Th

e A

rce

lorM

ittal O

rbit

Steel Market Outlook Federal Reserve Bank

Economic Outlook Symposium December 4, 2015

Robert Dicianni

ArcelorMittal USA

Topics for Discussion

• Key indicators

• Key steel consuming markets

• Steel consumption trends

• Global steel market and raw materials

• Questions

1

2

U.S. Gross Domestic Product (GDP) Real GDP Growth vs. Prior Years 2000-2014, Forecast 2015-2016 Source: U.S. Department of Commerce; September Blue Chip for 2015-2016 forecasts.

4.1%

1.0%

1.8%

2.8%

3.8%

3.3%

2.7%

1.8%

-0.3%

-2.8%

2.5%

1.6%

2.2%

1.5%

2.4% 2.4%

2.9%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

200

0

200

1

200

2

200

3

200

4

20

05

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6%

Annual G

DP

Gro

wth

3

Industrial Production Index (IP) Percent Change in Index vs. Prior Years 2000-2014, Forecast 2015-2016 Source: U.S. Federal Reserve Board; base year for index 2007: September Blue Chip for 2015-2016 forecasts.

4.0%

-3.3%

0.2%

1.3%

2.3% 3.2%

2.2% 2.7%

-3.5%

-11.4%

5.7%

3.0% 2.8% 1.9%

3.7%

1.3% 1.6%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

20

11

201

2

201

3

201

4

201

5

201

6%

Annual G

row

th

IP has had stronger growth than the economy as a whole throughout this recovery period. However in 1H15 this

trend ended as no growth was recorded in the 1Q15 IP (+0.1%) and the 2Q15 IP index contracted (-1.4%). The

causes were bad weather (a factor in 1Q15), a strong dollar and reductions in oil drilling activity.

After contracting in 1H15 vs. December 2014 index data, IP is forecast to grow in 2H15 and into 2016,

Consumer spending should drive growth in 2015 and 2016 while declines in drilling activity are moderating

Manufacturing Index

4

Key Steel Consuming Markets

Construction

6

900

554 586 612

784

928

1001

1112

1297

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

200

400

600

800

1000

1200

1400

2008 2009 2010 2011 2012 2013 2014 2015 2016

Housing Starts y/y change

1372

775

671 673 707

780

950

1050

1150

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014 2015 2016

Millions of Square Feet y/y change

Housing Starts ‘000 units, SAAR

Nonresidential Building Square Feet

Source: Global Insight, Nov 2015

7

Automotive

• Pent-up demand from the recession is not expected to be exhausted until 2016/2017.

• The average age of vehicles on the road is now over 11.5 years. The fleet is old and needs to be replaced.

• Fleet sales were low from 2009 through 2012, adding to pent-up demand.

• Auto credit markets are improving, slowly. OEMs will initially absorb the effect of interest rate increases.

• As the housing market improves demand for pickup trucks is improving.

• While gasoline prices are high, improved fuel economy of new vehicles has become a positive for sales. OEMs offer more high mileage vehicles than in the past.

• Although the unemployment rate is not improving significantly as the economy continues to expand the workforce is increasing every month and this adds to demand for new vehicles.

• 2015 will be record production for NAFTA

Source: AM USA Marketing

15

12.6

8.5

11.8 13.1

15.4 16.1 16.9 17.5 17.8 18.2

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

North America Auto Production

(millions of units)

16.1

13.2

10.4 11.6

12.7 14.4

15.6 16.4

17.3 17.5 17.7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

US Auto Sales (millions of units)

Light Vehicle Inventory - Units

Source: Wards Automotive

8376

6875

657074

62

72

107115

95

126

108

8885

6965

48

30

576564

52

7268

5457

48555153

59

7171

56

73

605656

5257

515252

6165

53

71

61585854

61575861

7674

60

78

666265

59615856

65

8081

67

93

78

6571

62626457

68

7973

63

83

71

6267

57625956

61

72

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2008

May

Sept.

2009

May Se

p20

10M

ay Sep

2011

May

Sept

2012

May

Sept

2013

May

Sept

2014

May

Sept

2015

May

Sept

0

20

40

60

80

100

120

140

DAYS' SUPPLY TOTAL LIGHT VEHICLE

Light Vehicle Inventory – Days Supply

8

U.S. Auto Inventories

9

Heavy and Medium Duty Truck

• The driver for class 8 truck demand is GDP growth.

• Truck demand is strong, capacity is limited, and trucker profitability is strong, but we are approaching the peak of the cycle.

• Demand has stopped growing. Cutbacks in energy have been high. Drop in steel shipments have been felt by the truck industry.

• As demand falls profitability will fall.

• High prices for used trucks will help demand for new trucks over the next few years.

• Government regulation continues to reduce capacity and this will offset some of the lost demand from a slowing economy.

• Driver shortages also continue, helping to reduce capacity.

• The next EPA mandate will be in 2020. We expect a few slower year before there is a strong buy forward in 2019 and 2020 to beat the government mandate.

• Another CAFÉ is expected in 2021.

Source: ACT Research, September 2015

253 275

207

156

98 118

167 195

208 232 231 232

246 251 266

283

Class 5-7 NAFTA Production

(000s of units)

339 376

212 206

118 154

255 279

245

297 336

296 250 259

294 329

Class 8 NAFTA Truck Production (000s of units)

• The driver for medium duty truck demand

is consumer spending.

• The forecast is just now approaching the

replacement level over the next few years.

Growth will continue to be slow and

steady.

• Recovery in the housing market will

support continued growth over the next

few years as the heavy duty market

tapers.

• Forecast includes bus and RV

USA Energy Market Steel Demand (millions of tons)

3.6

4.9 5.1

2.3

3.2

3.9

4.8

4.3 4.2 4.4

3.5

0

1

2

3

4

5

6

line pipe

4.9 4.6

5.2

3.2

4.7

5.9 6.2

5.9

8.1

3.9

3.2

0

1

2

3

4

5

6

7

8

9

OCTG

10

Totals:

2014 - 12.3

2015 - 8.3

2016 - 6.7 Source: Preston Pipe and Tube Report, November 2015

USA Service Center Data: Carbon Flat Roll Shipments & Inventory

11

4400

4600

4800

5000

5200

5400

5600

5800

6000

6200

6400

1500

1700

1900

2100

2300

2500

2700

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

En

d In

ve

nto

ry (

,000

to

ns)

Sh

ipm

en

ts (

,000

to

ns)

Service Center Monthly Shipments and Inventory

Shipments

Inventory

Source: MSCI

USA Service Center Data: Carbon Flat Roll Months-on-Hand

12

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Months on Hand

Source: MSCI

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Aug Jul Jun May Apr Mar Feb Jan

2015

Dec Nov Oct Sep Aug Jul Jun May Sep Mar Feb Jan

2014

Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan

2013

Oct Apr

HR CR Coated

Shipments HR CR Coated Total LFR

Jan-Oct 2014 14,931 3,022 6,029 23,983

Jan-Oct 2015 13,753 3,054 5,530 22,337

Diff: Tons -1,178 31 -499 -1,646

Diff: % -8% 1% -8% -7%

Flat Roll by Product - Average Daily Shipment Rate:

Y/Y % Change

Source: MSCI

Steel Markets Direction in 2016

Auto

Residential Construction

Non-residential

Construction

Machinery

Appliance

Electric motors

Infrastructure

Energy

Steel Inventories

Source: AMUSA analysis

There is no expectation that we will

see robust growth any time soon.

Most steel market are still slowly

recovering from the recession.

Auto will increase slightly in 2016 as

the offset of the F150 is behind.

Non-res will add about 2 million tons

of demand in 2016.

Energy activity will continue to drop

but not as much as in 2015.

Steel inventories start the year high,

will draw in Q1 and should add to

demand as the year progresses.

USA Apparent Steel Consumption

Millions of short tons % change

2013 106 1%

2014 118 12%

2015 114 -3%

2016 116 2%

About 3 million tons of the 2014 increase was an inventory overbuild due to a late year surge in

imports.

USA Apparent Steel Consumption million of short tons

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1953 – 22%

1957 – 22%

1973 – 23%

1981 – 27%

2009 – 41%

Drop in ASC in

select recessions

Source: AISI, AM Marketing

Steel Consumption Trends

Weekly US Raw Steel Production

Capacity Utilization

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

2015 2014 2013 2012 2011 2010 2009 2008 2007

Weekly Utilization

11/14/2015

67.0%

12/7/2008

33.5%

Source: American Iron & Steel Institute

Steel Imports and Shipments

19

5.9 6.1 6.3 6.4 6.0

7.2

8.4

8.7 9.3 9.7

8.2 7.3

-20%

-10%

0%

10%

20%

30%

40%

50%

-

2

4

6

8

10

12

4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd

2012 2013 2014 2015

Q-Y

-Q %

incr

ease

Mill

ion

Net

Ton

sFinished Imports

22.3

23.6 23.8

24.5

23.6 23.9

24.9

25.3

23.8

22.0 22.0 22.2

-20%

-10%

0%

10%

20%

30%

40%

50%

20

21

22

23

24

25

26

4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd

2012 2013 2014 2015

Q-Y

-Q %

incr

ease

Mill

ion N

et T

ons

Domestic Shipments

Source: AISI, US Dept of Commerce

0%

5%

10%

15%

20%

25%

30%

400

2,200

2,000

1,800

1,600

1,400

1,200

1,000

800

600

Mar

Feb

Ja

n

De

c

No

v

Oct

Se

p

Au

g

Ju

l Ju

n

Ju

l Ju

n

Ma

y

Ap

r M

ar

Feb

Ja

n

De

c

No

v

Oct

Se

p

Au

g

Ju

l Ju

n

Ma

y

Ap

r M

ar

Feb

Ja

n

De

c

No

v

Oct

Se

p

Au

g

Ju

l

Fla

t roll im

ports

Im

port

s %

of A

SC

Au

g

Ap

r M

ar

Feb

Ja

n

Ju

n

Ma

y

Ap

r

Ma

y

Ap

r M

ar

Feb

Ja

n

Dec

No

v

Oct

Se

p

Aug

Ju

l Ju

n

Ma

y

Import % of ASC

Annual Average (Import % of ASC)

Flat Roll Imports

Year 2011 2012 2013 2014 2015 YTD (Aug)

Avg Imports % of ASC 14.3% 15.9% 15.6% 22.7% 24.3%

U.S. Flat Roll Imports and Import % of ASC

(Carbon & Alloy)

2011 2012 2013 2014 2015

Source: AISI.

Trade Cases and Sunset Reviews Trade Cases:

• Welded API Line Pipe – Filed 10/16/14 – USITC Final Decision in Due Nov 2015

– Against Korea and Turkey

• Corrosion Resistant Steel – Filed 6/3/15 – DOC Preliminary Determination due Nov 2015

– Against China, India, Italy, Korea, Taiwan

• Cold rolled Steel – Filed 7/28/15 – DOC Preliminary Determination Due Oct 2015

– Against Brazil, China, India, Japan, Korea, Russia, UK

• Hot rolled Steel – Filed 8/11/2015 – DOC preliminary Determination Due Nov 2015

– Australia, Brazil, Japan, S.Korea, the Netherlands, Turkey, UK

Sunset Review:

• Cut-to-length plate – Hearing in Sep – Decision Due Nov 2015

– China, Russia, Ukraine

21

22 Source: SIMA, Census Bureau

* Jan-Sep actual imports, Oct Import licenses

U.S. flat roll imports by country YTD* (Oct) in million metric tons, carbon and alloy

5% 7%

CANADA

19%

NETHERLANDS

4% GERMANY

4% INDIA

TAIWAN

5%

MEXICO

5% JAPAN

5%

Others

18%

BRAZIL

CHINA

17% KOREA

10%

2015 YTD (Oct) Total: 12.33m

Steel mills in China are not

generating profits

646 572 551 480 399 0

100

200

300

400

500

600

700

2011 2012 2013 2014 2015e

USD/MT HRB operating cost Median Mill, China

HR Band OperatingCost Median MillChinese

Source: WSD (operating cost) ; June 9, 2015

- 70% of the Chinese

industry is believed to

be unprofitable today

- If Chinese domestic

and export prices do

remain low for longer

than expected, this will

would provide a clear

basis for more trade

actions

U.S. Manufacturing and Indirect Steel Trade Deficits Source: U.S. Commerce Department, Bureau of the Census and AISI

2010 2011 2012 2013 2014 2015

ROW (300) (348) (337) (339) (399) (428)

China (298) (325) (349) (341) (364) (361)

50% 48% 51% 50% 48% 46%

-$900

-$800

-$700

-$600

-$500

-$400

-$300

-$200

-$100

$0

$ B

illi

on

– N

et

An

nu

al

Tra

de

U.S. Manufacturing Trade Deficit 2010-2015* Source: U.S. Census

*2015 data is annualized based on 6 mo.

2010 2011 2012 2013 2014

ROW -6.2 -7.1 (8.0) -8.2 -10.4

China -5.7 -6.3 -7.0 -7.2 -7.7

53% 48% 47% 47% 43%

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Ind

ire

ct S

tee

l D

efi

cit –

Mil

lio

n N

et

To

ns

U.S. Indirect Steel Trade Deficit 2010-2014

Source: AISI

Total Manufacturing Exports (annualized June YTD) are down 6% with further drops in steel intensive categories or primary metals (down 8% vs. 2014), fabricated metal products (down 3%) machinery (down 6%) and petroleum (down 30%).

Global Markets and Raw

Materials

26

Steelmaking Raw Material Input Costs 2009-2015 Averages and October/November 2015

2009 – June 2012 = SBB, July 2012 - Present = Platts

All charts in $ per metric ton except for Scrap

$160

$246

$392$403$416

$495

$428

$263

2009 November

’15

2015

YTD

2014 2013 2012 2011 2010

#1 Busheling Chicago Scrap AMM ($/GT) Platts IODEX 62%CFR China

Metallurgical Coke SBB/Platts Australian Hard Coking Coal CRU/SBB

$58

$97

$135$130

$169

$147

$80

$53

2015

YTD

2014 2013 2012 2011 2010 2009 October

’15

$123$150

$195

$258

$444$473

$456

$408

October

’15

2015

YTD

2014 2013 2012 2011 2010 2009

$79$90

$113

$147

$191

$294

$219

$145

October

’15

2014 2013 2012 2015

YTD

2011 2010 2009

27

Steelmaking Raw Material Input Costs 2009-2015 Averages and October 2015

All charts in $ per metric ton

Source: AMM, LME, AM 3-month ask

Zinc: LME Aluminum: LME

Tin: LME

$1,751

$2,012

$2,168

$1,941$1,965

$2,213$2,187

$1,682

2015

YTD

2010 2009 October

’15

2014 2013 2012 2011

$15,744$16,300

$21,886$22,329$21,125

$26,128

$20,430

$13,377

2015

YTD

October

’15

2014 2013 2012 2011 2010 2009

$1,547

$1,741

$1,895$1,888

$2,051

$2,422

$2,199

$1,699

October

’15

2014 2015

YTD

2013 2012 2011 2010 2009

Raw Materials Cost Drivers

28 Source: World Steel Association – Short Range Outlook (October 2015)

1,5231,5131,5401,528

1,4391,412

1,308

1,151

1,2261,218

1,139

0.7%

6.2%

1.9%

-6.1%

13.7%

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

20

16

f

20

15

f

-1.7% 2

01

4

0.7% 2

01

3

20

12

ASC % Change Y/Y

20

11

7.9%

20

10

20

09

20

08

0.7%

20

07

20

06

9.2%

ASC % Change Y/Y

Global Apparent Steel Consumption (Finished Steel Products) million metric tons

Global ASC Growth Forecast by Region 2015 & 2016 (% Change Y/Y)

2015f

Global -1.7%

China -3.5%

C&S America* -7.3%

CIS -10.9%

EU28 1.3%

NAFTA -2.7%

2016f

0.7%

-2.0%

2.0%

0.0%

2.2%

2.1%

* Central and South America

Iron Ore Market Conditions • Cliffs Natural Resources has shuttered a Canadian mine.

• MMX Sudeste Mineraca SA, in Brazil, filed for bankruptcy production in October and as

of Feb has stopped operations.

• “A slide in iron ore prices is turning the screw on China's fragmented mining sector,

paving the way for closures and consolidation with three-quarters of the country's mining

capacity at a loss (Yahoo Reuters March 27, 2015)

• More than 60% of China’s iron ore miners will be eliminated this year (2015), said Lei

Pingxi, deputy chairman of Metallurgical Mines Associates of China (MMAC),

• Chinese iron ore production capacity; estimated average cost per ton (mmt) (source: WSD)

– Cost: $150/ton & up 70m tons

– Cost: $110 - $125/ton 140m tons

– Cost: $95 - $110/ton 140m tons

– Cost: $85 - $95/ton 100m tons

– Cost: less than $80/ton 155m tons

– Total 605m tons

29

Summary

• U.S. growth is still slow in several markets

• Auto is outstanding; how long will it last

• Global growth is slow in several markets

– China soft landing

– Europe political risk & instability

• Longer term impact on raw materials will still need to shake out

– Adjustments in market fundamentals should be expected

• Questions

30