ArcelorMittal urges action on costs to help Europe’s steel producers

ArcelorMittal stepped up calls on Thursday for EU governments to ensure a level playing field for domestic steel producers against imports from outside the bloc amid rising higher carbon prices.

Chief executive Aditya Mittal said the industry needed some support to ensure a level playing field, including a carbon border adjustment mechanism, to help it to decarbonise.

He made the comments as the company, Europe’s largest producer, reported its strongest quarter for a decade, driven by surging commodity prices.

Record prices for carbon dioxide allowances have raised the cost of polluting in the bloc far above any other region, hitting the big industrial groups.

Mittal said that while there was a “cost impact” from the current high carbon prices, the “greater question” is “how do we create a level playing field to prevent carbon leakage”.

“It is critical to ensure that there is a level playing field otherwise the steel industry will not survive in Europe and we will see steel being produced in other parts of the world and being imported into Europe which does not help the whole carbon reduction [agenda].”

He added that the company was encouraged with its discussions with EU governments.

The EU is expected to unveil proposals for a carbon border adjustment tax next month that aims to tackle the problem.

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The Financial Times reported in April that this is initially set to target limited goods including steel, cement, power generation and some chemicals imported from non-EU countries that do not have as stringent emission targets.

ArcelorMittal has pledged to be carbon neutral by 2050 and committed its European business to cut emissions by 30 per cent by 2030.

It has previously estimated that decarbonising its facilities in line with the bloc’s drive to eliminate net greenhouse gas emissions by 2050 will cost between €15bn and €40bn.

The company has a number of trials under way in Europe, including one to test hydrogen’s ability to reduce iron ore at its Hamburg facility.

Mittal said it would require “multiple tools” to ensure there is funding available to help Europe’s steel industry to decarbonise, including a subsidy mechanism akin to the contracts for difference that were used to kickstart the offshore wind industry.

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His comments came as the company reported first-quarter core profit — earnings before interest, taxes, depreciation and amortisation — of $3.24bn, more than three times the $967m in the same period a year earlier. Net debt declined to $5.9bn, down from $6.4bn at the end of 2020.

The company said it would pay a dividend of $0.30 cents a share in June as part of a plan to return $570m to shareholders. 

Steel producers are enjoying the benefits of a dramatic turnround. The company expects global steel demand to grow by between 4.5 per cent and 5.5 per cent this year, underpinned by low inventories from prolonged destocking that had continued through the pandemic last year.

Mittal said the company was noticing demand “across the board, in all geographies and all [market] segments”.