United States strategy
In the United States, Action 2020 emphasizes cost competitive assets running at higher levels of productivity and yield with no loss of volume or market share. This goal serves as the basis for our business strategy in the United States and addresses the goals of our 10 sustainable development outcomes. We work hard to use resources efficiently, drive customer trust and ensure our products create sustainable infrastructure and contribute to sustainable lifestyles for people everywhere.
To effectively implement the United States’ portion of Action 2020, we are focused on the following:
1. World class assets
Today’s competitive landscape requires that we examine our internal structure to ensure that every facility is operating in the most efficient and cost-productive manner possible. ArcelorMittal is working to maximize core assets that are capable of delivering higher value added products. We are also streamlining inefficient operations with low productivity levels. For example, in May 2015, ArcelorMittal announced the closure of the Georgetown, South Carolina wire rod mill. This mill, due to high input costs and waves of unfairly traded steel imports from China and other countries, could not maintain long-term financial viability. At our largest facility in the United States, Indiana Harbor, ArcelorMittal is making significant structural changes required to ensure the facility is cost competitive. We are specifically focusing on maximizing the productivity of Indiana Harbor’s downstream finishing facilities by optimizing steelmaking capacity to increase utilization on these lines.
2. Effective utilization of financial resources
In accordance with our Action 2020 plan, we are making financial investments to ensure that our most cost competitive assets run at peak productivity. For example, we are investing more than $200 million in our Indiana Harbor facility to ensure its long-term sustainability. Our investments are focused on improving the 80” hot strip mill, steel producing, logistics and finishing operations. Operating fewer assets in the United States and focusing on investments in high productivity assets leads to more effective use of resources. Combining these investments with long-term maintenance and operating costs, our U.S. business will see higher productivity and increased financial viability by 2020 with these changes.
The threat of imports, eroding steel prices and continuing economic crisis outlined in our steel industry section have led our U.S. business to negative financial performance in recent years. At ArcelorMittal, we know we are in a high-fixed cost, capital-intense business, and in this kind of environment, high utilization is key to ensuring our long-term financial sustainability. Productivity of our assets rests largely on our facilities' capacity utilization rates. Let’s focus on one example, our hot strip mills (HSMs) in the U.S. average only 70 percent utilization. This means that they aren’t producing roughly 30 percent of the time, even though we are paying the costs associated with operating and maintaining those assets as if they were operating 100 percent of the time. Action 2020 will take into consideration each of these assets and ensure high utilization rates to provide our highest levels of productivity.
4. Long-term asset investment
To ensure productivity and long-term sustainability, ArcelorMittal must invest in continuous improvement and ensure our business is running with its best assets. In 2014, ArcelorMittal purchased, in partnership with Nippon Steel & Sumitomo Metals Corp., a steel finishing facility in Calvert, Alabama, just north of Mobile. AM/NS Calvert is the most advanced steel finishing facility in North America today, and its ability to finish advanced high strength steel provides new geographic support and enhanced product capability for our North American business. This investment will strengthen our business in the United States and enhance our long-term relationships with our customers. We are also making significant investments - $2.5 billion over five years – in our facilities. Examples include investments in the powerhouse and walking beam furnaces in Burns Harbor, Indiana and blast furnace, hot strip mill and furnace hearths in Cleveland, Ohio among others. All of these efforts will continue to optimize ArcelorMittal's assets in the United States.
5. Delivering high value-added products for our customers
ArcelorMittal’s United States business has long prided itself on the strength of our customer relationships. We recognize, though, that customers continually look for deeper collaboration and the creation of value added products and solutions from their suppliers. ArcelorMittal is the largest producer of advanced high
strength steels in the world, and each year invests in research and development ($227 million globally in 2015
) to drive innovation in product solutions. Value-added products include finished, galvanized and other coated steels. Producing grades of steel no other steel maker can produce will help insulate our U.S. business from the threat of imports over time, as well as improve our competitive advantage.
6. Talented employees delivering world class productivity
To drive continuous improvement and asset optimization, ArcelorMittal must also employ the best operators, technicians, craftspeople and engineers to keep our facilities running at optimum productivity. In our 10 sustainable development outcomes, we emphasize in outcome 9 the importance of a pipeline of talented scientists and engineers for tomorrow. ArcelorMittal works hard to develop a more efficient workforce as we lose employees to retirement. While technology advances allow steel mills to operate with fewer employees, those advances also make it imperative for ArcelorMittal to attract the best talent.
Ultimately, the implementation of each of these priorities will improve our financial performance. Through Action 2020, our United States operations hope to generate a $230 million financial opportunity for ArcelorMittal.
United States strategy in action
By strategically executing our business strategy, driving optimization, utilizing resources effectively, and maintaining strong relationships both internally and externally, ArcelorMittal will achieve positive cash flow and gain market share. We also recognize this business strategy is underscored entirely by our 10 sustainable development outcomes. Simultaneously, as we execute our business strategy, we must do so in a sustainable fashion.