Executive Summary / Key Takeaways

• ArcelorMittal has undergone a significant transformation, divesting high-cost assets and strategically acquiring new ones, resulting in structurally higher margins and resilient financial performance, even in challenging market conditions.
• The company is aggressively pursuing high-return organic growth projects in key regions like India, Liberia, and the U.S., which are projected to add $1.2 billion in structural EBITDA over the next few years, building on $0.3 billion already realized.
• A robust capital allocation policy emphasizes consistent shareholder returns, with 37% of shares repurchased since 2020 and an increased dividend, underpinned by strong underlying free cash flow generation.
• Technological advancements, particularly in Electric Arc Furnace (EAF) steelmaking and specialized electrical steels, are enhancing product quality, cost efficiency, and market positioning in high-value segments like automotive.
• While global overcapacity and unfair trade practices pose ongoing risks, ArcelorMittal is strategically positioned to benefit from strengthened trade protections and a concerted push towards economic decarbonization, particularly in Europe.

The Transformed Steel Giant: A Foundation for Growth

ArcelorMittal S.A. (AMSYF), founded in 1976 and headquartered in Luxembourg City, stands as an integrated steel and mining powerhouse with a global footprint spanning the Americas, Europe, Asia, and Africa. The company produces a comprehensive range of semi-finished and finished flat and long steel products, alongside vital mining products such as iron ore and coking coal. Its diverse customer base includes the automotive, appliance, engineering, construction, energy, and machinery industries. This broad operational scope and product portfolio are foundational to its strategy, which has seen a profound transformation in recent years.

Historically, ArcelorMittal has strategically optimized its asset portfolio, notably divesting higher-cost operations while acquiring new assets designed to create value across all market environments. This strategic shift, particularly evident from 2018 to 2024, has not only enhanced its market position but also contributed to a remarkable 50% reduction in absolute carbon emissions. The company's overarching strategy today is centered on driving structural EBITDA growth through high-return organic projects and strategic acquisitions, focusing on value-added products and solutions rather than merely increasing crude steel capacity. This approach is complemented by a clear and consistent capital allocation policy aimed at rewarding shareholders.

Technological Edge: Precision Steel for a Modern World

ArcelorMittal's competitive differentiation is significantly bolstered by its technological advancements, particularly in Electric Arc Furnace (EAF) steelmaking and specialized product development. The company is commissioning a new state-of-the-art EAF at Calvert, Alabama, which is described as the most technologically advanced in the United States. This EAF, coupled with a caster and hot-strip mill, possesses the capability to produce exposed automotive grades, a high-value segment. The full ramp-up of this EAF is anticipated within approximately 12 months from its first slab production, expected by the end of Q2 2025, with high run rates projected by the end of 2025. This technology offers superior flexibility and a lower carbon footprint compared to traditional blast furnace methods.

Further enhancing its technological moat, ArcelorMittal is developing a new, 100% owned electrical steel facility at Calvert, dedicated to non-grain-oriented (NGO) steels. This facility will cater to the premium automotive demand, including electric and hybrid vehicles, offering excellent gauge capability and quality characteristics. The NGO electrical steel market is currently in deficit, with significant supply met by imports, positioning ArcelorMittal to capture a substantial share with its high-quality domestic production. This investment represents incremental capacity, not a replacement, underscoring the company's commitment to expanding its presence in technologically advanced, high-margin product categories. The company's R&D efforts also extend to its XCarb brand, offering low-carbon solutions and doubling volumes this year to over 400 kilotonnes, demonstrating a commitment to economic decarbonization.

Competitive Landscape and Strategic Positioning

ArcelorMittal operates in a highly competitive global industry, facing direct rivals such as Nucor Corporation (NUE), POSCO (PKX), and BHP Group (BHP), as well as indirect competition from alternative materials. The company's competitive standing is primarily defined by its vast scale, vertical integration, and diversified geographic presence.

Compared to Nucor Corporation, a major U.S.-based EAF steel producer, ArcelorMittal's integrated operations, spanning mining and steel production across multiple continents, provide a broader global footprint and greater control over its supply chain. This vertical integration can lead to superior margins and more reliable delivery, particularly in large-scale infrastructure projects. While Nucor's scrap-based EAF model offers energy efficiency and recycling benefits, ArcelorMittal's diversified raw material sourcing, including its own mining assets, provides a strategic buffer against raw material price volatility.

Against POSCO, a leading South Korean steelmaker known for high-quality flat products and advanced materials, ArcelorMittal's extensive product portfolio and global mining operations offer a broader strategic reach. While POSCO excels in technological innovation for niche, tech-driven sectors, ArcelorMittal's scale and full-service provider positioning allow it to compete effectively across a wider array of industries, including construction and automotive. ArcelorMittal's unique value proposition lies in its ability to control inputs and outputs, fostering stronger growth in integrated markets.

In comparison to BHP Group, a global mining giant, ArcelorMittal's integration into steel production provides a more comprehensive value chain. While BHP specializes in extraction efficiency, ArcelorMittal benefits from synergies between its mining and steel operations, potentially leading to better cost structures and stronger customer relationships in downstream markets.

ArcelorMittal's strategic positioning emphasizes end-to-end solutions, differentiating it from more resource-centric or specialized steel producers. The company's investments in advanced EAF technology and electrical steels are critical for maintaining its competitive edge in high-value segments. However, vulnerabilities include exposure to commodity price volatility and the need for supportive policy frameworks, particularly in Europe, to ensure the economic viability of large-scale decarbonization investments. Barriers to entry in the steel and mining industries, such as high capital requirements and regulatory hurdles, generally favor ArcelorMittal's established position.

Financial Performance and Operational Resilience

ArcelorMittal has consistently demonstrated resilient financial performance, a testament to its transformed business model. In Q1 2025, the company reported an EBITDA per ton of $116, which is double the level observed during previous cyclical lows. This structurally higher margin reflects the benefits of its optimized asset base and diversified exposures, contributing to significantly more stable results compared to peers.

For the full year 2024, EBITDA reached $7.1 billion, translating to $130 of EBITDA per ton shipped, further underscoring the structural transformation of its earning capacity. Adjusted net income for 2024 was $2.3 billion, yielding a 4.4% return on the book value of equity ($64 per share), with a commendable 6% return on capital employed.

Cash flow generation remains robust. Excluding seasonal working capital investments and discretionary growth CapEx, ArcelorMittal generated approximately $700 million in underlying free cash flow in Q1 2025, showcasing strong cash generation even at the bottom of the cycle. The company generated over $2 billion of investable cash flow in 2024, contributing to a total of $21 billion since 2021. This strong liquidity has enabled significant investments in strategic growth projects, totaling $1.3 billion in 2024, and substantial capital returns to shareholders.

Strategic Initiatives and Growth Drivers

ArcelorMittal's strategic growth agenda is well underway, with several high-return projects gaining momentum:

• Liberia Expansion: The Liberia iron ore expansion project is on track and on budget, with the first line commissioning soon. This project is expected to add $450 million in additional EBITDA at capacity, based on conservative long-term iron ore prices, with significant upside if current prices hold. The project aims to increase capacity to 20 million tonnes of high-quality cilta-cel product. At least a 10 million tonne volume increase from Liberia is expected in 2025.
• Calvert EAF and Electrical Steel: The commissioning of the new state-of-the-art EAF at Calvert, U.S., is underway, and the development of the electrical steel facility is progressing. These investments target high-value automotive markets and are crucial for strengthening the North American franchise.
• India Expansion: The Phase 1 expansion at Hazira is progressing to schedule, and a new greenfield steel plant on India's East Coast (Visakhapatnam) is an exciting development, opening new avenues for growth with access to the sea, customers, and iron ore. Apparent steel consumption in India is forecasted to grow by about 7% in 2025. The 1-gigawatt solar-wind project in India, commissioned in September 2024, will add close to $100 million to sustainable solutions in 2025.
• Brazil Vega Complex: The new cold mill complex at Vega in Brazil was completed in Q2 2024 and is ramping up well, expected to reach 80% by year-end 2024, contributing an anticipated $100 million in EBITDA for 2025.

These strategic growth projects are expected to contribute a total of $1.2 billion in structural EBITDA over the next few years, building on the $0.3 billion already realized from projects like the Mexico hot strip mill. The overall CapEx envelope is targeted to remain between $4.5 billion and $5 billion, with flexibility to reallocate spending.

Outlook and Guidance

ArcelorMittal's outlook for Q2 2025 is positive, with management expecting EBITDA to be "clearly better than the first quarter," driven by a recovery in EU spreads and strengthened safeguards in Europe. North American volumes are guided to be stable, with prices slightly up, and the impact of Section 232 tariffs on the North American business is expected to be "largely neutral" when combining results from the North America segment and Calvert. The company anticipates a release of working capital for the full year 2025, despite seasonal investments in Q1, supported by actions such as working through high-cost materials from H1 2024.

The company's commitment to "economic decarbonization" remains a key strategic pillar. While the $10 billion target for decarbonization by 2030 (gross, $5 billion on an ArcelorMittal basis) remains the best estimate, the pace of large-scale European investments is contingent on a supportive policy framework. This includes a strong Carbon Border Adjustment Mechanism (CBAM), effective trade protection, and competitive energy access. Decarbonization CapEx for 2025 is not expected to see a material step-up from the 2024 level of $300 million to $400 million, primarily supporting engineering studies.

Risks and Challenges

Despite a strong strategic position, ArcelorMittal faces several risks. The impact of tariffs on demand remains an uncertainty, with customers monitoring the situation closely. Global overcapacity, particularly from China, continues to pose a threat, leading to weak spreads and elevated imports in various regions. While Europe has strengthened its safeguards and India has introduced new ones, the effectiveness and duration of these trade protections are critical. The situation in Ukraine remains volatile, with operations running at approximately 30% capacity and incurring cash losses, though the company has contingency plans for raw material sourcing. Project delays, as seen with Mardyck, Barra Mansa, and Serra Azul, highlight execution risks, although a new global projects team has been established to address these. The decision to put the Monlevade expansion on hold and shut down the long business in South Africa due to prohibitive costs and lack of government support underscores the need for disciplined capital allocation and a supportive operating environment.

Conclusion

ArcelorMittal has demonstrably transformed into a more resilient and structurally stronger company, capable of generating significant cash flow and higher margins even in challenging market conditions. Its strategic focus on high-return organic growth projects in key geographies like India, Liberia, and the U.S., coupled with a commitment to technological leadership in areas like EAF steelmaking and specialized electrical steels, positions it for sustained future growth. The company's disciplined capital allocation, marked by substantial share buybacks and increased dividends, reflects confidence in its long-term outlook and ability to create shareholder value across the steel cycle.

While global trade imbalances and the need for supportive policy frameworks for decarbonization in Europe present ongoing challenges, ArcelorMittal's proactive approach to asset optimization, technological differentiation, and advocacy for fair trade practices provides a robust foundation. The company's ability to adapt and execute its strategic agenda, leveraging its integrated operations and global scale, will be crucial in capitalizing on evolving industry trends and solidifying its competitive standing in the years to come.