The "Dirty" Business of the Paris Olympics
The torches and ceremony cauldrons that carry the sacred flame will be made by ArcelorMittal using low-carbon steel, also known in the market as "green steel."
Highlights
ArcelorMittal MT 0.00%↑ unveils "green steel" for Paris Olympics torches, signaling a shift towards low-carbon production.
ArcelorMittal faces challenges like fluctuating prices and global competition, which raise questions about its long-term sustainability.
With rising consumer demand for eco-friendly steel, ArcelorMittal aims to secure its role in the global energy transition spotlighted by the Paris Olympics.
As the world eagerly awaits the grand stage of the Paris Olympics, the event's sponsors are preparing to showcase their commitment to innovation, sustainability, and entrepreneurship on the world stage. ArcelorMittal, the world's second-largest steel company, is not just a silent spectator of this spectacle; it is a key player in understanding the narrative trend of these games. Let's delve into the fascinating partnership between ArcelorMittal and the Paris Olympics, exploring its history, its significance, and the controversies it stirs.
The History of Partnership
Iron and steel are a fundamental but often unnoticed part of the gigantic Olympic event, from the barbells used in Olympic lifts to the Eiffel Tower itself. However, unlike other sponsors whose products are more tangible and familiar to the general public, ArcelorMittal produces commodities. How do you bring your products down to earth to capitalize on the mass public's attention? At the London 2012 Olympic Games, the company built the ArcelorMittal Orbit, a 114-meter observation tower for public use, creating the largest public artwork in the United Kingdom. This towering fusion of art, architecture, and steel served as a manifesto showcasing the company's prowess in pushing boundaries.
In this edition, the torches and ceremony cauldrons that carry the sacred flame will be made by ArcelorMittal using low-carbon steel, also known in the market as "green steel." The steelmaking process has remained almost unchanged for almost a century. The investments required in this line of business are hundreds of millions of dollars, take years to get running, and involve projects of titanic size. What is driving this change, and why is a giant like ArcelorMittal investing a lot of money to promote this product at the Olympics?
Beyond steel: decarbonization
Making steel is a dirty business. Conventional steelmaking emits carbon dioxide twice over: first to generate the intense heat needed to force the coke to react with the iron ore; then, in the chemical reaction itself, as the coke takes oxygen atoms from the ore to form iron and CO2 as a by-product. For every tonne of steel, some 1.8 tonnes of carbon dioxide are emitted into the atmosphere. As a result, steelmaking accounts for 7-9% of the world's man-made greenhouse gas emissions, about as much as the entire country of India.Â
Cleaner steel production methods are being explored, but much of the pertinent technology is in its infancy. That, together with the cost of converting from old to new equipment, which might run to several billion dollars per plant, means it could take decades for steelmakers to go green.
Not everything goes smoothly: challenges and setbacks
However, amidst the excitement of a green transition, ArcelorMittal's journey is not devoid of controversy. The glorious days of Tokyo 2020 are long gone for the steel industry. Since then, the price of steel has fallen by half on the international market. It is clear that this type of industry is cyclical and moves elastically with global economic acceleration or deceleration, but that is not the only problem on ArcelorMittal's horizon.Â
Twenty years ago, the West dominated the world's steel production rankings. Today, only 5 of the world's top 50 steel companies are based in Europe or North America, while most of the top companies are Chinese and Indian. The cost of labor and lax environmental controls encourage this trend to continue to increase, forcing Western companies to reassess their role in the global landscape.
In addition, ArcelorMittal's operations have come under scrutiny for environmental issues, especially with regard to emissions and resource extraction. Critics argue that the company's track record is not in keeping with the Olympic spirit of environmental protection, especially considering the environmental and human damage frequently reported in those communities near the group's giant steel plants.
Final thoughts
The good news is that global demand for green steel is growing. Rich-world consumers increasingly expect manufacturers to strive for carbon neutrality. Thus, the makers of cars, appliances, and other steel products have started to look seriously for ways to decarbonize their supply chains and are willing to pay extra for the clean stuff.
Industries often take time to gain traction, at which point they accelerate before slowing again as they mature. Green steelmaking is still in the first phase of this maturity curve, although it is eager to accelerate this process. Although ArcelorMittal has made progress in reducing its carbon footprint, doubts persist about the true extent of its commitment and the long-term sustainability of its practices. As the Paris Olympics spotlight sustainability, ArcelorMittal is at a crossroads, striving to secure its place in the global energy transition.
Financial Outlook
ArcelorMittal MT 0.00%↑ sales for 2023 decreased by -14.5% to $68.3 billion as compared with $79.8 billion for 2022, primarily due to -13.5% lower average steel selling prices as shipments were relatively stable.
Operating income for 2023 of $2.3 billion was lower as compared to $10.3 billion in 2022 primarily driven by negative price-cost effect, impairment charges and impact on disposal of Kazakhstan operations.
New projects expected to be commissioned in 2024 include: the cold rolling mill complex at Vega, additional capacity at Serra Azul mine and Barra Mansa (all in Brazil); the first phase of new Electrical Steels capacity in Europe; the first iron ore concentrate in Liberia; 1GW of renewable power capacity in India; and the new EAF at AMNS Calvert (US).
The Board proposes to increase the annual base dividend to shareholders from $0.44/sh in FY 2023 to $0.50/sh (to be paid in 2 equal installments in June 2024 and December 2024), subject to the approval of shareholders at the 2024 AGM. In addition, the Company will continue to return a minimum 50% of post-dividend FCF to shareholders through its share buyback programs.
Read ArcelorMittal’s Q4 and full year 2023 earnings report here.
