Overview

2016 was a year of important progress for ArcelorMittal.

Action 2020

Action 2020 is ArcelorMittal's commitment to structurally improving profitability and cash flow generation.

Governance

Good corporate governance is about compliance, continuous stakeholder dialogue and being a good corporate citizen.

Fact book

Details of our steel and mining operations, financials, production facilities and shareholder information.

Carbon reduction strategy

We already know that steel plays a key role in the circular economy – safe, strong, durable, and infinitely recyclable, steel is a lower-carbon alternative over its lifecycle to other materials such as aluminium and concrete in many applications. What we now know is that a truly transformational circular economy has the potential for steel, with the right technology, to make significant reductions in global CO2 emissions.

The chair of our COP committee regularly updates our chief finance officer, Aditya Mittal, and is made up of senior leaders from technology strategy, environment, government affairs, strategy, corporate responsibility and communications. Its sole purpose is to deal with the issue of climate change for the company.

During 2016, the committee undertook an extensive engagement process with 50 external stakeholders, reviewed the external factors influencing our carbon emissions, analysed the potential of our portfolio of steel plants to reduce their carbon emissions, and reviewed the feasibility of each of the various low-carbon steelmaking technologies we have been working on.

The result is a realistic assessment of where we are likely to be able to make the most substantial carbon reductions. Our analysis has confirmed several things: that the world will not have enough scrap to enable recycling to make a sufficient difference to climate change for decades to come; that if we are to make more than incremental reductions in carbon, we need to go far beyond energy efficiency; and that carbon capture and utilisation (CCU) technologies offer the most likely path.

Our carbon reduction strategy, therefore, is to pilot the most promising low-carbon breakthrough technologies, whilst continuing to pursue energy efficiency measures relentlessly, wherever they are still available. We’ve made significant progress in each during 2016.

The role of scrap and energy in carbon reduction

Stakeholders expect us to reduce our carbon footprint by using more scrap. This ignores two realities. Firstly, contrary to expectations, there is no global carbon benefit to be had from encouraging steel producers to use more scrap, since virtually all the post-consumer scrap available globally is already being recycled. Only as more steel products become obsolete can the world produce more recycled steel. Secondly, any steel producer will only make the products that its customers demand.

Only some types of steel are suited to being produced entirely from scrap in the electric arc furnace – generally those that are used in the construction of buildings and infrastructure. Other more technically specialised products,for the transport and energy sectors for example, are currently made in the blast furnace route, using predominantly iron ore (although some scrap is also used).

For ArcelorMittal, as a global steel producer with the option of using either route, the balance between blast furnace and electric arc furnace production - and so between iron ore and scrap use - is driven by the pattern of demand for different steel products in our markets. Where the demand for construction products falls – as it has done in developed economies - the relative production of steel from scrap also falls, which may drive up overall CO2 per tonne. Only when the availability of scrap reaches sufficient levels will we be able to ‘choose’ to produce more products from post-consumer scrap.

In 2016, we commissioned an extensive study on the impact of future scrap supplies. We know it will take decades for scrap supplies to improve significantly, so when it comes to reducing our carbon footprint, scrap cannot provide enough, soon enough.

So how can we reduce our carbon footprint whilst continuing to make steel with iron ore rather than scrap? Energy efficiency, for its part, can only play a moderate role in our carbon reduction efforts since much of the work has already been done. The energy required to produce a tonne of crude steel has reduced by some 40% since 1960 according to the World Steel Association. Our best plants are already as efficient as they can be using the technology currently available. Using renewable energy is also of limited impact on its own, since the majority of the emissions from producing steel come from the chemical process of reducing the iron ore. Clearly a new kind of technology is needed.

As the CEO of one of the most energy-efficient plants in Europe, I can honestly say that we already use the best available current technology. To make any more real improvements in our carbon footprint, we need completely new breakthrough technology to make it work.

Reiner Blaschek
CEO, ArcelorMittal Bremen

Breakthrough technologies for carbon reduction

New, breakthrough technology, we believe, can help us in two important areas: changes in the steelmaking process itself, and changes in the way we manage our waste gases.

In Dunkerque, France, we’ve been testing the potential use of high-temperature gas, made from our waste gases, to reduce iron ore and thus partially displace the use of new coal. Based on this research, new materials have been developed which can sustain the extremely challenging conditions caused by contact with this high-temperature gas and in 2017, will be launching a first industrial pilot to demonstrate the feasibility of this technology.

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Managing our carbon-intensive waste gases has given rise to the most promising set of technologies to date, known as carbon capture and utilisation. The aim is to convert the carbon in our waste gases into useful products. This is a rapidly evolving area, and our work is taking several forms. For example, flue gases from our Fos-sur-Mer plant in France are being used in an experiment to grow microalgae in nearby pools, with the aim of converting the microalgae to bio-crude or valuable chemicals.

But the most promising technology at present is what we’re developing with bio-tech company LanzaTech, which we’re planning to demonstrate at our Ghent plant in Belgium.

Low carbon technology partnership initiative

Potential synergies that exist between the manufacturing processes of three energy intensive sectors.

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Exploring innovative partnerships

Fresh ways of thinking about the relationship between industries can also contribute to lower-carbon solutions. We already sell many of our by-products to other industries, providing them with raw materials for cement, road-building, chemicals and glass-making among other activities. Re-using by-products in this way avoids the emissions that would be generated in the making of these products from primary materials.

We want to harness more opportunities like this – and at the COP22 talks in Marrakesh in 2016, we announced the formation of our Low Carbon Technology Partnership Initiative with partners Evonik, LafargeHolcim and Solvay. It will look at potential synergies between the manufacturing processes of the steel, cement and chemicals industries, and how we can harness them to produce CO2 savings. As a first step, the partnership will study potential ways to use waste gases and other by-products to create value.

Key investments will reduce US energy use

Investments play an important part in our overall ambition of reducing energy intensity by 10% in the US over 10 years. Our 2016 investment in the second phase of a major revamp of Burns Harbor power plant should bring significant energy and carbon savings on completion in 2019.

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Energy projects at Dofasco save enough power for 12,500 homes

Energy is one of our biggest input costs. Since 2011, a range of energy optimisation projects at our Dofasco site in Ontario, Canada, has achieved annual recurring savings of some CAN$10 million and 125,000 megawatt hours, enough to power some 12,500 homes. More investment will bring further efficiencies.

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Making the most of the energy we use

The chemistry of steelmaking means that we won’t get away from using carbon completely – in the medium term at least – but by thinking innovatively about our processes we can make the carbon we do use work harder, and reduce overall CO2 emissions by helping others avoid carbon use.

What does this mean in practice? First, it involves ensuring we don't waste energy. We continually seek ways to recycle energy within our own operations, and in several sites we directly export energy as heat, steam or electricity for local businesses or communities. Our plant in Tubarão in Brazil, for example, generated 2,816,557 MWh electricity from its waste gases in 2016, enough both for its own consumption and to export 732,074 MWh to the grid –supplying the equivalent of over 331,000 homes a year. As technology advances, we think there will be opportunities for our sites to do more of this – generating and even using the technology within a steel plant to store energy to smooth out intermittencies in the electricity grid.

5,009 GJ

of electricity from renewable sources used across our sites

25%

recovered energy as proportion of total used

23,373 GJ

energy exported to local community as heat, steam or electricity

Nation unies conference sur les changements climatiques 2015 Paris, France

Public policy on climate change

We support action on climate change, and we want the right public policy frameworks to deliver substantial carbon reductions from the steel industry globally, so that steel can viably play its part in a lower-carbon future. In the wake of the Paris agreement, policy-makers were tackling this issue in many parts of the world in 2016. The CDP estimates that by 2017, 70% of the world’s steel will be covered by some form of carbon pricing.

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Lakshmi Mittal's FT comment

A carbon border tax is the best answer on climate change.

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Before these schemes are finalised, it’s important that they are designed in detail to be aligned and so work for global carbon reduction. So we contribute to the discussion wherever we can, advocating three principles: that carbon targets and processes should be consistent across all regions, to avoid the cross-border trade that will advantage steel made where the effective carbon price is lowest; creating a level playing field for all steelmakers; and that targets should be set at levels that are technically and economically feasible.

While this is particularly relevant with regard to the Emissions Trading Scheme in Europe, in 2016 new carbon pricing schemes or regulatory initiatives were being discussed in Brazil, Mexico, South Africa, Kazakhstan and the US. The Canadian Government announced plans for a national minimum carbon price.

One of the major obstacles to success is that emissions are global. The aim of the system should be not just to reduce emissions from what Europe produces, but also to reduce emissions from what Europe consumes … A carbon border tax is the best answer on climate change.

Lakshmi Mittal
Chairman and chief executive officer

Our carbon emissions in 2016

Our target is to reduce our carbon emissions per tonne of steel by 8% by 2020, using 2007 as a baseline. If we look at the steel plants we operated in 2007 and still operate today, the carbon intensity of the steel we make in those plants has declined by 4.6% in CO2/tonne steel since 2007.

While carbon intensity is influenced by a combination of factors – technology, scrap use, energy efficiency and the quality of raw materials – in the end, the most significant influence is the pattern of demand for different steel products, since this is what determines the balance of steel production between our blast furnace (BF) plants and our electric arc furnaces (EAF). In recent years the decline in demand for construction industry steel has meant that we have made less EAF steel than in the past. This trend continued in 2016 and, as a result, our impressive carbon reduction progress at our EAF sites has an ever smaller influence on the average carbon intensity of all the steel we produce year on year.

Overall, despite the improvements in our energy efficiency in 2016, the average carbon intensity of our steel across both our BF and EAF plants has not changed year on year and stands at 2.14 tonnes CO2 per tonne of steel. Our entire carbon footprint in 2016 across our steel and mining operations was 204 million tonnes CO2e, down from 205 million tonnes in 2015*. The reduction is largely due to decreased EAF production, and therefore our indirect (scope 2) emissions from the electricity we used. Greenhouse gas emissions from our mining operations made up 5% of this footprint.

Whilst we have achieved much in recent years, it is becoming more and more challenging to continue to reduce our direct (scope 1) carbon emissions at our blast furnace sites as we reach the limits of what current technology can deliver. This is why it is so important to emphasise the importance of breakthrough technologies, and not only this, but the policy frameworks that will see such technologies become commercially viable.

* This is made up of our Scope 1, 2 and 3 emissions in accordance with Worldsteel Association methodology

Greenhouse gas emissions by scope (steel and mining)

Million tonnes CO2e

X-axis Value Color code
Scope 1 176 #5C7F92
Scope 2 14 #8B819E
Scope 3 14 #AA9E6E

The emissions by Scope 1, 2 and 3 are calculated in accordance with Worldsteel Association methodology. See Worldsteel CO2 Emissions Data Collection, User Guide, Version 7 available here.

Total greenhouse gas emissions

Million tonnes CO2e

Color #8B819E #AA9E6E
X-axis Steel Mining
2014 195 11
2015 198 7
2016 194 10

Lower-carbon vehicles

Our contribution to a low-carbon circular economy is of course much wider than reducing our own carbon emissions. Much of it is about producing solutions for our customers that have fewer lifecycle emissions than ever before – as our S-in-Motion® range for the automotive sectors has shown.

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Lower carbon buildings

Our specialist steels are making other industries more energy and carbon-efficient. Our R&D teams are developing a tool to help construction industry customers lower the carbon footprint of the buildings they design.

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Performance at a glance

Metric Unit 2016 2015 2014
Primary energy consumption (steel)* million GJ (PJ) 2,158 2,205 2,221
Energy intensity (steel) GJ/t liquid steel 23.9 23.9 23.8
Total CO2e emissions (steel and mining) million tonnes 204 205 203
Scope 1 CO2e (steel and mining) million tonnes 176 176 174
Scope 2 CO2e (steel and mining) million tonnes 14 16 17
Scope 3 CO2e (steel and mining) million tonnes 14 13 15
Total CO2e emissions (steel)* million tonnes 194 198 195
Total CO2e emissions (mining) million tonnes 10 7 8
CO2 emissions per tonne* tonnes CO2 per tonne of steel 2.14 2.14 2.09

* This data has been assured by Deloitte Audit.

10 key expectations of stakeholders

It is vitally important that the right strategy facilitates rather than hinders global paths to carbon reduction. We want to make sure our stakeholders understand the contribution that steel can make to a lower-carbon future.

In 2016, we listened to the expectations our stakeholders have of us as the world’s largest steelmaker, with one of the largest corporate carbon footprints that cannot be easily reduced. We had around 50 engagements with customers, as well as discussions with other companies, investors, banks, experts and NGOs.

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In summary, stakeholders have ten expectations of us on climate change. We are expected to remain truthful on what we can and cannot achieve on carbon. We need to show empathy, ambition and progress on reducing our direct carbon footprint. The most difficult expectation will be the scale of the carbon reductions we can offer versus the ‘science-based target’ concepts of the Paris agreement on climate change. We mapped the actions we are already taking to help address these expectations, and what more can we do to better meet them.

The 10 stakeholder expectations of ArcelorMittal on carbon are:

  1. Expression of empathy and concern regarding climate change
  2. Knowing the risk of carbon and carbon policy to our business
  3. Reduction in direct emissions
  4. Breakthrough technology and a demonstration of ambition
  5. Collaboration is king
  6. Contribution to the circular economy
  7. An action plan on carbon reduction
  8. Suggestions of viable alternatives to the EU ETS
  9. Transparency on our carbon emissions
  10. Large carbon emitters will be in the spotlight