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Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy FINEX ’10 Conference London, 27 th October 2010.

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Presentation on theme: "Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy FINEX ’10 Conference London, 27 th October 2010."— Presentation transcript:

1 Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy FINEX ’10 Conference London, 27 th October 2010

2 FINEX '10 Conference1 Disclaimer Forward-Looking Statements This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward- looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2009 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

3 FINEX '10 Conference2 Contents Historical context Promising medium term outlook Meeting the challenges of demand

4 FINEX '10 Conference3 Four phases of global steel since 1900 Global crude steel production (kt) Industrialisation of US and parts of Europe Post war rebuild 3.0% CAGR (1900-1945) Saturation of demand in developed world Industrialisation of China and developing world 5.8% CAGR (1950-1973) 0.4% CAGR (1973-1998) 6.3% CAGR (1998-2007) Source: Worldsteel; ArcelorMittal Corporate Strategy

5 FINEX '10 Conference4 Recent “pre-crisis” growth phase was not just a China phenomenon Apparent crude steel consumption, million tonnes China Developed world CAGR 4.8% 20002003 138 467 242 428 490 412 53 847 1330 259 437 975 Developing world 2007 CAGR 8.1% 279 4.9% -2.2% 23.3% 10.3% 2.9% 13.4% Developing world added about half as much additional demand as China Relatively sluggish growth in developed world (despite credit bubble) Sources: Worldsteel Steel Statistical Yearbook 2008; ArcelorMittal Corporate Strategy

6 FINEX '10 Conference5 1990-2009 Raw materials price index (1990 real values*****) Indexed at 1990 =100 Increasing and more volatile pricing *1990-2003 McCloskey, 2004-2009 CITI Investment Research, 2010 SBB **1990-2003 McCloskey, 2004-2009 CITI Investment Research, 2010 UBS ***1990-2001 minerals.nsw.gov, 2002-2009 CITI Investment Research, 2010 UBS ****1990-1999 WSD, 2000-2010 SBB *****Use USA CPI as deflator Source: CITI group, McCloskey, NSW gov, WSD, SBB, www.inflationdata.com, UBS, ArcelorMittal Corporate strategy team analysiswww.inflationdata.com

7 FINEX '10 Conference6 Iron ore spot price and steel price in China Source: SBB Price-cost squeeze risks for steel industry 0 50 100 150 200 250 Dec 04Dec 05Dec 06Dec 07Dec 08Dec 09 300 400 500 600 700 800 900 Indian Iron Ore 63% Fe dry - China import CFR (USD/t) - LHS HRC - China domestic Shanghai (USD/t) - RHS

8 FINEX '10 Conference7 Industrial production has rebounded strongly… Global industrial production (y-on-y) Source: Global Insight, WSA and ArcelorMittal estimates

9 FINEX '10 Conference8 …As has apparent steel consumption Apparent crude steel consumption, Jan 2008 = 100 Source: Worldsteel, Trade database

10 FINEX '10 Conference9 *Apparent consumption of crude steel **US, Canada, EU-15, Japan, S Korea, Taiwan, Australia, NZ Sources: WSA and ArcelorMittal estimates Steel market structure (%, bn tonnes*) The world steel market has shifted Developing world China Developed World** 198019902009 2000 0.710.771.23 0.84 100%= 50% 44% 6% 50% 41% 9% 25% 27% 48% 55% 29% 16%

11 FINEX '10 Conference10 Contents Historical context Promising medium term outlook Meeting the challenges of demand

12 FINEX '10 Conference11 Developing markets and China account for ~85% global population and an increasing share of world GDP Source: Global Insight Average GDP (PPP, $ trillion) 1990-992000-092010-19 3 14 26 5 19 13 30 39 32 43 56 82 Average Population (billion) 1990-992000-092010-19 1.2 3.6 0.95 1.3 4.2 1.38 4.8 1 0.96 5.7 6.5 7.2 China Developing world Developed world

13 FINEX '10 Conference12 Rising urbanization in developing countries Source: Global Insight 1990-19992000-20092010-2019 712 1420 630 691 745 2,877 Urban population (million) 358 547 923 1145 1,911 2,344 +500 +165 +275 +54 Increase 2009-19 (millions) Developed world Developing world China

14 FINEX '10 Conference13 Steel is changing our world

15 FINEX '10 Conference14 Chinese steel consumption is following same pattern as developed world followed earlier Crude steel production, kg/capita India China France US Germany Japan S. Korea Sources: Worldsteel; www.populstat.info; ArcelorMittal Corporate Strategy team analysiswww.populstat.info

16 FINEX '10 Conference15 * US, Canada, EU-15, Japan, Korea, Taiwan Sources: WSA, www.populstat.info; ArcelorMittal Corporate Strategy team estimates and analysiswww.populstat.info Outside China there is also significant, broad- based growth in steel consumption Steel consumption per capita 2009 (kg) 74 398 290 48 IndiaOther developin g world ChinaDeveloped World* Developing world ex-China: Over 4 billion people Large populations in MENA, CIS, Brazil, parts of SE Asia Many of these countries are well on industrialisation and urbanization growth path Over 400m tonnes steel consumption 6% CAGR 1997-2007 Developed world: Ca. 1bn people Low population growth Post-industrial service based economies Declining steel consumption

17 FINEX '10 Conference16 Steel consumption is forecast to continue to grow strongly beyond 2014 in the developing world 5.8% CAGR 4.5% Apparent crude steel consumption, Indexed China Developed world* Developing world 4.8% 0.2% CAGR ’08-’19 Sources: Worldsteel; base steel demand scenario, CCM/Corporate Strategy demand model (Feb 2010) *EU15, US, Canada, Japan, South Korea, Taiwan, Australia and New Zealand 100 150 130 CAGR 3.1% CAGR 3.8%

18 FINEX '10 Conference17 Leading to significant demand growth for raw materials and requiring a supply response Raw material consumption forecast, Indexed Sources: ArcelorMittal Corporate Strategy team analysis Metallurgical coal 2009 2019 Iron ore 2009 2019 100 159 100 165

19 FINEX '10 Conference18 Contents Historical context Promising medium term outlook Meeting the challenges of demand

20 FINEX '10 Conference19 Challenges for the mining sector Physical supply Quality requirements Infrastructure People Pricing stability

21 FINEX '10 Conference20 Source: CITI group, Macquarie Research, Credit Suisse, FIL Investments, Standard Chartered, Goldman Sachs, ArcelorMittal Corporate Strategy team analysis New Iron ore supply projections 2010-14 (from 2010 reports), mt Significant project pipeline

22 FINEX '10 Conference21 New low cost Iron Ore supply to China* China Iron Ore demand growth 600 500375 570 440 330 30-70-195 16060-65 27017045 *Includes Chinese domestic projects Source: ArcelorMittal Corporate Strategy team analysis Broad range of outcomes for scenarios Scenarios for displacement of Chinese high cost supply by 2014 relative to 2008

23 FINEX '10 Conference22 Source: Mysteel, WSO, UNCTAD, AM Corp. Strategy team analysis Declining average ore quality in China China Domestic iron ore requirement at 63% Fe quality (LHS) China ROM iron ore production (LHS) Iron ore Quality in China (RHS) China’s iron ore requirement & domestic supply (Mt) and apparent quality (%Fe)

24 FINEX '10 Conference23 Changing Mineralogy

25 FINEX '10 Conference24 Larger Blast Furnaces changing quality needs * Ash content: residual after burning, the less the better M40: crushing strength, the higher the more strength CSR: coke strength after reaction, the higher the more strength CRI: coke reactivity index Source: China Metal Association, China Metallurgy Newspaper BF volume, m 3 10002000300040005000 Coke ash content, %< 13 < 12.5< 12 M40, %> 78> 82> 84> 85> 86 CSR, %> 58> 60> 62> 65> 66 CRI, %< 28< 26< 25 Coke quality requirement by BF volume size Lower, better Higher, Stronger Lower, better Index implication

26 FINEX '10 Conference25 Coal absorbing Chinese rail capacity Share of railway cargo used for transporting coal, China, % Source: China Railway Bureau 2009 Year Book, Railway Mid/long-term Planning by NDRC, SX coal, ArcelorMittal Corporate Strategy team analysis

27 FINEX '10 Conference26 Australian coal infrastructure debottlenecking Source: ABARE, ArcelorMittal Corporate Strategy team analysis Queensland coal infrastructure projection (m tonnes) NSW coal infrastructure projection (m tonnes)

28 FINEX '10 Conference27 People and skills to meet the needs

29 FINEX '10 Conference28 Steep cost curve leads to high price volatility at the margin 2009 cash cost curve for iron ore* - CIF into China ($/tonne) *Chinese iron ore production is re-evaluated to 63% Fe content Source: SBB, Mysteel, WSD, ArcelorMittal Corporate Strategy team analysis Ability of seaborne supply to meet China and ex-China import demand is key to medium term market dynamics This drives requirement for Chinese domestic production to fill the supply/demand gap

30 FINEX '10 Conference29 Summary Strong period of growth over past decade Supply constraints contributed to volatile pricing Medium term outlook fundamentally strong Meeting demand implies challenges to be met

31 FINEX '10 Conference30 Thank You/Q&A


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