Good afternoon and good morning everybody. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you very much for joining us today to discuss the Results for the Fourth Quarter of 2020. Present on this call today, we have Mr.

Mittal, Executive Chairman; we have Aditya Mittal, CEO; and we have Genuino Christino, CFO; and we also have our Head of Mining, Simon Wandke. The focus of today's call is to discuss the results for the fourth quarter and the strategic progress we're making at ArcelorMittal.

This was covered in-depth in a detailed presentation published alongside our results this morning. So, as usual, the format of this call will be some opening remarks followed directly by a Q&A session. As such, we should be able to complete this call in about 45 minutes. [Operator Instructions] With that very brief opening, I'll hand over to Mr.

Mittal..

Thank you, Daniel. Good day, everyone, and thank you for joining us on this call to discuss our results for fourth quarter 2020 and the strategic progress we have achieved. 2020 was, of course, an exceptional year in many ways. What was not exceptional was the response of ArcelorMittal to the many challenges that we faced over the past 12 months.

It is our organization's DNA to lead, to respond quickly and effectively to changes and challenges those -- effectively to changes and challenges that often occur in our industry. I'm immensely proud of all our people and what we achieved together in 2020. We start 2021 in a position of strength. Our markets have bounced back.

Our balance sheet has never been strong. We have a more focused asset base with a defined growth plan and a clear strategy to drive our decarbonization goals. Most importantly, after many years of deleveraging focus, we are now in a strong position to reward our shareholders consistently.

Returning capital is a clear priority of the new policy announced today. I have decided this is the right moment for me to transition to Executive Chairman. The Board unanimously agreed that Adit Mittal is a natural and right choice for the company's Chief Executive of what I believe is the most prestigious steel company in the world.

Adit and I have worked closely together since he joined the company in 1997 and in recent years, we have been managing the company together. But this transition will be one of continuity and it will be seamless.

Adit, would like to say a few words?.

Sure. Thank you. Good morning and good afternoon everyone. As you have said, we have been working very closely together for many years and we will continue to do that. I'm personally very excited about what lies ahead. ArcelorMittal is full of incredible people, a company with excellent knowledge and capabilities and a company with tremendous potential.

I'm also very proud of all our people and the character they have shown as we navigated the challenges of 2020. Given the circumstances, the company performed well. As you heard, we have a strong balance sheet, having paid down a lot of debt. We have reshaped our portfolio of assets, which gives us more focus.

And through the experiences of COVID, we have uncovered more efficient working practices, which will underpin our competitive position going forward. From this strong base, we're well placed to undertake the work that will be involved in ensuring that ArcelorMittal transitions successfully to a low-carbon future.

It is a great challenge, but also a great opportunity as it allows us to utilize the strength and breadth of our human and technology capital. Our role is to lead this transition and this will undoubtedly be a critical driver of ArcelorMittal's strategy in the coming years and decades. I believe we can do great things as a company.

Today, we also announced Genuino Christino as our new CFO. You've all come to know Genuino well, I think. He has regularly attended our analyst calls for several years now, and he's also been meeting with many of our investors.

Genuino and I have been working closely together in his capacity as Head of Finance and he has been instrumental in the progress we have made to reshape our balance sheet. He has proven his capabilities with a track record of achievement, and he really embodies the attributes that we look for.

I will pause there now and hand back to Daniel to begin the Q&A session. Thank you..

Thanks Aditya. Thanks Mr. Mittal. So, we have a good queue in front of us and we'll take the first question, please, from Alain at Morgan Stanley. Please go ahead..

Yes hi. Hi Daniel. Aditya, congratulations on your new role. You are now at the helm of a company that is probably in the best position it has been since the merger of Arcelor and Mittal back in 2006.

But if I may ask you, in your new CEO role, putting your CEO hat on, what are the top three accomplishments that you plan to achieve in your first year in the role?.

Okay. Fantastic. First of all, thank you very much. It's a real privilege and honor to be appointed the CEO of ArcelorMittal. As you know, Mr. Mittal and I have been working very closely. You've watched us for many, many years. So, the change is evolutionary, not revolutionary. So, I would think of continuity more than anything.

But clearly, as a CEO, I'll be managing and overseeing the performance of the company and the development of our short and long-term strategy to create value for all stakeholders. I think there are three areas to focus on. A lot of this is captured in our presentation as well.

But let me begin with the first, clearly, leadership on sustainability as that is not only a license to operate, but as I mentioned, it's an opportunity for us to demonstrate our capabilities. As you know, we have tremendous capability in terms of R&D. We are the technology leader.

We have the most committed, most diverse, most passionate workforce in the steel industry on a global basis. And together, I do believe that we can create the right solutions as we have to decarbonize the steel industry. And this is not only processed, but also product.

As you know we have begun investments on various technologies, whether it is the smart carbon route or innovative DRI. And that we were the first company to actually book certified green steel in the fourth quarter of 2020. So, clearly, that's an area which is a threat ,but also an opportunity for us.

The second is we need to maintain and improve our cost position. This is at the heart of our DNA and I think this is how you remain successful in the global steel industry.

Clearly, having the lowest cost position in each of the regions in which we operate is what allows us to further develop our products, further develop our strategy, grow the business, and create value through the chain. Lastly, I would say, our portfolio of assets is now more focused and it presents a range of investment opportunities.

I'm not suggesting that we increase CapEx. On the contrary, you'll have seen our CapEx for 2020 on a scope adjusted basis matches what we've done with the same scope in 2019. But the portfolio of assets that we have separate us from our peer group as it allows us to capture unique growth opportunities, whether this is Mexico or Liberia or Brazil.

We have talked a lot about this in our presentation, but we have restarted our Liberian project, for example, where more than half of the capital has already been invested. In Brazil, the market is growing faster than we anticipated. So, we've restarted the Vega project, which is more value-added product in the market.

We continue the hot strip mill project in Mexico. As you know, we don't have a domestic presence in Mexico. It's a growing market. It's still importing flat steel and through this investment, we can participate in all of that. Just to give you a sense of numbers, just these three projects is an incremental $1.5 billion CapEx.

And on normalized spreads and normalized pricing, our long-term conservative forecast of iron ore, we expect them to generate more than $600 million of EBITDA. So, I hope this gives you a sense of the three key priorities. Clearly, underpinning all of that is we need to reward our shareholders.

We all in the company have worked very hard and together with our shareholder support, we have achieved our balance sheet targets. We now have a strong foundation for consistent capital returns to shareholders. I hope you saw that this morning in terms of our announcement.

So, maybe I'll just conclude right there and just say I'm very excited about the next chapter..

Thank you..

Thanks Alain. So, we'll move to the next question, please from Luke at JPMorgan. Go ahead Luke.

Luke are you there?.

Luke has just dropped off the conference..

Okay. So, I'm sure he will rejoin. In which case, we will move directly to Seth at Exane, please..

Good afternoon. I'd like to reiterate the other comments, congratulations on the new role, Aditya. If I could ask a question with regards to the outlook for deleveraging and shareholder returns. On past calls, I believe you commented that deleveraging would essentially conclude at about $7 billion, subject to seasonality.

The 50% free cash flow payout ratio is excellent to see, but it does leave a lot of cash on hand that will naturally drive further deleveraging.

Just trying to better understand, given your comment that $7 billion is sufficient to ensure investment-grade through cycle, do you want net debt to fall further? Is there a new target we should keep in mind for lower net debt? And if that is the case, is there an opportunity for the free cash flow payout ratio to actually increase in future years? Thank you..

Sure. Thank you, Seth. I would look at the capital return policy that we announced this morning as a very good starting point. We've talked about reinstating our base dividend at $0.30. That's -- our intention is that, that progressively increases. And simultaneously, we have added a variable component of free cash flow as our share buyback.

On a combined basis, that's about 60% of free cash flow. We have not articulated any further deleveraging target. Our target is based on maintaining our investment-grade metrics as a cycle. $7 billion is the appropriate number based on the work that we have done.

So, the takeaway I would have from our release and our thought process is this is a very good starting point. And based on the discussions we have had with our stakeholders, shareholders, as well as our Board, the feedback we have received that this is a good start. And I'm sure in the near future, we will be progressively increasing these payouts..

That’s very clear. Thank you..

Thanks Seth. So, we'll move to the next question, please, from Jack at Goldman Sachs. .

Yes, thanks very much. And yes, I would echo the congratulations. My question is just -- I mean, you've talked about sustainability and decarbonization as obviously key focuses for the group. And we see the carbon price, which has ticked up quite notably of late.

So, I was just wondering, can you tell us what the cost of covering Mittal's carbon emissions was in 2020 and then the cost expected going forward?.

Yes. Thank you, Jack. In terms of your question, we have not disclosed the cost of emissions. But what I would suggest to you is that we are in line with the competitive situation in Europe and there has been some discussion in the past or some analyst estimates as to what roughly that is and that's in the ballpark.

In terms of moving forward or going forward, a significant portion of our shortage is hedged. So, not all of it, but a significant portion. So, we would not expect to see a cost increase due to the price action that has happened in the recent past.

I think it's also -- what's also important to underline is that we continue to make progress as we decarbonize our process routes and we continue to improve our emission standards and that also provides support as the level of emission allowances are reducing progressively year-on-year..

Thank you. And perhaps just one follow-up, if I can, which is, obviously, you've now disposed of the AMUSA assets, and you've announced the fixed cost reduction this morning.

And I'm just wondering kind of in a more normalized demand environment, if you would think that margins can exceed prior peaks in 2017, 2018? Or whether perhaps some of these sort of considerations would likely -- sort of diminish that likelihood?.

So, if you look at the market today, clearly, it's ahead of where we were in 2017, 2018. In terms of what are the drivers of this, it's a fact that real demand has come back. You can see this across the board post the summer lockdown. We see that in all the regions in which we operate. On top of it, we've had significant stimulus support.

And clearly, we see new demand patterns that should emerge as the energy sector continues to decarbonize. And that's what's driving real demand, and we see this underlying recovery of real demand continuing into the second half. In terms of the cost of carbon and the impact on margins, as I mentioned earlier, it is not that significant.

Clearly, these costs will continue to increase and therefore, with our capabilities as a company, both on the technology side and on the process and product side and regulatory support, I believe that we can turn this threat into an opportunity..

Thanks very much..

Thanks Jack. So, we'll move to the next question, please, from Jason at Bank of America. .

So, good afternoon everybody and congrats to you, Aditya. Well done. Just a quick question for you on your JVs. I'm just wondering if you think that you're getting value for your JVs in the share price. And what would it take to bring these assets into the P&L as part of the group EBITDA.

And particularly here, I guess, I'm focused on Essar, given the way that business is growing in importance..

Great. First of all, thank you, Jason. You're right. This is an important question that you raise. This is a discussion that we continue to have with our stakeholders, and we'll engage with you and others to better present the results and figure out what is the best way to also present it in terms of EBITDA.

Maybe I'll take a moment and just provide everyone with an update. There's a lot of information in the investor presentation that we issued this morning. But the company performed well in 2020, hit production records in the fourth quarter almost across the value chain in the month of December.

We're very proud and appreciative of the hard work the management team has done there. The company was positive EBITDA and positive free cash through every quarter of 2020.

We're in the process of commissioning a pellet plant, a 6 million tonne pellet plant in the second -- in the first half of this year, bringing our total pellet capacity to 20 million tonnes and focused on debottlenecking this operation to 8.5 million tonnes and then focusing on further growth.

I think one action that we will take this year, which will support your question, is we will be inviting post -- assuming COVID travel rules are relaxed to visit the facility and see firsthand what is the quality of the assets that we have, the quality to the people and exactly what is the strategy.

And perhaps post that visit, we can continue these discussions and figure out, is there a better way to present Essar as part of our financial presentation..

Thanks Aditya. We look forward to that trip. It should be pretty exciting..

Yes, me too. We all need to start traveling now..

Great. Thanks Jason. So, we'll move to the next question, please, from Alan at Jefferies. Please go ahead..

Thanks and good afternoon and congratulation Aditya. I was just wondering if you could talk about the tightness we're seeing in the European market right now.

How far into the second quarter are your lead-times? And how long do you think this market environment could persist? Is there an environment where this tightness goes beyond the summer?.

Yes. Thank you. So, the demand -- the situation is actually driven by real demand. And as I mentioned earlier, we saw real demand come back stronger than any of us had forecasted, driven by consumer sentiment, but also by stimulus funds. And we see that situation continuing into the second half. I mean underlying demand levels remain healthy.

Clearly, we should not underestimate risks. We're still in a situation where there is a global pandemic. There could be mutations or the rate of vaccine deployment could disappoint. But assuming those risks don't manifest, then I would expect that demand levels would remain healthy into 2021 and perhaps even into 2022..

Thank you very much..

Thanks Alan. So, we'll take the next question, please, from Phil at KeyBanc..

Hey thanks very much.

Aditya, on the auto and packaging contracts in Europe and North America, should we expect those to be gross profit accretive to 2021 against current iron ore prices or would we need to see some easing in those raw materials?.

Sure. Phil, overall, automotive and packaging is in the aggregate positive relative to 2020. And that's -- yes -- and so, I hope I've answered your question..

Yes, it does. And then secondarily, on the net working capital expectation for the year, clearly, there's a build given the volume and pricing tailwinds you have.

What's a reasonable way to think about how much build we could see this year in the numbers?.

Genuino, would you take that up?.

Yes, Aditya, I can. Phil, so I think it's important to start by saying that we had, of course, efficiency targets to achieve in 2020. I think we did a very good job in achieving those. So, I think the objective is to make sure that we retain those gains in 2021 and beyond.

I think it's also important to acknowledge that we exited 2020 with market conditions at reasonable level in terms of raw material prices, et cetera. So, this is important to keep in mind as, fundamentally, our working capital position will be determined by the change we see in quarter four of 2021 against quarter four of 2020.

Of course, we believe that our volumes will continue to increase, I mean, production and shipments. As you saw, our apparent steel consumption forecast for the year. And additionally, our selling prices in Q4, it still do not reflect the current market prices that we will see in Q1 and in Q2. So, that has to be taken into account as well.

So, I guess, in a nutshell, our expectation is for 2021 to see investments in working capital. But as long as we can retain our efficiency gains, as we discussed, we do not expect this to be out of proportion or outsized, Phil..

Thanks very much..

Thanks Phil. So, I see next in list, we have Alan. Please go ahead..

Okay. Thanks for a follow-up question already. I actually had one about the green steel products and I appreciate it's early days with some of those only coming out in December.

But from a commercial standpoint, you can say, are you able to achieve a premium pricing level for these products? And how do you see the market eventually maturing for these? Is it one where it's a simple premium above their more CO2-intense equivalents or does it become kind of a completely separate market with its own supply and demand fundamentals?.

Yes, I think it's a great question, and we don't have all the answers. As you mentioned, it's early days. I think the two key takeaways are that, look, we have a product out there which is accepted by the market. It's certified by a third-party auditor. It's accepted by the UN global house emission protocols.

So, that's excellent achievement, and we'll continue to grow that product offering. And number two, we did receive better margins on that product, all in. So, it's off to a good start..

Okay. Thank you..

Thanks Alan. So, we'll take the next question, please, from Christian at SocGen. .

Thanks Daniel and congratulations to both of you, Aditya and Genuino.

Just on green steel, just to follow up, could you remind us what kind of volume you expect to be able to produce, say, in the next two, three years? And is that all coming out of Germany? Or are you able to achieve some in future out of your DRI in Quebec, for instance?.

Yes. So, first of all, thank you, Christian. The target is to do 600,000 tonnes of certified green steel by 2022, and this is primarily a West Europe offering at this point in time. We are examining what we can do in other regions and other markets as we speak..

Okay. Okay. Thanks. And follow-up on a different subject. The 50% of free cash flow, which you -- would be used to do share buyback.

In a scenario where your share price increases materially and perhaps the share buyback impact is less obvious, would you consider changing that for a dividend payment or reducing the buyback and increasing the dividend instead or is that purely committed to buy back?.

Yes. Thank you for the question. We're not committed to the buyback in that sense. We remain flexible. The intent is to return capital to shareholders. Clearly, in a buyback, our shareholders can also participate by selling down their stake proportionately as well. But this remains a live discussion and we're happy to engage and fine-tune the plan.

But the fundamental takeaway should be that there's a progressive base dividend, i.e., by the word, progressive, we are signaling that it should increase in time. And on top of that, the remaining cash flow, 50% would be returned to shareholders..

Great. Thank you..

Thank you..

Thanks Christian. So, we'll move to the next question, please, from Carsten at Credit Suisse. .

Thank you very much. And first of all, congrats Aditya and Genuino to the new roads. I have a question on the $1 billion fixed cost reduction plan, as it is shown on slide 11.

Just to clarify, are the closures in Kraków, Florange, and in Saldanha part of the $1 billion fixed cost reduction plan? Or did it just open the opportunity to reduce fixed cost in other plants?.

Carsten, thank you. I'm not 100% clear on your question. So, I'll try and answer it, but let me know if I haven't fully done so. So, the footprint optimization in Kraków, in Florange and Saldanha are part of our $1 billion fixed cost reduction plan. It's not the only part of the cost reduction plan.

There are other productivity improvements that we're making across the board. These are all learnings from the COVID crisis. And at the same time, we're improving our cost in terms of how we maintain and repair our facilities and then clearly, there's significant SG&A savings as well..

Okay. No, that answers it already. So, the cost reduction you had to the lower -- or the lower numbers of employees, et cetera, et cetera, in Kraków, Florange and Saldanha, they actually contributed to the $1 billion.

Because I just wanted to see whether there is a -- because the EBITDA is missing from that facilities too, I would guess, after the closure. Thank you very much. That is my question. I get back in the line. Thank you very much..

Sure Carsten. Just to add something to your comment. The -- I would not get too focused on the EBITDA missing from these facilities. This is a bit like the asset optimization plan. So, the contribution is really the cost saving.

The volumes that we would lose from the Kraków primary are being supported or supplanted by the volumes coming from our facility which is next door, DG facility. So, we're ramping up our capability at DG. There's also a small investment there where we're debottlenecking the caster.

So, the concept is that we have the same throughput to the market, but with a lower asset intensity. So, the saving here is -- cost is one, clearly, which is most important, but we also save an ongoing working capital because our working capital is just at one primary facility.

And we also save on CapEx because we no longer have to support two primary facilities for the same throughput. And the same applies to the coke battery, same applies to Saldanha, where a lot of the production is shifted to Vanderbilt Park..

Okay, that helps a lot. Thanks for the explanation..

Sure..

Thanks. Move to the question, please, from Myles at UBS..

Thank you. Just maybe first of all, on CapEx, $3 billion in 2021.

How should we think about that for the medium term? And alongside your decarbonization plan, do you think we can see CapEx stay around that level out for the next five, 10 years? Or are we going to have to see some material increase come through as you look to decarbonize the business?.

So, that's an excellent question. I think fundamentally, our CapEx level is $2.8 billion for 2021. And this is in line or slightly in line with our depreciation forecast for 2021 and includes all the strategic CapEx investments we are making. Some of it is decarbonization, but also the stuff we're doing in Mexico, Brazil, and Liberia.

In terms of going forward, I would wait a little bit in the sense that in June of this year, we're issuing our carbon report. And in the carbon report, we will provide more granularity as to what our CapEx requirements would be to decarbonize our asset base to 2030 with specific CapEx numbers.

But fundamentally, we're not expecting that the CapEx levels will materially increase. They should be around the $3 billion ballpark, plus minus, as you suggested..

And then maybe just on the M&A front. So, there's various transactions going or being talked around in Europe.

Do you think there are any sort of compelling opportunities for yourselves to get involved in Europe or elsewhere?.

So, as you know, we've done a lot of work to delever the balance sheet. We have achieved our targets. At this point in time, our focus is to look at the opportunities we have on an inorganic basis. We also made a huge acquisition and step forward in India.

Our focus is to grow that business and there's tremendous growth opportunities there and some of the emerging markets in which we operate. I would say Southern United States is an area of growth for us. We announced an EAF there at Calvert, plus Mexico, Brazil and of course, we have a lot of infrastructure and mining, so just leveraging that.

I think those are the areas which are growth priorities and simultaneously, clearly, the focus is how we decarbonize where, as I mentioned earlier, we see threats but also opportunities. .

So, no M&A is the message?.

Yes. I would never rule it out, but that's not the focus. .

Okay. Thank you..

Thank you..

Thanks Myles. We'll move to the next question, please, from Ephrem at Citi..

Thanks.

Can I just follow up on the capital return policy? So, what would be the policy on disposal, both of assets and for stakes, like the ones in China, et cetera? Would that also -- should we kind of read from the buyback announcement on the Cliff stake sale that, that would be the policy is to use that cash for buybacks in addition to that 50% of the free cash to be used for a buyback? Yes, that's the question..

Sure. Thank you. So, first of all, I just want to make sure we all differentiate between the capital return policy and asset optimization. So, the capital return policy is quite simple, progressive base dividend. After that, whatever free cash flow is remaining, 50% to be returned to shareholders, and that continues.

In terms of the asset optimization, clearly, you saw that we received cash proceeds from Cleveland-Cliffs in the second half of last year, and we used that to buy back our shares. We also sold down our stake in Cleveland-Cliffs beginning of this week and we're using those proceeds to buy back our shares.

We have -- as I mentioned earlier, we have hit our deleveraging target. So, to the extent that through asset optimization, we have net proceeds -- net excess cash proceeds, then I think it's fair to assume that we would figure out the most optimum or efficient way to return that to shareholders..

Thank you..

Thanks Ephrem. So, we'll move to the next question, please, from Rochus. Go ahead..

Yes. Thanks for taking my questions and congrats again to Aditya and Genuino. The question I have is on the plate business. So, obviously, this is now part of your assets for sale.

Can you talk about what the ideas are for this business? And in this context, would it also then can be applied for the Dillinger stake on which you have done an impairment in Q4?.

Yes, I would not read -- make those conclusions. I think we looked at these businesses, and clearly, the plate market has not recovered. We ran our impairment testing and those were the impacts. So, I would not read into our disposal strategy linked to our impairment strategy. But I'll get Genuino to provide more details..

I think that's it, Aditya. You summarized it quite well. I think our plate business is -- part of it is really dependent on oil and gas projects that we believe is going to take a little while to recover.

And then once we plug that into our impairment models, then impacts the DCS, and that's why you have the impairment, and the same would apply to Dillinger also. I would just say that those are our own assumptions. It doesn't mean that the company is recording that impairment locally, but that's our own views of the situation..

Okay. And then a follow-up on Ilva. So, by mid of the quarter, Italian government will join as a shareholder and it will be then run as a 50-50 JV.

How should we think about the cash needs or the cash needs to inject into the JV from your side going forward? How long do you think the planned investment to step up the environmental installations and to implement the industrial plan and to cover the future cash needs, how long these be covered by the new capital structure as of this quarter? And in this context, what are you thinking about the DRI project, which will be linked to the electric arc furnace installation in Toronto? How much would you be available as a partner or owner of that asset?.

Sure. So, you're right that we intend to consummate this transaction in the middle of this quarter. So, fairly soon. It's -- as you mentioned, it's a public/private partnership.

The business plan that has been jointly made within Vitalia and ArcelorMittal contemplates that Ilva as a stand-alone entity will have the funds which are sufficient to fund its environmental CapEx as well as its industrial CapEx and that's a multiyear plan that has been agreed.

The intention is that there's another consortium, and clearly, Ilva can join that consortium. But another consortium would be building the DRI facility, which would be supplying the DRI at a predetermined price. And Ilva's obligation is to build an EEF and complete its environmental investments, and obviously, refurbish blast furnace number five.

So, those are the key tenets of the industrial and strategic plan vis-à-vis the Ilva project..

And can you comment whether that DRI project could be of interest for ArcelorMittal?.

Yes, I think at this point in time, it's so premature to comment. But clearly, we'll be working through our ownership/partnership in Ilva on how that DRI project is commissioned, what are the technologies it deploys and what is the best way to have the best OpEx cost for Ilva going forward..

All right. Excellent. Thank you very much..

Thanks Rochus. So, we'll move to the next question, please, from Grant at Bloomberg Intelligence. Go ahead Grant..

Thank you. Congratulations Aditya. Just a follow-up question on your outlook. So, you've got consumption in Europe going up sort of 7.5% to 9.5%. I'm trying to contrast you fairly bullish remarks on steel demand and the outlook in the second half of the year with some of your peers in Europe who are probably a little bit more cautious.

What is your sort of actual outlook or how much visibility do you have looking out into the second half in terms of order books, et cetera?.

Thank you. That's a very good question. I think we are receiving lots of inquiries into the third quarter of this year. So, we do have some visibility. And we are in the midst of deciding whether we book those inquiries into the third quarter. I would characterize our outlook based on what we're seeing in terms of demand.

We see good levels of real demand across the board. And in terms of inventory levels, if you look at inventory levels, they still remain low. And so the full restock is also not complete, and that perhaps is the reason why we're more constructive in terms of the real demand levels..

Great.

And then perhaps just a small follow-up in terms of -- are you -- in terms of the green recovery plan in Europe, are you actually seeing any sort of tangible evidence of projects or demand coming through on that sort of basis?.

We have been supplying to the renewable sector. So, in terms of growth, it's as we were expecting. So, there's nothing which is divergent into 2021 relative to 2020. But the interest that we have seen in certified green steel is clearly very supportive, and we have seen a lot of interest in that product..

Great. Thank you very much..

Thank you, Grant. We'll move to the next question, please, from Luke at JPMorgan. .

Hi. Apologies up for and congratulations, Aditya and Genuino. Two questions, if I may.

Just firstly, on the EBITDA contribution from Ilva and the flat steel assets sold to Cliffs, can you give an indication of what the contribution was from them in Q4 and 2020?.

Sure.

Genuino, would you like to take that?.

Yes, I can Aditya. So, look, so Ilva was Q4 kind of a breakeven, slightly positive, but not really adding much..

And the same for AMUSA, it was marginally positive into Q4..

Okay, great. And then secondly, just on European shipments, you talked about, again, restarting mid-February.

Could you remind us how much additional capacity that spots [ph] adds? And then just in terms of shipments for Q1, is it realistic to expect output could potentially be flat quarter-on-quarter in Europe even with Ilva being deconsolidated and coming out of the consolidated numbers?.

So, we haven't provided such specific guidance by region. I think the important thing to take away from the Gent reline is that we all build inventory ahead of a reline. So, the impact on finished steel is not that significant. Sure, there is some impact, but not as significant as the total size or the total volume of that furnace.

Clearly, shipments into Q1 relative to fourth quarter are increasing across the board as we see real and apparent demand come back..

Okay. Thank you..

Thanks so much, Luke. So, we'll take a follow-up now from Seth at Exane..

Thank you for taking my follow-up. Just with regards to your profitability in North America following disposal of AMUSA. Aditya, your last comment that AMUSA was just moderately positive in Q4 is, I guess, a bit surprising in light of the higher profitably reported for the entirety of NAFTA.

Can you just touch on a go-forward basis, how we should think about the profitability of the new AM NAFTA business versus prior and any scale of margin uplift we should expect in maybe a comparable pricing environment? And if I can just throw a second question.

Your comment earlier on potentially expanding Calvert, if you can walk through what would potentially drive that decision and over what timeline? Thank you..

Sure. I'll talk about Calvert and I'll get in Genuino to answer the first question. In terms of Calvert, we've taken the decision to build a 1.5 million tonne EAF and caster. There's a good description in our investor presentation. We have submitted all the required documents for environmental permitting.

The equipment manufacturer selection is ongoing, and the preconstruction activities are already underway. There's a lot of benefits from this EAF. Clearly, it supports our made in America or buy American initiative. It helps in the automotive business as well. And the idea is to produce Gen 3 steels at Calvert, we can hot charge.

So, there are some cost advantages as well. We also have the option to add further capacity. This will literally be doubling and just duplicating the asset base. And the CapEx intensity would be much lower, almost half of the first. And this would also be very attractive as we become even more nimble and have shorter lead-times and address the market.

This obviously is not an increase of shipments in the marketplace because Calvert is already maximizing its finishing output. But this really is a pressure on us trying to supply slabs into Calvert, whether it's the contract that we have at Cleveland-Cliffs or from our Mexican operations as they ramp up their hot strip mill.

So, I hope that provides you with a perspective of some of our thoughts vis-à-vis Calvert and I'll get Genuino to talk about NAFTA..

Yes. Seth, so NAFTA in Q4, I believe that the key driver there, as you can see, didn't really capture much of the selling price, right? I mean you see a very small increase quarter-on-quarter in prices. Clearly, that's because of the lag. Our quarterly contracts do not benefit at all in quarter four.

Also -- the spot orders also because of the lag also didn't benefit so much. I think we are really looking to show a significant improvement in terms of prices, of course, as we move into quarter one. The deconsolidation of the AMUSA or the sale of AMUSA will translate into higher levels of EBITDA per tonne for that segment. That's our expectation.

Yes, so that's how I would summarize it..

Are you able to give us any sense of the range of uplift in EBITDA per tonne on a like-for-like basis?.

No, I will not get into that level of detail, Seth..

Thank you..

Just to add to Genuino's comment though, Seth. I think based on what we said previously, you can work it out. So, you have the shipments, 12 million to 13 million tonnes through the cycle, $500 million of EBITDA contribution to the segment.

So, if you strip that out from the average of the prior cycle, I think you will see that it's comfortably less than half the EBITDA of the segment, comfortably more than half of the shipments of the segment. And therefore, the remaining NAFTA business, you will see through that cycle, a step-up in the EBITDA per tonne..

Very clear. Thank you..

Great. Thanks Seth. So, we'll take another follow-up from Jason at Bank of America..

Jason is not on the queue anymore..

Thanks operator.

So, perhaps Carsten at Credit Suisse, a follow-up from him?.

Yes, of course. I have one question on the iron ore segment. We have seen a quite significant increase of almost 1 million tonnes of marketable iron ore quarter-on-quarter.

Can we assume that this would be the new run rate? Or did you sell out of inventories in the current -- in the last quarter and shipment will moderate to more normal levels going forward?.

Thanks Carsten. It's Simon speaking..

Hi Simon..

Look, Q4, you need to look at that in the sense of Q3 and Q4 together. So, the main increase that we saw in Q4 was a really solid quarter across the board, but particularly in Liberia and Canada. And Liberia was, of course, coming out of the wet season from Q3.

So, you do see a tick up in Q4, but we had a particularly strong business run through the Q3. So, not really building stocks, as you're intimating, just solid performance. Canada, the same. AMMC in Quebec had a very strong quarter. Again, there's been some delays in -- as you know, in COVID-related contractor activities and maintenance in Q2.

In Q4, we had a strong run at production. And so overall, you saw a big number at 10.6. In terms of Q1 and looking forward on your question, I mean, Q1 is, of course, a -- seasonally a down point typically with the weather in the Northern Hemisphere.

So, you'll probably see that come back a bit, but our goal is to run our assets full at this point in time. .

Perfect. Thank you very much..

Thanks Carsten. I think we're going to make time for three more questions, the first of which we'll take from Myles at UBS..

Great. Thanks. Just to clarify with you, what's the intention with the remaining Cliffs stake? I mean, are you -- it kind of feels like it's noncore. There's a bit of a lockup, I believe.

But if you were to sell it, say, in three, four months' time, are you likely -- do you think about out-of-cycle returns? I mean you've done it -- you've seen it twice already, so I assume the answer is probably yes. But I thought it'd be worth just clarifying that..

Sorry, Myles, I missed the second half of your question..

So, with any proceeds from disposals, the -- as a Board, do you decide to return those immediately? Or would you wait until the quarterly results to decide what to do with the proceeds?.

Okay. Look, I'll just answer Cliffs first. In terms of the equity sale that was completed the early part of this week, I think Cliffs was looking at how they can strengthen their balance sheet, delever their balance sheet. And they were contemplating an offering, and we thought this was a good opportunity to piggyback with their activities.

So, other than that, there's nothing more to add vis-à-vis our stake at Cleveland-Cliffs. In terms of overall strategy, look, as I mentioned earlier, the intention -- we have achieved our net debt targets. We have a capital return policy to shareholders.

In case we do sell down stakes and other interests that we have, I mean, clearly, we would examine what to do with that cash. The intention would not to just continue to delever. But if there is no good use for that cash, then clearly, we'd be wanting to return it to shareholders.

I also mentioned earlier that the focus is not M&A, the focus is to grow the business. We have great opportunities within the company, within our CapEx envelope, and we -- and that's really the focus areas..

Thank you..

Thanks Myles. So, we'll move to a further follow-up from Christian at SocGen..

Yes. Thank you. A very quick one on what we're seeing in China at present with, in particular, Baowu seemingly consolidating increasingly into the Chinese corporate world. I mean -- and at the same time, we're seeing the rhetoric from the authorities about continuing to take out capacity.

So, is your impression that we're having a step change in the position of China as a great exporter of deflation? And are we going to see more imports into China in future? Do you think that's a relevant factor to consider?.

I think those are all questions to be answered. I think they're all good indicators. There's also interesting commentary on the VAT rebate, that they may be reducing the VAT rebate, so making exports marginally less attractive. But I think it's too early to conclude on what the demand/supply balance in China would be and how that would shape up.

Clearly, consolidation is good. And that is one of the areas that the Chinese steel industry was very different from rest of the world because in other markets, there's a higher level of consolidation than what we have seen in China. And as you mentioned, Baowu is leading that process, but I expect other steel companies to also do the same.

It will also be interesting to see what the impact of decarbonization is on the Chinese steel industry because that will also shift capacity or the type of process that is deployed and what impact that has on the overall supply of steel in the Chinese industry.

Nevertheless, I would always remain cautious given the history of exports coming out of China..

Okay, great. Thanks..

Thanks Christian. So, we'll move to a further follow-up from Bastian at Deutsche, please..

Yes. Good afternoon gentlemen. Aditya and Genuino, also congratulations from my side. I just have a very quick follow-up on Luke's question earlier on the European production network.

Could you please help us reconcile how much capacity you brought back to production on a net basis since the beginning of the year? I'm not sure if kept track correctly, but from what I understand, you brought back Gent and then one blast furnace at Ilva with, I think, 4 million to 5 million tonnes annual capacity all in.

And then secondly, are there still any blast furnaces which you keep offline here after idling them in response to COVID last year? And are there any larger maintenance breaks coming up here in the European network before the year end? Thank you..

All right. Hi Bastian. So, in terms of our production, so we have -- as you rightly said, so in Europe, we brought back capacity during quarter four. And now we expect to restart the BF in Gent at some point now in Feb. We have also restarted -- we're also operating Ilva now with three blast finances.

So -- and then we're going to be running all of those full. There is no more blast furnaces to be got back up. In Gent, as we said earlier, there's extra production because we built inventory slabs. So, we continue to operate our finishing facilities. So, the production now will replace the slabs that we have been consuming..

Okay, perfect. Thank you.

And in terms of any maintenance breaks, which are potentially coming up, is there anything larger on your schedule?.

Not for quarter one. .

And for the rest of the year in the European network?.

Well, I don't believe we have anything. I would need to double check, Bastian. We are all looking to each other here. So, I don't think -- nothing that comes from our mind that is of significance. .

Okay. That’s perfect. Thanks so much Genuino..

Thanks Bastian. So, we have one final question and it's from Luke at JPMorgan..

Hi, thanks a lot for the follow-up question. My question is just on the comment earlier around China and scrap steel and obviously a big move in the scrap market at the back end of last year and early this year, and it coincided with the taxation of scrap imports in China. I'm just curious if you have any thoughts on availability of scrap.

And maybe over the medium term, given your environmental drive probably or likely include the move towards electric arc furnace over the near-term, whether you see any risks from scrap availability and scrap pricing inhibiting your move towards EAF versus blast? Thanks..

Okay, great. I think you know we don't comment on specific price action or specific products, either on a regional or a global basis, but maybe just to provide some context. As I said earlier, it's a bit hard to read all the actions in China. Let us see what conspires there and the impacts it has on EAF technology and scrap.

But what I would add is that on a global basis, if you look at the steel industry, two-thirds of steel is coming from pure iron ore and one-third from scrap. So, fundamentally, there is no way to satisfy demand if you just rely on scrap.

And that is why there's a lot of discussion on DRI route, where you basically use different energy sources, but you create DRI from iron and that you can feed into an electric furnace or you deploy smart carbon technologies in which you reduce the carbon emissions coming out of blast furnaces today.

And so at the end of the day, if you really want to decarbonize the steel business, you need to find a solution for primary steel as well just because there's not that much of scrap around..

Thank you..

Great. Thanks Luke. Mr. Mittal, Aditya, that's -- finalizes the Q&A session. So, I'll hand back to you for any closing remarks..

Thank you, everyone and thank you, Daniel. Thank you, everyone, for joining this call. And as usual, it's always a pleasure to talk to you, listen to your questions, and see your reaction and reflection on our performance and take a lot of cues from what you have been discussing and we will work on those things.

And looking forward to speaking to you next quarter. Thank you. Have a great year..

Great. Thank you very much guys. Talk to you next quarter..