Arcelormittal SA

Good afternoon, everyone. This is Daniel Fergler from the Arsenal Mittal Investor Relations team. Thank you for joining this call to discuss Arsenal Mittal's performance and progress during the first half of 2025. Leading today's call will be our CFO, Mr. Gioino Cristino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation in detail, but we published it this morning on our website for your information. I do want to draw your attention to the disclaimers that are on slide number 25 of that presentation. As normal, Germino will make some opening remarks before moving directly to the Q&A session. So to ask a question, please do press star 1 1 on your keypad to join the queue.

Over to you, Germino. Thanks, Daniel. And welcome, everyone.

And thanks for joining today's call. As usual, I will keep my remarks brief, beginning with safety, a core value for our company. We are less than one year into what we know will be at least a three-year transformation to implement the six core safety recommendations post the audit last year. Already, our enhanced safety assurance model has improved oversight and consistency. I'm encouraged by the progress we are making. and the determination that I see in my colleagues to drive lasting change and achieve our targets as quickly as possible. Now, I want to focus this quarter on three key points. First and foremost, our results continue to show structural improvements. Second quarter EBITDA increased as expected, and at $135 per ton, Our margin continues to show that the benefits of our asset optimization and growth strategy are delivering structurally higher margins. Our strategic projects have good momentum. Liberia posted a record volume quarter. Our India renewables project is delivering all the performance that was expected and more. And the commissioning of our new value-added capacity at Hazira is underway. Our strategic projects, together with the impacts of recently completed M&A, are an important support to our EBITDA profile. Compared to 2024 base, the impact on future normalized EBITDA is now expected to be $2.1 billion, a third of which is due to be captured in the current financial year. Asselomital has a unique asset portfolio, And this creates significant optionality for high return strategic investments. So I'm confident that we can maintain our growth momentum. My second point is that full ownership of Calvert is a very positive development for Asala Metal. Calvert is the premier steel making facility in the United States and a cornerstone of our North America franchise. Calvert achieved a new shipment record in the second quarter, 10% higher than the first quarter and 10% above the same period last year. Since 2014, Calvert has invested over $2 billion in improving its asset base and product portfolio. The biggest investment has been the new state-of-the-art EIF, which is ramping up right now and could not have been better timed Along with the new seven-year domestic flood supply contract, Calvert's highest quality finished steel will meet U.S. melted and pooled requirements. And we will continue to invest in the U.S. Our project to build a new world-class non-grain-oriented electrical steel facility in Alabama is well underway. This will be a billion-dollar investment over the next few years. with first production anticipated in 2027. And then, of course, we have the second EIF at Calvert, a decision on which will be taken as part of our next capital allocation cycle. My final point is on Europe, where we are transitioning to a more favorable market structure. We have the promise of a trade defense mechanism that protects the domestic industry and a carbon border that truly delivers a level playing field. A lot still needs to be action over the second half of this year. But if the European Commission delivers, then our business should be in a far better position to deliver the margins and returns on capital it is capable of when not suppressed by unfair trade. Added to this, more favorable mix is the prospect of demand support from low interest rates and higher investment in defense and infrastructure. Our market position and product capabilities place AcelerMittal favorably to capitalize on the opportunities these trends should create. Putting this all together, AcelerMittal is in a strong position, both operationally and financially. Our optimized asset portfolio is delivering structurally higher margins. And with the outlook supported by our strategic growth projects, this should continue. The value we are creating is being compounded by our share buybacks. Over the past four and a half years, we have bought back 38% of our equity. Each ArcelorMittal share now represents a greater proportion of our capacity, a bigger share of our leading franchise businesses, a larger stake in our growth, projects and a greater ownership of our unique business in India. With that, Daniel, I believe we can start the Q&A. Great. Thank you, Jamina. Just to remind everybody, if you do want to join the queue to ask a question, please do press star 1 1 on your telephone keypad. We do have a good queue in front of us already. And we will take the first question, please, from Alan at Morgan Stanley. Hi, Alain. Please go ahead and ask your question.

Hi. Thank you for taking my questions. I have two questions, if I may. The first one is on the EBITDA building blocks into Q3 2025. Can you walk us through the different moving parts, including the ASP in Europe and North America, the dollar impact of tariffs on North America, and the power outage impact on Lazaro Cardenas in Mexico, if you don't mind? That's my first question.

Thanks. Thank you, Ola.

So I will start with your second question on Mexico, and then, as usual, Daniel will walk you through the moving blocks. So in quarter two, as you can see, and as highlighted in our earnings, we faced operational issues with one of our transformers. So that impacted the production of our EIF. That has been restored. The EIF, as you know, that's our most important part of the business as the flat business. So that is up and running again. Nevertheless, as we disclosed in our MDA of our NAFTA segment, we experienced $40 million of losses because of the operational issues in quarter two. We have subsequently taken the decision to bring down the furnace that is producing for the long business for maintenance. And this furnace will most likely continue to be down for the next couple of months as we perform this maintenance. So that's why, and Danny will comment, we will continue to see shipments at the same level as you see in quarter two coming from Mexico. So we will get back the shipments from flat, but then you will see a reduction in shipments because the furnace is down. But quarter on quarter, then shipments should be relatively stable for Mexico. Daniel, do you want to talk about the moving parts? Yeah, sure. Thanks, Shamina. So I think what I'd like to do is just focus on the key moving parts, and we can get into any of these in more detail as you wish, Alan. But I think as we look from the second quarter to the third quarter and the bridge between the two quarters, I think the first thing to be anticipating is the impact of normal seasonally lower volumes in the Europe segment. I think that's going to be the key driver for Europe performance quarter to quarter, normal seasonality of volumes. Second factor to look out for is in the North America segment. Yes, we will see marginally higher tariff costs, Section 232 tariff costs, but that will be more than offset by the impacts of the Calvert consolidation. And then the third factor I would be looking out for in the Q2 to Q3 bridge is is the impact of lower volumes in the mining segment, because we did see some volume catch up in the second quarter, and that would then repeat into Q3. So mining volumes will sort of come down a little bit in Q3, but that should be the main impact in mining because so far, quarter to date, pricing is a little bit higher than last quarter. So those are the main three factors I would be thinking about in terms of the bridge from Q2 to Q3.

Thank you. And the cost at Mexico should be assumed still same cost Q on Q, or is there going to be an increase in the cost run rate because of the stoppage?

That's a good reference, Salah. So the $40 million is a good reference.

Thank you. Thank you. And my second question is on Calvert. So we can see the path to being slab self-sufficient in the U.S. at Calvert in the medium term, but in the short term, you're still highly dependent on imported material for your slabs. How do you plan to mitigate the risk of tariffs? Should the current 50% level remain unchanged versus Mexico and Brazil? Will you be changing the flows? How will you change the mechanics of the business? Thank you.

Well, I think what is important, Alain, as you know well, I mean, we have the EIF that is ramping up, right? And then the new agreement that was signed between Point Steel and U.S. Steel for a new slab supply agreement that will guarantee coverage to what it needs in terms of melted and poor materials in the United States. And then, of course, coverables do need to be importing slabs from either Brazil or Mexico, so we don't see that changing in the near future. But as you can see, I mean, a lot of the tariffs, in fact, is kind of already captured in our Q2 results, right? So as Daniel said, going forward, the increased incremental impact of tariffs is not so significant. And as you can see in the results of Calvert, it's really exceptional, right? So the run rate is getting very close to $900 million. So Calvert is doing extremely well. Record levels of shipments in quarter two. So where we really, Calvert is not really the concern. I think the concern at this point is really the flows from Canada to the U.S.

right that's where we see the biggest impact today thank you very clear great thanks a lot so we'll move to the next question uh which we will take from uh ephraim at city hi ephraim please go ahead uh thanks um on the calvert second year as you said

you know, in the next CAPEX capital allocation cycle, you would be considering, could you be a bit more specific at the time of that? Is it 2026 or is it second half of 2025? And the second question, regarding your comment on record I&O shipments from Liberia, I think it should be doing about $5 million per quarter for a ramp-up, and it looks like you're doing close to 3 million tons in the second quarter. Is that correct? And how should we think about the contribution margin of the additional tons? I suppose at a $100 benchmark, I know you will be getting about $80 per ton additional contribution margin given the cost base is relatively fixed. Thank you.

Yeah. Yeah. So, Efren, the first part of your question, the second, I think we have been very clear that that is something that we see as natural for the next step for COVID. We are advancing our studies, and I'm sure we're going to be in a position to update you more. Most likely, I would say, in our quarter four results. I'm not saying that there will be a decision at that point in time, but... We are progressing our studies, and this is something that just makes a lot of sense for us, given everything that we are seeing. And then, of course, as we have been discussing, a lot of investments have already been made in anticipation of the second year, right? So, CapEx-wise, it should also make sense to move forward with this. But timing-wise, you're going to need to bear with us for a little longer. Liberia, our guidance for Liberia this year is 10 million tons of shipments. So you can see that the run rate in H1 is about 8 million tons. So we have commissioned the first line. So the first line of the concentrate is running. That's about 5 million tons. And we're going to be commissioning the other two lines as we progress now in the second half. So in quarter three, the level of shipments that you're going to see, it's going to be largely the same. You're not going to see an increase in shipments in quarter three, but you're going to see already a change in mix. So you're going to see more Sinterfeed concentrate being shipped out of Liberia and less DSO. And then in quarter four, with the three lines running, then we're going to be at higher levels of shipments. And we are comfortable at this point that we're going to be achieving our 10 million tons guidance. And then, of course, with the new product, you should also expect that profitability will increase, and we will detail that more as we talked about Q3.

Thank you. Great. Thanks, Efrem.

So we will move now to take the next question from Boris at Capital Chevron. Please go ahead, Boris.

Hi. Hello. Thank you for taking my question. The first question would be on tariffs. I've read a headline where you were quoting, estimating the impact of tariffs to $150 million. That means there is something like $50 million of of mitigating measures. Can you share the way you mitigate those impacts and just confirm that the impact in Q1 was around $130 million already? And regarding CapEx, just back to that question on the second EAF, how confident are you to maintain your CapEx envelope of $4.5 to $5 billion over time? Thank you.

Yeah, sure. Yeah, I can confirm, Boris. So in quarter two, we incurred about $140 million in costs with Section 232 tariffs. As we discussed in Q1, the expectation was for this number to be lower, about $100 million. But of course, we had the increase in tariffs impacting us from beginning of June, so you And what we have been doing really is, as you can imagine, the whole organization, the whole Canadian team, they have been doing a tremendous job looking for opportunities to mitigate the impacts. And that's why we're confident here to guide for a number that is lower than otherwise we would have expected when we reported Q2 numbers. So that's the $150 million. So the net-net from one quarter to the other, it's in the range of $10 million. And what we have been doing is, of course, discussing with our customers on sharing tariffs, looking at our cost base. So a significant amount of work being done there to make sure that we can continue to supply at the OEMs, and we, as you know, what we sell into the U.S. is high value added materials, important not only for us, but also for our customers. And that's our focus, to make sure that we can maintain our market share with the OEMs, and make sure that we can also generate big profit with these volumes.

And then, sorry, there is a second part of your question, Boris.

With the second EIF, how are we comfortable that we can manage? Look, I mean, we are finishing this year a number of projects, right? So we guided for this year to spend between 1.3 and 1.5 billion with growth projects. But you should not forget that we're going to be completing this year which has consumed a significant amount of the envelope. So we'll be completing some of the smaller projects in Brazil as well. So we're going to be making a room for new projects that I'm sure we're going to be in a position to discuss together with our results in quarter four.

Great. Thanks, Boris.

So I think we'll move to the next question, which we'll be taking from Tom at Barclays.

Yes. Hi. Thanks for taking my questions. Yeah. Hi. Sorry, I'm going to have to come back to it. Just on tariffs one more time. Just to sort of check our understanding on why there's so little increase, I suppose, into Q3, even though, you know, from June, you've only had one month, basically, 50% tariffs. And you then had the consolidation of Calvert. So as I understand, you used to be sending about 2 million tons of slab every year from mostly Brazil into the Calvert JV. Those costs used to be shared with Nippon, but now you're basically absorbing 100% of those costs. Are you basically just saying most of these tariff costs are just being passed on to customers and that's why you're not absorbing any more? And is that true out of Calvert as well? That's the first question.

Yeah, look, as I said, I mean, I would just reiterate, I think we have been working on mitigating these impacts, right? And as you can imagine, a lot of initiatives, a lot of discussions with our customers. So we are going to be sharing tariffs with customers as well. So that's why net-net, the increase should not be so significant.

And that thought process around the slab movement, that's correct as well, right? You're now basically absorbing all of those slab tariff costs instead of sharing it with Nippon?

That's right, because now after... So there are two things, but just make sure that we don't mix them, right? One is the supply agreement with U.S. steel facilities. So that has nothing to do with supply within the United States. So there is no tariffs there, right? And then the tariffs, of course, will be applicable for imports from either Brazil or Mexico. But there, as you can see, I mean, as we talked about, then you see... When you see the performance of Calvert, then you can see that it's actually the profitability of that facility is actually increasing. And I should remind you that even before the costs of the slabs that were being supplied to Calvert, they were under our responsibility, under Salamita's responsibility. And that's why we were capturing already part of the EBITDA in our segment, right, as we explained in our meeting, just to make sure that it's clear.

Yeah, okay, fair enough. And then second one, maybe just moving on to Europe, you know, we've seen some attempted price hikes through Q3. We're seeing a little bit of raw material cost inflation with iron ore and coking coal. Maybe just some color in general on what you're seeing in the European market at the moment. Are you seeing any sort of inventory build ahead of CBAM and safeguard replacements, or are you seeing still quite a slow market? Just curious, yeah, how you see prices sort of developing in the second half. Thank you.

Yeah. Well, the dynamics, I mean, we talked about the fact that demand in Europe at best has been moving sideways. We feel that and that remains a positive aspect that inventory levels in the system that we believe they continue to be low. What is interesting, of course, is the fact that we're going to have CBAM in whatever form taken in from JAN and the promise of revised safeguards. So that creates different dynamics as well, right? Because if you are importing material, and given the lonely times, so you're going to start to worry about some of these factors, right? So that is positive for the domestic meals. Right now, because of some of course activities are slow, but I think we are about to see in Europe, as I said at the beginning, my opening remarks, important developments, right? So we are all waiting to see really the actions that the commission will pass into legislation. And it's encouraging. And also the agreement between U.S. and Europe with regard to coming together to find ways to ring fence the industry against the biggest issue that we face today, that is, of course, the overcapacity in China, right? I think that is also something that, of course, we don't have yet the details, but the fact that the problem is at college and there is a goodwill to try to address it, that should be extremely positive for our business.

Okay, clear. Thank you. I'll turn it back.

Thanks, Tom. So we'll move now to the next question, which we'll take from Dominic at J.P. Morgan. Hi, Dominic. Please go ahead.

Thanks for taking my question. My questions also relate to Europe. So I just wondered if I could maybe push you a little bit more on safeguards in terms of what you would think would be acceptable for the industry as a whole. And I guess I'm also interested in the timing of the European Commission announcement with your recent indication that you're going to restart the volumes at Dunkirk. So could you just maybe give us some timing? Is that an expression of confidence in the market in the second half? And again, just really interested in a bit more detail on how you think about safeguards evolving in the months ahead.

Yeah. Well, regarding safeguards, we, and by we, I mean the industry through Eurofair, the request is that we limit through hard quotas the level of imports to a market share that is more consistent with prior years, which is about 15% of the market share, right? And that is the request. And as we know, last year, in 2024, the market share of imports were as high as 27%, right? So that is a significant, if implemented, it will be a significant boost to utilization rates of the steel industry in Europe and will allow investments to happen. So that's going to be extremely positive for the industry in Europe. And then, of course, above the quota, then we believe that we should have also 50% of tariffs during what we have under Section 232. Coming to Dunkirk, Dunkirk was just a normal reliant which we completed during the second quarter. We had built slave inventories before. So you should not read into it. So we just completed the reline. We brought the funnels up and we are running again. So nothing really, just normal business there.

Okay. And then just second question, really helpful on the CapEx reiteration at the $4.5 to $5 billion. Yes. But I guess in light of the question and your comments, could you maybe just give us, again, an updated comment on how you're thinking about decarbonization, CapEx, longer term in Europe at the present moment?

Yeah. Well, our expectation is that this is going to happen gradually. Dominic, this is a transition that will take the cake. to be completed. What we have indicated is that provided that we have the right policies in place, and by that we mean we have CBAM, we have effective trade protection, we have competitive power prices, then we are ready to invest. And we have indicated that we are prepared to move ahead with a significant investment at Dunkirk, with a large EIF, And that's what we would see going forward, that we will progressively, provided that we have the conditions, to keep then investing in new EIFs. And I would remind you that we are investing today. So we are spending about $300 million in DCAR projects. We invested this amount in 2024, and we have a similar amount this year. So we are executing or building a new EIF in Spain, Gijon. We are investing in Sestal. So that's 1.6 million tons EIF flat business. So we are progressing. And then, of course, we should not forget the renewable investments. And I think as a company, we are well-placed. We have the DRI facilities. We are one of the largest producers in the world.

So I think we believe that we are progressing quite well. Thank you. Thanks, Dominic.

So we'll move now to the next question, which we're going to take from Max at Otto. Please go ahead, Max.

Yeah, good afternoon. Thanks for taking my question. So I have a first question. It's from the HBI unit in Texas. Can you shed more light on your procurement there? Because I understand a lot comes from Brazil and it's not taxed at 50%. So are you able to shift the sourcing or are you facing some extra costs there?

Thank you, Max. Well, we have the flexibility marks because we can also bring materials from our own mines in Canada, right? But I believe that, to be honest, I believe that it has been included on the list of exemptions. But I have to double check to be 100% sure. But that was my reading. It came out yesterday, right? So, I need to confirm that, but I think that was because pig iron is now for sure not. And I think, I don't know, it's also excluded. Daniel, unless you have some more. Yeah, no, that's the case. But I think these things can change. So it's important that your first point to have that flexibility that should something change that we can source from a source from a different mine within our own system and that would be Canada.

Okay, so that's clear. Second question is on M&A. So Cleveland Cliffs has put up a for sale sign in its latest results call. So I know you don't like to comment on specific targets, but how are you thinking of further expansion in the US, notably to address the mismatch you currently have in terms of organic versus M&A?

Max, yes, you're right. So we don't really comment on M&A. I would just say that U.S. is and has always been a very important market for the company, right? And as you can see, our investments covered the new electrical steels plant that we are investing. So we do have the ambition to keep growing in the United States, and we have plans in place and being developed. But more specifically on M&A, I'm not going to be able to comment.

Okay, fair enough. And just the last one, it's on India. So you're flagging again your ambition there to grow even more, notably through a new green feed facility. But at the same time, we are seeing prices in India quite depressed at just a few tens of dollars of premium to the Chinese market. So wouldn't it be wiser to wait to have a better trade defense system there? to potentially start new investments because clearly the 12% of safeguard tariffs we've had for a few months are not enough.

Yeah, I think the industry would agree with you and I think the views are mobilized. But look, I mean, we have to look beyond this, right? And structurally, the Indian market is very attractive, right? So it's highly concentrated. It's a market that is growing 7-8% every year. And if you want to continue to be relevant in the market and you want to keep your market share, increase your market share, you have to grow with the market. And as you can see in our results this quarter as well, the results already doubled, so back to 200 plus million. You can argue that yet not enough, but it's, and we have not yet seen the benefits of some of these investments that we talked about, the downstream. So our automotive complex is going to be commissioned part of it now and towards the second half of the year. So we'll continue to improve the mix of products that we're going to be able to offer in the Indian market. So we remain very excited about the opportunities provided by the Indian market. And right now, the focus is on completing the expansion in Azura and, of course, prepare the ground for future expansions. As you know, this is a long process in India, and it's important that we continue to work so that we can, when the moment is right, to move forward.

Okay, very clear. Thank you.

Thanks, Max. So we'll move now to take the next question from Andy at UBS. Hi, Andy. Please go ahead.

Thank you. Can you hear me okay? Yes. Cool. Excellent. To follow up on M&A, no specific targets, but obviously the net debt after Calvert's now, you know, back above 8 billion, you used to sort of talk about a 7 billion target, albeit, you know, obviously the business is very different now. I mean, how are you thinking about leverage more broadly around the potential for further M&A? I mean, does this rule out large-scale M&A, things like Valorec or, you know, I mean, I've I mean, without being specific, I mean, are you thinking you can do something large or are we talking like potentially small incremental stuff from here or, you know, just focusing on some of the organic growth projects, which are obviously pretty numerous in your portfolio? How do you think about that more big picture?

Yeah, well, I can say that we have a good pipeline of projects that we can execute in organically, right? So that has been the focus, continues to be the focus. And specifically on, and I should also say that our message on Palo Alto made the same, right? So we are not, we are happy with the performance of the company. We are happy with our state. We have no intention there to increase it. When it comes to the debt, So, first of all, I think we feel very comfortable. As I'm sure you have seen, we were just upgraded by S&P, right, to BBB flat. So, showing the progress, all the progress that we have been discussing, acknowledged by the rating agencies as well. And we should not forget that with these investments, M&A, we are adding significant amount of extra EBITDA to the business, right? You see in our bridge, in our debt. So this year, $700 million of extra EBITDA coming from projects, but also M&A. So that's how we are looking. So very comfortable with the capital structure of the company.

Okay. And just one other follow-up on the settlement that you put into one of the one-offs for the EBIT in the quarter, this Votorantin. When do you actually expect to make cash payments on that settlement and how is that phased?

It will happen over three years. So that is one down payment, and then divided by four, you have one on signing and three other payments in three years. So it's going to happen over three years.

Okay. And that's in line with the EBIT loss that you booked on that settlement, right? In cash.

EBIT loss. Well, actually, if you look at the footnote, you're going to see that the amount is 500, right? And then what you see in our P&L is the difference because we had already some provisions. So that's why you see a delta between the P&L and the footnote. But that's about $100 million. So the settlement is $500 million.

Okay. That's clear. Thank you.

Great. Thanks, Andy. So we have time for two or three more questions. So the first we're going to take from Bastian at Deutsche Bank. Hi, Bastian.

Yeah. Hey, good afternoon. Thanks for taking my questions. My first one is actually on your project pipeline. I saw in the footnotes that there are some projects which are delayed. And I was wondering if this is purely due to permitting. Is this also a response to the current environment? And are there any further shifts or delays which you're currently at least looking at? Maybe you could also give us an update on the APTA cadence. I think the chart here and the presentation deck seems to be changed. So there must be something which is compensating for the delay there. That's my first one.

Yeah.

So basically, you have a magic. in north of France, that's the electrical steel project there, in Bastien. And as we write there, every time you have a brownfield, you always face, you know, the risk that you may find out something that you could not have anticipated. That's one of the reasons. And then in Maastricht, when one of the mines was switched, so the delays primarily because of license that delayed some of the moving of the equipment. But these are not very significant movements, I would say. They are quite minor. So that's why you don't really see a significant, any important change in the EBITDA bridge coming from projects and M&E.

Daniel, anything further?

No, I would only reinforce those points. No further additional comments.

And no other projects which you're currently looking to move just given the current economic environment, I guess?

No, not at all. And I think that's a good point because despite the challenging market conditions, we feel that the company is very well positioned to move forward with the projects. And as we talked about, it's going to be completing a number of projects, right? And then as you can see, then we're going to have another significant pickup in EBITDA also in 2026. So we want just to keep that momentum. And so on the contrary, you should see us announcing more projects as we talked about in our Q4 results.

okay got you then my second one is on your Brazilian slab strategy I guess few years ago you obviously bought CSP which is basically a slab business you still have Sierra Vitoria which is basically long slabs used to supply both I guess into Calvert or into into the into the US and North American market now given that there is obviously a pretty long list of capacity projects in the US at the moment I mean, you've just built like the one and a half million ton EF. You're talking about a second one. What's going to be your strategy here for the Brazilian slab capacity where you're still long?

Yeah. Well, I think that's a good question, Balcian. And we are very well positioned in the Brazilian market. So first of all, I think it's important to acknowledge that Brazil is growing, right? So the flat... Demand is growing and it will continue to grow. And we are well positioned because we have the crude steel capacity, right? So we don't need to invest in developing or building a new upstream. So we have. So if you look at some of our competitors there, that's a real differential that we have. to grow with that market. Right. Um, so that's one of the possibilities that we have. And, uh, and we should not forget also that, uh, the same and, and they, they produce some of the highest quality slabs in the world. Right. You're not going to find that quality of slab everywhere. So, uh, so we, we, uh, we, uh, we feel that we're going to be, uh, always in a position to market, uh, uh, the volumes that we have from there.

Okay, very clear. Thanks so much. Thanks, Bastian.

So we'll move now to the next question, which we're going to take from Tristan at BMP Exxon. Hi, Tristan.

Yes, hi. Thank you for squeezing me in. Just the first one on China. What is your take on the recent official commentary on potential capacity restructuring? I mean, Do you believe significant capacity cuts like in 2015-16 are really on the table? And also, you kept a stable demand outlook for the year in China, despite what I think was pretty weak H1. So what are you baking into H2, and why would you have a more constructive setup for H2? That would be my first question.

Do you want to take that one, Daniel? Yeah, absolutely. So I think relative to our, it's all about the relative to our expectations at the beginning of the year. So yes, in China, they're obviously seeing some export impacts from the reciprocal tariffs environment, but they are finding opportunities, obviously new export opportunities. and then domestically demand is being supported by the infrastructure spend and the efforts to stimulate domestic consumption. So that's the reason why we've not significantly changed our projections for Chinese demand relative to what we published back in February. I think on the prospect of capacity reform. Obviously, this is something that we have been championing, something that it's very obvious that this needs to occur. China has a capacity imbalance. It's leading to very depressed profitability within the domestic industry. It's leading to aggressive exports at very low pricing and as we talked about in previous questions, it is a significant source of unfair competition for the rest of the global industry. So reform needs to happen. And your question obviously is, will it happen and over what sort of timeframe? And all the statements that we've read over the last couple of months would give you encouragement that reform Things will improve. I think if you look at the recent production statistics, it would suggest that things can improve. However, exports do remain very elevated. And so, you know, I think the only thing that we can really be really optimistic looking out for is this ring fencing that Jim Weiner talked about previously. That's what's required. We can't assume that China will reform its industry in due course and therefore the other regions need to appropriately ring fence their industries to make sure that they're not damaged by that excess capacity and unfair trade.

All right. That's helpful. Thank you and My second question is just going back to the steel action plan. There's been a specific proposal to cut quotas by 40, 50%. Do you think there's a real probability that the European Commission will take such action? And how confident are you? Basically, what is different this time in your conversation with the Commission? For instance, if we look at it, I mean, the fact that Germany was not part of the recent proposal could indicate that There is not a united front from all the member states, so any color there, that'd be great.

Tristan, I think we can only wait, right, and see finally what comes out. Of course, we are engaged through our association, so we are in very close dialogue with the authorities, governments, the commission. encouraging France published recently a position paper in which they also defend these levels of quotas. But I agree with you, in Europe it's challenging, that's why we have to really wait and see and see what finally gets converted into legislation. I guess we will know very soon. I mean, the promise is to deliver the new proposal after summer. So I think we should know relatively soon.

All right. Thank you.

Thanks, Tristan. So we'll move to our last question, which we will take from Matt at Goldman Sachs. Hi, Matt. Please go ahead.

Hey, good afternoon. Thanks for squeezing me in there. My first question is just on India. Encouraging to see those tariffs in April possibly contribute to your margins. And I have to say the quarter uplift was quite impressive. So my question is just, what was the exit margin at the end of the quarter on a per ton basis, if you happen to have that to hand? And how should we think about it to go forward in light of both the tariffs and commissioning of the downstream value-added products?

So I'm not sure that I got the first part of the question, Daniel. I thought that was just on the, yeah, go, yeah.

Would you like me to repeat? Yeah, sure, okay. My question was just the margins that you've seen, the quarter-on-quarter uplift in India has been quite impressive. So the question is just what was your exit margin at the end of June? And then how should we think about the go forward, just given the effect of the tariffs, but also the commissioning of the downstream? Yeah. Yeah.

Yes, perhaps I talked about the moving parts there, right, in a little bit more detail. So moving forward, I mean, for quarter three, and I think it will address your first part of your question. So our expectation is for profitability to be largely stable compared to what you see in quarter two, right, which I think addresses some of your points. stable. And the downstream really, I mean, of course, there will be a good contribution in terms of extra margin that we're going to be able to print. But more importantly, we'll open up a new avenue in terms of product offering in the market. So both us and Nippon, as you know, out Alto is a franchise of our companies, and it's a market that we're going to be able then to address strongly once we complete these investments. And as you know, I mean, these are profitable products, so I will not get into specifics, but just to give you a favor, the importance of completing these projects for the future of the profitability of AMNSI. Daniel, if you have anything to add, because you were there recently as well. Yeah, absolutely, Gemmina. an important part. When we took investors to India to see the expansion of the capacity and the new value-add capacity that you were just talking about, I think this is all a very important part of the transformation of the business. So as we go from the current capacity, as we add the two new blast furnaces, as we as we add the coat capacity, we add these new finishing capabilities, higher the value product opportunities. this will really transform the profitability of our business in India. So you shouldn't think that the doubling of capacity will double profitability. Really, you should think that the doubling of capacity underway will add 150% to the normalized profitability. And a lot of that additional profitability will come through this higher added value product mix.

That's helpful. Thank you. And my last question is just on carbon. Congrats on the first slide. How should we think about the ramp up from here to the 1.5 million tons by mid-2026? And if you can, give any color sort of on the margin uplift alongside that ramp up. Thanks.

Yeah. I mean, we talked about, I think it was in the previous quarter, so it should take us about a year to get to full capacity there, right? So we had a couple of weeks of delays to have the first slab casted. So our expectations to get to the end of the year, we don't need a run rate in the range of 60%. And then from there, we will continue to ramp up uh so by end of second quarter next year we should be at full we should be at full capacity that's great thank you great and and then what we perhaps just add uh the in terms of the the margin profitability uh the if you think about the uh the the cost of the EAF, it should be very similar to the Brazil slab cost. So when you think about the impact on our business, that should be a pretty good guide for you.

Thanks, Zena. Great. So that was our last question, Gemino. So back to you.

Okay. Thank you, everyone. Before we close, I want to reiterate my messages from the beginning of the call. First and foremost, our results continue to show structural improvements, and this is expected to continue. Secondly, our North America franchise is well positioned. We now own 100% of Calvert, the best steel facility in the U.S. This is the cornerstone of our franchise and the new EIF together with the new slab supply agreement will ensure we meet melted and pool requirements. Third, we are transitioning to a more favorable market structure in Europe. If the European Commission delivers a new trade defense mechanism and an effective CBA, then our business can flourish. And ArcelorMittal is well positioned to capitalize on the opportunities created by defense and infrastructure investments. And finally, to repeat what I have said in recent calls, returning capital to shareholders at the bottom of the cycle while continuing to invest in growth is clear evidence of the progress that Salamito has made and demonstrates that our company can deliver value through all aspects of this suicide. With that said, I will close today's call. And if you need anything further, please do reach out to Daniel and his team. I look forward to speaking with you soon. Wishing you all a happy summer. Stay safe and keep those around you safe as well. Thank you very much.