Executive Summary / Key Takeaways

• ArcelorMittal has structurally transformed its earnings power through portfolio optimization, capturing $0.7 billion of a $2.1 billion medium-term EBITDA improvement in 2025, with performance at cycle lows now double historical troughs.
• The company's aggressive capital allocation policy has reduced share count by 37% since 2020 while growing dividends 85%, demonstrating management's confidence and providing tangible shareholder returns even in a cyclical downturn.
• EU trade protection measures—50% import quota cuts plus Carbon Border Adjustment Mechanism—create a more favorable industry structure, with ArcelorMittal positioned to capture market share as imports decline by an estimated 40% for flat steel.
• Geographic diversification across North America, Europe, Brazil, and India, combined with vertical integration through mining assets, provides resilience against regional downturns and raw material volatility that single-region competitors cannot match.
• Key risks include record Chinese steel exports of 110 million tonnes, execution challenges on major growth projects, and EU energy cost pressures that could offset structural improvements if trade protections fail to materialize as expected.

Setting the Scene: The Reshaping of Global Steel

ArcelorMittal S.A., founded in 1976 and headquartered in Luxembourg, operates as the world's second-largest steel producer with a fully integrated business model spanning steel manufacturing and iron ore mining. The company generates revenue by producing and selling a diverse range of flat and long steel products to automotive, construction, infrastructure, and energy customers across more than 60 countries. This global footprint creates a natural hedge against regional demand cycles that pure-play domestic producers cannot replicate.

The steel industry structure has been defined by chronic overcapacity, particularly from Chinese producers, and volatile trade flows that pressure margins. However, a fundamental shift is underway toward regionalization and protectionism. The European Commission's October 2025 proposal to slash steel import quotas by 50% and double tariffs on non-quota volumes represents the most significant trade protection measure since Section 232 in the United States. This policy pivot creates a durable tailwind for domestic producers with viable cost structures and available capacity.

ArcelorMittal's position in this evolving landscape is unique. The company ships approximately 30 million tonnes of finished steel annually in Europe alone, with capacity "way in excess" of current production. In North America, the segment is "by far the biggest contributor" to EBITDA, while the Mining segment benefits from a world-class iron ore expansion in Liberia. This diversified asset base, combined with vertical integration that covers roughly 60% of iron ore needs, provides cost visibility and pricing power that non-integrated peers lack.

Technology, Products, and Strategic Differentiation

ArcelorMittal's competitive moat rests on two pillars: portfolio optimization and decarbonization leadership executed through an economic transition pathway. Since 2018, the company has reduced absolute carbon emissions by 50% while increasing its Electric Arc Furnace (EAF) production share from 18% to 25%. This matters because EAF production offers greater flexibility, lower fixed costs, and a smaller carbon footprint—attributes increasingly valued by automotive OEMs and regulators. The new EAF in Gijón and revamped EAFs in Sestao support the company's XCarb low-carbon solutions brand, enabling premium pricing for green steel products.

The Calvert facility transformation exemplifies this strategy. By acquiring Nippon Steel 's 50% stake in June 2025, ArcelorMittal gained full control of a premier North American asset now being enhanced with a technologically advanced EAF capable of producing exposed automotive grades and a new electrical steel facility for non-grain-oriented steels. These investments, operational by end-2026, target the fastest-growing segments of automotive demand—electric vehicles and hybrid systems—where material specifications are more stringent and pricing power is superior. The electrical steel market is currently in deficit, with significant supply through imports, positioning ArcelorMittal to capture margin expansion as domestic production ramps.

In Brazil, the Vega coal mill complex and new cold mill complex are performing ahead of schedule, delivering first Magnelis coated coil in September 2024. Magnelis, a patented metallic coating, commands premium pricing in construction and automotive applications due to superior corrosion resistance. The Pecem slab acquisition provides a world-class, low-cost asset with multiple growth options, reinforcing the company's value-over-volume strategy in a region with strong domestic demand growth.

Financial Performance & Segment Dynamics

ArcelorMittal's Q3 2025 EBITDA per tonne of $111 demonstrates structural margin improvement, standing 25% above historical averages and double previous cyclical lows. This performance validates the portfolio optimization strategy—management emphasizes the company is "a transformed company that has high-graded its asset portfolio by divesting higher-cost assets and acquiring new assets positioned to create value in all market environments." The Q1 2025 EBITDA per tonne of $116 and full-year 2024 figure of $130 similarly show resilience that peers have not matched.

Segment performance reveals the geographic diversification benefit. North America delivered record shipments at Calvert in Q3 2025, with the segment's contribution "a bit higher" than the previously mentioned $60 million per quarter baseline. The Mining segment achieved record production and shipments in Liberia even before new capacity ramp-up, with the expansion project on track to add $450 million in EBITDA at full capacity based on conservative long-term pricing assumptions. This provides significant upside optionality if current iron ore prices persist.

Brazil's operations exemplify operational excellence. The economy's strong GDP growth and low unemployment support robust apparent steel consumption, while antidumping measures expected by end-2025 will curb rising imports. The Monlevade expansion, though put on hold due to prohibitive costs, will be complemented by new investments to be announced, demonstrating capital discipline—an attribute often lacking in cyclical industries.

India's AM/NS joint venture continues to benefit from extremely strong demand, with 7% growth forecast for 2025. Safeguards introduced in April 2025 are supporting prices that recovered from Q1 lows, while a 1-gigawatt renewable energy project started supplying power in September 2024, reducing energy costs and supporting the company's decarbonization credentials.

Capital allocation efficiency drives the investment case. Since 2021, ArcelorMittal has generated $21 billion in investable cash flow, returning $1.7 billion to shareholders in 2024 alone through dividends and buybacks. The share count reduction of 37% since 2020, combined with an 85% increase in dividend per share, demonstrates management's commitment to shareholder returns. The new long-term buyback program through 2030, with nine million shares repurchased in 2025, signals confidence in sustained cash generation.

Outlook, Management Guidance, and Execution Risk

Management's guidance framework centers on capturing $0.7 billion in structural EBITDA improvement in 2025, with the medium-term impact of $2.1 billion remaining unchanged. This implies an additional $800 million contribution in 2026 from strategic projects, creating a visible earnings growth trajectory even without cyclical recovery. The Liberia iron ore expansion is expected to reach 10 million tonnes of shipments in 2025, eventually doubling to 20 million tonnes, while the Calvert EAF should achieve 40-50% run rate by year-end 2025 and full rate within 12 months.

The European outlook has "clearly improved" over the past three months, driven by the new trade tool proposal and effective CBAM implementation starting January 2026. Management expects imports to decrease by about 40% for flat steel, with ArcelorMittal's European mills operating consistently and supporting good cost performance. The demand forecast for 2025 remains neutral to a 2% increase, with positive impact from reduced imports. This matters because it provides a foundation for the European business to earn its cost of capital—a milestone the segment has struggled to achieve in recent years.

Execution risk remains the primary swing factor. Project delays in Mardyck, Barra Mansa, and Serra Azul shifted $100 million of expected EBITDA from 2025 to 2026, prompting creation of a new global projects team to enhance consistency. Operational issues in Mexico resulted in a $200 million impact across 2025, though management confirms these will not recur in 2026, representing a direct EBITDA bridge improvement. The South Africa long business shutdown, while eliminating a drag on profitability, highlights the challenges of operating in markets with regulatory distortions like scrap export taxes that favor competitors.

Risks and Asymmetries

The central thesis faces three material threats. First, Chinese steel exports at record 110 million tonnes levels could overwhelm trade protections if enforcement proves weak. Management's commentary reveals concern: "The demand situation in China continues to be challenging, and we continue to see very weak spreads and elevated exports from China." If Chinese capacity remains elevated and new stimulus measures are not steel-intensive, global oversupply will pressure margins regardless of regional trade barriers.

Second, execution risk on the $2.1 billion EBITDA improvement plan could undermine the structural growth narrative. While the Liberia expansion and Calvert projects are on track, the Monlevade delay shows that engineering cost inflation can derail returns. If the new global projects team fails to improve execution consistency, the 2026 contribution could fall short of the $800 million target, leaving the company more exposed to cyclical downturns.

Third, EU energy policy and regulatory uncertainty create asymmetric downside. Management confirmed it will not meet 2030 emissions intensity targets at two German plants due to "lack of green hydrogen availability, high import volumes, effectiveness of European policies like CBAM, and uncompetitive energy prices." If European energy costs remain elevated and decarbonization support weakens, the company's competitive position in its largest market could deteriorate despite trade protections.

The primary upside asymmetry lies in iron ore pricing. The Liberia expansion's $450 million EBITDA contribution is based on conservative long-term assumptions, but current prices suggest meaningful upside. If iron ore prices remain elevated through 2026, Mining segment margins could exceed expectations, providing a cash flow cushion that accelerates buybacks or funds additional growth projects.

Valuation Context

At $46.23 per share, ArcelorMittal trades at 13.6 times trailing earnings and 7.98 times enterprise value to EBITDA—multiples that appear compressed for a company demonstrating structural margin improvement. The price-to-book ratio of 0.64 suggests the market values the company at a 36% discount to stated book value, despite management having "high-graded" the asset portfolio through strategic divestitures and acquisitions.

Peer comparisons reveal a mixed picture. Nucor (NUE) trades at 23.2 times earnings with superior operating margins (10.4% vs. 4.1%) but lacks ArcelorMittal's geographic diversification and mining integration. POSCO (PKX) trades at 49.4 times earnings with significantly weaker profitability (0.65% profit margin), while Nippon Steel (NPSCY) trades at a negative earnings multiple due to recent losses. United States Steel (X) trades at 127.6 times earnings, reflecting its own transformation challenges.

Cash flow metrics provide a clearer valuation signal. ArcelorMittal's price-to-operating cash flow ratio of 8.21 compares favorably to Nucor's 11.93, while the company's $21 billion in investable cash flow since 2021 demonstrates consistent generation. The underlying free cash flow for Q1 2025 was approximately $700 million, excluding seasonal working capital and discretionary growth CapEx, suggesting the recent quarterly negative free cash flow of -$486 million reflects temporary working capital builds rather than structural deterioration.

The company's net debt of $9.1 billion at Q3 2025, up from $8.3 billion due to working capital and M&A investments, remains manageable at roughly 1.5 times EBITDA. Year-end 2024 liquidity totaled $12.0 billion, providing ample flexibility to execute the $4.5-5.0 billion annual CapEx envelope while returning capital to shareholders.

Conclusion

ArcelorMittal has engineered a fundamental transformation from a cyclical steel producer into a structurally higher-margin, capital-efficient industrial company. The $2.1 billion EBITDA improvement program, diversified geographic footprint, and integrated mining assets create earnings power that outperforms at cycle lows while capturing upside during recoveries. Management's disciplined capital allocation—returning 50% of post-dividend free cash flow through buybacks that have reduced shares by 37%—demonstrates a shareholder-first mindset rare in capital-intensive industries.

The investment case hinges on two variables: execution of strategic growth projects and effectiveness of trade protections against Chinese overcapacity. If the new global projects team delivers on the $800 million incremental EBITDA expected in 2026, and if EU and US trade measures successfully reduce import penetration, ArcelorMittal will have created a self-funding growth engine capable of thriving across cycles. The current valuation multiples suggest the market has not yet recognized this structural improvement, presenting an attractive risk/reward profile for investors willing to tolerate near-term volatility from project execution and geopolitical uncertainties.