Aperam Positioning, strategy and drivers Bernard Fontana Chief - - PowerPoint PPT Presentation

Aperam – Positioning, strategy and drivers

Bernard Fontana – Chief Executive Officer

16 December 2010

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Forward-looking Statements

This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target”, “will” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed

• r identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de

Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made

• r to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December

31, 2009 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

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Content

• Overview
• Markets and products
• Unique strengths
• Challenges and opportunities in stainless steel
• Challenges and opportunities in electrical steel, alloys and specialties
• The Leadership Journey
• Q&A

3

Overview

4

Aperam snapshot

An EBITDA average of USD 778m over 2007-2009 representing approximately 5%* of ArcelorMittal’s EBITDA

*Stainless steel segment within ArcelorMittal

– A global player in stainless steel

• 2.5mt of Flat stainless steel capacity in Europe and Brazil (27% of Aperam turnover in 2009)

– Leading position in high valued added niches, alloys and specialties

• Stainless specialities (Ferritics)
• Electrical steel (GO and NGO)
• Special-carbon
• Nickel alloys & specialties

– A highly integrated distribution, processing and services network – A unique capability to produce stainless and specialities from low cost biomass/charcoal – An industrial network concentrated in 6 main plants located in Brazil, Belgium and France

• Approximately 9,800 employees

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A global player

FOREST SALES AGENCIES SERVICE CENTERS PLANTS

North America South America Europe and CIS Middle-East & Africa Asia & Pacific

43 kT 743 kT 46 kT 41 kT 228 kT

Stainless steel shipments in 2009

Source: Aperam

6

Production assets in Europe & South America

Strong presence in both Europe and South America

Isbergues

Location & facts

• Cold-rolling mill and

finishing

• France

Capacity:

• Finished: 350 kt
• LC2i: integrated

line

Gueugnon

Location & facts

• Cold-rolling mill and

finishing

• France

Capacity:

• Finished: 400 kt
• Specialised in Bright

Annealing (BA) products and stabilized ferritics

Châtelet

Location & facts

• Melt shop and hot-

rolling

• Belgium

Capacity:

• Slabs : 1,000 kt
• HSM : 3,400 kt

Location & facts

• Melt shop and cold

rolling mill

• Belgium

Capacity:

• Slabs: 1,200 kt
• Finished: 740 kt
• 2,000 mm wide

capacity, 316 and duplex grades

• Cold rolling mill: 750kt

Genk Timóteo

Location & facts

• Melt shop and

finishing facilities

• Brazil

Capacity:

• Melt shop: 900kt
• 320kt cold rolled &

60kt hot rolled annealed and pickled

• Silicon cold rolling:

60kt GO and 120kt of NGO Location & facts

• Melt shop and

finishing facilities

• France

Capacity:

• EAF: 60 kt
• 1 VIM, 1 VAR, Rotary

Continuous Caster for Long Products – Hot Rolling mill of wire: ~40 kt – 6 Cold Rolling Mills

Imphy

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Alloys & Specialties

Bioenergia

Biomass & Upstream Strategic participation Stainless & Electrical Steel Services & Solutions

Industry Tubes Precision Industry Distribution Distribution Wire drawing Components Industry Tubes

An organization by core competencies

GMO Distribution

8

Team and organisation

Bernard FONTANA CEO Julien BURDEAU Alloys & Specialities Jean-Paul ROUFFIAC Clenio GUIMARAES Timoteo DI MAULO Services & Solutions Johanna VAN SEVENANT Sustainability, HR & Communication Stainless & Electrical steel South America Julien ONILLON CFO & Strategy Stainless & Electrical steel Europe 53 years old 48 years old 58 years old 51 years old 39 years old 40 years old 42 years old

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Markets and products

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Demand for stainless steel driven by consumers and industrial investments

Stainless steel consumption by end user*

General Industry 20% Building & Construction 17% Automotive & Transportation 12% Catering & Appliance 34% Others 3% Energy & Chemicals Industry 14%

Stainless steel represents only 2% of total world steel market in volume

Main end-user applications

*Pre-crisis Source: Aperam

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Demand for stainless steel comes later in the economic development cycle

Stronger growth potential in stainless steel than carbon steel

Carbon steel consumption per capita* (kg/year) Stainless steel consumption per capita* (kg/year)

2 4 6 8 10 12 Emerging world China Developed world 90% x8 100 200 300 400 500 Emerging world China Developed world 30% x6

*Pre-crisis Sources: CRU and Aperam

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Grain Oriented (GO)

• GO is used in the construction of static electrical

machines / transformers

• Amorphous alloy is the only material that

competes with GO steels (restricted to small distribution transformers for specific market segments )

Electrical steel products are driven by energy oriented applications

Non-grain Oriented (NGO)

• NGO is used in the construction of large and

small rotating electrical machines (hydro- generators , electrical motors, hermetic motors / compressors for refrigerators, air conditions and freezers, drills, household appliance transformers, energy meters , ballasts ….)

• Limited substitution threat

High Low Low High Polarization Core Losses

High grades

• Higher efficiency equipment
• Lower Energy consumption
• Lower CO2 emissions

Regular grades

• Low efficiency

equipment

• High energy

consumption

Best properties

Stricter governmental regulations, greater electricity demand/cost, focus on energy efficiency and environmental concerns drive the growth of both GO & NGO products

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CAPEX budget of USD 4.0 billion for 2010

Nickel Alloys applications and products

High value added materials (price over 20,000 USD/t) with unique properties

Magnetic and controlled expansion alloys

• FeNi alloys (Ni>25%) and FeNiCo exhibit unique thermal

expansion coefficient and magnetic properties Superalloys, corrosion alloys

• High Ni-based alloys, enriched with Cr and additions of

Co, Mo, Nb, Ti exhibit outstanding corrosion performance in various environments and mechanical properties at high temperatures Specialty stainless grades

• Strict control of residuals

Oil & Gas Aerospace Heat resistance Electronics

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Unique strengths

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Strategy to leverage and maximize unique strengths

What makes Aperam unique

– Long-term growth trends in mature markets supported by emerging market demand

• Emerging markets representing approximately 30% of Aperam total sales
• Approximately 30% of sales in emerging markets

– Global, integrated distribution network and proximity to customer

• Services & Solutions division provides exclusive global distribution channel
• Focus on services, partnership and customer satisfaction offers growth opportunities

– Leading R&D capabilities

• Continuous product development and innovation (Ferritics, High-end GO/NGO, Nickel Alloys, Duplex…)
• R&D facilities in France and Brazil

– Culture of continuous improvement

• Continuous improvement program ensuring cost effectiveness and focus on health & safety

– Ability to produce stainless and speciality steel products from low-cost charcoal

• Unique upstream integration into forestry asset provides cost advantage and access to sustainable energy source

– Strong financials through the cycle and effective working capital and risk management

• Superior earnings profile and lower volatility
• Best in class working capital ratio
• Active use of risk management tools to manage in particular Nickel exposure

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Leading global stainless and specialty steel producer

Nickel Alloys producers ranking in Europe (by production)

TK VDM 30- 35 kt 20- 25 kt Aperam 5 kt DNick 7 kt 4 kt Generalist pure players Specialists / Multi materials 3 kt 2 kt 2 kt Kanthal BGH A&D VAC G&G 1 kt Isabellen Hütte Wire drawers

Flat product stainless steel producers ranking (by slab capacity)

1 2 3 4 T K S A c e r i n

• x

T I S C O Y U S C O P O S C O A p e r a m O u t

• k

u m p u F u j i a n D e n s h e n g B a

• s

t e e l N i p p

• n

S t e e l A K S t e e l

CAPEX budget of USD 4.0 billion for 2010 Leading player in stainless and specialty steel in Europe and South America

Sources: CRU and Aperam estimates

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A small but fast growing market

Market leader in stainless and electrical steel in Brazil

Brazilian stainless steel demand estimates (000t) Brazilian electrical steel demand estimates (000t)

50 100 150 200 250 300 350 400 450 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E GO (Grain oriented) NGO (Non-Grain Oriented) +90% 100 200 300 400 500 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E +75%

Sources: CRU and Aperam

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Close to customer through a highly integrated distribution network

Sales subsidiaries and representative offices Steel Service Centers Sales agencies

A key competitive advantage to maintaining market share and capturing growth

• pportunities

Sales, distribution and steel services centers network

Strong relationships with global and long term customers, including Whirlpool, Bosch Siemens, Indesit and others…

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Strong R&D capabilities catering to high-end application and specialities

High-end application and specialties products

Commodity and specialty price (USD/t) Sales 2009 breakdown by products

Stainless steel 80% Electrical Steel 11% Nickel Alloys & Specialities 9% High grade GO Base price Stainless 430 Regular GO Nickel alloys Base price Stainless 304 CR 500 High grade NGO Regular NGO 1,000 1,500 2,000 2,500 3,000 17,000 Base price Surcharge

Sources: Aperam

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Strong culture of continuous improvement

Steelshop

Chatelet 1.0Mt Genk 1.1Mt Clients Isbergues 0.35Mt Genk 0.74Mt Gueugnon 0.40Mt

Cold rolling

Steel Service Centers Transformation Direct sales

Service

Chatelet 3.4Mt

Hot rolling

Timoteo 0.90Mt Timoteo 0.88Mt Timoteo Electrical 0.17Mt Timoteo Stainless 0.38 Mt* Electrical flat Stainless flat Steel Service Centers Transformation Direct sales Imphy 0.06 Mt

Imphy (wire)

Imphy SSCs, Direct sales Transformation Ni alloys & specialties

Chatelet (strip)

Stainless flat

* Includes 0.06Mt of finished HRAP products

Upstream has been significantly upgraded in Europe demonstrating rationalisation efforts

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Equivalent Coke and Charcoal cost in 2009 (USD/t)* 280

194

Brazil (charcoal) Imported (coke) 31%

A unique capability to produce stainless and specialties from Biomass

Biomass is a strong competitive cost advantage

– Strategic participation of 36% in Bioenergia which produces biomass (charcoal) from eucalyptus - planting, maintenance and cutting at 7 years old – Consumed 194,000t of biomass (charcoal) in 2009 and target to double consumption of biomass (charcoal) by shifting Blast Furnace #2 from coke to biomass by 2012 – Positive impact on environment

*One tonne of charcoal is equivalent to approximately 0.90 tonne of coke Source: Aperam

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Strong financials through the cycle and effective working capital management

Earnings profile is less volatile than competitors due to relative high proportion of long term contracts, ferritics, specialties and geographic diversity

EBIT per tonne (in USD)

*Average of Acerinox, ThyssnKrupp Stainless and Outokumpu ** Average of Acerinox and Outkumpu Source: Aperam

Operating working capital as % of sales

• 1500
• 1000
• 500

500 1000 1500 1 Q 7 2 Q 7 3 Q 7 4 Q 7 1 Q 8 2 Q 8 3 Q 8 4 Q 8 1 Q 9 2 Q 9 3 Q 9 4 Q 9 1 Q 1 2 Q 1 European competitors* ArcelorMittal Stainless 0% 10% 20% 30% 40% 50% 60% 1 Q 7 2 Q 7 3 Q 7 4 Q 7 1 Q 8 2 Q 8 3 Q 8 4 Q 8 1 Q 9 2 Q 9 3 Q 9 4 Q 9 1 Q 1 2 Q 1 European competitors** ArcelorMittal Stainless

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Challenges and opportunities in stainless steel

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Global stainless steel demand has more than recovered from 2009

Stainless steel market structure (mt)

Long-term growth expected to be around 6%

Global flat stainless steel demand* (mt)

• 5

10 15 20 25 30 1998 2008 2009 2014E China Emerging World Developed World 25% 42% 62% 40% 13% 32% 26% 34% 37% 29% 37% 31% 32% Sources: CRU 5 10 15 20 25 30 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E Cold rolled Hot rolled +6% per year +20%

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European demand expected to come back to pre-crisis levels in 2013/2014

Western Europe remains a major stainless steel consumer and technology leader, while Eastern Europe is expected to continue to expand

Eastern European HR & CR demand (mt) Demand for stainless steel flat products in Western Europe* (mt)

Source: CRU

1,000 2,000 3,000 4,000 5,000 6,000 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 E 2 1 1 E 2 1 2 E 2 1 3 E 2 1 4 E 2 1 5 E 100 200 300 400 500 600 700 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 E 2 1 1 E 2 1 2 E 2 1 3 E 2 1 4 E 2 1 5 E

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South American demand is growing again at a solid rate

South America presents important growth potential

Stainless steel consumption per capita pre-crisis (kg/year)

1 2 3 4 5 6 Other South America India Brazil China US Sources: CRU & Aperam estimates

Stainless steel flat products demand in South America (kt)

100 200 300 400 500 600 700 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 E 2 1 1 E 2 1 2 E 2 1 3 E 2 1 4 E 2 1 5 E Rest of South America Brazil

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Despite increased demand, structural

• vercapacity remains a challenge

Worldwide excess capacity* (mt)

Stainless steel prices expected to remain under pressure

Global utilization rates* (mt)

Source: CRU

50% 55% 60% 65% 70% 75% 80% 85% 90% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 China Rest of World

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Raw material impact on pricing

Nickel pricing has a high influence on short term demand and pricing for stainless steel

*Sources: Steel Business Briefing

Stainless steel CR 304 base price versus LME Nickel pricing* (US$/t) Stainless steel CR 304 base price versus Ferro- chrome North Europe Import CFT*

50 100 150 200 250 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 FeCr Europe (USc/lb) - RHS Europe Base price CR 304 (USD/t) - RHS 10,000 20,000 30,000 40,000 50,000 60,000 Jan- 04 Jul- 04 Jan- 05 Jul- 05 Jan- 06 Jul- 06 Jan- 07 Jul- 07 Jan- 08 Jul- 08 Jan- 09 Jul- 09 Jan- 10 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Nickel - LME (USD/t) - LHS Europe Base price CR 304 (USD/t) - RHS

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Challenges and opportunities in electrical steel, alloys and specialties

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Electrical steel market growth expected to come mainly from China

By 2015, 90% of new electrical steel demand is expected to come from China, while demand in the developed world will return to 2008 levels

Global GO demand (mt) Global NGO demand (mt)

• 0.5

1.0 1.5 2.0 2.5 3.0 2 4 2 5 2 6 2 7 2 8 2 9 2 1 E 2 1 1 E 2 1 2 E 2 1 3 E 2 1 4 E Europe, Middle East & Africa Americas Asia +10% per year

• 2

4 6 8 10 12 14 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E Europe, Middle East & Africa Americas Asia +12% per year Source Aperam

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Current overcapacity due to crisis expected to reduce progressively

Despite rapid capacity expansion, supply demand equilibrium in China is expected to remain tight

Global capacity and demand for GO (mt)

Source Aperam

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2008 2009 2015E Demand Capacity +56% +18% 2 4 6 8 10 12 14 16 2008 2009 2015E Demand Capacity +40%

Utilization Rates 100% 64% 84% Utilization Rates 93% 71% 101%

Global capacity and demand for NGO (mt)

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CAPEX budget of USD 4.0 billion for 2010

Nickel alloys markets expected to recover in line with core end-use sectors

Innovation will be key in capturing alloys market growth

Ni use in nickel alloys

Sources: Steel Market Research Gmbh, 2009

End-use sectors: CAGR 3-4%

50 75 100 125 150 175 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CAGR +8.5% +50% by 2015 60 70 80 90 100 110 120 130 140 150 2008 2009 2010 2011 2012 2013 2014 2015 Base: 2008 = 100% Power generation Oil & Gas Process industries Elec. Appliances Aerospace

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The Leadership Journey

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An adverse trend

EBITDA expected to decline significantly in Q4 compared to Q3 due to price pressure and seasonality as anticipated

Aperam quarterly EBITDA (USDm)** Southern Europe - CR 304 2B 2mm coil base price (/t)*

*Source SBB

144 178 66 1Q 2010 2Q 2010 3Q 2010

** Non audited

800 850 900 950 1000 1050 1100 1150 1200 1250 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

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The Leadership Journey to confront challenges and seize opportunities

• Leadership Journey accelerating sustainable management gains

– Targeting USD 250m over the next two years

Approximately USD 40m of provisions to initiate Leadership Journey in 2010

Based upon : – USD 100m of fixed costs improvement (including Isbergues traditional cold roll mill suspension, Gueugnon Hot AP line project, tubes assets optimization in South America, fixed cost base improvement plan in Brazil, SG&A reduction plan through organization simplification) – USD 100m variable costs improvements (including charcoal program and connection to natural gas in Brazil, yields and quality plans) – USD 50m of EBITDA upside on additional business from existing assets, growth in biomass (charcoal), etc…

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Biomass (charcoal) production to be doubled and to represent 35% of Aperam energy needs by 2012

Forest expansion and biomass development

*Share of Bioenergia Source: Aperam 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2009 2010 2011 2012 2013 2014

Biomass Stainless & Electrical Stainless, Electrical & Alloys

Biomass integration (% of Aperam production) Biomass (charcoal) production (000t)*

100 200 300 400 500 2009 2010E 2011E 2012E 2013E 2014E

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Current downstream industrial network Future downstream industrial network 29 downstream tools Total capacity of 1.49mt Total capacity of 1.39mt

Reconfiguring European downstream to achieve cost leadership

20 downstream tools

Rationalization initiated by temporarily suspending the Isbergues’ traditional cold rolling mill capacity of 100,000t

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Investment in productivity

Benefits:

• Productivity increase
• Energy saving
• Elimination of one line
• Quality and yield

improvement

• Gain of approximately

40 USD/t

Existing pickling shot blastingx4 Furnace Manual welding Existing edge trimming We Keep the existing bay with exiting over-cranes New shot blastingx4 New Scale breaker New furnace New welder New 2 Pickling tanks + brushes Current RD7 Future RD79 New Pay-off SCHEME This part of RD7 line is kept (minor modifications) This part of RD79 line is new

USD 62m for a new Hot Annealing and Pickling line in Gueugnon

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Each additional tonne expected to contribute approximately USD 450 of EBITDA

Capturing post-crisis growth and recovery

Stainless steel demand in Western Europe (000’t)*

* Source: CRU 2,500 3,000 3,500 4,000 4,500 2008 2009 2010E 2011E 2012E +22% +3% +4%

Stainless steel demand in Brazil (000’t)*

200 250 300 350 400 2008 2009 2010E 2011E 2012E +43% +7% +6%

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Project to capture South American growth in electrical steel

Capacity expansion for 180,000t in high grade electrical steel under review

Hot Rolling Cold Rolling Electrical Cold Rolling Stainless Melt Shop BF1 BF2

CR5 HAP5 DC2 B O X 5 CL2 HAP CR New ZMill New HAP5 – 400 kty DC2 BOX5 CL2 New GO final lines (Decarb, Box, Carlite) LF New Ladle Furnace LF

GO and NGO expansion project

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Other opportunities and potential

Asian footprint and upstream integration would require M&A

…and upstream opportunities

• Develop further Biomass (charcoal) opportunities
• Strategy to actively look at upstream and mining
• pportunities (Cr, Ni) directly or in partnership
• Upstream integration aiming to secure strategic

raw materials and create upstream/production synergies by leveraging ArcelorMittal technology in ferro-chrome and nickel pig iron.

Developed world South American Brownfield Expansion Asian opportunities

Asia…

• Targeted opportunities in Nickel Alloys &

Specialties and Services & Solutions to be explored

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Q&A