External influences on ArcelorMittal operations
ArcelorMittal’s business context and operations are influenced heavily by external factors in the global economy and commodities markets. A strong U.S. dollar, overcapacity in the global steel industry, and volatile raw material costs have created extremely challenging market conditions for domestic steel producers.
Key influences on the ArcelorMittal operating context:
• Commodity prices (iron ore, oil and various types of steel created)
• Strength of the U.S. dollar
• Regulatory environment
• Auto sector performance
• Construction recovery
• Energy pricing
A tidal wave of imports
Overcapacity in the global steel industry, coupled with a slowdown in emerging markets like China, has resulted in a supply versus demand imbalance causing the depressed steel prices that we see today. This has set the stage for one of the biggest challenges facing the steel industry in the U.S. – imports.
In 2015, imports surged into the United States. Carbon flat roll imports increased by 70 percent year-over-year in 2014, and import market share grew from an average of 13 percent from 2007-2013 to 21 percent in 2014. Despite weak demand conditions in early 2015, imports continued to arrive at a strong pace, causing import share to swell to 25 percent in Q1 2015. These numbers are staggering for ArcelorMittal in the United States where flat carbon products account for 93 percent of ArcelorMittal’s business.
In the United States, we have urged our government to strengthen U.S. trade policy to level the playing field and combat unfair imports. We greatly appreciate the successful Congressional efforts in 2015 to improve our trade enforcement tools. However, we cannot rely on government policy alone. We must implement a competitive business model that works within today’s market conditions and does not assume major changes or improvements in external influencers.
Challenges in domestic pricing
In the U.S., steel prices eroded throughout the year in 2015, falling more than 40 percent in December compared to early January. Pricing improved slightly at the end of December, but ended the year 36 percent lower than at the same time in December 2014.
In 2016, the steel industry continues to operate in a challenging environment related to both pricing and the threat of imports. Though some price appreciation for steel in the United States has already occurred in 2015, the relative strength of the U.S. economy and dollar will likely continue attracting imports, even with success in trade cases for the industry.
Resiliency of the U.S. economy
If there is a positive story in the steel industry today, it may be the increased demand for steel domestically. The U.S. economy has stabilized since 2013, resulting in an annual GDP growth of 2.4 percent for the past 3 years.
In the steel industry, we see the construction market gaining momentum and having wide-reaching impact on steel demand from structural steels to construction equipment, appliances and more. The automotive sector, the second largest steel-consuming market, expanded for the sixth consecutive year in 2015, and though growth may slow in 2016, it will continue to drive demand in our industry. Unfortunately, in many steel consuming sectors, much of the increased demand since the economic downturn has been filled by imports.
The triple bottom line at ArcelorMittal