Financial value creation
ArcelorMittal’s operations in the United States are a part of our parent company, ArcelorMittal S.A., based in Luxembourg. Preparing a country-level integrated report at ArcelorMittal means discussing financial challenges and opportunities related to our business units in the United States. However, direct financial statements are not public at this level. Full financial results for ArcelorMittal globally can be found in our
annual report and 20F.
Steel production
In the United States, ArcelorMittal faced a significant downturn in steel prices throughout 2019 due to reduced demand as service centers destocked. However, U.S. production remained stronger than recent years, as the production capacity utilization rate hovered around 80%, due to a lack of imports from the Section 232 tariffs. Toward the end of 2019, COVID-19 began to spread across the globe and into the U.S. in early 2020. This pandemic has dealt a significant blow to U.S. steel demand, prices and production, with some domestic mills idling facilities to cut costs while steel demand is low. There is some optimism for a turnaround in the market as the economy reopens and COVID-19 is gradually contained. Raw steel production in the chart above refers to steel in the first state of melting, suitable for finishing. In 2019, ArcelorMittal USA produced 14.2 million tons of raw steel, with more than 98% of that production in our flat operations, primarily integrated steel production facilities. ArcelorMittal USA operates only one long carbon facility today in Steelton, Pennsylvania.
Raw steel production, ArcelorMittal flat carbon USA: 2008-2019
Key market segments
Steel has a major role to play in the vitality of the U.S. economy and national security. Steel has a broad range of applications in industries such as transportation, energy, defense, machinery, appliance, construction and packaging. In construction, steel offers superior performance, affordability and an environmentally-friendly profile over competing materials. Steel is the main material used in products that generate renewable energies such as solar, tidal and wind. The automotive sector accounts for roughly 12% of the overall global steel consumption. In the United States, that number rises to 28%. The majority of ArcelorMittal’s shipments in the United States serve the markets of service center/distribution (40%), automotive (27%) and energy/mining/ chemicals/water (17%). The chart below illustrates our sales by market segment in the United States from 2008-2019.
ArcelorMittal sales by market segment in the United States: 2008-2019
As it relates to ArcelorMittal USA’s profit and loss equations, our profitability and long-term financial stability depend largely on conversion costs. These are the costs the company incurs to transform raw materials into finished steel products, minus the cost of raw materials. Repairs and maintenance, labor, energy use and logistics are examples of types of conversion costs. As shown in the chart below, labor directly accounts for 38%, the largest share of the total conversion cost of steel and influences all major cost categories.
Components of conversion costs: 2009-2019
Capital investment
ArcelorMittal is committed to investing in our assets in the United States through capital expenditure (capex). For the last five years, our capital investment related to the ArcelorMittal USA business unit has averaged more than $290 million per year to enhance our facilities’ capabilities and extend the life of our assets.
In 2014, ArcelorMittal acquired AM/NS Calvert, a joint venture with Nippon Steel. The capital expenditure specific to AM/NS Calvert is reported separately below. Since 2015, capex has allowed this facility to build capability and efficiency, opening new market opportunities specifically related to high value-added products. We are dually committed to increasing capacity at AM/NS Calvert, while simultaneously investing in reliability, quality and cost projects at our ArcelorMittal USA assets.
The list below includes the 25 largest capex projects in the United States in 2019. They are listed in order from largest to smallest according to total expenditures in 2019.
Economic contribution
In 2019, our U.S. operations employed more than 18,000 individuals with a direct economic contribution of $2.2 billion through wages and benefits (not including expenses related to active and inactive pension and retiree health care). We also contribute $40 million each year in property taxes, providing significant funding for schools and local governments that would otherwise face significant challenges in terms of long-term sustainability. Often, ArcelorMittal is the largest employer in the communities in which our facilities are located. In Indiana, Ohio, Alabama and Pennsylvania–where the majority of our USA workforce is located–our entry-level hourly pay is significantly higher than the local minimum wage. This allows our employees to earn highly competitive wages to provide for their families and contribute to the local economy. In addition to providing highly competitive wages, we seek to engage local businesses in fulfilling our supply chain, multiplying our economic contribution in our communities. To ArcelorMittal, being a good employer and community partner are all part of being a responsible corporate citizen.
ArcelorMittal economic contribution in the United States: 2019
