Daniel Fairclough - Director of Investor Relations London Lakshmi Niwas Mittal - Chairman, Chief Executive Officer, President, Managing Director of Operations and Member of the Group Management Board Aditya Mittal - Group Chief Financial Officer, Principal Accounting Officer, Member of the Group Management Board and Chief Executive Officer of Arcelormittal Europe Davinder K.

Chugh - Member of the Group Management Board, Member of Investment Allocation Committee and Chief Executive Officer of Africa & CIS Louis L.

Schorsch - Former Chief Technology Officer of Research & Development - Global Automotive, Member of the Group Management Board, Member of Investment Allocation Committee and Chief Executive Officer of Arcelormittal Americas.

Michael Shillaker - Crédit Suisse AG, Research Division Alessandro Abate - JP Morgan Chase & Co, Research Division Michael E.

Flitton - Citigroup Inc, Research Division Bastian Synagowitz - Deutsche Bank AG, Research Division Carsten Riek - UBS Investment Bank, Research Division Stephen Benson - Goldman Sachs Group Inc., Research Division Luc Pez - Exane BNP Paribas, Research Division Anthony B.

Rizzuto - Cowen and Company, LLC, Research Division Philip Ngotho - ABN AMRO Bank N.V., Research Division Rochus Brauneiser - Kepler Cheuvreux, Research Division Justine Fisher - Goldman Sachs Group Inc., Research Division Seth Rosenfeld - Jefferies LLC, Research Division Alexander Hauenstein - MainFirst Bank AG, Research Division Dmitriy Kolomytsyn - Morgan Stanley, Research Division Charles A.

Bradford - Bradford Research, Inc. Alain William - Societe Generale Cross Asset Research Cedar Ekblom - BofA Merrill Lynch, Research Division.

Daniel, you can go ahead now..

Thank you. And thank you, and good morning and good afternoon to everybody. This is Daniel Fairclough from ArcelorMittal Investor Relations team. Thank you very much for joining us today on our conference call to discuss the third quarter 2014 results. First, I'd like to remind you that this call is being recorded.

And we are going to have a brief presentation from Mr. Mittal and Aditya, and that will be followed by a Q&A session. Given that the call will be limited to 1 hour, [Operator Instructions]. And once again, just to remind you that the call is being recorded. And with that, I will hand it over to Mr. Mittal..

We have significantly upgraded our assets portfolio in North America; we have supported our franchise business of the steel for automotive; we have achieved this with no impact on our net debt. Number two, that as Gallatin was nonconsolidated, it had no EBITDA effect.

Like the Calvert JV, too, is nonconsolidated, there will be a consolidated EBITDA impact to our slab sales to the JV, and we have estimated this as at least equal to $258 million annually once up at full speed. For me, this is clearly value-creating M&A. Next, I will discuss our market outlook.

Our core markets, Europe and North America, continue to grow year-on-year. This particularly applies to the U.S., where we have further upgraded our demand forecast for 2014. As you can see on the chart on the left of this slide, the ArcelorMittal shipment weighted global PMI has pulled back slightly in recent months.

This follows signs of weakness in some emerging markets. But most recent information show an overall uptick and points towards continued growth in demand for our steel. In the U.S., the steel demand continues to grow strongly. This reflects robust underlying growth and restructure.

October PMI signals a strong growth in manufacturing output, which is already above precrisis levels. Growth is buoyant in all major steel-consuming sectors, especially auto, machinery and now nonresidential construction. The steel demand in U.S.

is higher than we anticipated at the beginning of the year, and we have raised our growth estimate for 2014 to over 8%. Moving to Europe. It is clear, speaking to investors, that there are growing concerns over weak headline GDP growth. However, while we remain cautious, we continue to expect a gradual improvement in European growth.

Eurozone manufacturing PMI remains above 50, including a slight pickup in October. I can also point to our European order books, which so far shows no impact from the weaker market sentiment and are firmly higher than this point last year. The weaker euro, together with any stimulus from ECB, should provide positive momentum in 2015. Moving to China.

The oversupplied real estate market continues to depress steel demand. So far this year, both property sales and newly started construction have declined around 9%. There continues to be growth in other steel-consuming sectors, notably auto. [indiscernible] car assembly grew at a positive growth of 11% year-to-date.

When you have growth in machinery, real reinvestment and even shipbuilding, these segments are stabilized. But the negative impact of real estate and destocking at traders has caused us to cut our demand forecast around 1 -- between 1.5% to 2% growth in 2014 as compared to 3% at the time of our second quarter results. Turning to the emerging markets.

Brazil is in recession and has seen significant declines in steel demand during the last 6 months. Underlying demand has been impacted by the World Cup, uncertainty over the elections and structural problems that have held back investments. But I believe the worst is behind us.

Conditions are stabilizing, particularly in construction, and I do not foresee a further deterioration in overall steel demand. Elsewhere, the ongoing crisis in Ukraine is impacting CIS demand. But our units in the region are largely unaffected and supported by currency depreciation, continued to be able to export into Middle East and African markets.

Overall, despite weakness in some markets, we're pushing global -- apparent steel consumption growth down to around 2.5% this year. Our exposure to growth in our core markets means we expect ArcelorMittal steel shipments to increase by over 3%. With this, I hand it over to Adit, who will discuss the financial results and guidance in more detail..

a 3% increase in steel shipments and a 15% increase in marketable iron ore volumes. Together with our ongoing cost reduction plans, this is driving better results in 2014. Despite the lower iron ore price, the company still expects 2014 EBITDA to be greater than $7 billion.

I'm also able to tighten up our CapEx guidance as we now expect 2014 capital expenditures to be approximately $3.8 billion. Finally, there is no change to our deleveraging priorities. We maintain the medium-term $15 billion net debt target.

And as operating cash flows improve and we receive the cash from Gallatin, I expect us to make progress towards this objective in the fourth quarter of this year. With that, we'll be now happy to answer your questions. Thank you..

[Operator Instructions] So we will move straight to Mike Shillaker from Credit Suisse, please..

So my 2 questions, please. First question, just looking forward, obviously, you talked about Q4 being at a similar sort of level, I think -- or no reason why it would be lower in Q4. So call Q4, $1.9 billion.

Firstly, is there anything sort of odd about that or one-off-ing about that? And if not, that would kind of set us up for around $8 billion next year, all things equal.

Can you then give us any sort of form of guidance for next year -- sorry, wrong word, not guidance for next year but help us out with any structural earnings improvements that you are looking at for next year so we can actually -- because obviously, iron ore is maybe not going to be as exciting as it was on the structural side.

But what are you looking at for structural earnings improvement next year so we can kind of get a feel for where we should be looking at without taking a view on the cycle? That's point number one. Second question, an obvious one, really, can you give us an update on Ilva? It all seems to have gone a little bit quiet.

I did hear, and I'm not sure whether this is correct, that JSW said on their conference call that they were no longer interested, but I'm not sure whether that's true.

But can you give us an update on where we are?.

Sure. Thank you, Michael. So in terms of Q4, yes, you're right, we have said no further deterioration in performance in Q4. There are no one-offs in EBITDA in Q4. The gain on the Gallatin sale is captured in income from equity as a nonconsolidated entity. So there will be some gains below the EBITDA line but not in the EBITDA line.

And in terms of structural improvements for 2015, I think there are a few, and I'll just walk you through some of them. I guess the first point is that we are constructive on demand in the U.S. and Europe, which is slower than the U.S. but still positive; and even in Brazil, where we expect improvement after a very tough year in 2014.

So there should be positive volume impact and, as you know, in the steel business, volume -- we have a high operating leverage to volume. So that's a positive EBITDA driver. Excluding volume, we continue to drive performance for cost optimization. We still have some residual AOP benefits coming in '15.

We have a further 7% reduction in Mining costs as well as continuation of our Management Gains program. The third point I think is quite important as well is we don't expect a repeat of cold weather and litigation as a tailwind. So if you remember in the first half of this year, we had $350 million of costs in NAFTA, which will not repeat in 2015.

We also had U.S. litigation of $90 million, [indiscernible] itself is for $40 million, plus we had a C5 furnace failure at Cleveland in the U.S. as well. So there's about $500 million of costs that we incurred in the first half which will not repeat in 2015. And lastly, we also have 2 blast furnace impacts.

Some of this we see in third quarter, which we mentioned, which is the startup of blast furnace No. 3 in Tubarão, which is exporting slabs into Calvert and other markets. That's been a positive driver of EBITDA in Q3, and that will continue to strengthen into Q4. And we'll see the full benefit of that in 2015.

Actually, today, we have relighted a blast furnace in Newcastle in South Africa. So we had cost of that in the second quarter, cost of that in 3Q and some cost in Q4. We'll see the full benefit of that in 2015. So I think, Michael, those are the key structural improvements that we are seeing in 2015 versus 2014.

In terms of Ilva, there's no further update at this point in time. We remain interested in Ilva. We think we can create value for ArcelorMittal shareholders. Nevertheless, we also remain very focused on ensuring that we do not move away from our priority to delever the balance sheet.

And we've demonstrated through the Calvert acquisition and the sale of Gallatin that we're able to manage those investments and divestments quite well..

So we'll move to the next question from Alessandro of JPMorgan, please..

My 2 questions. The first one is ACIS. The result has been really impressive in terms of expansion on margin.

Can you give me a little bit more granularity how much is related to restructuring effort, and, how much is coming from the FX? And the second one, if you can actually compare the situation Q4 2014 versus Q4 2013, in terms of perception of the renegotiation of contract with the automotive industry for next year, whether the weight of the iron ore price is as strong as it was in 2013 now that apparently it seems to be coming off but not as strongly as it was last year? In other words, whether this proxy that was used for the settlement that probably is losing a little bit of power..

Davinder?.

Yes. On the first one, which is ACIS, I think it's the combined effect of several factors, most of them is operational stability, and we are trying to run all the assets full and filling the mills, particularly from the value-add end. That is helping us.

We have captured the benefits offered by the foreign exchange, and that has helped us, too, especially conserving the costs and not allowing any leakages to happen on that account. Then products and market developments are also working in our favor. So these are some of the actions which we have taken, and they are all bearing fruit..

Alessandro, on the other negotiations, it's very difficult for us to make comments about the overall trend there -- pricing patterns there.

And I would say that we pursue those negotiations really on a regional basis based on the requirements of the OEMs in North America, it's based on the competitive environment, based on the underlying trends in the spot markets and so on.

So I think we would foresee that, that would continue to be a market where we're relatively well rewarded for the value that we provide to our customers across the board. But again, the specifics of individual regions or customers are things we can't comment..

Thanks, Alessandro. So we'll move to the next questions from Mike Flitton of Citigroup, please..

Just 2 from me. Firstly on Mining and then on -- again, on ACIS. So on the Mining side, can you help us a little bit with the cash costs? I know you've been a little bit hesitant, I guess, to give costs previously.

But just given the volatility in the market, it'd be helpful for us and I think for investors as well to get a sense of where your cash costs are sitting at the moment. I know we have numbers from 2011, I think around $45 a tonne.

But where would we be, at the moment and perhaps for next year, given the cost reduction? Would you guys essentially be positive EBITDA, maybe $60 iron ore if -- were that to come through? Secondly, on ACIS, obviously, it's performing very well. Do you anticipate [ph] seeing any impact from, firstly, the trade case with the U.S.

and Russian steel and, obviously, the developments in the Russian economy, which could push some steel previously consumed in-house out into Europe and your other export markets? So any sort of pricing pressure or market share loss that might be anticipated there..

[indiscernible].

Okay. On the iron ore costs, we don't give out the individual costs on that, but what I can say is that we're on target for the 7% cost reduction this year that we anticipated. We mentioned, I think, in 2011, $38 off the AMMC.

But that is on target as well, which is good news, and that's coming from efforts on the volume side but also the cost-reduction procurement benefits and a little bit of ForEx benefit as well.

In thinking about forward profitability, we get the benefits of Canada from improving the volumes, where we have the stretch potential there in further cost reduction efforts. And the cost there will go down further below the $38 that we did announce previously.

And in Liberia, that is the other key marketable asset, and the costs there will be less than $30. And as we look to the Phase 2, when that comes on, we'll also get the benefit of a better product quality. We get scale benefits and the cost as well.

So for those 2 key marketable assets, they should be in good position at more conservative pricing assumptions..

Davinder?.

Yes. It's a fact that there are 2 moving parts as far as this market is concerned. We have the ruble weakness coming through. We have more steel now to be sold by Russian mills in the region or domestically and also the overall weakness in the economy coming through. The other moving parts, on the other hand, there are some positives.

Our own domestic currencies is one positive. There are other markets which are developing, which is a positive. Middle East is still growing mature. So it's a constant play of these things, and we are constantly on the ball. And I think we have done so far well, and we'll be very vigilant going forward also on this count..

Okay.

Just on that, again, I mean in terms of -- do you see headwinds increasing, really, in terms of the prospects for material to come from Russia into Europe as well as the ACIS region?.

Yes, these factors are relatively new, have not started manifesting in any way. There's, of course, now seasonal impact also been setting through a bit towards the winter. So these are the factors which are very difficult to segregate each one of them what impact it is creating. But so far, we are not seeing much impact coming through..

And perhaps, I can just add to that a few comments. First of all, in terms of just ACIS operating performance, I mentioned earlier that we are relighting a blast furnace in our South African operations. So as that relighting gets completed, we will see a positive benefit in our South African operations. We continue to improve the base operation in CIS.

We started that journey roughly 12 months ago with Davinder as well as with our new CTO, Marc Vereecke, which is showing improvement. In terms of exports pressure, I think if you see, this year, we have seen significant increase in exports in our core markets, which is Europe as well as the U.S.

But that has not prevented from the overall margin expansion in our Steel business. So I think there is clearly the impact of exports which may continue. On the flip side, there are some trade actions which are starting up as well. But regardless of the increase in exports, the fundamentals are strong in the core markets in which we operate.

We believe we can maintain our exports..

We'll move to the next question from Bastian at Deutsche Bank, please..

My first question is on the NAFTA numbers, which have improved quite significantly but still less, I guess, than the $90 margin expansion, which one of your major peers delivered. And I know there were probably a couple of one-offs in there, but I think you obviously changed the management here.

Can you give us your view on why you see your numbers have been falling behind a little? And do you think that you will improve further in Q4 and Q1, obviously, having in mind that spot prices are down now and imports are up roughly 38%, meaning that prices might not recover meaningful for the short term.

Then my second question is on the Brazilian business, where the margin was down $20 for the first half.

For the year, could you share with us what was the contribution from the blast furnace ramp-up in Tubarão? And then secondly, looking at prices, I guess, rebar I think is now down roughly $200 in the domestic market in October versus average Q3 and then hot-rolled coil and some other grades are down more than $90 in the same period.

It seems like the price premium in Brazil got broken so were not really restored in real terms, and you're apparently not seeing this trend, at least not yet.

Can you share with us the trends and EBITDA drivers you expect in Brazil, therefore, going into the fourth quarter and maybe given -- very early view whether that you see the recovery in Brazil you're talking about happening in the first quarter already given that, that is obviously typically a weaker, seasonally, quarter?.

Thanks. On the NAFTA numbers, I think we did see substantial improvement Q3 over the first half of the year. I must have mailed them when we talked about the issues that we had with the weather and so on in the first half of the year. So we came out of those well in the third quarter. We had a more extended outage in Calvert than we'd expected.

I think our results would have been even better marginally but for them. Relative to competitors [indiscernible] I think the recovery was very strong and very evident compared to almost everybody in our peer group in North America.

I think for the folks where the gap remained despite our improvement, you'd have to look at some of the discussion of one-off benefits in Q3 and what's likely to -- whether they're likely to be reversed in Q4, and I think you, all, can do that on your own.

I think moving to Brazil, you're right that we're -- we see some weakness in the macroeconomy there that's showing up in the price realization as well. But I'd also stress that an awful lot of that in terms of dollar results has to do with the depreciation of the real. And ultimately, that should be a very positive benefit for us.

Already I can tell you if we look, without giving numbers away, we look at our flat rolled operations across the globe, Tubarão has emerged as the real market leader in terms of our cost base, which put some challenges in some of our other operations, but certainly an important aspect of that besides the blast furnace being restarted is the real depreciation.

That immediately -- the real coming down immediately has an impact on the price realization in dollar terms. I think it also offers some opportunity for restoring the premium to some degree.

But that's something that doesn't happen instantaneously but certainly something we'll be looking to and trying to implement, I think, and expect to be able to implement as the months pass by..

And in terms of your specific question on blast furnace 3 start on impact on EBITDA, I don't want to get too specific, but I would say that without the blast furnace impact, you would see largely flat results in Brazil to slightly up. So I think the delta improvement, a large portion of that is restarting the third furnace in Tubarão..

Building on that, I think in the global slab market now with the real devaluation with the iron ore price coming down, because as you know, we purchase the iron ore in Tubarão from Bali that we have an extremely competitive operation globally in Tubarão now for the global slab market..

That's been very helpful. Now following up on that briefly. I can't really obviously -- I mean the real is a mess, I assume, [indiscernible] then for your Brazilian business and the cost competitiveness. But then obviously, again, looking at the Brazilian market, I think, historically, we obviously have this very high premium.

And it seems like apparently, the local market, given that the price to sell even quite significantly in real terms have lost maybe some of the discipline they had before and obviously now to continue to actually, I think, have the same profitability level, I guess, you would generally need to raise prices in real terms and resume the discipline on the market, which so far at least seems it has not happened.

So don't you see the risk that possibly -- basically, we see this trend flowing in possibly in the fourth quarter or not in the first? Or are you confident that basically the price premium in real terms will basically be restored fairly soon?.

I think we don't talk about discipline. I think what we look at is we have a very extensive distribution network. We are very close to our customers. We have very deep roots in the Brazilian economy.

We have an extensive network of scrap collection as well as the finished distribution channels and value-adding activities pending and so on that I've described. So we think that underlying value benefit that we bring to the customer base, that's what really supports the premium that we have in that market typically.

And again, we have a surprising weakness in the Brazilian economy. We expect that -- some recovery to happen next year. I think despite the political development, whoever won the election, I think it's clear that more pro-growth policies need to be implemented, the real will help the development and performance of manufacturing customers and so on.

So I think because of that structural advantage that we have in Brazil, we'll be able to restore those premium to appropriate levels of, say, over -- not immediately but over the next quarter or 2..

Okay. But then basically, everything else equal, it sounds like we probably will get a bit of this lagging effect resulting in some margin compression most likely in the fourth quarter.

Do I understand this correctly?.

Yes. I think we're getting way too specific on a particular segment and guidance into Q4. And I think there are a lot of factors that impact performance. We talked about the blast furnace numbers here, rounding up, that's continuing into fourth quarter as well. There are a lot of businesses in Brazil and, we call it, our neighboring countries.

So there's Argentina long, there's the Tubarão business. There is a flat domestic, there's long domestic, there's flat exports, long exports, Trinidad as well as slab exports into Calvert..

We'll move on to Carsten at UBS please..

My question -- the first question also circles around NAFTA, similar to Bastian, I just have a question. There is an improvement in NAFTA yet year-over-year, but I'm much more interested in quarter-on-quarter improvement. Because if I understood you correctly, you had $290 million one-off last quarter.

On that $277 million, that would give me somewhere around $460 million, $470 million in EBITDA. And if I look at your shipments, shipments are up quarter-on-quarter and sales per tonne are also up quarter-on-quarter. So I'm just wondering what happened in order to make this result not as good as it could be. Second question is on the guidance.

You reiterated your guidance of in excess of $7 billion in EBITDA. But you simply said that now the iron ore price guidance you gave before of $105, you don't mention them anymore. I would rephrase the question.

What is the minimum iron price you have to get for the last quarter in order to make the excess of $7 billion?.

Sure. I think there's no need to refer to iron ore. Because I think what we're saying is based on today's market conditions, we expect to have no deterioration in Q4 results. And if you do the math there, as Michael has done it earlier, I think there's quite a lot of room of $7 billion.

In terms of your question on NAFTA, I think you raised a valid point. I think if you go through the results, you will see that we talked about an outage in Calvert. We had to do repairs to the hot -- to the rock heating [ph] furnace in the hot strip mill. So that costed a bit of money as well as higher fixed costs..

Can you quantify the last one?.

I think you've quantified the delta so I will just split the difference..

So we'll move on to Steve Benson at Goldman..

My first question was just on Liberia. I understand the volumes target around 5 million tonnes, but I wondered what was happening on the cost side.

Have you no -- have you had higher costs in Liberia since Ebola? And what should we be expecting on the cost side of it next year, if we should be modeling roughly the same volumes?.

Okay, yes. On Liberia, the impact has not been under, the tonnes were not much less. There is a small impact on the cost side from Ebola, which I estimated around $1.50 a tonne on the operation. Looking forward, we're anticipating similar volumes next year. And of course, we're also looking at the costs to see how we'll mitigate that in the next year..

Okay. And my second question was just on the net debt target. I think it was -- the medium-term target was originally given at the start of 2013.

What is the definition of medium term? When can we expect -- or do you expect to hit that?.

Senegal, U.S., as well as the federal tax programs in Brazil. And when you add all of that, it's $1 billion. On a like-to-like basis, excluding those effects, the balance sheet is $1 billion lighter than previously already..

Thanks, Steve. So we'll move to the next question please, from Luc at Exane..

One question, if I may, on Europe. If I look at Q3 versus Q2, looks to me that EBITDA per tonne has been dropping and being squeezed much higher than what I anticipated given the lower iron ore cost environment.

So if you could elaborate on the point at which we should see the full impact of these lower raw material costs in the division and maybe elaborate on what was behind this. Because if I got it right, shipments were seasonally lower, yes, but much less than usual..

Okay. So I think there's a significant seasonal impact. So if you look at it year-on-year basis, which I think captures the seasonal impact, you can see a $20 improvement.

And when we look at the bridge of the $20 improvement in Europe, roughly $10 comes from the higher volumes and roughly $10 comes from the benefit of our management gains and cost programs.

In terms of inventory benefit or iron ore benefit, I think they're still marginal in third quarter versus the second quarter, i.e., the price environment is developing similar to our cost of inventory environment..

A follow-up question maybe. With regards to the trend you foresee for Q4, if you could quantify destocking. I understand that you do not see much growth for that, but I suppose that you would expect some improvement in your working capital requirement.

So should we factor in a full reversal of the working capital requirement buildup over Q3?.

Yes. So I don't think this is related to destocking the Steel business. But generally, we build up working capital in the third quarter, and we tend to begin to release working capital in Q4. So I think an assumption that working capital movement in the second half would be neutral is fair..

Thanks. So we'll move to the next question from Tony Rizzuto at Cowen..

Congrats too on the performance and being able to offset the weakness in the Mining segment. My first question is with regard to planned outages in the U.S., are there any plan for the fourth quarter? Or if you can give us any view into 2015 in, say, the first half of the year. I heard that you did some work at Calvert in 3Q.

But if you could discuss that. Secondly, an executive from another company indicated that the timing was not right with regard to filing of trade action against China on the cold rolled and coated side. I wonder how you feel about that.

Is the timing right?.

The fourth quarter, as you know, Tony, is always a quarter where you do some extensive maintenance because it's seasonally a softer quarter for production. So we have a variety of activities planned, typically at somewhat higher [indiscernible] in terms of overall R&M spend.

But nothing -- but there's no sewage projects, if you will, like the blast furnace work that we've done over the past couple years. And I don't think there's anything else major planned yet for 2015 either.

I would mention in the Calvert situation, we did take that facility down a touch [indiscernible] it's literarily the first planned outage in its history. It's been operating for 4 years so -- and we did find that we needed to do more extensive work than we had wanted to do.

But again, I think given that we just acquired the facility for the first time in 4 years, it wasn't that dramatic a surprise. I don't know if there's any, any major issues -- major R&M projects that I can point to either in the fourth quarter or into 2015.

On the trade cases, I think we -- we're ever vigilant, but it's very difficult to comment on them. And we prefer not to comment on individual cases. So I think we have certainly taken some important steps. As I said, we're always vigilant, but it's difficult to comment on a particular case..

Thanks, Tony. We'll move to -- the next question is from Philip at ABN AMRO..

My first question is on Brazil. You have quite a few capital expenditure projects there. I was wondering how flexible you are to potentially put them at hold -- on hold if their [indiscernible] deteriorates further.

And also I was wondering if it's anything that's currently really of concern to you, or whether you think that you'll really just continue with these projects. Then the second question is on the Mining segment and then mainly on the coal mines, the coking coal price has also been coming down.

And I was just wondering -- I appreciate that you probably don't give indication where the cash costs are, but I was wondering if you can confirm whether they're still cash flow-positive. And if I may, maybe the last question, just to sneak that one in.

Working capital movement in Q4, should we expect a similar movement as last year?.

Working capital? So maybe I'll just answer the last question very quickly. So as I said earlier that we expect second half working capital movement to be largely neutral, which implies that investment in the third quarter would be released in the fourth quarter..

And the capital targets in Brazil, I think that's the whole region, as Aditya mentioned, there's other countries involved. We got some of them growing. In no particular order, we're investing in a new rolling mill in Argentina. That'll be up in 2015. I think that's on track. No reason to look at delays.

The biggest project has -- is sort of a joint project. You could say there's 1.5 projects, if you will, a new wire rod mill at Monlevade, and then secondly, a related set of investments at Juiz de Fora, both long -- both integrated long product mills in Brazil.

At Juiz de Fora, we're expanding the ability to produce rebar to allow some of the wire rod production that's done at Juiz de Fora to be transferred to Monlevade. We are able to delay those projects to some degree. And in fact, we're looking at that option for -- in our business plan for next year.

We're very close to being done with both, so there's not a big advantage in that, but there are some economies that we're looking at to start that up, for example, in the second quarter versus the first quarter. So we're looking at that now. Again, we haven't put together the business plan.

Finally, on that, if we look at the growth that we expect next year in Brazil, even if modest, there's some recovery in construction markets and so on, we'd expect they'd still be running [indiscernible] those facilities. But we're looking at modest delays.

Finally, in our [indiscernible] facility, which is a finishing facility for flat roll products, we are making some round on investment to expand the capacity in the cold rolling area as well as to produce our proprietary Usibor product, which is critical for advanced high-strength steel applications in automotive.

Both those are on track, and I think we have no concerns about the market's ability to absorb those investments..

Okay, yes. On the coal mining, I think our Kazakhstan coal in the CIS, that has competitively a very good cost position and is profitable on the [indiscernible] we make there. The issue is around Princeton in North America, actually Appalachian coal is difficult to reduce seaborne prices for the exports.

We've been increasingly refocusing that on the North American market. We've been making some mine plan adjustments and the like, which is lowering the costs for that, and I expect that is free cash flow-positive going forward..

Okay. [indiscernible] it isn't..

It's -- at the back end of last quarter, it was free cash flow-positive..

Thanks, Philip. We'll move to the next question from Rochus at Kepler, please..

Sorry to get back to Carsten's questions on NAFTA. Regarding this delta, as it is a net equity consolidated company, I wasn't sure how much that repair costs have really impacted your EBITDA contribution on the business, so I would consider that what is impacting negatively is that you couldn't ship the slab from Mexico or other U.S.

facilities down to Calvert. And that is costing -- or this is hitting some performance.

Maybe can you clarify again? And is there any kind of legacy effect still helping you in the fourth quarter? Or is the fourth quarter purely a function of pricing and volume trends? And then secondly on Europe, I think you're doing pretty well on -- in the European market whereas the market itself has carried lost momentum.

Is the strong performance -- is that take -- are you gaining against your other European competitors? Or is this more a function that we start to see imports are being pushed back by the weakening euro? And then on Brazil, probably one area where you start to get slightly more constructive into next year.

What shall we think about any improvement or any change in earnings contribution as the delta in volumes is primarily coming from increased exports? So how much can we expect in terms of earnings delta as the export volumes are obviously by far less profitable than domestic volumes?.

So in terms of Calvert, I think you have to recognize that the change in Calvert is also reflected through the selling price of slabs into Calvert, and that's how it comes into our EBITDA. So there is a JV portion as well, but the remainder of it comes through our slab sales. So we get lower pricing for our slabs.

So that's how the cost of the working B furnace revamp has impacted our results in NAFTA. I'll again move to talking about pricing volume into Q4, but just quickly, I'd also take the chance to answer your question on Europe. So in terms of Europe, I think we still see fundamental demand being positive.

I think when we look at our automotive order books, we see that the automotive market continues to do well. We see that into Q4. We see that into Q1. And I think there is still some momentum left on the cost-reduction programs that we have implemented. But I do not believe at this point in time that Europe has lost momentum.

I think when we look at the overall order book of industry in automotive, we still see that October order book is higher than what we saw 12 months ago. So perhaps there are concerns. We understand the concerns of stagnation or deflation. There are geopolitical uncertainties. But on the flip side, we do have a weaker euro.

We have a lower interest rate environment. We have the ECB doing asset purchases. And therefore, our base case remains Europe will have positive apparent steel consumption next year, not as strong as 2014 but still should be decent in 2015..

Louis?.

And the pricing developments in North America, if I understood the question, we do see some modest and gradual softening in the last few weeks, let's say, but I think as you may know, there's been some recent announcements of price increases, in fact, being put in place. So I think we still see the underlying demand being very strong.

Fourth quarter is normally a somewhat weaker quarter seasonally, but we're still seeing very good demand and good prospects for our shipments. Again, maybe some slight downward adjustments but nothing that's significant, and if anything, just in the last few days, these price announcements.

I think if we look out beyond this period, certainly the imports are always a concern, but we do see some important steps that Russia came up earlier. Russians' exports to the U.S. were up 500% the first 9 months of this year. But September, Russian exports to the U.S. were the same as the total, similar year-to-date figure for 2013.

So I think you'll see some relief on that side of the equation as well..

So on Brazil, I think the key drivers in 2015, I think we've spoken about it a lot, is the blast furnace No. 3 for ramp-up. I think we are forecasting positive apparent growth in Brazil so there's some volume improvement.

And I think we spoke about the currency devaluation and assuming that we can get back to price premiums, the currency devaluation is beneficial both for domestic business as well as for the export business..

I would say that, I mean, certainly the exports are for any producer not -- rarely as attractive as the domestic markets for a variety of reasons. But given the cost base we have in Brazil now, we're seeing the best margins on product exports we're hearing or that we're seeing [indiscernible] since 2008.

And so again, I think we feel that if there's even a modest recovery in Brazil as we're expecting, that, at least, we'd be able to get through that..

Okay, thanks. So we'll move on to Justine at Goldman Sachs..

So the first question that I had was on the dividend that you paid in the quarter. It was $380 million. And I know you guys had spoken about it before. But what can we expect as far as this cash outflow going forward? And then the second question is just on the cash balance at the end of 4Q.

I know you mentioned in the press release that you had repaid your 2015 bonds that I calculate are about $1.3 billion. And so if you've repaid those in '14, the cash balance might go down temporarily, nothing that would concern me.

But is it the company's goal to in addition to the Gallatin proceeds perhaps tap the bond market again to replenish the cash balance?.

Okay. So Justine, in terms of dividend proceeds, I'm not sure what's your question is. But out of the $380 million, there's approximately $40 million to $50 million which are dividends paid to non-Arcelor shareholders. This is our minority interest in Mining Canada, our joint venture in Brazil of Bekaert.

In terms of cash balance, I think all things being equal, cash would go down, but recognize that we talked about a release of working capital in Q4, so free cash flow should be positive. So the business will be deleveraging as we enter into Q4. And you mentioned yourself the proceeds of Gallatin.

And as you know, our customary policy is not to comment on future bond raisings..

Thanks, Justine. So we'll move to Seth Rosenfeld at Jefferies please..

This is Seth Rosenfeld at Jefferies. A few questions on the outlook for managing your EAF capacity globally. Clearly, scrap prices have significantly outperformed raw material prices for iron ore and coking coal year-to-date.

First, do you think this price disparity is sustainable looking forward into 2015 and beyond? And second, has this past period of scrap price strength allowed you to shift to either capacity from electric arc furnaces to blast furnaces in some regions where you do have dual capacity just in order to avoid these higher scrap costs?.

Yes. So you have seen scrap prices have come down already, especially this month, so the high price differential that you have between the arc furnace route and the hot metal route has compressed. We have dual capacity primarily in Europe of arc furnace and hot metal.

But they're not adjacent to each other in the sense that on the long business, Western Europe is primarily arc furnace and in Eastern Europe, it's primarily integrated. And so we have not dialed down arc furnace capacity or dialed up integrated capacity. Clearly, for us, the ability of integrated has been higher than arc furnace.

We will not make capacity swings of that sort. Similarly in slab, we have not really made capacity swings of that sort. We have maintained the level of production in our arc furnace operations in 2014..

And if I could talk about the Americas, I think we're always -- I'm sure this is true all over the company, too, everybody's always trying to optimize the balance between scrap and ore products based on immediate economics in that region. So that goes on constantly.

But again, as Aditya indicated, we don't have tremendous opportunities to do that if we're going to stay in the market. But where the opportunity is there, we do it. So an example, over just the last quarter, even with the -- in Brazil, in fact, where in our long business, we have both integrated and electric furnace operations.

And as the market has softened somewhat, we've ramped up more of those operations that are integrated because of the lower cost base they have than the electric furnaces. But again if that relationship shifts, we will adjust accordingly..

Thanks, Seth. So we'll move to Alex from MainFirst please..

Alex Hauenstein from MainFirst. One question with regards to Brazil. You said that you think that the country might, let's say, see some modest improvement into next year.

But if we would assume this is not the case, is there anything you could do to steer against the negative trends here going forward? I mean, should we think about something more on the cost savings front and/or asset optimization here? Or what does the market structure allow here? It seems like after you might have turned around the ACIS successfully, and it currently looks like, but this might be the next part of concerns and measures.

Is that right in the way of thinking?.

I think we're always looking aggressively at -- our cost competitive. We do a lot of benchmarking internally. We do a lot of benchmarking in results also with competitors certainly. So I think when the market is softer then the scrutiny in those sets of opportunity goes -- opportunities go up quite a bit.

Again, Alex, you can have a long debate, somewhat philosophical about what the prospects for Brazil. I think we're still, on an underlying basis, quite bullish about that economy.

I think a lot of the obstacles are really political, and I think some of the messages in the last election, it's clear that whichever party had won, some measures need to be taken to improve the growth rate. Already the exchange rate, I think, is going to have a very positive impact in a lot of our consuming industry.

The manufacturing sector is much more competitive to-date. And a lot of the easiest things for the government to undertake to improve growth have to do with infrastructure and spending. And these are things that actually are relatively steel-intensive, so they help our business.

So certainly, if you want to paint a very broad picture then there's broad consequences, but I think we certainly are working to manage through what we expect will be a difficult 2014 but then some recovery beginning [indiscernible]..

Great, and thanks, Alex. So we'll move to Dmitriy at Morgan Stanley..

Two quick questions for you. Considering your new CapEx guidance for the year, I would assume your CapEx in the fourth quarter will be substantially higher than in the third quarter.

Could you please explain to us where the delta is going to come from? Is it the resuming CapEx in Liberia? And also would you be able to quantify ForEx impact from weak performance of currencies in countries like Ukraine, Brazil, Kazakhstan, South Africa, and the impact it had on the third quarter EBITDA?.

Dmitriy, we typically spend more in Q4, not to be a cynic, but I think it's because the year is ending and everyone wants to spend their CapEx budget, otherwise they lose it. And at the beginning of the year, we clearly spent less. There's also the FAS [ph] effect, where we settle [indiscernible] of the fire.

So those are 2 effects which cause us historically to have higher CapEx in Q4. Liberia will actually be less CapEx this year than before because as we announced earlier, due to Ebola, some of our contractors have announced force majeure.

So the level of CapEx there will be slightly lower too than we had anticipated and that is why we will also trim a little bit our CapEx. So $3.8 billion to $4 billion. We're suggesting it's approximately $3.8 billion. And I think there was another question which was....

Foreign exchange..

Oh, in ACIS? So Davinder, go ahead..

Yes. As I said before, the intention is to capture all the benefit that comes through exchange rate, particularly on [indiscernible] But as it should be expected, that benefit is there definitely. So it's -- as a very rough estimate of guidance, half of the improvement can be attributable to the currency benefits flowing through..

Thanks. We'll move to [indiscernible] at ING [ph], please..

Most of my questions are answered.

I guess my remaining question would be could you disclose the average realized price on iron ore in the quarter based on the year sales you reported in the mining division?.

So we haven't really disclosed the actual average realized, and it closely follows the reference. Clearly, we have some lag effects. And I think you know the reference price..

So we'll move to Chuck Bradford of Bradford Research, please..

I've got a 2-part question on tubular products.

First of all, have you seen any effect on your orders because of the reduced energy cost? And then secondly, what kind of impact can we see from the reduced energy cost? How much oil, for example, do you burn in diesel and other things that might be helped?.

Lou, you want to answer on energy cost?.

I mean, it's a good question, Chuck, because I would say it's one of the instances, speaking primarily about NAFTA here, but it's one of the areas that we want to be monitoring looking into next year. We've not seen any softening directly yet.

But as we look at the broad range of markets, I mean, I think we see kind of a green light in every market, and I wouldn't say we see evidence of softening in energy, but we've been thinking that that's a possibility given the decline in the oil price. Again, we haven't seen any evidence yet, but that's something to monitor, if you will.

So -- but I think that's, again, no direct effects seen to-date..

[indiscernible], you want to comment on [indiscernible]?.

I think it's in line with what Lou Schorsch said, in the sense that we have not seen any effect for the moment. The market of energy fuel is being strong. So for the moment, we have not seen any impact, maybe NAFTA, maybe Europe, and the Middle East, it continues to be strong..

Okay. My second question involves coking coal. Usually by now, you've done your contracts for next year.

Can you tell us how much lower the price will be and at what level?.

I think we're down a bit, Chuck, but I can't get more specific than that..

Thanks very much. So we'll move to the last 2 callers. The first, Alain from SocGen please..

So I would have 2 questions, please. The first one is whether the slab for export concept is becoming again a valuable proposition beyond shipments to Calvert.

And what's your view on the merchant slab market going forward? And second question, just wondered if you have prepared yourself in terms of raw materials of some of these inventories for the kind of weather we have had in the U.S. last year..

Okay. So I think we should be -- we should not take away from this call that the slab business on a global basis become very attractive. I think that's a wrong conclusion. I think what we've been trying to say is that our operations in Tubarão are doing well.

Recognize that we're running this operation at less than design capacity at 5 million now running it at 10.5 million tonne. That does provide a benefit. The slabs are going to Calvert, and the U.S. market has a price premium, and that is helping the performance of this operation. So I don't think our views of the slab market have changed.

I don't think there is a fundamental difference here. I think the benefit we're seeing in our result is the benefit of blast furnace 3 restart at Tubarão due to Calvert. And number two, clearly the devaluation has also helped..

Thanks a lot. So we'll move to -- the last question is from Cedar at Bank of America please..

One question on the utilization rate situation in Europe. There's a perception in the market that there's a lot of overcapacity in the region and yet margins are holding versus raw material cost.

Can you give us an idea of your own capacity that you could reasonably turn back on and what you need to see to take that decision?.

Thank you, Cedar. I think in terms of ArcelorMittal, especially in West Europe, we're running all of the blast furnaces that can be run. So running 15 out of 16 blast furnaces in West Euro. So really, we cannot turn on any capacity.

We have the opportunity to debottleneck, to improve operating performance, et cetera, et cetera, which we will continue to do to capture the growth. We have leverage in East Europe, and that will be dependent on how the Eastern European market shapes up..

Thank you for participating in third quarter's call, and look forward to be talking to you in the month of February..