Arcellor Mittal

8/11/2019 Arcellor Mittal

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CHAPTER 2

Vision And Mission

We are fully aware of our responsibility for the region in which we operate, forthe people who live in the region and for our employees. We consistently

implement the policy of corporate responsibility, which is considered to be an

integral part of the Company management system.

ArcelorMittal Ostrava strives for:

- becoming a good and responsible neighbour that understands the needs of the

region in which it operates, and is able to adapt to them;

- protecting the environment for future generations and carrying out all

activities bearing future generations in mind;

- treating its employees with fairness and dignity;

- reducing the impact of its activity on society and the environment in

conjunction with its key partners, i.e. employees, customers, suppliers,

business partners and other stakeholders.


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CHAPTER 3

Business Strategy

ArcelorMittals success has been built on a consistent strategy that

emphasizes size and scale, vertical integration, product diversity, continuous

growth in higher value products and a strong customer focus. We intend to

continue to be the global leader in the steel industry, in particular through the

following:

Three-dimensional strategy for sustainability and growth.ArcelorMittal

has unique geographical and product diversification, coupled with upstream

and downstream integration that reduces exposure to risk and cyclicality.This strategy can be broken down into its three major elements:

Geography: ArcelorMittal is the largest producer of steel in Europe, North

and South America, Africa, the second largest steel producer in the CIS

region, and has a growing presence in Asia, particularly in China.

ArcelorMittal has steel-making operations in 20 countries on four continents,

including 66 integrated, mini-mill and integrated mini-mill steel-making

facilities which provide a high degree of geographic diversification.

Approximately 36% of its steel is produced in the Americas, approximately

49% is produced in Europe and approximately 15% is produced in other

countries, such as Kazakhstan, South Africa and Ukraine. ArcelorMittal is

able to improve management and spread its risk by operating in six segments

(Flat Carbon Americas, Flat Carbon Europe, Long Carbon Americas and

Europe, AACIS, Stainless Steel, and Steel Solutions and Services) reflecting

its geographical and product diversity.

Worldwide steel demand in recent years has been driven by growth in

developing economies, in particular in the BRICET countries. The Companys

expansion strategy over recent years has given it a leading position in Africa,

Central and Eastern Europe, South America and Central Asia. The Company is

also building its presence in China and India. As these economies develop, local

customers will require increasingly advanced steel products as market needs

change.


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Products:

As a global steel producer, ArcelorMittal is able to meet the needs of

diverse markets. Steel consumption and product requirements are

different in mature economy markets and developing economy markets.Steel consumption in mature economies is weighted towards flat products

and a higher value-added mix, while developing markets utilize a higher

proportion of long products and commodity grades. To meet these diverse

needs, ArcelorMittal maintains a high degree of product diversification

and seeks opportunities to increase the proportion of its product mix

consisting of higher value-added products. The Company produces a

broad range of high-quality finished, semi-finished carbon steel products

and stainless steel products.

Value chain :

ArcelorMittal has access to high-quality and low-cost raw materials

through its captive sources and long-term contracts. ArcelorMittal

plans to continue to develop its upstream and downstream integration in

the medium-term, following a return to a more favorable market

environment. Accordingly, the Company intends in the medium-term to

increase selectively its access to and ownership of low-cost raw material

supplies, particularly in locations adjacent to, or accessible from, its steel

plant operations.

Downstream integration is a key element of ArcelorMittals strategy to

build a global customer franchise. In high-value products, downstream

integration allows steel companies to be closer to the customer and

capture a greater share of value-added activities. As its key customers

globalize, ArcelorMittal intend to invest in value-added downstream

operations, such as steel service centers and building and construction

support unit services for the construction industry. In addition, the

Company intends to continue to develop its distribution network in

selected geographic regions. ArcelorMittal believes that these

downstream and distribution activities should allow it to benefit from

better market intelligence and better manage inventories in the supply

chain to reduce volatility and improve working capital management.

Furthermore ArcelorMittal will continue to expand its production of

value-added products in developing markets, leveraging off our

experience in developed markets.


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Organic Growth.

Notwithstanding the current downturn, ArcelorMittals management

believes there will be strong global steel demand growth in the medium

and long term. Accordingly, the Company is maintaining its previouslyannounced strategic growth plan to increase shipments in the medium-

term to 130 million tonnes, which represents a 20% increase over 2006

levels, primarily through production improvements at existing facilities.

Realization of this plan will nonetheless be delayed due to the

postponement of capital expenditure in light of current market conditions

and uncertainties.

Mergers and acquisitions/Greenf ield growth.

Mergers and acquisitions have historically been a key pillar of

ArcelorMittals strategy to which it brings unique experience, particularly

in terms of integration. Instead of creating new capacity, mergers and

acquisitions increase industry consolidation and create synergies.

ArcelorMittal has also placed strong emphasis on growth in emerging

economies through greenfield developments. In light of the current

economic and market conditions, ArcelorMittal has temporarily curtailedmerger and acquisition and greenfield investment activity until a return to

a more favorable market environment.


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CHAPTER 4

ArcelorMittal Code of Business Conduct

ArcelorMittal has a reputation for honesty and integrity in its managementpractices and in all its business transactions. It is vital, for the Company,

including each subsidiary, and for each one of us, that we preserve this

reputation and maintain the relationship of trust that must exist with all the

individuals and companies with whom we have dealings. In varying degrees, we

are all the custodians of ArcelorMittal's reputation. Accordingly, the Company

expects each one of us to behave in an upright manner. This code of conduct

applies to all directors, officers and employees of ArcelorMittal and its

subsidiaries worldwide. It is designed to help us understand our ethical andlegal obligations in handling the Company's business. Although this code of

conduct does not cover every issue that may arise, it is intended to establish

guidelines to which we can refer in situations where the proper course of

conduct may not seem clear.

The guidelines set out in this code of conduct are mandatory and, as such, must

be observed by every one of us at all times.Our supervisor, a member of

management, the head of the Legal Department/General Counsel or the head of

the Internal Audit Department can advise us and help us make the appropriatedecisions concerning our conduct at work and in business.

COMPLIANCE WITH LAWS

ArcelorMittal and its employees worldwide must comply with every local, state,

federal, national, international or foreign law or regulation that applies to the

Company's business. If we are unsure whether a particular legal provision is

applicable or how it should be interpreted, we should consult our supervisor or

the Legal Department. Many of the Company's activities are subject to complex

and changing legislation governing domestic and international trade and

commerce. Ignorance of the law is generally not considered a valid defense

when an infraction is committed, regardless of the jurisdiction where the

Company is operating.


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Competition and Antitrust

ArcelorMittal is committed to strict observance of the competition and antitrust

laws of the countries in which it does business and to the avoidance of any

conduct that could be considered illegal. Agreements or arrangements may befound illegal even if they are not made in writing, since the conduct of the party

involved can be sufficient to establish that a violation occurred. Consequently,

we must not take part in any formal or informal discussions, agreements,

arrangements, projects or accords with current or potential competitors related

to pricing, terms of sale or bids, division of markets, allocation of customers or

any other activity that restrains or could restrain free and open competition. The

courts may impose large fines and, in certain circumstances, lengthy prison

terms for violations of antitrust laws, and these penalties may be imposed onboth employees and companies. In view of the serious legal consequences, at

both the civil and criminal levels, to which such violations could expose the

Company, ArcelorMittal will take any steps that may reasonably be warranted

against employees who disobey these laws. Ignorance, overzealousness, good

faith or the argument that time did not permit the advice of the Legal

Department to be sought will not be accepted as an excuse. All questions in the

competition/antitrust area should be submitted to the Legal Department before

any action is taken.

Payments and/or gifts to Government Officials

ArcelorMittal will comply with the anti-corruption laws of the countries in

which it does business, including the US Foreign Corrupt Practices Act, which

applies to its global business. We will not directly or indirectly offer or give

anything of value to any government official, including employees of

stateowned enterprises, for the purpose of influencing any act or decision in

order to assist the Company in obtaining or retaining business or to directbusiness to anyone. We will also ascertain that any agents we engage to conduct

business on our behalf are reputable and that they also will comply with these

guidelines. Trading in the Securities of the Company Should we decide to

acquire, as employees, any shares issued by any listed company in the

ArcelorMittal Group, is aware that the purchase of securities of any corporation

listed on a stock exchange entails a certain risk and that the decision to acquire

shares of any ArcelorMittal Group company is strictly a personal one. In

addition, before we conclude any trade involving securities of the Company, we


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must consider that securities laws contain prohibitions concerning the use of

privileged or "inside" information. In particular, securities laws prohibit us from

purchasing, selling or otherwise trading in or recommending, for our own

account or for others, any securities of corporations where we are in possession

of any "material inside information" concerning the corporation in question.

Communicating such information to others is also prohibited. The term

"material inside information" refers to any information which, if it were made

public, would be reasonably likely to influence the price of the securities of the

corporation or to affect an investor's decision to purchase or sell securities of the

corporation.

CONFLICTS OF INTEREST

ArcelorMittal recognizes that we all have our own individual interests and

encourages the development of these interests, especially where they are

beneficial to the community at large. However, we must always act in the best

interests of the Company and we must avoid any situation where our personal

interests conflict or could conflict with our obligations toward the Company. As

employees, we must not acquire any financial or other interest in any business

or participate in any activity that could deprive the Company of the time or the

scrupulous attention we need to devote to the performance of our duties.

We must not, directly or through any members of our families or persons living

with us or with whom we are associated, or in any other manner:

1. have any financial interests that could have a negative impact on the

performance of our duties,or derive any financial benefit from any contract

between the Company and a third party where we are in a position to influence

the decisions that are taken regarding that contract; or

2. attempt to influence any decision of the Company concerning any matter witha view to deriving any direct or indirect personal benefit. We must inform our

supervisor or the Legal Department of any business or financial interests that

could be seen as conflicting or possibly conflicting with the performance of our

duties. If the supervisor considers that such a conflict of interest exists or could

exist, he or she is to take the steps that are warranted in the circumstances. If the

case is complex, the supervisor is to bring it to the attention of the Vice-

President of his or her division, the Chief Executive Officer or the General

Counsel.


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Receiving Gifts or Benefits

We must not profit from our position with ArcelorMittal so as to derive

personal benefits conferred on us by persons who deal or seek to deal with the

Company. Consequently, accepting any personal benefit, such as a sum ofmoney, a gift, a loan, services, pleasure trips or vacations, special privileges or

living accommodations or lodgings, with the exception of promotional items of

little value, is forbidden. Any entertainment accepted must also be of a modest

nature and the real aim of the entertainment must be to facilitate the

achievement of business objectives. For example, if tickets for a sporting or

cultural event are offered to us, the person offering the tickets must also plan to

attend the event. In general, offers of entertainment in the form of meals and

drinks may be accepted, provided that they are inexpensive, infrequent and, asmuch as possible, reciprocal. As these instructions cannot cover every

eventuality, we are all required to exercise good judgment. The saying

"everybody does it" is not a sufficient justification. If we are having difficulty

deciding whether a particular gift or entertainment falls within the boundaries of

acceptable business practice, we should ask ourselves the following questions:

Is it directly related to the conduct of business? Is it inexpensive, reasonable and

in good taste? Would I be comfortable telling other customers and suppliers that

I gave or received this gift? Other employees?

My supervisor? My family? The media? Would I feel obligated to grant favours

in return for this gift? Am I sure the gift does not violate a law or a Company

policy?

In case of continuing doubt, we should consult our Supervisor or the Legal

Department.

Corporate Boards of Directors

Before agreeing to sit on the board of directors of a business corporation, we

must obtain the authorization of our supervisor or the General Counsel. The

purpose of this step is to ensure that there is no possible conflict of interest.

Political Activities

Employees who run for an elected office are required to so inform their

supervisor or the General


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Counsel.

Employees who wish to participate in activities of a political or public nature

must do so in a personal capacity only and during non-working hours.

Corporate Opportunities

We, as directors, officers or employees, are prohibited from (a) taking for

ourselves personal opportunities that are properly within the scope of the

Company's activities, (b) using corporate property, information or position for

our own personal gain, and (c) competing with the Company; unless otherwise

authorized by the Board of Directors of the Company. We owe a duty to the

Company to advance its legitimate interests to the best of our ability.

FAIR DEALING

Customer Relations

The Company's prosperity is founded on customer satisfaction. ArcelorMittal

expects us to preserve the quality of our customer relations by maintaining

business relationships that are based on integrity, fairness and mutual respect.

Only clear, concrete, pertinent and honest information is to be given to

customers. We must be careful to avoid making any statement to a customer

that could be misinterpreted. The Company does not tolerate the making of

promises to customers which will probably be impossible to keep, regarding

product quality and characteristics, delivery times and prices.

Offering Gifts and Entertaining

The Company expects us to refrain from offering gifts or granting favours

outside the ordinary course of business to current or prospective customers,

their employees or agents or any person with whom the Company has a

contractual relationship or intends to negotiate any agreements. Employees who

are called upon to do so may incur reasonable expenses for the entertainment of

current or prospective customers or other persons who deal with the Company,

provided that such entertainment is in keeping with the person's position and is

related to business discussions and that appropriate accounts are kept.

Supplier relationships

Suppliers of the Company are to be chosen in consideration of objective criteria,based on quality, reliability, price, utility and performance or service. Suppliers


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are to be treated justly, fairly and honestly. Fees and commissions are to be paid

to consultants only in the course of ordinary business relations. Any fees must

be substantiated by documentation demonstrating that the amount charged is

commensurate with the value of the services rendered.

Confidential Information

Data, information and documents pertaining to the Company are to be used

strictly for the performance of our respective duties and may be disclosed or

communicated to persons outside the Company only to the extent that the

information in question is needed by such persons in connection with their

business relations with the Company, or where the information is already in the

public domain or is required to be disclosed by law or court order. In case of

doubt as to whether the information may be disclosed and to whom it may be

sent, we should consult our supervisor or the Legal Department. We are

required, for the duration of our employment with the Company and after our

employment terminates, to keep such information confidential and to use the

utmost discretion when dealing with sensitive or privileged information. Such

information includes, in addition to the technology used by the Company,

intellectual property, business and financial information relating to sales,

earnings, balance sheet items, business forecasts, business plans, acquisition

strategies and other information of a confidential nature.

Confidential information must not be discussed with or disclosed to any

unauthorized persons, whether Company personnel or persons outside the

Company. We must take the necessary steps to ensure that documents

containing confidential information, when sent by fax or other electronic media,

are not brought to the attention of unauthorized persons, whether Company

personnel or persons outside the Company. We must take the appropriate

security measures when destroying documents that contain confidentialinformation (regardless of the medium by which such documents are

recorded).We must also keep confidential any similar information relating to the

organizations with which the Company has a business relationship of any kind.

Public statements on behalf of the Company can be made exclusively by

authorized persons. Any request for information concerning the Company that

originates with the media or a government agency should be directed to the

Communications/Public Affairs Manager, the Chief Executive Officer or the

Legal Department, depending on the nature of the information requested.


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Personal Information

Personal information, that is, information relating to an individual that allows

that individual to be identified, is protected, among other things, by laws in

most of the jurisdictions where ArcelorMittal is doing business. ArcelorMittalfully supports the objectives of such legislation and applies rigorous measures

to ensure compliance with its provisions. Any collection, retention, use or

communication to third parties of personal information must be carried out in a

manner that is respectful of the individual and in compliance with the law at all

times. Except in certain limited cases, personal information is to be used strictly

for the performance of our respective duties and may be disclosed to third

parties only where such disclosure has been authorized by the individual

concerned. Such information must be kept in a secure place. In case of doubt asto the handling of personal information, we should consult our supervisor or the

Legal Department.


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CHAPTER 5

PROTECTION AND PROPER USE OF COMPANY ASSETS

Accuracy of Records

The books, records, files and statements of ArcelorMittal must faithfully reflect

the entirety of the Company's assets and liabilities, as well as all of its

operations, transactions and any other items related to its business, without

omission or concealment of any kind, in accordance with applicable standards

and regulations.

All transactions must be authorized and carried out in accordance with the

instructions of management. Transactions must be recorded in a manner thatwill allow accurate financial statements to be prepared and the utilization of

assets to be accounted for. No file is to be destroyed without the authorization

of our supervisor. Such authorization will be granted only if it is in keeping with

applicable laws and Company policy.

Property of the Company

The loss, theft or inappropriate use of the Company's property is bound, sooner

or later, to affect the Company's profitability. The protection of the Company'sproperty by each one of us is a matter of integrity and honesty.

We must use any property of the Company entrusted to us in an appropriate

manner, ensure that it is secure, and prevent theft, damage and premature wear

from occurring. Company property must be used exclusively for the business of

the Company and must not to be used for personal purposes unless we first

obtain permission from our supervisor.

ArcelorMittal encourages initiative, creativity and innovation on the part of itsemployees. Nevertheless, intangible property such as inventions, ideas,

documents, software, patents and other forms of intellectual property related to

the Company's business, created or conceived by employees in connection with

the performance of their duties, belongs, on that basis, to the Company. Subject

to any mandatory applicable law, we may not derive profit from, or apply for a

patent in our personal name for, any creation or invention conceived or made by

us in the course of performing our duties.


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Software developed or acquired by the Company may not be reproduced or

tampered with, nor may it be used for any purposes other than those intended by

the Company. Software that is not owned or licensed by the Company is not to

be used on the work premises or in the Company's business.

E-mail and the Internet

ArcelorMittal owns the e-mail and internet systems used in the workplace and

thus we should use these systems primarily for work-related communications.

Although we each have individual passwords to access the e-mail and internet

systems, the Company reserves the right, subject to applicable law, to access

and monitor our use of these systems in appropriate circumstances.

We are strictly prohibited from using the e-mail and internet systems for anyimproper or illegal purpose, including the transmission of messages that may be

viewed as insulting or offensive to another person, such as messages, cartoons

or jokes that could be construed as harassment of others on the basis of race,

color, religion, sex, age, national origin or disability.


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CHAPTER 6

RESPECTING THE ARCELORMITTAL COMMUNITY

Work environment free of harassment and discrimination ArcelorMittal iscommitted to providing a work environment that is free of any form of sexual or

other harassment, whether it be harassment by an employee of another

employee or harassment by an employee of a customer or supplier or vice-

versa.

ArcelorMittal is committed to ensuring that each one of us is treated with

fairness and dignity; accordingly, any discriminatory practice based on race,

color, sex, age, religion, ethnic or national origin, disability or any other

unlawful basis will not be tolerated. The Company seeks to provide each of uswith equal opportunity for advancement without discrimination. However,

distinguishing between individuals based on the aptitudes or qualifications

required for a particular employment does not constitute discrimination.

An employee who believes he or she has been the victim of, or a witness to, a

situation involving harassment or discrimination should immediately report that

situation to the head of the Legal Department. All such reports will be treated in

confidence. ArcelorMittal permits family members of existing employees towork for the Company, provided that they are evaluated and selected

objectively and on the basis of the same criteria as other candidates and

provided that their respective positions will not be potentially in conflict or

collusion.

Occupational Health and Safety

ArcelorMittal makes every effort to provide us with a healthy and safe work

environment, to conduct regular inspections so as to eliminate any dangerousconditions or behavior and their causes, and to develop programs dedicated to

our safety and well-being. We must abide by the Company's standards in safety

matters, do our part to maintain a healthy and safe work environment and take

the necessary steps to ensure our own safety and the safety of others.

The manufacture, use, purchase, sale, trafficking or possession on the Company

premises (or outside the premises while we are on duty) of substances such as

alcoholic beverages (except in permitted circumstances), stimulants, narcotics

and other intoxicants is forbidden.


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Respect for the Environment

Respecting and protecting the environment is an important value to which

ArcelorMittal subscribes. We must comply at all times with the environmental

legislation applicable to ArcelorMittal, and we have an important role to play inimplementing the guidelines issued by the Company in this regard.

A SHARED RESPONSIBILITY

Each one of us is responsible for adhering to the values of ArcelorMittal in our

daily lives as employees of the Company and for making every effort to ensure

that our rules of conduct are respected by all. Conduct that is contrary to these

rules is punishable by disciplinary action up to and including termination of

employment, in compliance with all applicable laws and procedures.

WAIVERS OF THIS CODE OF CONDUCT

A waiver of any provision of this code of conduct will only be given if it is

deemed absolutely appropriate under the circumstances. A waiver of this code

of conduct for executive officers or directors of the Company will only be

granted by the Board of Directors of the Company or a committee of the Board.

Any such waiver granted will be promptly disclosed as required by law or stock

exchange requirement.

REPORTING ANY ILLEGAL OR UNETHICAL BEHAVIOUR

Any behaviour that deviates from this code should be reported immediately to

our supervisor, a member of management, the head of the Legal Department or

the head of Internal Audit Department. In the case of accounting, internal

control and auditing issues, these may also be reported to the Audit Committee

of the Board of Directors of ArcelorMittal. If, after our supervisor has been

informed, appropriate steps still have not been taken, we should personallybring the matter to the attention of one of the other persons mentioned above. It

is the policy of the Company not to allow retaliation of reports of misconduct by

others that we make in good faith. Employees are expected to cooperate in

internal investigations of misconduct


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CHAPTER 7

STRATERGIC ALLIANCE OF POSCO AND ARCELLOR MITTAL

ArcelorMittal will sell 15 per cent stake in a Canadian subsidiary that ownsLabrador Trough iron ore mine to a consortium led by Posco and China Steel

Corporation (CSC) for $1.1 billion. ArcelorMittal Mines Canada (AMMC), the

worlds largest steel makers wholly-owned subsidiary, will retain the rest 85

per cent stake in the joint venture, ArcelorMittal said in a statement on

Wednesday.

As part of the transaction, Posco and CSC will enter into long-term off-take

agreements proportionate to their joint venture interests, it added.

AMMC, according to information on its website, produces around 15 million

tonnes iron ore concentrate and over nine million tonnes of iron oxide pellets

annually. ArcelorMittal, which is facing challenges due to subdued demand in

Europe, said the move to sale stake in the iron ore venture is part of its strategy

to build strategic relationships with key customers.

Apart from Posco and CSC, the consortium has certain financial investors,

but their identities were not disclosed. Subject to various conditions, the deal is

expected to be closed in two instalments in the first and second quarters of

2013.

We are committed to growing ArcelorMittals mining business. This joint

venture incorporating a long-term off-take agreement is consistent with our

strategy to forge strategic relationships with key customers as we build our

global mining business, Peter Kukielski, Chief Executive, Mining at

ArcelorMittal said.

ArcelorMittal had clocked USD 94 billion revenue in 2011 and produced 91.9

million tonnes of crude steel, representing approximately six per cent of world

steel output. The Groups mining operations produced 54 million tonnes of iron

ore and eight million tonnes of metallurgical coal.


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CHAPTER 8

Risks Related to ArcelorMittal

ArcelorMittal has a substantial amount of indebtedness, which, along withadverse conditions prevailing in global credit markets, could make it more

difficult or expensive to refinance its maturing debt, incur new debt and/or

flexibly manage its business.

As of December 31, 2008, ArcelorMittal had total debt outstanding of $34.1

billion, consisting of $8.4 billion of short-term indebtedness (including payables

to banks and the current portion of long-tem debt) and $25.7 billion of long-

term indebtedness. As of December 31, 2008, ArcelorMittal had $7.6 billion of

cash and cash equivalents, including short-term investments and restricted cash,

and $5.8 billion available to be drawn under existing credit facilities (although

$4.2 billion is earmarked under current Company policy as back-up for its

commercial paper program). Substantial amounts of indebtedness mature in

2009 ($8.4 billion), 2010 (8.1 billion), 2011 ($3.9 billion) and 2012 ($7.7

billion) although ArcelorMittal has recently secured refinancing commitments

from banks for two Forward Start facilities (i.e., a committed facility to

refinance an existing facility upon its maturity) that, if drawn, would effectively

extend the maturities of $4.8 billion of lines of credit (drawn and undrawn) to

2012 (from original maturity dates ranging from 2009 to 2011). See Item 5

Operating and Financial Review and ProspectsLiquidity and Capital

Resources.

In response to the downturn in the global steel market and difficult credit

market conditions, ArcelorMittal is targeting a reduction in net debt (i.e.,

long-term debt net of current portion plus payables to banks and current portion

of long-term debt, less cash and cash equivalents, restricted cash and short-terminvestments) of $10 billion by the end of 2009. While ArcelorMittal achieved

$6 billion of this reduction in the fourth quarter of 2008 (of which a substantial

portion resulted from the unwinding of a hedging transaction and gains on an

asset disposal), there can be no assurance that it will attain the full amount of

the targeted reduction. If the steel market deteriorates further, consequently

reducing operating cash flows, ArcelorMittal may come under liquidity

pressure, depending in particular on conditions in the credit markets. Credit

default swaps on ArcelorMittal debt, although illiquid and driven by technicalor speculative factors, have traded at elevated spreads since the fall of 2008,
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although easing somewhat since early 2009. ArcelorMittal could, in order to

increase financial flexibility during a period of reduced availability of credit,

implement capital raising measures such as an equity offering or asset disposals,

which could in turn create a risk of diluting existing shareholders, receiving

relatively low proceeds and/or causing substantial accounting losses

(particularly if done in difficult market conditions).

ArcelorMittals principal financing facilitiesthat is, the $3.2 billion term and

revolving credit facility, which was amended on February 6, 2007 and on

March 14, 2008 (the 2005 Credit Facility), the $800 million committed multi -

currency letter of credit facility (the Letter of Credit Facility), the 17 billion

(approximately $25 billion) term and revolving credit facility entered into on

November 30, 2006 (the 17 Billion Facility) and the $4 billion revolvingcredit facility entered into on May 13, 2008, which was amended on

October 23, 2008 (the $4 Billion Facility)contain restrictive covenants.

Among other things, these covenants limit encumbrances on the assets of

ArcelorMittal and its subsidiaries, the ability of ArcelorMittals subsidiaries to

incur debt and ArcelorMittals ability to dispose of assets in certain

circumstances. These facilities also include financial covenants: a leverage ratio

(that must not exceed 3.5 to 1) in the 2005 Credit Facility, the 17 Billion

Facility and the $4 Billion Facility; and an interest coverage ratio (that must begreater than 4 to 1) in the Letter of Credit Facility. See Item 5Operating and

Financial Review and ProspectsLiquidity and Capital Resources for a

detailed presentation and explanation of these covenants. Failure to comply with

these covenants would enable the lenders to accelerate ArcelorMittals

repayment obligations. Moreover, ArcelorMittals debt facilities and its

guarantees have provisions whereby certain events relating to other borrowers

within the ArcelorMittal group could, under certain circumstances, lead to

acceleration of debt repayment under other ArcelorMittal credit facilities. Anypossible invocation of these cross-acceleration clauses could cause some or all

of the other.


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CHAPTER 9

CASE STUDY ON ARCELLOR AND MITTAL RELATED TO EU

Summary

This briefing examines how the worlds biggest steel company,ArcelorMittal,

is set to become the largest beneficiary of the EU Emissions Trading Scheme.

By 2012 the company is set to have 80 million permits to pollute which it does

not need and which it was given for free. If sold, these will make over 1

billion in windfall profits by 2012, paid for in part, by UK power consumers.

briefing goes on to make the case Lakshmi Mittal, the CEO of the ArcelorMittal

and also Britains richest man, should choose to forgo windfall profits and opt

instead for climate philanthropy. Cancelling the 80 million surplus permitswould be equivalent to Denmark, host nation of the forthcoming climate talks,

producing no carbon for a whole year. Such a commitment would make Mittal

the worlds foremost climate change philanthropist.We have produced this

briefing using European Union verified data on the emissions and allocations

received by polluting installations across Europe under the EU ETS. To enable

us to isolate polluting installations belonging to ArcelorMittal we have used

data provided by Carbon Market Data who have carefully matched all EU

installations to the parent companies which own them.

Background: The EU Emissions Trading Scheme

In 2005 the EU implemented the worlds first large scale emissions trading

scheme, know as the EU ETS. The scheme put in place an emissions cap on

heavy industrial sectors and power generators within the EU. For each tonne of

carbon that polluters were allowed to emit, an emissions permit (EUA) was

issued. These permits were given out for free to companies who, to comply with

the scheme, had to make sure they had enough permits to cover their pollution.

The theory was that the cap would result in a shortage of permits and would

mean companies either had to cut their carbon emissions, or buy extra permits,

thereby paying for emissions reductions elsewhere. For the first three years of

the scheme, known as Phase 1, things did not go to plan. Following intense

lobbying and high profile claims that the scheme would harm business and

mean job losses, the cap on emissions was set too high and therefore too many

permits were issued. Arcelor also launched an unsuccessful attempt to block the

trading scheme. As it turned out, most companies found themselves in a


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position to sell surplus permits on the market generating windfall profits, until

the price of carbon reached zero. Thus the great potential the scheme had for

cutting emissions was not achieved; instead the scheme became a cash cow for

many of the businesses it covered. The EU ETS is now into Phase 2 of trading

which will last until the end of 2012 and the problem of windfall profits

continues. This time around industrial companies are the main beneficiaries.

Even before the recession they had many more permits than they needed. With

2009 one of the worst years on record for industrial production, these

companies will now be sitting on vast numbers of unused emissions permits. If

these are sold we will see a repeat of the huge windfall profits from Phase 1,

and if not, the permits will be banked to allow future pollution undermining the

integrity and ambition of the EUs post 2012 climate targets.

The Case of Arcellor Mittal

One company stands out as the biggest beneficiary of the EU Emissions Trading

Schemethe worlds largest steel company, ArcelorMittal. Its CEO and major

shareholder Lakshmi Mittal is the UKs richest resident, and one of the worlds

richest men. The company is the EUs 5thbiggest polluter but rather than being

asked to cut its emissions under the scheme, it has been allowed to increase

them. In 2008, ArcelorMittal had over 14 million surplus permits equivalent to

the annual emissions of Luxembourg, or a windfall of over 200 million. With

global steel production dropping by over 37% in 2009, we estimate that this

could grow to 40 million for that year meaning surplus permits equivalent to a

windfall of 560 million.By the end of 2012 ArcelorMittal is likely to control

surplus permits equivalent to 80million tonnes of carbon, or put another way,

more than the annual emissions of nation hosting this months climate change

talks, Denmark Selling these permits which ArcelorMIttal was assigned for free,

could make the company around 1 billion.Could Mittal have the makings of a

great philanthropist?

As the major stakeholder of Arcellor and its CEO, Lakshmi Mittal has

enormous influence over what happens to the companys surplus permits. One

option which he has is to retire the permits and thereby securing global

emissions cuts equivalent to Denmark emitting no carbon for a whole year. If

the current prime minister of Denmark were to make such a commitment, the

world would most certainly stand up and take notice. Famously a donor to the

Labour party, Mittal even has considerable power when compared to Secretaryof State Ed Milliband MP who is in currently in charge of the UKs response to


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climate change. Between now and 2012, if Lakshmi Mittal cancels all his

surplus emissions permits he will deliver 80% of the emissions reductions that

the whole UK has promised.A century ago a man named Andrew Carnegie was

the most powerful man in the steel industry but he is now more renowned for

his work to tackle poor education and illiteracy, key challenges of the

20thCentury. Today Bill Gates is famous for his work to tackle malaria, HIV

and international poverty but he has no equivalent in thefield of climate change.

But Lakshi Mittal certainly has the power to become the worlds greatest

climate philanthropist if he chooses.

Or will EU citizens be paying the price?

Of course if Mittal does not act to cancel his surplus emissions permits and

instead sells them to make windfall profits, then it will be the ordinary power

consumer paying the price. Our major power providers are short of the permits

that allow them to pollute. But at the moment it is cheaper for them to buy

surplus permits from elsewhere in the EU, or pay for emissions reduction

projects abroad, than to invest in making our power cleaner and greener. With

its huge surpluses, ArcelorMittal will be one of the places power companies go

to buy permits. So when we pay our power bills there is a chance that we are

reaching into our pockets to pay windfall dividends to Britains richest man.

There is rightly strong concern than tax payer supported banks might pay large

and unwarranted bonuses to their top staff; we should be equally concerned

about the case of ArcelorMittal. Despite the windfall profits that companies

such as ArcelorMittal are set to make, they are still seeking special treatment for

the period from 2013 to 2020. Whilst power companies will have to buy all of

their emissions permits at auction, industrial sectors have argued that they will

continue to need to receive theirs for free. The steel industry claims that if it

were forced to buy permits it would be cheaper to relocate production outside

the EU and on this basis, has organised steelworkers to carry out street protests.

This spectre of job losses has led to European politicians to deliver a raft of

concessions to industry even though the risk of such relocation is actually

minimal if the costs of transporting goods and of building new plants are taken

into account. However, with the huge power of the industrial lobby there is a

real risk that windfall profits will continue even after 2012 and that little will be

done to reduce industrial carbon emissions.


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Conclusion

The weakness of the EUs targets in relation to industrial companies such as

Arcellor Mittal may seem like an isolated problem. But if we are unable to

make cuts to industrial emissions in the EU, then what chance is there ofemerging economies such as China and India cutting theirs? Until polluters are

asked to pay to pollute rather than being handed windfall profits, we will

struggle to effectively tackle climate change. Tougher overall caps on emissions

in Phase 3 of the scheme will be vital, and the European Commission, with

Member States must ensure that industrial companies are set challenging targets

for emissions reductions, rather than being given a free ride.We call on Lakshmi

Mittal and his company ArcelorMittal to take positive action and commit to

cancellation of all its surplus emissions permits between now and 2012. Thiswould be an unprecedented act of climate philanthropy and an example to

business and industry worldwide.We also call on the European Commission and

EU Member States to ensure that in Phase 3 of Emissions Trading tougher caps

on carbon emissions are put in place, and that industrial companies like

ArcelorMittal are given challenging targets, rather than windfall profits.

KEY FACTS: ARCELORMITTAL AND EMISSIONS TRADING

General

ArcelorMittal operates across 85 sites in the EU with its head office based in

Luxembourg. Its international revenues in 2008 were $124.9 billion and its

global crude steel production was 103.3 million tonnes, representing

approximately 10% of world steel output. ArcelorMittal owns both steel plants,

and mines which supply raw materials for steel production. The company has

been repeatedly criticised by civil society groups for poor environmentalpractice in a variety of its plants and mines, most recently in South Africa where

the company has been challenged for local pollution


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CHAPTER 10

CONCLUSION

Since its inception, ArcelorMittal has rapidly grown through a successfulconsolidation strategy with a number of significant acquisitions ArcelorMittal is

the successor to Mittal Steel, a business originally set up in 1976 by

Mr Lakshmi N Mittal, chief executive officer and chairman of the board of

directors. ArcelorMittal was created through the merger of Arcelor and Mittal

Steel in 2006. Mittal Steels rapid growth since 1989 has been the result of

combining a successful consolidation strategy with a number of significant

acquisitions. Since setting up operations in Trinidad and Tobago in 1989, some

of its major acquisitions are Siderurgica del Balsas (Mexico) in 1992, Sidbec(Canada) in 1994, Karmet (Kazakhstan) and Hamburger Stahlwerke (Germany)

in 1995, Thyssen Duisburg (Germany) in 1997, Inland Steel (US) in 1998,

Unimetal (France) in 1999, Sidex (Romania) and Annaba (Algeria) in 2001,

Nova Hut (Czech Republic) in 2003, BH Steel (Bosnia), Balkan Steel

(Macedonia), PHS (Poland) and Iscor (South Africa) in 2004, ISG (US),

Kryvorizhstal (Ukraine), as well as a significant interest in Hunan Valin Steel

(China) in 2005, and three Stelco Inc. subsidiaries (Canada) in 2006.

Arcelor was created in February 2002 through the merger of Arbed

(Luxembourg) founded in 1911, Aceralia (Spain) and Usinor (France). Arcelor

also had major steel production facilities in Belgium, Germany, Italy, Brazil and

Argentina.Arcelor acquired a controlling interest in Companhia Siderurgica

Tubarao (now a part of ArcelorMittal Brasil) in 2004, Huta Warszawa (Poland)

in 2005, a controlling interest in Sonasid (Morocco), as well as Dofasco

(Canada) in 2006.

At the time of the merger with Mittal Steel, Arcelor was the second largest steelproducer in the world. In 2007 the newly merged ArcelorMittal continued to

pursue an expansive growth strategy, with 35 transactions announced

worldwide. At the beginning of 2008 ArcelorMittal continued to make

investments, with significant transactions announced in Australia, Brazil,

Canada, Costa Rica, France, Russia, South Africa, Sweden, Turkey, United

Arab Emirates, the US and Venezuela, the majority of which were completed.
http://www.arcelormittal.com/corp/who-we-are/leadership/board-of-directorshttp://www.arcelormittal.com/corp/who-we-are/leadership/board-of-directorshttp://www.arcelormittal.com/corp/who-we-are/leadership/board-of-directors


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But in light of the deteriorating economic situation during 2008, ArcelorMittal

suspended most investment activity by the end of the year.Post-crisis,

ArcelorMittal has cautiously restarted certain projects to capture growth in key

emerging markets and mining. Capital expenditure on mining doubled in 2011

to almost US$1.3 billion, as the group embarked on major development

programme aimed at expanding existing mines and developing new ones.

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