Management report 1 Annual Report 2016 2 Management report Management report 3 Table of contents Management Report Company overview ____________________________________________________________________________________________ 4 Business overview _____________________________________________________________________________________________ 5 Disclosures about market risks ___________________________________________________________________________________ 28 Group operational structure _____________________________________________________________________________________ 30 Key transactions and events in 2016 _______________________________________________________________________________ 32 Recent developments __________________________________________________________________________________________ 33 Corporate governance _________________________________________________________________________________________ 33 > Luxembourg takeover law disclosure_____________________________________________________________________________ 59 Additional information __________________________________________________________________________________________ 60 Chief executive officer and chief financial officer’s responsibility statement _______________________________________________ 63 Consolidated financial statements for the year ended December 31, 2016 ________________________________________________ 64 Consolidated statements of operations ____________________________________________________________________________ 65 Consolidated statements of other comprehensive income ____________________________________________________________ 66 Consolidated statements of financial position _______________________________________________________________________ 67 Consolidated statements of changes in equity _______________________________________________________________________ 68 Consolidated statements of cash flows _____________________________________________________________________________ 69 Notes to the consolidated financial statements ______________________________________________________________________ 70 Report of the réviseur d’entreprises agréé – consolidated financial statements ____________________________________________ 155 Risks related to the global economy and the steel industry ____________________________________________________________ 157 Mining ______________________________________________________________________________________________________ 170 4 Management report Company Overview several major research centers sells its steel products primarily Mining Value Chain: ArcelorMittal as well as strong academic in local markets and through its has a significant portfolio of raw History and development of the partnerships with universities and centralized marketing organization material and mining assets, as Company other scientific bodies. to a diverse range of customers well as certain strategic long- in approximately 160 countries term contracts with external ArcelorMittal is the world’s Against this backdrop, including the automotive, suppliers. In 2016, approximately leading integrated steel and ArcelorMittal’s strategy is to appliance, engineering, 55% of ArcelorMittal’s iron-ore mining company. Since the leverage four distinctive attributes construction and machinery requirements and approximately creation of ArcelorMittal in 2006 that will enable it to capture industries. The Company also 15% of its PCI and coal (through the combination of leading positions in the most produces various types of mining requirements were supplied from Mittal Steel Company N.V. and attractive areas of the steel products including iron ore lump, its own mines or pursuant to Arcelor) and continuing through industry’s value chain, from mining fines, concentrate and sinter feed, strategic contracts with third-party 2008, ArcelorMittal has pursued at one end to distribution and as well as coking, PCI and thermal suppliers. The Company currently a disciplined growth strategy, first-stage processing at the other: coal. has iron ore mining activities in with transactions in Argentina, global scale and scope; superior Brazil, Bosnia, Canada, Kazakhstan, Australia, Austria, Brazil, Canada, technical capabilities; a diverse As a global steel producer, the Liberia, Mexico, Ukraine and the Costa Rica, China, Estonia, France, portfolio of steel and related Company is able to meet the United States. The Company Germany, Italy, Mexico, Poland, businesses, one of which is mining; needs of different markets. currently has coal mining activities Russia, Slovakia, South Africa, and financial capabilities. Steel consumption and product in Kazakhstan and the United Sweden, Turkey, the United requirements clearly differ States. Kingdom, Uruguay, United Arab Geography: ArcelorMittal is the between developed markets Emirates, the United States and largest steel producer in the and developing markets. Steel In addition, ArcelorMittal produces Venezuela. Beginning in the Americas, Africa and Europe and consumption in developed substantial amounts of direct latter part of 2008, ArcelorMittal is the fifth largest steel producer economies is weighted towards reduced iron, or DRI, which is largely suspended mergers and in the CIS region. ArcelorMittal flat products and a higher value- a scrap substitute used in its acquisitions activity in light of has steel-making operations in added mix, while developing mini-mill facilities to supplement the deteriorating economic 18 countries on four continents, markets utilize a higher external metallics purchases. and market environment, and including 51 integrated and mini- proportion of long products and ArcelorMittal is also a significant sharply curtailed its investment mill steel-making facilities. As of commodity grades. To meet these producer of coke, which is activities, with the exception of the December 31, 2016, ArcelorMittal diverse needs, the Company produced from metallurgical coal acquisition (along with a partner) had approximately 199,000 maintains a high degree of and is a critical raw material for of Baffinland in 2011. employees. product diversification and seeks steel-making, satisfying 92% of opportunities to increase the its coke needs through its own Since September 2011, ArcelorMittal’s steel-making proportion of higher value-added production facilities. ArcelorMittal’s ArcelorMittal has been undergoing operations have a high degree products in its product mix. facilities have good access to a deleveraging process to reduce of geographic diversification. shipping facilities, including its indebtedness including Approximately 37% of its crude Automotive focus: ArcelorMittal through ArcelorMittal’s own 16 numerous divestments of non- steel is produced in the Americas, has a leading market share in its deep-water port facilities and core assets (see note 2.3 to the approximately 47% is produced in core markets in the automotive linked railway sidings. consolidated financial statements Europe and approximately 16% is steel business and is a leader ArcelorMittal has its own for the divestments made in 2015 produced in other countries, such in the fast-growing advanced downstream steel distribution and 2016). Despite ArcelorMittal’s as Kazakhstan, South Africa and high strength steels segment. business, primarily run through its overall strategy of deleveraging, Ukraine. In addition, ArcelorMittal’s ArcelorMittal is the first steel Europe segment. It also provides the Company completed an sales of steel products are company in the world to embed value-added and customized acquisition through a 50/50 joint spread over both developed its own engineers within an steel solutions through additional venture partnership of Calvert in and developing markets, which automotive customer to provide processing activities to meet 2014. have different consumption engineering support. The specific customer requirements. characteristics. ArcelorMittal’s Company begins working with ArcelorMittal’s success is built on mining operations, present in original equipment manufacturers its core values of sustainability, North and South America, Africa, (“OEMs”) as early as five years quality and leadership and the Europe and the CIS region, are before a vehicle reaches the entrepreneurial boldness that has integrated with its global steel- showroom, to provide generic empowered its emergence as the making facilities and are important steel solutions, co-engineering first truly global steel and mining producers of iron ore and coal in and help with the industrialization company. Acknowledging that a their own right. of the project. In November combination of structural issues 2016, ArcelorMittal introduced and macroeconomic conditions Products: ArcelorMittal produces a new generation of advanced will continue to challenge returns a broad range of high-quality high strength steels, including in its sector, the Company has finished and semi-finished steel new press hardenable steels and adapted its footprint to the new products (“semis”). Specifically, martensitic steels. Together, these demand realities, redoubled ArcelorMittal produces flat steel new steel grades aim to help its efforts to control costs and products, including sheet and automakers further reduce body- repositioned its operations with plate, and long steel products, in-white weight to improve fuel a view toward outperforming including bars, rods and structural economy without compromising its competitors. ArcelorMittal’s shapes. In addition, ArcelorMittal vehicle