U.S. Steel Market Update

Amy Ebben

ArcelorMittal USA

December 13, 2019

U.S. Steel Market Update

Agenda

• ArcelorMittal introduction

• U.S. steel industry performance and trade

• Review of steel markets and 2020 outlook

1

About ArcelorMittal

2

• An industrial presence in 19 countries

exposes the company to all major

markets, from emerging to mature

• Values geographical breadth, product

diversity and raw material security

• 2018 crude steel production of 92.M

metric tons

24%

14%

48%

14%

ACIS

North AmericaBrazil

Europe

• World's leading steel and mining company with about 209,000 employees in

more than 60 countries

• Recognized leader in all major global steel markets, including automotive,

construction, household appliances and packaging, with leading R&D and

technology, as well as sizeable captive supplies of raw materials and outstanding

distribution networks

Crude steel production by region

ArcelorMittal in the United States

• Operates 26 facilities including mines, integrated operations, mini-mills and

finishing facilities

• Industrial presence in 12 states

• Employs more than 18,000 in the United States

Steel demand in the U.S. has stagnated and remains below

pre-recession levels

4

U.S. apparent steel consumption: 1998-2019

Sources: AISI, ArcelorMittal USA Marketing; 19E based on YTD September comparison to same period 2018

110

60

140

70

130

120

90

80

100

01 1202

M tons

98 99 00 03 06 07 08 1309 10 11 14 15 16 17 19E180504

-11%

Steel consumption

1998-2007 avg

Shipments by U.S. steel mills have improved as market share has

been regained from imported steel

5

Steel shipments by U.S. mills


105

90

110

65

60

85

115

70

75

95

80

100

16 1808009998 01 03 04 05 06 1507 1409 10 11 12 13 17 19E02

M tons

-8%

U.S. mill steel shipments

1998-2007 avg

65%

5%

30%

Flat roll

Long products

Pipe and tube

2019

Trade restrictions have led to meaningful decline in steel imports to

lowest level since 2011

6

U.S. finished steel imports and share


25 15%

10

15

20

30

10%

35

40

0%

30%

25%

5%

20%

21%

29%

1308

25%

22%

07

23%

27%

10

21%

09

22%

11

24%

12

23% 23%

28%

14 16 1715 18

20%

M tons

19E

% share

-26%

Finished steel imports Share of U.S. demand

Section 232 update

7 Sources: Dept of Commerce, Customs & Border Protection, ArcelorMittal

• April 19, 2017: Commerce initiates 232

investigation

• March 23, 2018: 25% tariff on all steel product

categories applied to most countries; Canada,

Mexico, EU exempt temporarily while

negotiations continue (Turkey at 50% from Aug

2018-May 2019)

• June 1, 2018: 25% tariffs imposed on Europe,

Canada and Mexico

• Country-level exemptions:

• Korea, Argentina and Brazil agree to quotas in place of tariffs; Australia

given full exemption with no quota

• Canada and Mexico: May 17, 2019 announced that tariffs removed for

Canada and Mexico as well as retaliatory tariffs against the U.S.

• Product exemptions: process put in place for U.S. manufacturers to apply for

one-year waiver

Section 232 impact continues to fade as more tons are exempt from

the 25% tariff

8 Sources: US Department of Commerce Steel Import Monitor, ArcelorMittal USA Marketing

2019 Flat roll imports by country (carbon and alloy)

Share of volume from S232 exempt countries

15%

14%

4%

4%

4% 30%

40%

10%

7%

38%Jan-May

2%32%Jun-Sep

OtherAustralia

Korea* Brazil*

Canada

Mexico

23%

68%

Note: Canada and Mexico exemption on 5/17/19

*Quota in place

Some portion of this

volume not subject

to 25% tariff from

granted product

exclusions to

individual

companies.

Global steel supply continues to grow at a strong pace

9 Sources: World Steel Association, ArcelorMittal USA Marketing

in M metric tons Delta

Jan-Oct YTD 2018 2019 Tons %

World 1,493 1,541 48 3%

China 770 828 58 8%

India 91 93 3 3%

Japan 87 84 -3 -4%

USA 72 74 2 3%

S. Korea 60 60 0 0%

Russia 59 59 0 0%

Lower export opportunities have impacted domestic mill shipments

10

U.S. steel exports and share


14%

15%15% 15% 14%

13%

12%12%

11%12%

9%

0%

5%

10%

15%

10

2

20

24

22

18

0

16

14

12

8

6

4

M tons % share

17 1815

8%

1413121110090807 19E

10%

16

-34%

Steel exports Share of U.S. mill shipments

Lowest

since

2002

Steel trade balance has improved but has failed to return to pre-

2014 import surge position

11

U.S. steel trade balance


5

0

20

-25

10

15

25

-15

-10

-5

-35

-30

-20

-17

10 13 14 15 171612

-15

19E11

-12

-22

M tons

-5-7

-8-12 -12

-22

-17-19

-15

07 08 09 18

Steel exports

Trade balance

Finished steel imports

Capacity utilization has not sustained 80% threshold given in

Section 232 report

12 Sources: AISI, ArcelorMittal USA Marketing

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

06 19130905 1107 1208 10 14 15 16 17 18

U.S. monthly raw steel capacity utilization

Jan 2005-Oct 2019

Flat roll product shipments, the biggest segment for U.S. mills, are

worse this year than before Section 232 was introduced

13

Shipments by U.S. steel mills – carbon flat roll

201920182017

14.4 14.5 14.2 13.5 14.2 14.514.6 14.5 13.7 14.0 14.1

1Q 3Q

2Q 4Q

56.6

2016 2017 2018 2019F

55.4 57.0 55.9

2019F vs 2017:-1%M tons

Sources: AISI, AMUSA Marketing; 19F based on YTD September comparison to same period 2018

Quarterly actuals

Weaker manufacturing environment weighs heavily on steel demand

and buyer behavior in 2019

14 Sources: FRED

100

101

102

103

104

105

106

107

108

109

110

2017

2014

2015

2016

2018

2019

U.S. Industrial Production Index:

Durable manufacturing

Jan 2014- Oct 2019Index 2012=100, seasonally adjusted

Manufacturers’ new orders:

Core capital goods

Jan 2014- Oct 2019% change y/y, seasonally adjusted

-10%

-5%

0%

5%

10%

15%

2015

2014

2016

2017

2018

2019

Steel service centers have significantly destocked in 2019; inventory

volume is lowest since 2010

15

Steel service centers inventories – Flat rollin millions of tons

Sources: MSCI, ArcelorMittal USA Marketing

-0.1

0.7

-0.4

-0.3

0.0

5.0

0.1

0.2

0.4

0.6

5.4

4.2

4.4

4.6

4.8

0.5

5.2

5.6

-0.2

5.8

6.0

6.2

0.3

-0.6

-0.5

1918162014 17

m/m changeTotal inventory

15

Inventory (LHS) m/m change (RHS)

Review of steel markets

16

Steel consuming markets

17 Source: AISI Profile 2019, ArcelorMittal USA Marketing

44%

28%

9%

6%

5%

3%3%

Containers

Construction

Energy

Automotive

Machinery

Appliance

Defense

2%

All other

Estimated 2018 U.S. steel consumption by end-use market

Construction and

automotive industries

are the top consumers

of steel in the U.S.

About 35% of steel

shipments flow through

distribution before

reaching the final

customer.

Construction sector is slowing but is not expected to drop sharply as

suggested by recent forward-looking indicators

18 Sources: FRED, AIA

AIA Architecture Billings Index

$300

$800

$400

$500

$700

$600

2017

2014

2015

2016

2018

2019

Nonresidential

Residential

Nonres. Last Cycle Peak

Res. Last Cycle Peak

YTD Oct 2019

Total – 1.7%

Nonresidential +2.2%

Residential -7.1%

52.0

45

50

55

60

2017 2018 2019

1,100

1,200

1,300

1,400

1,500

201920182017

Construction spending

Billion $, SAAR >50 = increase in firm billings

Private housing building permits

SAAR, thousands of units

Auto sales step back from 2016 peak but remain at strong pace;

production cutbacks in 2019 support 2020 improvement

19 Sources: FRED, Marklines.com

U.S. light vehicle sales: SAAR

Jan 2010-Nov 2019

10

11

12

13

14

15

16

17

18

1210 13 1611 14 15 17 18 19

M Units

17

2019 YTD average

= 16.9M units

2019 light vehicle production

• USA: -4% YTD Oct

• Mexico: -2% YTD Oct

• October impacted by GM

strike (-15% y/y)

Machinery market has yet to turn around with continued uncertainty

from trade war threats

20 Sources: FRED

US machinery: New orders and industrial production

y/y % change: Jan 2014- Oct 2019

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

20182014 2015 2016 20192017

New orders IP

1.8

1.9

2.0

2.1

2.2

2.3

1815 1916 1714

Ratio of manufacturers’ total

inventories to shipments: Machinery

Jan 2014-Oct 2019

Oil and gas demand outlook is mixed, while wind and solar

installations soar due to expiration of tax credits

21 Sources: EIA, Baker Hughes, SEIA/Wood Mackenzie, ArcelorMittal USA Marketing

20

2,000

$30

$40

14

$50

$60

16

$70

17

$90

$100

$110

15

1,500

18 19

1,000

500

$80

Rig countWTI price ($/bbl)

WTI crude

Oil and gas rig count

U.S. oil and gas rig count and oil price

forecast (EIA)

Jan 2014-Dec 2020

U.S. P.V. installations

2020 Outlook

22 Sources: World Steel Association Short Range Outlook October 2019, ArcelorMittal USA Marketing

USA view:

• Despite the growing economy, U.S. steel

demand has deteriorated in 2019 given

mature consuming markets, buyer

uncertainty, and inventory destocking.

• Lean inventory position at distributors will

bring a better start to 2020. Although the

outlook remains cautious given weakness in

manufacturing data, major steel consuming

markets like automotive, construction, and

energy should support steel demand.

• The sharp decline in import volume since

2014 has benefited U.S. mills but under-

utilized domestic capacity, narrower Section

232 scope, and growing global supply warn

of difficult conditions ahead for the industry.

2000-2020 Global apparent steel use

(finished steel)

600

800

1,000

1,200

1,400

1,600

1,800

2,00015%

0%

10%

-10%

-5%

5%

02

05

14

Y/Y % Chg ASC (M mt)

00

01

03

04

06

07

08

20

F

09

12

10

11

13

15

18

16

17

19

F

ASC y/y change

World Steel 2020 outlook: Top 3 countries

1. China: + 1.0% (909.1M mt)

2. India: +7.0% (108.7M mt)

3. USA: +0.4% (101.2M mt)

Thank you

U.S. Steel Market Update

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