ArcelorMittal sees financial ‘risk’ in decarbonisation

Global steel giant ArcelorMittal posted on Thursday a record annual profit in 2021 but warned that reducing its carbon emissions posed a financial risk to the group.

With prices of raw materials soaring as economies recovered from the pandemic, the world’s second-largest steelmaker posted a net profit of $14.9 billion (13 billion euros) in 2021, bouncing back from a $733-million loss in 2020.

“The global economic rebound, post initial Covid-19 restrictions being lifted, supported buoyant demand in all markets, delivering very high levels of profitability,” said chief executive Aditya Mittal.

But he said pressure to cut carbon emissions in the steel industry, one of the most energy intensive on the planet, risked affecting profit.

The Luxembourg-headquartered group aims to cut carbon intensity by 25 percent worldwide by 2030 and by 35 percent in Europe.

Mittal said steel production costs could rise in Europe if the European industry faced unfair competition from other parts of the world.

“There is a risk because, as you know, steel industry is global. If there a higher cost in Europe and there is no higher cost in other regions, the European industry can be undercut,” Mittal told journalists.

The European Union is mulling a Carbon Border Adjustment Mechanism which would raise the price of some carbon-intensive imports from regions with less stringent emissions reductions rules.

Mittal’s warning of the need for a “level playing field” worldwide rattled investors, sending company shares falling in Paris.

– Falling production –

The group, which was the world’s largest steel producer until it was overtaken by China’s Baowu in 2020, saw crude steel production fall last year to 69.1 million tonnes compared to 71.5 million in 2020.

Iron ore production also fell to 58 million tonnes from 50.9 million in 2020.

This was largely caused by a slump in steel deliveries to the car industry, namely in Europe, which was badly affected by the global semiconductor shortage.

ArcelorMittal nevertheless posted a huge profit in 2021, after economies began emerging from Covid restrictions, demand for raw materials and commodities soared and prices consequently jumped.

The group’s revenue jumped by 44 percent to $76.6 billion last year.

Sales rose 43.7 percent to $76.6 billion as steel selling prices doubled.

Steel shipments rose 9.2 percent to 61.9 million metric tonnes, driven by the recovery in demand.

– Safety issues –

Looking ahead, ArcelorMittal said it expected global steel consumption to rise just one percent in 2022, compared to four percent in 2021. Much of the future demand would come from the automotive sector.

The company announced a $1-billion share buy-back programme for the first half of 2022.

Despite an upbeat report to investors, ArcelorMittal admitted it had not done enough to improve the health and safety of its workers and had “to do better … with an absolute focus on eliminating fatalities”.

The IndustriALL union — which says it represents 50 million workers worldwide, many in heavy industry — issued a statement in March 2021 decrying fatal accidents at ArcelorMittal plants in Kazakhstan, Poland, South Africa, Spain and Ukraine.

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