ArcelorMittal announced Aditya Mittal as CEO, replacing his father Lakshmi Mittal as the head of a massive steelmaker gearing to lead its industry in climate-conscious business practices.
Aditya Mittal led the effort by Mittal Steel in 2006 to merge with steelmaker Arcelor, the deal that formed ArcelorMittal, and was appointed president of the company in 2018. He takes the helm of a company in the middle of a transformation that promises to prioritize sustainability and higher returns at the same time.
But while ArcelorMittal has invested in greener operations and partnered with stakeholders throughout the supply chain on cutting carbon emissions, Mittal faces a race against time. The European Union is moving forward with a carbon border adjustment mechanism that would penalize carbon-intensive steelmakers, and the European Parliament voted Feb. 5 to impose the toll by 2023. This could have a domino effect, forcing other countries to tax dirtier steel.
On a Feb. 11 call with analysts, Mittal said reducing the environmental footprint of ArcelorMittal will be a top priority as CEO. "I do believe we can create the right solutions as we are to decarbonize the steel," he said. "That is an area that's a threat but also an opportunity for us."
Evidence of the opportunity in green steel can be found in a recent demand recovery in steel, fueled at least partially by the energy sector attempting to reduce its carbon emissions, Mittal said.
"We see new demand patterns that should emerge as the energy sector continues to decarbonize. That's what's driving real demand. We see this underlying recovery of real demand continuing into the second half [of 2021]," he said.
Asked by an analyst how much ArcelorMittal has paid regulators under the existing carbon taxes it is subject to, Mittal said he would not disclose that figure but the margins are "not that significant." However, the company is aware of the dangers new levies could pose to its bottom line and hopes that with institutional zeal and regulatory support it can "turn this threat into an opportunity."
"Clearly, these costs will continue to increase," Mittal said.
It is also still ambiguous whether the market for green steel will materialize into a strong premium. Mittal maintained the importance of the company debuting a product in 2020 certified as green with positive margins. The company will release more details in June through a report that will include estimated costs for capital improvements to cut carbon emissions.
"We don't have all the answers. ... It's early days," Mittal said.
The company also appointed Genuino Christino CFO. Christino was previously head of the company's finance division.
ArcelorMittal recorded $1.21 billion in net income for the fourth quarter of 2020, or $1.01 per share, versus a year-ago net loss of $1.88 billion, or a loss of $1.86 per share. EBITDA rose to $1.73 billion from $925 million.
Credit Suisse analyst Carsten Riek said in a same-day note that the fourth quarter of 2020 was the strongest quarter ArcelorMittal had seen in two years, driven primarily by cost-driven decisions in Europe. Riek added that the appointment of Aditya Mittal "managed a smooth transition at the top of the leadership team."
