Europe

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Our Business

How and where we run our steel and mining business.

Our progress

This year saw important progress across our business, where we continued to meet the needs of all our stakeholders.

Action 2020

Action 2020 is ArcelorMittal's commitment to structurally improving profitability and cash flow generation.

Governance

Good corporate governance is about compliance, continuous stakeholder dialogue and being a good corporate citizen.

Fact book

Details of our steel and mining operations, financials, production facilities and shareholder information.

Our emphasis on Action 2020 efficiencies and customer-focused innovation produced real progress in 2016. Our European Action 2020 initiatives contributed US$263 million to Ebitda, and played an integral role in improving ArcelorMittal Europe’s Ebitda to US$2.5 billion, the highest level achieved since we began reporting on our European segment as a single entity in 2013.

In terms of outlook, we expect continued demand growth in 2017, albeit at modest levels, and are very well placed to capture our share. This, combined with further progress anticipated from our European Transformation Plan, and other Action 2020 initiatives, puts us in a very strong position to improve the sustainable profitability of our business over the long-term.

Aditya Mittal Group CFO and CEO ArcelorMittal Europe

Watch the video

Employees

80,975

Sales

29.3

(US$ billion)

Ebitda

2.5

(US$ billion)

Steel shipments

40.2

(million tonnes)

Lost time injury frequency rate

1.01

(incidents per million hours worked)

Ebitda contribution to Action 2020

263

(US$ million)

Our 2016 operating environment

Our Europe business ended 2015 in an extremely challenging environment for steelmaking. As 2016 began, global overcapacity and unfair imports continued to keep prices unsustainably low. The outlook improved over the year, with steel demand slowly rising, postive rulings on a number of trade cases, and more sustainable pricing for both steel and raw materials. The longer-term outlook remains clouded, however, by the design of the next phase of the European emissions trading scheme (ETS), that, in its proposed form, will support neither the regional economy nor wider climate change goals. The key stakeholder and steel market aspects of 2016 included:

EU GDP grew by 1.9%, driven mainly by the service industries but with some manufacturing growth.
Year-on-year, *apparent steel consumption grew by between 1.5% and 2%.
Automotive sales reached their highest levels since 2008, and construction markets showed gradual growth.
The European Commission made positive rulings on a number of anti-dumping and anti-subsidy trade cases, though procedures for investigating dumping remained slower than in some other markets, with tariffs often imposed at lower levels.
Customers in automotive industries continued to demand high-quality, lighter-gauged steel as they sought to achieve emission reductions through weight savings.
Automotive customers led an increasing focus on supply chain sustainability standards.
With the EU's plans for phase 4 of the ETS due to start in 2021, steelworkers in a number of markets protested against these plans, while steel industry leaders continued to warn that, if it passes into law as proposed, not only will the ETS not achieve its objective of reducing global carbon emissions, it will also impose unsustainable costs on the European steel industry.

*Apparent steel consumption is physical deliveries, or sales, of steel products to end users or steel stockists. It differs from real steel consumption, which takes into account changes in steel inventory levels to assess underlying real steel demand.

Climate change is a clear threat and needs to be addressed. Designing policy appropriate for multiple sectors and industries is difficult and complex. But the extent to which Europe’s steel industry and the 320,000 people it employs directly will be affected based on current proposals needs to be understood before it is too late.

Lakshmi Mittal Chairman and chief executive officer

Fewer severe accidents but more work to do

Our lost-time injury frequency rate (LTIFR) of 1.01 was stable compared with the rate of 0.99 in 2015. However, six colleagues tragically lost their lives in 2016, four lower than in 2015, but still an unacceptable number.

To further improve our health and safety performance, we have launched several initiatives across Europe. In our Flat Products business, the ‘meet the people’ CEO initiative is now almost 100% complete, and safety leadership training has been finalised. The Take Care! training programme that was introduced in 2015 across the entire European segment will be extended significantly this year, and other ongoing initiatives that are progressing well, are: treating serious occurrences as fatalities, and improving contractor management by ranking based on contractors’ safety performance.

See Outcome 1 for our global approach to safety.

LTIFR

incidents per million hours worked

Color	#8B819E
X-axis	LTIFR
2014	1.09
2015	0.99
2016	1.01
LTIFR

Severity rate

number of days lost to injury per thousand hours worked

Color	#AA9E6E
X-axis	Severity rate
2014	0.10
2015	0.10
2016	0.10
Severity rate

A flagship new safety training programme for Europe

In Europe, we launched a different kind of initiative at the end of 2015 to drive better progress on safety. The Take Care! training programme targets all 60,000 shop-floor workers across our plants in Europe and aims to build a better health and safety culture. It focuses on changing behaviour through intensive participatory classroom and shop-floor learning.

Based on well-known standards such as ArcelorMittal’s 10 Golden Rules, Take Care! brings the principles of safety to life through practical examples, group activities and games that enable staff to internalise safety values and thus contribute to a stronger safety culture.

In 2016, we rolled the programme out across operations in France, Spain, Luxembourg and Bosnia & Herzegovina.

Belval, Luxembourg wins excellence award for safety ‘maturity culture’

An ambitious programme of safety culture change at our Belval plant is recognised by Worldsteel.

Even with all the proper processes and systems in place, safety can still be a challenge, because it’s as much about behaviour and paying attention as it is about procedure. Our plant in Belval, Luxembourg, saw that their safety standards were beginning to slip, and realised that the solution lay in attitudes and culture. The leadership team introduced the ‘Maturity Project’ which aimed to bring about an ambitious culture change to ensure that everyday production processes adhered to the highest safety standards. This included a training programme for all site leaders to enable them to empower all employees at the facility by building technical knowledge and the right behaviour. The project was recognised by Worldsteel’s Safety and Health Excellence Recognition Programme in October 2016.

Our performance

Working closely with customers to develop high quality, specialised and innovative products which contribute to sustainable development has played a key part in the delivery of our Action 2020 goals in 2016. We have also continued to focus on procurement, reliability and productivity savings, and embraced digitalisation, to deliver an increase of 4.6% in Ebitda.

Geert Van Poelvoorde CEO, ArcelorMittal Europe - Flat Products

Europe sales were 8.2% lower in 2016 compared with 2015, primarily due to lower average steel selling prices, which fell by 6.7%, while steel shipments were also 1.1% lower than the previous year. Pricing improved as the year progressed; average steel selling prices in the second half of 2016 were 0.3% higher than the corresponding period in 2015, partially offsetting the 12.6% decline in average steel selling prices that occurred in the first half of the year.

Ebitda

2.5

(US$ billion)

Operating income for the year was US$1.3 billion, a marked improvement on 2015 operating income of US$171 million, driven by cost efficiency improvements and an absence of impairment charges and inventory write-downs that occurred in 2015. Ebitda generation also improved to US$2.5 billion, from US$2.4 billion in 2015.

Read the full review of Europe’s operating results.

Sustainable innovation at the heart of Action 2020

The future of steel, and of our Europe business in particular, will be driven by innovation. In 2016, we developed and expanded a wide range of solutions in terms of both products and processes – and since our customers are, like us, growing more focused on their environmental and social impact, these solutions are increasingly designed to contribute to a sustainable future.

Broadening our product mix is a key part of our Action 2020 strategy, and innovation ensures that this expansion is focused on quality, as well as quantity. In 2016, for example, we inaugurated a new, breakthrough technology for the metallic coating of steel – called Jet Vapor Deposition (JVD) – in our brand new line in Liège (Belgium). This line will produce two new coated products – Jetgal® for the automotive industry and Jetskin™ for industrial applications such as household appliances, both of which demonstrate improved quality, enhanced functionality and lower environmental footprints in both energy and water. The €63 million production line was officially inaugurated by the King of the Belgians in February 2017.

We also expanded our capability to produce improved versions of existing products – for instance, by bringing out new refinements to our range of sheet piles, developed by our R&D teams, enabling us to attract new customers in new market segments.

Our customers’ needs are continually evolving and the products we will make in ten years’ time will not be the same products we are making today. We're working alongside customers to understand and anticipate these developments and shape our product portfolio accordingly. Our R&D teams' focus on sustainability – and increasing customer demand – mean that the products we develop will contribute to a sustainable future.

Augustine Kochumparampil
CEO, ArcelorMittal Europe - Long Products

Developing lighter-weight, stronger steels in step with customer demand

Our innovation is underpinned by our understanding of the sustainability benefits of our products. That makes it a particular asset to customers driven by their own sustainability goals and increasing levels of environmental regulation. For example, for carmakers seeking to meet European directives on fuel economy and emissions, our advanced high-strength steels (AHSS) can help reduce the weight of a vehicle while ensuring it remains strong and safe. In 2016, we prepared to expand our ability to produce Fortiform®, a third-generation AHSS product for cold stamping which can deliver weight savings of up to 20% and which combines high levels of formability and mechanical strength with increased energy absorption on impact in a crash. New 'quenching and partitioning' facilities installed in 2016 will enable our Liège mill to produce the Fortiform® line in 2017.

Similarly, our Sagunto mill in Spain became the fourth plant in Europe to produce our aluminium-silicon coated press hardenable steel for automotive customers, Usibor® Alusi, joining Mouzon and Florange in France and Dudelange in Luxembourg. High-value products such as Fortiform® and Usibor® will play a vital role in our drive to deliver Action 2020.

We received further recognition from our European automotive customers in 2016, being named by the PSA Group as their best supplier for the second consecutive year.

ResponsibleSteel™ and sustainability assurance

Our customers are growing increasingly interested in how the products they buy are sourced and made, and requests for value chain assurance are becoming widespread in a range of industries. We are seeing evidence of the broader trend already in Europe. In 2016, our ability to demonstrate sustainability standards contributed to us winning an open tender for a valuable contract to supply 120-metre rails to Deutsche Bahn, while many of our biggest automotive customers were involved in founding the European Automotive Working Group on Supply Chain Sustainability.

European carmakers come together to drive sustainability

Some of the biggest names in the European automotive industry have joined forces to form the European Automotive Working Group on Supply Chain...

Deutsche Bahn supplier

ArcelorMittal secures another year of rail deliveries to Deutsche Bahn.

We see this trend as an opportunity to develop a common approach for our customers and, as a result, strengthen our credentials as our customers' preferred supplier. At its heart, the ambition is to reassure our customers about our own sustainability standards and our approach is to work with partners to drive improvements across the steel and raw materials supply chain. This is why, at a global level, ArcelorMittal is helping to lead the industry’s drive towards third-party certification standards through the development of ResponsibleSteel™, something many of our European customers are responding to positively.

Advocating good carbon policy

Phase 4 of the EU Emissions Trading Scheme (ETS) is a central issue for us and many of our stakeholders, and this intensified in 2016. While we support the EU's climate goals we, like many leaders and workers in our industry, argued that the proposals as they stand will make no positive difference to global CO₂ emissions. Because they will have the effect of increasing the cost of European steel compared with imports from countries where a lower carbon charge is applied – and where environmental standards are often lower – European steelmakers, and their employees, will be penalised.

Our chairman and CEO, Lakshmi N Mittal, recently spoke out on this issue, saying that the aim of the ETS should be to reduce emissions from Europe’s steel consumption as well as its production. He proposed the use of border carbon adjustments to achieve this. You can read a full account of what Mr. Mittal said here. It is important to note that we agree with the EU’s climate goals, just not the way the ETS aims to achieve them – and that we are committed to reducing the carbon footprint of our business in Europe, as we are elsewhere.

Innovating to create a lower-carbon future

Through life cycle assessment – the study of the total impact of a product from raw material extraction, through manufacture and transport, to use and disposal or recycling – we know that our steel can contribute to lower overall carbon emissions compared to other materials in many applications. We also know that many of the products we make, such as lighter components for cars or packaging, help our customers achieve CO₂savings.

LCTPi

Read more about our Low Carbon Technology Partnership Initiative.

But we also expect innovation, and innovative partnerships and collaborations, to play a key role in addressing the carbon footprint of our operations. At the COP22 talks in Marrakesh in 2016, we announced the formation of our Low-Carbon Technology Partnership Initiative with our European partners Evonik, LafargeHolcim and Solvay. The partnership will look at the potential synergies that exist between the manufacturing processes of the steel, cement and chemicals industries, and how we can harness them to produce CO₂ savings. As a first step, the partnership will study potential ways to use waste gases and other by-products to create value.

Innovative cross-sector partnerships such as this will help us to develop and industrialise carbon re-use technologies, ensuring that waste products created from the steelmaking process are effectively harnessed and re-used.

Carl de MaréHead of technology strategy

Steel, ethanol and the low-carbon economy

How our partnership with LanzaTech could show the way to a carbon economy of the future.

We're also exploring the use of breakthrough technologies to capture and store carbon. One of our most promising projects is our partnership with biotech company LanzaTech, designed to convert waste carbon monoxide from steel production into ethanol on a commercial basis. In 2016, we began an €87 million pilot of this technology at our mill in Ghent, which aims to produce enough ethanol each year to run half a million cars. Ethanol produced in this way was recognised as a renewable energy by the European Commission in 2016 – and each tonne of ethanol produced will reduce overall CO₂ emissions by 2.3 tonnes.

These developments, though exciting, are still at a relatively early stage, and we know that many challenges remain for us. Among them is the availability and price of scrap steel, which affects the balance of steel production at our sites. High scrap prices make it less viable to produce steel in electric arc furnaces, which recycle a higher proportion of scrap than blast furnaces; these make steel from iron ore, with a higher carbon input. We have supported a number of studies into scrap steel flows in order to further explore this issue.

See Outcome 4 for our Resources.

Energy vigilance brings further cost and carbon efficiencies

Many of our steel plants in Europe are at a good level in terms of energy efficiency. And yet our colleagues are always looking for further improvements. A simple example in 2016 comes from Dabrowa Gornicza (Poland), where the installation of 11 variable speed drives (VSD) on different motors across the site, is expected to deliver electricity cost savings of over 250 times the investment in the first year.

Being able to control the speed of a motor and therefore the power supplied to it means that we can reduce the rotational speed of the motor to just what is needed. Since motors drive a large number of fans and pumps in a steel plant, even a small reduction in each can add up to a significant amount of energy and carbon savings. In the case of DG, the new VSDs will save an estimated 24,000 tonnes indirect CO₂ emissions from reduced electricity each year.

In total, our energy related investments in Europe Flat Products totaled €18.5 million in 2016 – generating a total of 135,000 tonnes CO₂ reduction (scope 1 and 2) on an annual basis.

Investing in cleaner air

While we continue to explore ways to address our CO₂ emissions, we're also improving our sites to reduce dust and other emissions that we know are a matter of concern for the people who live and work around us. A great example is our modernisation programme in Poland, in which environmental investments play an important part.

By the end of 2016, we had completed our modernisation of the coke plant at Zdzieszowice, which will have a significant impact on air emissions. We also approved three new capital investment projects at our Dabrowa Gornicza site, with a total investment of US$92 million. We expect these projects to be completed by 2018, when they will ensure our operations in Poland are compliant with the European Industrial Emissions Directive.

We know that other communities have concerns about dust and air quality, and we are continuing a programme of both innovation and investment across Europe. At our Zenica site in Bosnia and Herzegovina in early 2017, for example, we installed an industrial demonstration of an important new technology developed by our global R&D team to improve air emissions from the sinter plant.

Continuing our transformation as a business

The innovative work we've done in Europe in 2016 has been made possible because of the changes we've made to the business in recent years. In 2016 this involved important progress in the utilisation of new digital platforms to optimise our service to customers and our procurement processes. In 2016 this continued with changes to our operational footprint in our Long Products business through the sale of Zaragoza, the partial closure of Zumarraga and the partial shutdown of Sestao in Spain. In addition to footprint optimisation, our Long Products business also moved to a new, product-based business model in order to facilitate stronger customer focus and service.

We also made encouraging progress through our Flat Products Transformation Plan, the backbone of our European Action 2020 initiatives. In 2016 this involved important progress in the utilisation of new digital platforms to optimise our service to customers and our procurement processes. This has focused on further removing bottlenecks from our supply chain, reorganising our finance and purchasing functions, and increasing our commercial focus so that we can be more responsive to customers.

A high-performing workforce with the skills we need

The improvement in performance we still need to make to achieve our Action 2020 objectives will be delivered by our workforce. We're working with employees to ensure that our working culture is diverse, fair, and performance driven.

ArcelorMittal Europe employs more than 80,000 people

In 2016, ArcelorMittal Ostrava received the "Company of the Year: Equal Opportunities award" at the Prague Diversity at Work conference for its support of female employees, and in France, we've worked with three trade unions to promote the vocational integration of workers with disabilities. Our Fos-sur-Mer site runs a training programme aimed at qualifying unemployed people with disabilities to work in metallurgical roles in partnership with Agefiph (Fund for the Integration of the Disabled).

Ensuring that our current and future workforce has the skills needed to succeed in a rapidly evolving industry, in which digitalization and robotics are playing an increasingly important part, is also crucial, and we've continued to build relationships with schools, technical colleges and universities across Europe. To cite just a few examples, ArcelorMittal Galati in Romania welcomed 100 graduates from Galati and Braila counties at its apprentice school in 2016, and in Poland, we ran a pilot skills programme for students from Zespół Szkół HTS vocational school in Kraków.

At-a-glance: key progress against our Action 2020 objectives

Cost

Continued to optimise operating footprint with the sale of Zaragoza, partial closure of Zumarraga and partial shutdown of Sestao in Spain.
Flat Products Transformation Plan: procurement, productivity and reliability savings on track.
Reporting structures amended in finance, supply chain and marketing, to drive a more integrated, centrally co-ordinated approach.

Volume

Relining of blast furnace #5 in Kraków completed in 2016 as part of total upstream and downstream investment at the plant that will extend hot rolling mill capacity by 0.9 million tonnes a year and hot dip galvanizing capacity by 0.4 million tonnes a year.

Product mix and customer service

Expanding our Fortiform® family of third-generation AHSS products through upgrades at Ghent and Liège.
Sagunto, Spain, became our fourth plant in Europe to produce aluminium-silicon coated steel, Usibor® Alusi.
Working with customers on products with sustainability benefits and on supply chain assurance.

Opportunities for innovative products

There are clear opportunities for our business in 2017. We expect underlying demand in Europe to continue to rise, supported by the strength of the automotive market, though we expect apparent demand to grow only gradually, at 0.5% to 1.5%.

We aim to continue to increase the proportion of higher value, specialised products such as AHSS.

Stakeholder engagement trade protection remain crucial

We welcome competition, because we believe that the work we have done to achieve efficiencies through our Transformation Plan puts us in a strong position. However, unfair trade and dumping remain threats to European steelmaking despite trade action in 2016, and we will continue to call for faster and more effective measures to ensure competition is fair.

Getting the right ETS for the economy and the climate

We will continue to support Europe's climate change goals and to pursue innovative ways to reduce our carbon footprint in our business. In order to do this, we will advocate carbon-trading measures that reward European steelmakers who demonstrate and invest in carbon efficiencies, and oppose those that undermine European steel’s competitiveness in the global market on the basis of differing carbon costs.

At the same time, across the business our increasing emphasis on building and communicating our 10 SD outcomes is ensuring that we can better understand and anticipate the demands of all our stakeholders.

European carmakers come together to drive sustainability

Some of the biggest names in the European automotive industry have joined forces to form the European Automotive Working Group on Supply Chain Sustainability, which aims to improve the social, ethical and environmental performance of automotive supply chains.

The new group reflects the automotive industry's leadership in supply chain sustainability, a trend that is growing among other sectors. Coordinated by CSR Europe, the group consists of several automotive manufacturers working together in recognition that people and the environment are vital resources in the automotive industry. In their words:

"As the automotive industry has complex value chains and a deep structured supplier base, the group believes in the benefits of a common approach and common messages towards suppliers, i.e. trainings and other activities. However, every party of the group shall maintain the management of their independent supply chains. In the process of collaboration, the participants strongly agreed to work together in compliance with competition law."

Find out more about our SD outcome 7: Supply chains that our customers trust.