Management Report - Beursgorilla

ArcelorMittal Annual Report 2009Business Strategy 25ArcelorMittal has unique geographicaland product diversification,coupled with upstream and downstreamintegration that reduces exposureto risk and cyclicality. This strategycan be broken down into its threemajor elements:Geography: ArcelorMittal is the largestproducer of steel in Europe, Northand South America, Africa, the secondlargest steel producer in the CIS region,and has a growing presence in Asia,particularly in China. ArcelorMittal hassteelmaking operations in 20 countrieson four continents, including 65 integrated,mini-mill and integrated mini-millsteelmaking facilities which providea high degree of geographic diversification.Approximately 35% of its steel is producedin the Americas, approximately 47%is produced in Europe and approximately18% is produced in other countries,such as Kazakhstan, South Africa andthe Ukraine. ArcelorMittal is ableto improve management and spread itsrisk by operating in six segments(Flat Carbon Americas, Flat Carbon Europe,Long Carbon Americas and Europe,AACIS, Stainless Steel and Steel Solutionsand Services), reflecting its geographicand product diversity.Worldwide steel demand in recent yearshas been driven by growth in developingeconomies, in particular in the BRICET 1countries. The Company’s expansionstrategy in recent years has givenit a leading position in Africa, Centraland Eastern Europe, South America andCentral Asia. The Company is also buildingits presence in China and India and recentlymade its first strategic investmentin India in Uttam Galva.Products: As a global steel producer,ArcelorMittal is able to meet the needsof diverse markets. Steel consumptionand product requirements are differentin mature economy markets and developingeconomy markets. Steel consumptionin mature economies is weighted towardsflat products and a higher value-added mix,while developing markets utilize a higherproportion of long products and commoditygrades. As these economies develop,local customers will require increasinglyadvanced steel products as market needsevolve. To meet these diverse needs,ArcelorMittal maintains a high degreeof product diversification and seeksopportunities to increase the proportionof its product mix consisting of highervalue-added products. The Companyproduces a broad range of high-qualityfinished, semi-finished carbon steelproducts and stainless steel products.Worldwide steel demand in recentyears has been driven by growthin developing economies, in particularin the BRICET 1 countries.Value chain: ArcelorMittal has accessto high-quality and low-cost raw materialsthrough its captive sources and long-termcontracts. ArcelorMittal plans to continueto develop its upstream and downstreamintegration in the medium-term, followinga return to a more favorable marketenvironment. Accordingly, the Companyintends in the medium term to increaseselectively its access to and ownershipof low-cost raw material supplies,particularly in locations adjacent to oraccessible from its steel plant operations.Downstream integration is a key elementof ArcelorMittal’s strategy to builda global customer franchise. In high-valueproducts, downstream integration allowssteel companies to be closer to thecustomer and capture a greater shareof value-added activities. As its keycustomers globalize, ArcelorMittal intendsto invest in value-added downstreamoperations, such as steel service centersand building and construction supportservices for the construction industry.In addition, the Company intendsto continue to develop its distributionnetwork in selected geographic regions.ArcelorMittal believes that thesedownstream and distribution activitiesshould allow it to benefit from bettermarket intelligence and better manageinventories in the supply chain to reducevolatility and improve working capitalmanagement. Furthermore, ArcelorMittalwill continue to expand its productionof value-added products in developingmarkets, leveraging off its experiencein developed markets.Growth ProspectsNotwithstanding the difficult marketconditions of 2008 and 2009,ArcelorMittal’s management believesthat there will be strong global steeldemand growth in the medium to longterm. The Company will continueto invest opportunistically in expandingthe production capacity of its existingfacilities depending on market conditionsand projected global and regionaldemand trends.Mergers and acquisitions have historicallybeen a key pillar of ArcelorMittal’sstrategy to which it brings uniqueexperience, particularly in termsof integration. Instead of creating newcapacity, mergers and acquisitions increaseindustry consolidation and create synergies.ArcelorMittal has also placed strongemphasis on growth in emerging economiesthrough greenfield developments. In lightof the difficult economic and marketconditions prevailing in late 2008and 2009, ArcelorMittal curtailed mergersand acquisitions and greenfield investmentactivity. To the extent market conditionscontinue to improve, however,the Company gradually expects toresume mergers and acquisitionsand other investment activity in orderto take advantage of selected growthopportunities, mainly in emerging markets.In addition the Company remainsfocused on pursuing its greenfieldgrowth opportunities.1 BRICET refers to the countries of Brazil,Russia, India, China, Eastern Europe and Turkey.