Financial value creation
ArcelorMittal’s operations in the United States are a part of the parent company, ArcelorMittal S.A., based in Luxembourg. Preparing a country level integrated report at ArcelorMittal means discussing financial challenges and opportunities related to our business units in the United States. However, direct financial statements are not public at this level. Full financial results for ArcelorMittal globally can be found in our annual report and 20F.
At ArcelorMittal in the United States, we have seen a slow and progressive recovery year-over-year since the economic downturn of 2009. That recovery was dampened significantly by the flood of imports arriving in the United States in recent years.
Raw steel production in the chart below refers to steel in the first solid state after melting, suitable for finishing. In 2016, ArcelorMittal produced nearly 15 million tons of raw steel in our flat carbon business unit. More than 95 percent of ArcelorMittal’s raw steel production in the U.S. is from flat operations, which are primarily integrated steel production facilities.
Raw steel production, ArcelorMittal flat carbon USA: 2008-2016*
Applications for steel
Steel has a major role to play in the vitality of the U.S. economy and national security. Steel has a broad range of applications in industries such as transportation, energy, defense, machinery, appliance, construction and packaging.
In construction, steel offers superior performance, affordability and an environmentally friendly profile over competing materials. Steel is the main material used in products that deliver renewable energies such as solar, tidal and wind. The automotive sector accounts for roughly 12 percent of the overall global steel consumption.
In the United States, that number rises to 27 percent. The majority of ArcelorMittal’s shipments in the United States serve the markets of service center/distribution (40 percent), automotive (30 percent) and energy/mining/chemicals/water (12 percent). The charts below illustrate our sales by market segment in the United States in 2016 and year-over-year since 2008.
While optimistic about the future of our business, it is important to note that shipments have decreased in nearly every major market in the last three years.
ArcelorMittal sales by market segment, Steel shipments in the United States - 2009-2016
As it relates to ArcelorMittal’s profit and loss equations in the United States, our profitability and long-term financial stability depend largely on conversion costs. These are the costs the company incurs to transform raw materials into finished steel products, minus the cost of raw materials. Repairs and maintenance, labor, energy use and logistics are examples of types of conversion costs. As shown in the chart below, labor directly accounts for 44 percent, the largest share of the total conversion cost of steel, and influences all major cost categories.
Components of conversion costs - 2009-2016
In 2016, our U.S. operations employed over 18,000 individuals with a direct economic contribution of $2.2 billion through wages and benefits (not including expenses related to active and inactive pension and retiree health care). We also contribute $41 million each year in property taxes, providing significant funding for schools and local governments that would otherwise face significant challenges in terms of long-term sustainability. Often, ArcelorMittal is the largest employer in the communities in which our facilities are located. In Indiana, Ohio and Pennsylvania – where the majority of our USA workforce is located – our entry-level hourly pay is significantly higher than the local minimum wage. This allows our employees to earn highly competitive wages to provide for their families and contribute to the local economy. In addition to providing highly competitive wages, we seek to engage local businesses in fulfilling our supply chain, multiplying our economic contribution in our communities. To ArcelorMittal, being a good employer and community partner are all part of being a responsible corporate citizen.
ArcelorMittal economic contribution in the United States: 2016