The case is about the world’s leading integrated steel and mining company, Luxembourg-based ArcelorMittal’s troubles amid a shift in global steel demand. The year 2019 was challenging for the global steel industry as it affected steel production across the world (except in China). Steel demand in the rest of the world contracted due to slumping demand from automakers, slow global economic growth, trade tensions, and geopolitical issues across the world. Lower steel prices and higher raw material costs affected the global steelmaker ArcelorMittal in terms of its profitability. The company saw a fall in steel demand in its core markets such as the US and Europe, driven by macro headwinds, including depressed manufacturing activity and continued weakness in the automotive industry. In 2019, ArcelorMittal posted an annual net loss of US$2.45 billion as against a net income of US$5.14 billion the previous year. Despite challenging market conditions in 2019, one of ArcelorMittal’s greatest achievements was its acquisition of India-based Essar Steel, which, according to the company, was an important strategic move to establish its presence in an emerging global market. There were signs that the falling demand that roiled global steel markets witnessed in 2019, would stabilize in 2020. ArcelorMittal expressed some optimism in the expectation that the apparent steel consumption in its core markets would grow in 2020. In its five-year strategic plan Action 2020, the company expected to improve its core profit and achieve a surplus in its annual free cash flow by the end of year 2020. It remained to be seen whether the steelmaker would be able to deliver on its strategic plan.

Economics Case Studies | Case Study in Management, Operations, Strategies, Business Environment, Case Studies

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Issues

The case is structured to achieve the following teaching objectives:

	Identify the factors responsible for a shift in the demand curve.
	Understand how the demand for steel is determined by factors other than price.
	Assess the impact of change in demand for steel on global steel producing companies.
	Understand how steel companies can overcome the shift in demand challenges in the industry.

Contents

Keywords

Acquisition and consolidation, Industry slowdown, Demand; Shift in demand, Demand curve, Consumption, Economic growth, Fall in demand and price, Trade war, Fall in debt size

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