ArcelorMittal S.A. (MT) Earnings Call Transcript & Summary

Welcome, everybody, to the retail shareholders of ArcelorMittal Annual Meeting virtually on Zoom. My name is John Andrews. It's a real pleasure to welcome Michel Wurth, who is main Board member of ArcelorMittal and a very distinguished long-term person within ArcelorMittal and also Hetal Patel. Hetal is in charge of Investor Relations and will fill all your questions that you may ask either before this session or during the session. Please send them anything you want to know, and then he will ask me and Michel.

Michel, let me turn, first of all, to you. I mean everybody knows that ArcelorMittal is the world's biggest steel company. It's done -- it's a long history, and it's just had its third quarter results. And those results actually have been incredibly good. Now I think in outside, I might say that's rather surprising given COVID-19, the effects it's had on the economies around the world. What is the picture now of ArcelorMittal? Why has the third quarter been so good?

Okay. Hello, John. Hello, all the people, who are -- all the investors who are listening to us. First of all, I would like to say that it is for me, once again, a pleasure to have a dialogue with you. You know that this is extremely important, and your voice is listened as much as the ones of any other investors. And so it's really a pleasure to share with you at least once a year and to tell you where we are. And as John has said it, indeed, ArcelorMittal today is in a very good shape. Q3 had been absolutely fantastic. And I think that the whole year will be very, very good years. And everyone predicts, as I said, the year will be light and on continuation of what has happened in the third quarter, which means the best quarter since 2008. So absolutely, marvelous. Now your question is, I think, quite obvious for people, so that people ask, how is that possible in COVID types. And I think there are really a few reasons on it, some being depending exactly on the strategy which had been followed by Arcelor and some others coming from outside and where we have no real influence. And let me start out of this and give may be one explanation because what we have seen or realized after COVID was that during COVID, there's huge supply chain of steel, I would say, from the beginning, the steelmakers up to the stockist, up to all our customers. What did they do? They tried to empty their supply chain in order to make cash and to survive. And when, at the beginning of this year, vaccination started to be quite effective that everyone became much more optimistic that the virus really went back. The economy jumped back very, very rapidly. And what our customers realized at that moment was that the supply chain was empty. And so as a consequence was that they did not only order more because they wanted to grow and to take advantage of the bigger orders of our customers, but in the same time, they needed to refill their inventory. And the world was not prepared to that. They were not prepared to that with some of our customers, look at the automotive industry, was not report -- for example, for transporting iron ore and coal to the plants and hence, also increased demand of iron ore, surge of iron ore price. Remember, a good thing for us, let me tell, because we are a big producer, also a surge in price of coal and some scarcity in supply. And the consequence of that was that, to some extent, some customers really were worried that they would not have enough steel for fulfilling all of their activities. And that gives them this very huge price rise, which was, I would say, clearly higher than what was anticipated, strong demand and so on. And we were living out of that throughout the year with the peak, I would say, in July. Now the second element is that we have the lag between the moment when we get in the order and the moment when we ship it to the customers, which means that it is precisely in Q3 and also partly in Q4 that our orders have the highest value and then normally also our profitability per tonne should be the biggest. And so that is, I would say, the outside effect of your answer. And then comes the second element of the question, that's also what did ArcelorMittal do? And maybe that we come back to it, but only in one word, I think that all what we have done over the last years in terms of cost cutting, in terms of reviewing our strategy, in terms of optimizing our footprint has made that, I would say, in almost all jurisdictions, ArcelorMittal today -- ArcelorMittal today is stronger and more competitive than it had been before. And hence, also from that point of view, in relative terms and compared to some of our competitors in some of the jurisdictions, I don't speak about now specific names, but people in Europe know who are our big competitors, we can see that we have relatively done better than them. And I think that's the second part of your explanation.

I'm jumping ahead slightly, but given that you've got surge in prices with iron ore and steel, is this going to carry on into Q1 of next year? Or I mean, what happens to your contracts?

Yes. So I think these are 2 different questions. We can say that what we call the raw material basket, that is finally what you need to produce 1 tonne of steel in the integrated blast furnace would roughly, you need 1.5 tonnes of iron ore, and you need 500 kilos of metallurgical coal. We have seen in the first stage this year, iron ore prices surging from $80 or $70 to more than $200, coming now back to $100, but still quite a significant price. And you had the coal coming up later when iron ore prices were falling, so that the iron ore basket, in general, continues to be quite high. And so we are feeling cost inflation very, very much. It comes to that that also, as you have -- as people as everyone, people also in their daily life feel that natural gas has become much more important, which is also a big cost element, and fuel has been much more expensive. Look at when you buy petrol for your car, everyone feels it, but in a section height intensive energy industry like steel, obviously, that cause the question of cost inflation, which means also that when you are managing such a company, you need to make sure that if costs increase, that this has to be reflected into price. So that has come. Now coming to your second question of automotive, what is absolutely right? Most of our automotive contracts had been negotiated last year when there was not this cost push. And hence, in 2021, automotive contracts have been really much less profitable than most of the other orders we have seen. Because these were fixed price contracts, and we could not imposed to most of our customers higher prices because of the huge price increase -- cost increase we had felt. And hence, we are to date, negotiating most of our contracts for 2022. And what we -- what they're doing, we explained to our partners in the automotive industry what is going on that our cost is much higher. And I would say these are obviously very professional purchases. And they know that we cannot continue to supply at the same pricing basically automotive prices. You'd say these are 2 parts of the price. The first one is a part of the metal cost, and this part will go up. And the second one is what we call the express, and that is specialties, let's say, the extra we ask for the very sophisticated steels we are selling to the automotive industry and which helps an OEM to reduce the weight of the car, to make it safer, to make it stiffer, et cetera. And this is -- this part probably will not go up so much, except when mean to use new grades, but the other part will definitely be there. So we hope that it's a good surprise in 2021 when maybe some commodity prices, the margins won't continue to be as strong as they are today. That will be partly corrected also by the automotive contracts, which in terms of volume, is important, roughly -- contract represent roughly 20% worldwide for the group. But if we look at U.S. or Europe, it is obviously much more. And we are more in the 30% of what part of these products go in our order book.

Not the -- I mean isn't the automotive sector a little bit trapped by the shortage of chips. I mean there must be a problem from their point of view when they're negotiating with you?

That is absolutely clear. It was -- for us, it was a little bit paradox in 2021 because as auto -- big OEMs could not produce what they had sold they -- obviously, they bought on to less steel. And so the bad contracts in terms of results were not so high in numbers. And we could reallocate some of the steel also to other users who had a heavy need to get more supply. So that was obviously very, very useful. On the other hand, how will it continue in 2022? We believe that in the beginning of the year, there will still continue to be a chip shortage. So it will slowly evolve. But we foresee also that step by step, probably the constraint will be released, and automotive can start producing a little bit more, which is important because the order backlog extremely long and maybe for some of the people who have tried to buy a car some -- for some of the brands, they know that lead time is almost 20 years. So you can imagine that there is really a strong need for higher levels of production. And so in the medium term, I think -- or let's say, in the next quarters, this is quite positive for us, and we will make all possible that when the automotive steel industry needs more steel that we will be able to supply them.

Going back just briefly to the Q3 results. I mean, your net debt now is just $3.9 billion, which is really a transformation from a few years ago. Your shares -- your stock is investment grade. Things look rather good for shareholders. Is that going to continue? Or will you start spending more money on CapEx and not giving so many goodies to the shareholders?

I think that we have had the occasion to speak many times together that the group have decided some years ago definitively to strengthen its balance sheet. And as you mentioned it today, with a net debt of $3.8 billion, and despite some share buybacks we have done this year, this is today the most solid balance sheet as a company has ever had in its own history. And why was that? In fact, the strategy of the company was to have a minimum -- a maximum of net debt or the target net debt of $7 billion. Now due to the exceptional circumstances and also following some asset optimization or sales we have proceeds we have received; this level is even further down. Now how will it continue? I think also last year, and we had the occasion to speak to -- already to speak about. Then the company decided to make public a new capital allocation policy, which means, in fact, that once the target net debt has been reached, so below $7 billion. We will first complete -- first pay a base dividend, whose amount needs to be discussed and on an annual basis by the Board of Directors. And then for the remaining, we would distribute the remaining through different ways and the privileged way because also it is the most tax-efficient one was share buyback programs, which had been done in the -- now recently since the middle of last year. Now what you have seen and even in order to show this orthodoxy, you remember our auditors probably also know that we have sold our assets in U.S.A., and -- U.S.A. have been sold. And the entire proceeds of that has been distributed to our shareholders in terms of share buybacks, which this was absolutely good. So up to now, the group has decided to continue with this policy. And I think that we know that this is today, a very, very useful policy because interest payments went down drastically, and we can be hopeful and sure that we are able, even in periods which would not be as bright as a period we are living today, we would continue to generate free cash flow so that we will be able to give back money to our shareholders, which is our policy. Now this policy, I explained will be regularly reviewed by the Board, that is for sure, definitively be not for the worst but probably easier for the better. On top of that, we will obviously also continue to invest what needs to be done in order to maintain our assets. We will also continue to invest strategically where we have internal growth opportunities, and we have several projects which are ongoing. And maybe later on, we can discuss about it. And we have also announced that we want to be fit in the long run by finding the right solutions for the CO2 problem. And there also, we have announced that in order to fulfill our goal by reducing CO2 emissions by 35%, for example, in Europe by 2030, we need to invest. And we are presently negotiating with also is different governments, so that it can be shared that what needs to be invested will be shared between the use of some of the cash flow we generate and also some grants or some public money because it is basically the political decision and with Europe being in a front line so that we need to have some support in order to support the steel industry in Europe.

I'm glad you turned to that because I was about to ask you about COP26 and what you thought of the achievements or otherwise of the Glasgow meeting. And I think in terms of meeting your target for 2030, you're talking about $10 billion of investment, but half of it, you would like to come from governments. Is that correct? What did you think of COP26 first of all? I mean was it a step forward or not enough?

I was very much impressed is that, in fact, the consciousness of the CO2 challenge has dramatically accelerated. I understand that some green organizations were a little bit said, it's not enough. It's too slow. But if we imagine -- and would we sit down 5 years back or 10 years back, and we would have say 10 years back where we are today in terms of consciousness also, it is absolutely phenomenal. Why do I say it? That is because I believe, and I think ArcelorMittal believes also that in the future, this movement towards green economies and green steelmaking will accelerate. And then the reason why ArcelorMittal also strategically has decided to take it as, I would say, a single most important strategic topic, and I would say also this is also the hot topic. And the first priority of our new CEO, Aditya, who has really made out of this fight of CO2 a major step of his term, and that is going on. And then there is also why I think ArcelorMittal first has been, I would say, the first company who has explained the right way how to come to carbon neutrality. Second, that's the reason also why we have invested in many pilot technologies in order to see what is the best technology in order to reach the goal given the specific situations in different countries or in different circumstances, knowing that there is probably not one solution for all. And now third one to say, okay, and this would be the CapEx project we would like to implement. And parallel to that, we have seen basically all the governments in Germany, in Belgium, in France, in Spain, everywhere. And then we have discussed, this is what we have in mind. Can you help us to do that because then, we can also help you as a country and drastically reduce the emissions of CO2, which are there? And given that, in particular, in Europe, we see ETS system carbon today has a price. This is part of the equation, and it is a significant cut because today, 1 tonne of emission right, the market price is more than EUR 70. And if you know or if you recall that you need 2 tonnes of emission rights in order to produce 1 tonne of steel, that means internally that in alternative new technology, you can be a little bit more expensive in OpEx because you do not have to pay for emission rights. And that is also which is part of our subject. And it is a good point for our governance because the governments have taken for their countries' commitments how much to reduce, and they need contributors. And so we say this is a win-win strategy for our governance, for the countries we are in and for ourselves. And that is really, it's the basis of our strategy. And I think we can be very happy now to meet it. There's only one caveat on that, and that means that the European decarbonized steel industry needs to be set on the level-playing field with importance in order to make possible that steel continues -- can continue to be exported from Europe to outside. So this handicap -- this cost handicap needs to, at some way, to be solved. And in particular, also if you have Russian or Chinese steel, which is heavily carbonized, it cannot come free to Europe. And that's the reason why with the European commission at discussion about and the agreement in principle, there will be the carbon border tax.

Yes. Is that going to actually work out? Or is it going to become an administrative nightmare?

I think it will work out. Question will be, how will the details look at it. We don't know it yet because the details have not yet been decided. And today, we need that -- we see 2 elements where the policy needs to be improved. The first one is that the European steel industry can continue to export and set this cost -- negative cost differential because it's cheap, it's more expensive to produce carbon-free steel then steel, which emits a lot of carbon, that this needs to be compensated. And then the second one is I give you an example. For example, you want to import, or a European industry wants to import the machinery from China, which is made out of steel. And the steel component is significant part of the total cost. How can we show that there will not be a transfer of industrial activity from Europe outside in order to overcome the -- and this problem needs still to be discussed, but that is really industrial policy for Europe, and that needs to be discussed, let's say, with the Commission at the highest level and with the different industry ministers?

And you mentioned China. And historically, it seems to me that China has always been a bit in your bad books as an entity that there has been dumping excess steel in the market. This seems to have changed. Has it -- if it has changed, is the change permanent? I mean if you look at the Chinese economy, it is slowing down from its previous heights. In a sense, [indiscernible] seems to be making China as an economy more isolated than before and certainly more domestically demand-driven. Is the discipline on steel manufacturing in China, permanent feature? Will things, like the ever-grand financial problem, affect the whole of the Chinese economy? I mean, how do you see China being as a competitor to you and as a market and as a potential other estimates?

I would say, if I look at the situation today, I think it's fair to say that today, the situation with China is under control. But with China, you never know because China is not a market economy and it is not market behavior, which is directing what terms are doing. Now it is under control. But it is also under control, I would say, for 2 reasons. One reason is that the world has realized 3, 4, 5 years ago, that China was massively dumping and countervailing. And hence, we have seen, in most of the jurisdictions today, active or actions taken, which means that it is becoming increasingly difficult for Chinese steel companies to export to these countries. That applies for the U.S. but it applies also very largely to Europe, to Australia, to Brazil, to many, many traditions, in particular to those traditions which operate by themselves, a steel industry, which is quite important. But I think also there is a second element in it, and that's purely the Chinese one. The Chinese realize also today, and they have been also heavily attacked in Glasgow, that CO2 emissions is very serious. And if you look now exporting simply steel and especially commodity steel is probably not the most profitable way how to let your company grow. And if you see the pollution situation in China, you really have good ground to believe that Chinese are on the way, not to push too much the steel industry because they need cleaner air. They need to document that they are not growing the CO2 emissions when the rest of the world or when the industrialized world and trying this to be part of CO2 is decreasing. And I think that we are doing that. And so from that point of view, we believe that there is a lot of logics and a lot of reasons which would explain why, in the future, the Chinese steel industry should try more or less to restructure, to concentrate, but definitely be not to further grow and grow for exports, but at the same time also work for new technologies and to try also to be more energy efficient and more so too efficiency.

But that's why I ask -- I'm sorry.

No, that's fine.

Before I ask Hetal to really some of the shareholders' questions, can you say a word or 2 about United States? I mean, the Trump era is over for a moment anyway. And the 232 mechanism is up, I think, for renegotiation or perhaps is going to be phased out. How do you see relations between Europe and the U.S. in terms of the steel market developing? And also from a domestic point of view because you are quite big in the states, how do you see the Biden infrastructure bill, helping you?

Okay. Also, a very big question to know...

It's a big industry.

To answer it, but in order to be short, maybe first of all, in the U.S., the U.S. market was under Trump's market, which was the most ring-fenced among others. And as before the Trump administration came into place, the U.S. market was largely served also by imports. And Trump meet that drastically more expensive and strongly reduced imports. And hence, you had even a bigger scarcity in -- and a bigger tightness in the steel supply demand schedule than you had in Europe. And the consequence of that was -- and the steel today that U.S. prices are still, I would say, certainly more expensive than European prices today and hence, in a very, very profitable element. Now this has been followed by new investment decisions in the U.S. in new capacity. But -- and these new capacities are mainly electric and furnace scrap-based and not blast furnace integrated. And so you see continuing the trend we have seen in the United States over the last 30 years, where you have had a continuous decline of the part of the integrated steel needs versus the mini-mills. And which today that the mini-mills are the market leaders, and I will say also the price makers owns the U.S. market. Now in this context, maybe I have also to -- I would like to say a word that in this context, ArcelorMittal, you remember, has decided to -- over the year to sell its assets in AM, USA, which are integrated. And we decided to sell them to Cliffs, which is probably a good solution for Cliffs because Cliffs has iron ore base, and the ArcelorMittal iron ore base was a ways to be depleted. So we did not have really a solution how to supply with iron ore our own mills. And so for Cliffs today, they become integrated, and they can better manage over the next years there -- also their production of iron ore. But what you have to see is that in the long run, the trends of reducing the part of blast furnaces will continue. Second, there is a need of strong CapEx because the U.S. mills were not the last mills which have been buildings in terms of modern mills in the U.S. So some more cash requirements and turns this full CO2 problematic needs to be challenged also in these mills and basing the full combination of that, that there was no longer fit with iron ore. The long-term prospects of this maintenance to deal with Cliffs was probably very good for Cliffs, but definitely, it was also the right strategic move for ArcelorMittal. Now in the meantime, so the consequence was that our part in the U.S. as our market share is significantly decreased, but we are remaining today in NAFTA with very strong assets, and we have 3 big assets in NAFTA. The first one is Dofasco, I would say, the best integrated mill in NAFTA, but there also, we have negotiated with the Canadian government transition path towards lower CO2. Then we have Calvert, which is the most modern finishing facility in the world. And there, we have decided to integrate this plant by building a new electric arc furnace for at the beginning, I would say, 25% of -- or 30% of such needs, but possibly possibility to enlarge these activities so that Calvert will be partly integrated, which will be quite nice also in terms of supply chain, reducing working capital and in terms of profitability and of supplying grid steel. And then the -- our third asset in NAFTA is Mexico. And there, we will commission this year the new hot strip mill. So we are going downstream in order to be more present in the NAFTA market with finished the steel. So clearly, a nice strategy with hike, I would say, world-class assets on the 3 locations. And so from that point of view, definitely our competitive strengths in NAFTA is strongly improving compared to the past due to the different aspects of the strategy and just try to briefly explain.

I like the way you still talk of NAFTA, when Trump managed to call it USMCA. But I think everybody understands. Hetal, any questions from your end?

Actually, John, just another follow-up to the U.S. NAFTA discussion. Just to reiterate, when can we see or expect to see some benefits of the U.S. infrastructure build in the U.S.? And how much of this demand improvement can you expect to capture?

Okay. Yes. Indeed, I forgot this aspect to answer. I think it's a very, very big one because for everyone spent some time in the U.S., We have seen that the infrastructure is extremely poor and that a lot needs to be done in terms of rail infrastructure in terms of bridges, in terms of many, many things, and that is precisely where the U.S. infrastructure bill will help. And we can see that this will definitively give an additional demand in the long run for the next 5 to 10 years, every year, several millions of tonnes, which will add to the apparent steel consumption in the United States. Now even if, as a supplier, you don't produce the products, which go directly in this infrastructure products, it will be beneficial for the overall steel supply and demand balance. It will be a strong support also for pricing. And so it will definitely will be also a good opportunity for us. And also, it will partly absorb some of the new capacity which is coming on stream in some of the mills, including, as I told you, in Calvert,for example, where we have our own electric arc furnace.

Yes. Actually, there's a change intact a bit actually on to mining. How do you see your mining strategy going forward? And can you provide an update on your Liberia expansion project?

Okay. So first of all, one of the lessons of 2021 has been that the combination of iron ore with steel is quite a fantastic asset because we have seen, in particular in Q3, also a very strong contribution to the overall profits by the Mining division. It lengthens the value chain. It is useful. It is reducing the risks of -- the overall risk of the company, provided that your iron ore base is a competitive one. And that's the reason also why the strategy of ArcelorMittal is, first of all, to make sure that the different mills, in particular, the mills which are not directly next to an integrated plant with the noncaptive mines, those who are on the seaborne markets are extremely competitive and have a very high quality product. That is the case for the 2 big mines we have in this domain and which is AMMC. So our Canadian mine on one hand side, in Liberia on the other. One word about Canada is that this mine is very competitive. From a cost point of view, it is excellent quality. And we just have now decided together with the Canadian authorities to transform our pellet plants into DRI pellets, which will be the product of the future also for a carbon -- for a low carbon steel making. So from that point of view, I would say, in the long run, AMMC is really a strong basis for the future. Now in Liberia, we had produced a DSO. So that was, in fact, iron ore which was not beneficiated. And there, we came at the end of our reserves. And the question was what will we do? And we had since a long-term plan in place. We've already started some of the CapEx in order to restructure or to structure differently our Liberian mines by changing them into making higher-quality iron ore through a beneficiation effect. And what we have decided was to launch this investment, investment, which is done parallel with a strong increase of our available capacity. So we go -- we had been in the last years around 3 million tonnes. We had before nominal capacity of 5 million tonnes. And we will go now progressively to [ 15 ] million tonnes of high-quality iron ore fines, which can be used in our process. And what is also very important is that from a logistic point of view, this is much -- this keeps additional savings because from -- going from Liberia to Europe is obviously much less expensive than going from Australia and even from Brazil. So it will be excellent quality with an optimal logistics. And so from that point of view, I think also for our European mills, they will be in the long run, very much can be supported by our Liberian project.

And talking about CapEx, I imagine that you are quite relieved that Ilva is no longer something that has to show in the results. On the other hand, CapEx is your initiative in India. It seems to be going extremely well. Can you just say a few words on both of those?

So Ilva, I think, that in the meantime and due to the circumstances, we were finding in Italy, also due to the COVID difficulties, due to the heavy discussion and the -- will of the local authorities to renegotiate the environmental issues of the plan, we needed to come to a new solution. And I think ArcelorMittal is a responsible company. And so we thought that the best way would be to try to help the authorities, the government onboard. And the consequence of that was that the government was saying, "I don't want to be a sleeping partner. I want to be a full joint venture partner." And hence, the consequence of that is that in the today's situation, ArcelorMittal is one part -- it's a JV partner with the Italian government. But a consequence of that is also that the full restructuring of Ilva will be financed outside the ArcelorMittal balance sheet, and specifically on the basis of the balance sheet of Ilva and maybe with necessary support of the Italian government because there's also a strong decarbonization effect in it. So we hope that this is the right answer. We hope now that all stakeholders will very strongly and positively work on this new concept. And so our hope is that this new reorientation will work, but we won't be sole responsible for its execution because it is today on a stand-alone basis. Ilva is selling on a stand-alone basis. We are present in the Board. We are having discussions, but we are not directly operating Ilva as a fully consolidated company. So that's for this. Now second question is about India. I think it's a totally different story because India, in fact, is a growth story. India today consumes basically 100 million tonnes of steel; it is foreseen that this will double by the end of the decade and maybe triple somewhere in the 30s. And the acquisition of [indiscernible] was an opportunity because it was the kind of Chapter 11 consequence -- was a unique opportunity for ArcelorMittal to move. So we decided to move it together with our colleagues from Nippon Steel, who are also invested in Calvert, as you know. And so we decided to move there with ArcelorMittal owning 60% of the joint venture and Nippon Steel, 40%. Now the year 2021 has been very, very good for [indiscernible]. We have seen -- we have there a very strong management. We are running full. EBITDA margins are absolutely good. And we have developed there also our strategic plan how to grow from 7.4 million to 8.4 million tonnes and then to 12 million to 14 million, with a long-term view that we have today we believe the possibility to grow up to 30 million tonnes. And hence, at least keep our market share and in particular, due to the quality of Nippon Steel and of ArcelorMittal also in technical, things that we will be the supplier of choice for the very technical steel products on the Indian markets where probably our competitors cannot really offer. And so this is really a good opportunity. And I think that everyone is very keen how to say. Now in terms of CapEx, you are right. These are -- there is some -- a lot of money, which is involved, but what you need to realize is first that in India, CapEx is less expensive than, for example, in Western world because, for example, also labor cost in the CapEx is, all the time, a very big component is much cheaper. And second, as the country -- as a company is very profitable and doesn't have too much debt interest financial capability. We believe that this expansion plan can be financed through its own cash flow it generates. So from that point of view, really a nice opportunity. Remember, we start with 7 million tonnes, we want to land with 30 million tonnes. And that could be financed through the balance sheet of the company in a nice project, and I think it should also very much pleasing our investors.

But do you see any other potential opportunities because surely, if there are opportunities for M&A or for joint ventures, it could be at the expense of your plans for returning more money to the shareholders and for share buybacks?

I don't think that's not really the issue today. Today, we are saying that we have quite a lot of opportunities. First of all, inside our own plants where we can -- we have growth opportunities. I'll give you some examples, the hot strip mill in Mexico. We are investing in downstream in Brazil. we have the mining project in Liberia, but also some mining projects in Brazil and Mexico in order to support our 2 plants there and to make them more competitive. And so we can see we have some investment in the Dofasco plus the whole decarbonization program we were discussing earlier, I think these are very big -- that these are very big prospects. On the other hand, in many of the jurisdictions where we are -- as we are the #1 in terms of steel producer, there is not so much room to further consolidate because the competition authorities wouldn't allow our -- wouldn't allow ourselves growing too much, for example, that was a problem in -- that's a problem in [indiscernible] also, we still buy in Europe. And so we need to be careful. On the other hand, we have seen also, last but not least, I would not say there will never be in acquisition. But over the last M&A acquisitions we have done, for example, in India, also, we have tried to be quite careful and try to make that compatible with a strong balance sheet. We have suffered too much for the long run to have too much debt, especially in periods of high inflation and high interest costs that we definitely don't want to come back to that. That will prevent us to -- if we have some maneuvers, and if it makes sense, to make a transaction to make it as it has been shown in India.

I was noticing actually one of the analysts thinking of actually now, ArcelorMittal has become a blue-chip company, somehow beating the economic cycle, industrial cycle. I head out. Any -- we've got how much time. Let's do that.

Yes. I know. I think I would like to raise a question actually raised by Frederic De Brill. Could you answer Michel of how ArcelorMittal is improving its health and safety performance?

Okay. I think that's a very important question. And I would thank this investor because health and safety is on the top of our priorities. And we need to know that. And I think that there is not 1 meeting we are having together, it being the Board of Directors, it being the specific committee, it being management meetings also where we don't start with health and safety. This has given us over the time some good progress. And today, where we are, and I think with our -- if I look at the number of accidents, we have the systems we have in place, we are -- we have made huge progress. And we have reduced the number of accidents -- of recordable accidents by a factor 5 or 6 since the beginning of the creation of Arcelor, so which is very, very -- you would say, you could be very satisfied. But on the other hand, we have too many heavy accidents. And when we have an accident like the one, we have had in the mine -- in the coal mine in Kazakhstan, this is absolutely a drama inside the company. It just happened when we were finalizing the third quarter results, which was, as I told you before, the best in history. But when you have then confront it with such a drama, what can I say? You are really in a terrible mood, and you turn back to -- and you are telling you, what do we have to do for that not to happen. And I think what is -- the factor is that we need to start with continuing to reduce incidents because it is -- as you know, this is a pyramid. You have many incidents and then near misses and then not so severe accidents and then statistically, you have accidents. And the more you can avoid having incidents at the beginning, the less you have a probability of having an -- in accident. So what are we doing? We have also made some organizational changes in the sense that we have established in Health and Safety Council, which is chaired by the CEO of ArcelorMittal Brazil, where we have, I would say, the most solid results in terms of safety within the group. We have decided also to make safety a bigger part of the variable short-term remuneration of our managers. And we are now, once also with COVID helping, telling people and train that everyone throughout the hierarchy of the group towards much more on the floor be sensitive with our people that we need to take advantage of that. We need to take attention in order to make really a step forward in terms of safety.

Hetal, a final question from shareholders?

Going back to the actual energy cost inflation point. Can you give an indication of the impact of cost increases on your business? Have you been able to pass these through for surcharges to customers in your European operations?

So I think in order to calculate the the cost inflation, I think it's quite easy. And every investor can do it by itself because basically, as I told you, to produce 1 tonne to steel, you need 1.2 tonnes -- 1.5 tonnes of iron ore and 500 kilos of coal. On top of that, you have some needs of gas prices, but in the flat steel price -- in the flat steel industry, is largely hedged so that the cost inflation is a little bit moved around in long, I would say, where you have electric arc furnaces, and your sole energy is electric -- electricity and power electric power. And gas there, the cost impact was really very high, as in particular, also scrap prices went very high for 2 reasons. First of all, as there was a very strong demand; and second, also flat steel producers or integrated producers tend to try to increase the scrap input in the traditional [indiscernible] in order to reduce overall their CO2 emissions. And so that reason scrap was more -- was -- is in the round of $500 per tonne, which is extremely important, which is more expensive than rebar prices were 1 year ago. So it's really -- it was a difficult thing. So how do you manage this? We explained this to you, customers. What we have done also is to say we need to introduce in energy of cost surcharge due to these circumstances when you are doing that, this is, I would say, more an education in order to objectively explain to your customers that the price increase is due to the cost increase, but it is not by introducing a surcharge that the price -- the final price of steel will increase because the final price is all the time a question of balance between supply and demand. And that happens also. And so from that point of view, the question of -- which have been asked, you have not been able to impose the surcharge actually, it's not really right. It is much more of an educational tool than to change the rules of the game because you have to be a monopoly to change the rule of the game. And definitively, we are not the monopolist that we have to try to find that. We don't want to be also a monopolist because you want to have a long-term relationship with your customers. But how interesting sense it pay a fair price obviously.

Hetal, I see another hand raised?

Yes. Sorry, they managed to squeeze 1 more in -- actually on the ESG topic again. And it's really about green steel solutions under our XCarb brand. The question is what has been the response from customers? Are you able to command a premium to offset the additional costs?

Okay. So I would say the XCarb initiative is, in fact, twofold. It is first to be -- to identify comments pre steel products, which can be sold to the customers. It is, second, an element of new technologies implemented in order to move towards carbon-free steel. And it is certainly internal investment fund, investing in new companies, developing new technologies which are relevant for the carbon-free economy. Now the first is green steel products. As we implement today new technologies, which reduce the burden, it is possible to isolate that and to transfer it and to specific steel products so that you can certify to a customer that keep [indiscernible] steel, which is 0 carbon, or which is very low carbon as we are doing it in long steel. And this is certified by an independent expert based on a certified methodology. And I would say this is something where we start now supplying, we are selling this year 200-or-so-thousand tonnes of these green steels, very high interest from our customers. And also, they are happy to -- and they are ready to pay a higher price for it. Second part of the elements of the new technologies, maybe that I don't want to go totally through it, but I would recommend our readers to go on our site and to look at our climate action report, because this is very well explained there what we are doing. And then you can really see that from a technological point of view, the road map towards green steel is stressed and that it is possible to reach it over time. And the third element so that was in -- it's a $500 million investment fund, which is allocated roughly by -- for the next 5 years, each year by $100 million, where we invest in new technologies, could be storage technologies kind of batteries. It has been -- we have decided to join the initiative of Bill Gates, who has a huge plan in order to sponsor new technologies, which should aim to decarbonize the industrial economies. And there, we have committed $100 million, and we are participating in this fund with other top industries. And then we are -- and this fund is managed by an internal investment team exactly like a fund is managed by a GP, taking the decisions, evaluating it. And so I think it will give us new insight where technology is going. We didn't speak about hydrogen. We didn't speak about other technologies, which will help to go towards the decarbonization of our industry. And since this is the third part of the XCarb initiative which is, I would say, an absolutely exciting initiatives and they chose that the steel industry is really very up-to-date and a top technological industry. And that is important because it is steel, which is building also the new world. And without steel, the world and the model world will not be built or reconstructed, and steel has one feature, no other material has, that it is once you have produced it, you can recycle it forever each time. And I think that our investors shouldn't forget. And in fact, if you can bring that in link with the green or the path to green steel, then we can say we have many, many decades before us, which are extremely promising.

Michel, that's a very good note to end. And I was just looking at this actually your road map.

Absolutely.

And I was going to end on that, and the idea of net zero by 2050, but of course, another target in 2030 in Europe. I mean we are only 9 years away from that. How optimistic are you, if we have this meeting again in 2030, will you be saluting your success? Or are saying there's still more to do?

I think it -- we have the will to go there absolutely, but we are not allowing to deliver. And then the reason why we have had this context I was mentioning before, with the different governments, we have MOUs signed with all of these governments, but they need also to deliver. And in the meantime, we are, from a practical point of view, working on the different projects in order to make that happen.

Michel, [Foreign Language], thank you very much for spending an hour with us. Thank you very much, Hetal, and thank you very much to all shareholders who are tuning in. And any questions, please send them to Hetal. His e-mail address, you have, and I'm sure he doesn't mind being bombarded. But if it does, then that's too bad. And I wish you all the very, very good Christmas and festive season in the meantime. Take care. Thank you. Thank you, Michel.

Thank you very much, John. Thank you.