The Metallurgical Industry, Steel market Forecasts for the future Sanjay Samaddar CEO & Chairman of the Board, ArcelorMittal Poland Katowice, 18 th May 2011

Europe in the scheme of world economics

We live in a “Two Speed World” Real GDP Growth Forecast Different speed of advanced and emerging & developing economies growth  GDP to grow by 2.5% and 6.5% respectively © IMF April 2011 Source: World Economic Outlook Percentage Growth 2

BRIC countries GDP… …will continue to grow faster than G7 Source: GS Global ECS Research, 2010 By 2020 it is expected that BRICs to account one third of the global economy (in PPP terms) and contribute about 49% of global GDP Growth* *Goldman Sachs May

 Global annual steel production will grow from 1.4 billion in 2010 to 2.3 billion tonnes in This growth will entirely be generated outside Europe, most of it in emerging economies, with an increase in CO2 emissions in the range of 2.5 billion tons in the global steel sector.  Post crisis …Europe is the No #2 steel producer in the world World Steel Production 2010 Steel Production World: 1, 414 MT Asia: 898 MT EU 27: 173 MT Source: World Steel Association 4 (Source: EUROFER, 2011)

Challenges for Europe…

The “Global” Challenge 80% Growth in emerging economy Resources scarce in Europe 21% CO2 reduction versus 2005 needed in 10 years Oil and Natural Gas depletion in 2050 High productivity ambition Flexibility and Volatility Low Inventory Low Lead Times Customer oriented products FOCUS on EXCELLENCE ATTRACT THE BEST AND BRIGHTEST PEOPLE McKinsey,

7 Resources will be scarce in Europe Pricing of Raw materials no longer driven by European consumption 7

8 Oil Price Could Limit Economic Growth “Green” strategy is the only way to preserve growth 8

The Climate Change Challenge Steel industry as part of the global CO 2 emission picture Today, the steel industry is responsible (directly and indirectly) for 6% of the world’s CO 2 emissions and will be 8% in 2030 if no actions are taken. Effective abatement policies will lead to huge costs for industry and society. Source: McKinsey: Pathways to a Low-Carbon Economy 21% of total emissions * * * * * * * * * * * * dark part refers to indirect emission of power generation linked to each activity 28% of total emissions 9

European industrial policy… …requires a strong coordinated appraoch Industrial Policy ENVIRONMENT Climate change Industrial emissions ENERGY Competitive prices Compensation for indirect costs R & D Breakthrough Energy-efficiency COMMERCIAL POLICY Access to raw materials Trade barriers SOCIAL Salary cost Education 10

Climate Change Impact of EU ETS / 2050 Roadmap EU ETS Benchmarks agreed in December 2010 not to grant 100% free allocations notwithstanding carbon leakage status of steel sector Carbon leakage will be a reality for the steel sector as allowance shortages will exist in EU ETS III EU Commission 2050 Roadmap for Low Carbon Economy suggests higher GHG emission reduction target (80%) Currently available technologies in the steel sector do not allow further reduction of CO2 emissions  the EU ETS system is not an incentivizing but a penalizing system 11

Energy market Need for a market that is capable of delivering competitive prices adapted to steel industry needs 12

Commercial Policy and R & D 13

Summary Steel industry faces several challenges Mitigations Adequate market intelligence and trading capability  need to find value-generating niches Implementation of varied sourcing and sales models  flexibility: Raw-material sourcing optimization Capacity & Inventory management High level of end-to-end value-chain Long term adaptive strategy  diversified- capacity networks, resource adaption and lean management, cutback and subsequent use of external services Focus on innovation (R&D): improving profitability and fueling growth Rigid system  quality Challenges Unpredictability of the market Volatility of raw material prices Climate Change responsibility  CO 2 allowances Increasing energy costs Shift of consumption and production from traditional to emerging markets European competitiveness threatened by lack of level playing field Risk of sudden import surge from outside EU Source: BCG Dec

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