Below are key drivers of ArcelorMittal's value that present opportunities for upside or downside to the current Trefis price estimate for ArcelorMittal:
ArcelorMittal is currently the largest steel manufacturer in the world and was formed by the merger of steel giants Arcelor and Mittal in 2006. The company has a production capacity of nearly 114 million metric tons of steel annually and has operations in 20 countries on four continents.
Headquartered in Luxembourg, the firm operates its business in five main operating segments: Brazil, Europe, NAFTA, Africa and Commonwealth of Independent States (ACIS), and Mining. More than 25% of the steel produced is in the Americas, nearly 50% in Europe, and the remainder in countries such as Kazakhstan, South Africa, and Ukraine. ArcelorMittal produces a variety of flat products such as sheets and plates and long products, including bars and rods. The firm also produces pipes and tubes for various applications.
The European segment is the most valuable division of the firm, accounting for around 30% of the company's value. It is valuable for the following reasons:
The Europe division is characterized by strong underlying demand, driven by steady economic growth in Europe. The division's shipments and pricing have been negatively impacted by competition from cheap steel imports. However, with European trade authorities imposing anti-dumping duties on steel imports from several countries, the division's shipments and pricing are expected to recover over the forecast period.
Overcapacity in the steel industry has hit margins for many operators, as steel mills globally were running at around 50% of their actual capacity on average in mid-2020. While this saves some costs, there are significant fixed costs that cause margins to compress when capacity is not optimal. Capacity has improved over recent months and is closer to pre-Covid levels.