknowledge of the number of company. In April 2008, the board own or control following completion permitted to increase theNew York Shares held by US of directors approved resolutions of the offer (as defined in the MoU) percentage of shares it owns or Sustainabilityholders is based solely on the amending certain provisions of for Arcelor and any subsequent offer controls in any way except as arecords of its New York transfer the MoU in order to adapt it to or compulsory buy-out, except with result of subsequent occurrencesagent regarding registered the company’s needs in the the prior written consent of a of the corporate events describedArcelorMittal common shares. post-merger and post- majority of the independent in (1) or (2) above, or with the prior integration phase. directors on the company’s board written consent of a majority ofAt December 31, 2011, there of directors. Any shares acquired in the independent directors on thewere 783,824,165 ArcelorMittal On the basis of the binding MoU, violation of this restriction will be company’s board of directors.common shares being held through Arcelor’s board of directors deprived of voting rights and shall Performancethe Euroclear/Iberclear clearing recommended Mittal Steel’s offer be promptly sold by the significant If subsequently the significantsystem in the Netherlands, France, for Arcelor and the parties to the shareholder. Notwithstanding the shareholder sells down belowLuxembourg and Spain. The MoU agreed to certain corporate above, if (and whenever) the the threshold mentioned in thespin-off of ArcelorMittal’s stainless governance and other matters significant shareholder holds, first paragraph of this ‘standstill’and specialty steels business into relating to the combined directly and indirectly, less than 45% subsection or the 45% limit, asAperam effective January 25, ArcelorMittal group. Certain of the then-issued company shares, the case may be, it shall not be2011 had no impact on the number provisions of the MoU relating the significant shareholder may permitted to exceed the thresholdof ArcelorMittal’s issued shares, to corporate governance were purchase (in the open market or mentioned in the first paragraph Governancewhich remains at 1,560,914,610. incorporated into the articles of otherwise) company shares up to of this ‘standstill’ subsection or association of ArcelorMittal at the such 45% limit. In addition, the the 45% limit, as the case mayRelated party transactions extraordinary general meeting of the significant shareholder is also be, other than as a result of anyArcelorMittal engages in shareholders on November 5, 2007. permitted to own and vote shares in corporate event set out in (1)certain commercial and financial excess of the threshold mentioned or (2) above or with the priortransactions with related parties, Certain additional provisions of the in the immediately preceding written consent of a majorityall of which are affiliates and joint MoU expired effective August 1, paragraph or the 45% limit of the independent directors.ventures of ArcelorMittal. Please 2009. ArcelorMittal’s corporate mentioned above, if such ownership Financial statementsrefer to Note 14 of ArcelorMittal’s governance rules will continue to results from (1) subscription for Finally, the significant shareholderconsolidated financial statements. reflect, subject to those provisions shares or rights in proportion to is permitted to own and vote of the MoU that have been its existing shareholding in the shares in excess of the thresholdShareholder’s agreement incorporated into the articles of company where other shareholders mentioned in the first paragraphMr Lakshmi N Mittal, a company association, the best standards have not exercised the entirety of this ‘standstill’ subsection orcontrolled by the significant of corporate governance for of their rights or (2) any passive the 45% limit mentioned above ifshareholder and ArcelorMittal comparable companies and to crossing of this threshold resulting it acquires the excess shares in theare parties to a shareholder and conform with the corporate from a reduction of the number of context of a takeover bid by a thirdregistration rights agreement governance aspects of the NYSE company shares (e.g. through party and (1) a majority of the(the ‘shareholder’s agreement’) listing standards applicable to self-tender offers or share independent directors of thedated August 13, 1997. Pursuant non-US companies and Ten buy-backs) if, in respect of (2) company’s board of directorsto the shareholder’s agreement and Principles of Corporate Governance only, the decisions to implement consents in writing to suchsubject to the terms and conditions of the Luxembourg Stock Exchange. such measures were taken at a acquisition by the significantthereof, ArcelorMittal shall, upon shareholders’ meeting in which shareholder or (2) the significantthe request of certain holders of The following summarizes the main the significant shareholder did not shareholder acquires such sharesrestricted ArcelorMittal shares, use provisions of the MoU that remain vote or by the company’s board in an offer for all of the shares ofits reasonable efforts to register in effect or were in effect in 2011. of directors with a majority the company.under the Securities Act of 1933, of independent directors votingas amended, the sale of in favor.ArcelorMittal shares intendedto be sold by those holders. ArcelorMittal Annual Report 2011 89
  • 89. Major shareholders continued Lock-up Subscription to, and share lending Transitional services The significant shareholder had agreement in connection with, and related agreements agreed for a five-year period not to the May 2009 share offering Aperam has extended the transfer (and to cause its affiliates ArcelorMittal sold 140,882,634 transitional services agreement not to transfer) directly or indirectlycommon shares in a transaction for an additional term of one year any of the shares in the company that closed on May 6, 2009. until December 31, 2012, without the approval of a majority Ispat International Investments S.L. according to the terms and of the independent directors of the (‘Ispat’), a holding company conditions of such agreement. company. This lock-up provision beneficially owned by Mr Lakshmi In addition, Aperam will be entitled expired on August 1, 2011. N Mittal and Mrs Usha Mittal, to terminate the transitional subscribed for 14,088,063 services agreement at any time Non-compete common shares (or 10%) in the by giving three months’ notice to For so long as the significant offering on a deferred-delivery ArcelorMittal. ArcelorMittal, shareholder holds and controls basis. The offering was settled by however, may not terminate the at least 15% of the outstanding the company on May 6, 2009 transitional services agreement shares of the company or has (except with respect to Ispat) other than for material breaches of representatives on the company’s with 98 million common shares the agreement, Aperam’s insolvency board of directors or Group borrowed from Ispat pursuant to or if control over Aperam changes. Management Board, the significant a share lending agreement dated shareholder and its affiliates will not April 29, 2009 and the remainder Among other services, ArcelorMittal be permitted to invest in, or carry was settled using shares held in will provide the following services to on, any business competing with the treasury. The company returned the Aperam under the transitional company, except for Ispat Indonesia. borrowed shares to, and delivered services agreement: (i) corporate the shares subscribed by, Ispat on insurance, (ii) consolidation, (iii) legal Repurchase of shares from June 22, 2009 by issuing services, (iv) treasury back office entity related to director 112,088,263 shares following services, (v) health and safety Following the contribution shareholder approval at an (REACH implementation platform), of 76.88% of Saar Ferngas, extraordinary general meeting held (vi) company secretary , (vii) a German gas and electricity on June 17, 2009 of a resolution technical office, (viii) corporate IS/IT producer and distributor, broadening the authorization of and (ix) communication. The service on January 23, 2009 to an the board of directors to increase charges payable by Aperam to ArcelorMittal associated the company’s share capital. Under ArcelorMittal will be calculated company, Soteg, the stake the terms of the share lending individually for each service provided held by ArcelorMittal in Soteg, a agreement, the company paid Ispat on a cost-plus margin basis. Luxembourg gas and electricity a share lending fee of $2 million. producer and distributor, increased In particular, under the transitional from 20% to 26.15%. On February Agreements with Aperam services agreement, consolidation 16, 2009, ArcelorMittal sold in connection with stainless services means the maintenance 2.48% of Soteg to the Government steel spin-off and development of certain Wind fence system in Brazil of Luxembourg and SNCI In connection with the spin-off software necessary for Aperam’s In 2011, ArcelorMittal Tubarão (‘Société Nationale de Crédit et of its stainless steel division into reporting and consolidation. announced the installation of a wind d’Investissement’), a Luxembourg a separately focused company, fence system around the coal yard government controlled Aperam, which was completed on Insurance service is limited to high- that supplies the Sol Coqueria coke plant in Brazil in order to contain investment company. January 25, 2011, ArcelorMittal level advice for the management of dust emissions. The screens are entered into several agreements Aperam’s insurance policies. Access 450 meters long and 20 meters with Aperam. These agreements to certain continuing education high, one and a half times the height include a master transitional programs provided by ArcelorMittal of the piles of coal. The $3.6 million installation was completed in services agreement dated January will be on an on-demand basis. December and addresses the issue 25, 2011 (the ‘transitional services ArcelorMittal will also continue to of dust being generated in the coal agreement’), a purchasing services provide limited legal support, with yard which then affects local agreement and a sourcing services the possible assistance of external communities. agreement, certain commitments legal counsel. 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.90
  • 90. OverviewArcelorMittal continued to The purchasing services agreement Financing agreements Our businessmanage the administrative aspects also permit Aperam to avail itself As of the spin-off, Aperam’sof Aperam’s trademarks, domain of the services and expertise of principal sources of financingnames and patents portfolio for one ArcelorMittal for certain capital included loans from ArcelorMittalyear, and Aperam had the right to expenditure items not specific entities at the level of ArcelorMittalcontinue to use the ArcelorMittal to stainless and specialty steel Inox Brasil, which holds Aperam’sbrand for a transitional six month production. The purchasing assets in Brazil, and ArcelorMittalperiod that is now over. services agreement and the Stainless Belgium, which holds sourcing services agreement have Aperam’s assets in Belgium. SustainabilityIn the area of research and been entered into for a term of two These facilities were refinanceddevelopment, Aperam entered into years, expiring on January 24, 2013. in connection with the spin-off.arrangements with ArcelorMittalfor its withdrawal from the In South America, ArcelorMittal On January 19, 2011, ArcelorMittalArcelorMittal global research and Brasil performed certain corporate Finance as lender and ArcelorMittaldevelopment organization and for functions and certain purchasing and Aperam as borrowers enteredsetting out a framework for future activities for the benefit of certain into a $900 million credit facilitycooperation between the two Brazilian subsidiaries of Aperam until for general corporate purposes Performancegroups in relation to certain March 31, 2011. On April 1, 2011, and for the refinancing of existingongoing research and development ArcelorMittal Brasil ceased intercompany and other debtprograms. In addition, Aperam and performing the corporate functions (the ‘bridge loan’). The bridge loanArcelorMittal organized the fair of the relevant Brazilian subsidiaries was entered into for a period oftransfer of certain patents to of Aperam and transferred the 364 days after January 25, 2011.Aperam, as well as the licensing necessary personnel to The bridge loan was made availableof some patents between them. ArcelorMittal Inox Brasil to enable to ArcelorMittal and thenMoreover, Aperam and ArcelorMittal the latter to perform itself the automatically transferred by Governanceare keeping open the possibility of required corporate functions, operation of law to Aperam inentering into ad hoc cooperation except for the legal activities and connection with its spin-off.agreements for future research personnel, which were transferred The bridge loan was fully repaid byand development purposes. as of May 1, 2011. Insurance, Aperam with the proceeds of (i) a real estate, purchasing and payroll borrowing base facility agreementThe purchasing and sourcing activities, however, continued to be dated March 15, 2011 and (ii) anof raw materials generally are performed by ArcelorMittal Brasil offering of notes by Aperam onnot covered by the transitional for the benefit of certain Brazilian March 28, 2011. Financial statementsservices agreement. Aperam subsidiaries of Aperam, it beingwill be responsible for the sourcing understood that, as of April 1,of its key raw materials, including 2011, the costs of these activitiesnickel, chromium, molybdenum are being shared by Aperam’sand stainless steel scrap. However, relevant Brazilian subsidiaries on theunder the terms of the purchasing basis of new cost allocation agreedservices agreement and the upon between the parties.sourcing services agreement,Aperam relies on ArcelorMittal Certain services will continuefor advisory services in relation to to be provided to Aperamthe negotiation of certain contracts pursuant to existing contractswith global or large regional with ArcelorMittal entities thatsuppliers, including those relating ArcelorMittal has specificallyto the following key categories: agreed to assume.energy (electricity, natural gas,industrial gas), raw materials(ferro-alloys, certain basematerials), operating materials(rolls, electrodes, refractories) andindustrial products and services. ArcelorMittal Annual Report 2011 91
  • 91. OverviewAdditionalinformation ArcelorMittal as parent company ArcelorMittal Finance S.C.A. is a Minority shareholders litigation Our business ArcelorMittal, incorporated under société en commandite par actions On January 8, 2008, ArcelorMittal the laws of Luxembourg, is the with registered office address at received a writ of summons on parent company of the ArcelorMittal 19, avenue de la Liberté, L-2930 behalf of four hedge fund group and is expected to continue Luxembourg, Grand Duchy of shareholders of Arcelor to this role during the coming years. Luxembourg, registered with the appear before the civil court of The company has no branch Registre du Commerce et des Luxembourg. The summons was offices and generated a net loss Sociétés Luxembourg under also served on all natural persons number B 13.244. ArcelorMittal sitting on the board of directors Sustainability of $480 million in 2011. Finance is indirectly 100% owned of ArcelorMittal at the time of Group companies listed on the by ArcelorMittal. ArcelorMittal the merger and on the significant Luxembourg Stock Exchange Finance was, until June 18, 2008, shareholder. The claimants ArcelorMittal’s securities are traded the principal finance vehicle of the requested, among other things, the on several exchanges, including the ArcelorMittal group and, in this cancellation and the amendment Luxembourg Stock Exchange, and connection, it issued a number of of the corporate decisions relating its primary stock exchange bonds listed on the Luxembourg to the second-step merger in Stock Exchange. ArcelorMittal order to reflect an exchange ratio Performance regulator is the Luxembourg CSSF (Commission de Surveillance du Finance’s CSSF issuer number of 11 ArcelorMittal (the entity Secteur Financier). ArcelorMittal’s is E-0225. resulting from the first step CSSF issuer number is E-0001. merger) shares for seven Arcelor ArcelorMittal Rodange & shares (ignoring the impact of In addition to ArcelorMittal, the Schifflange S.A., a société anonyme the share capital restructuring securities of one other ArcelorMittal with registered office address at of Arcelor) accompanied by the group company are listed on the 2, rue de l’Industrie, L-4823 allocation by the significant Rodange, Grand Duchy of shareholder or the company of Governance Luxembourg Stock Exchange. Luxembourg, registered with the additional shares to the claimants Registre du Commerce et des to reflect this revised ratio, and Sociétés Luxembourg under alternatively, the payment of number B 10.643, approximately damages by the defendants 79.84% owned indirectly by (jointly and severally or severally, ArcelorMittal, was listed on the at the court’s discretion) in an Luxembourg Stock Exchange amount of €180 million. until October 31, 2011, when Financial statements its de-listing became effective. ArcelorMittal submitted its brief in response on October 16, 2008, challenging the validity, the admissibility and the merits of the claims. The claimants filed their conclusions on January 5, 2010. A hearing on the merits took place on February 15, 2011. By judgment dated November 30, 2011, the Luxembourg civil court declared all the plaintiff’s claims inadmissible and dismissed them. The judgment is subject to appeal.Left Port-Cartier, Canada ArcelorMittal Annual Report 2011 93
  • 92. Shareholder information ArcelorMittal is listed ArcelorMittal, with its diversified Indexes business model, strong cash flow ArcelorMittal is a member of more on the stock exchanges and cost leadership position, is wellthan 120 indices including the of New York (MT), placed to weather the current following leading indices: DJ STOXX Amsterdam (MT), Paris challenging economic environment 50, DJ EURO STOXX 50, CAC40, (MT), Luxembourg (MT) and has the ambition to develop AEX, FTSE Eurotop 100, MSCI and balance its shareholder base Pan-Euro, DJ Stoxx 600, S&P and on the Spanish stock on the major listed markets and Europe 500, Bloomberg World exchanges of Barcelona, to attract new investors. Index, IBEX 35 index and NYSE Bilbao, Madrid and Composite Index. Recognized for Valencia (MTS). ArcelorMittal remains optimistic its commitment to sustainable about the industry’s medium-term development, ArcelorMittal is also growth prospects. In light of recent a member of the FTSE4Good Index market uncertainty primarily due and Dow Jones Sustainability Index. to the European debt crisis and its potential global impact, the Share price performance company has calibrated its steel The price of ArcelorMittal growth projects to evolving shares declined by 50% in 2011, demand situations. At the same underperforming both the Global time, we are focusing on core Metals & Mining sector which growth investments in our mining declined by 34% and the Global business given their generally more Steel sector which declined by 39%. attractive return profiles. This has The underperformance largely resulted in postponement of some occurred during the third quarter planned steel investments. of 2011 when fears of a potential Accordingly, full year 2012 capital eurozone crisis intensified. This expenditure is expected to be unease affected the share price approximately $4-4.5 billion. performance of those companies with significant trading exposure to ArcelorMittal share price performance since creation Base 100 at August 1, 2006 ($) 350 300 250 ArcelorMittal 200 150 Global Metals & Mining (incl Steel) Index 100 50 0 Aug 06 Dec 06 Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 1194
  • 93. Overviewthe eurozone block. ArcelorMittal’s The dividend payments will occur Individual investors Socially responsible investors Our businessshare price was further impacted on a quarterly basis for the full ArcelorMittal’s senior management The investor relations team isby concerns over the company’s year 2012 (see financial calendar). plans to meet individual investors also a source of information forindebtedness and perceived risks Dividends are announced in $ and and shareholder associations in the growing socially responsiblethat debt covenants could be paid in $ for shares listed on the road shows throughout 2012. investment community. Thebreached; these concerns were New York Stock Exchange and A dedicated toll free number for team organizes special eventsaddressed at our Investor Day on paid in euros for shares listed on individual investors is available at on ArcelorMittal’s corporateSeptember 23, 2011.Subsequently, the European stock exchanges +352 4792 3198. Requests for responsibility strategy andduring the final three months of (the Netherlands, France, Spain, information or meetings on the answers all requests for Sustainability2011, ArcelorMittal’s share price and Luxembourg). virtual meeting and conference information sent to ArcelorMittalincreased by 14%, outperforming center may also be sent to: at: SRI@arcelormittal.comthe Global Steel and Global Metals Investor relations privateinvestors@arcelormittal.com& Mining peer groups. By implementing high standards Credit and fixed income investors of financial information disclosure Analysts and institutional Credit, fixed income investorsDividend and aiming to provide clear, investors and rating agency are followedArcelorMittal’s board of directors regular, transparent and balanced As the world’s leading steel and by a dedicated team fromhas recommended to maintain the information to all its shareholders, mining company, ArcelorMittal investor relations reachable at: Performanceannual dividend per share at $0.75 ArcelorMittal aims to be the first constantly seeks to develop creditfixedincome@arcelormittal.comfor 2012, subject to the approval choice for investors in the sector. relationships with financial analystsof the annual general meeting of and international investors.shareholders on May 8, 2012. To meet this objective, ArcelorMittal Depending on their geographicalOnce market conditions have implements an active and broad location, investors may use thenormalized, the board of directors investor communications policy: following emails:will review the dividend policy. conference calls, road shows with institutionalsamericas@arcelormittal.com the financial community, regular investor.relations@arcelormittal.com Governance participation at investor conferences, plant visits and meetings with individual investors. Financial statementsFinancial calendarFinancial results*February 7, 2012 Results for 4th quarter 2011 and 12 months 2011May 10, 2012 Results for 1st quarter 2012July 25, 2012 Results for 2nd quarter 2012 and 6 months 2012October 31, 2012 Results for 3rd quarter 2012 and 9 months 2012* Earnings results are issued before the opening of the stock exchanges on which ArcelorMittal is listed.Dividend payment (subject to shareholder approval)March 13, 2012 1st quarterly payment of base dividend (interim dividend)June 14, 2012 2nd quarterly payment of base dividendSeptember 10, 2012 3rd quarterly payment of base dividendDecember 10, 2012 4th quarterly payment of base dividendInstitutional investor days and retail shareholder eventsMay 8, 2012 Annual shareholder meeting in LuxembourgSeptember 18, 2012 Investor Day with Group Management Board membersSeptember 26, 2012 Retail shareholder eventContact the investor relations team on the information detailed above or please visit ArcelorMittal Annual Report 2011www.arcelormittal.com/corp/investors/contact 95
  • 94. We are deliveringcost improvement If we are to maintain our leadership position in the steel industry, we must be competitive on costs. We have a track record of consistent cost improvement, delivered through our management gains program. Since 2008, we have taken $4 billion out of our costs and we are on course to achieve the target we set ourselves of $4.8 billion of savings by the end of 2012. In September 2011, we announced a new asset optimization plan, which is separate from the management gains program. This is designed to optimize our production footprint by concentrating production around our lowest-cost plants and allow us to run them at full capacity – thereby ensuring maximum productivity at our ‘core’ facilities while losing none of our ability to service our customers. The asset optimization plan is targeted to add $1 billion run rate a year to sustainable Ebitda by the end of 2012.Picture North of England
  • 95. Overview Our business Sustainability Performance Governance Financial statementsAverage steel selling prices 2011 $ a tonneFlat Carbon Americas 892Flat Carbon Europe 982Long Carbon Americas and Europe 937AACIS 736Distribution Solutions 993 ArcelorMittal Annual Report 2011 97