ArcelorMittal steel production rating upgraded to ’BBB’ at S&P on business improvements

Investing.com -- S&P Global Ratings has upgraded the ratings for steel producer ArcelorMittal (NYSE:MT) to ’BBB/A-2’ from ’BBB-/A-3’, based on improved business performance and a stable outlook. This improvement is attributed to the completion of several strategic growth projects, acquisitions, and a focus on cost control, which have strengthened ArcelorMittal’s position as a global steelmaker.

The company’s strategic projects have reduced its exposure to the slower growing European market. The company has made significant investments in decarbonization efforts in Europe, which will gradually develop alongside supportive regulations. Despite the oversupply in global steel, ArcelorMittal’s operating performance in 2025 is expected to improve somewhat compared to 2024, due to structural enhancements in the business.

ArcelorMittal has been active in reshaping its asset portfolio, including strategic acquisitions and expansion in the North American market to reduce exposure to potential tariffs. The company has also rationalized its European footprint. Notable investments include the acquisition of a slab factory in Pecem, Brazil, capacity improvements at the downstream facility in Vega Do Sul, Brazil, a 1 gigawatt solar and wind project in India, acquisition of 28% in Vallourec (EPA:VLLP), and the commissioning of a new 1.5Mt electric arc furnace at AM/NS Calvert.

By 2027, the company expects these investments to contribute around $1.9 billion to its EBITDA, significantly aided by the recent completion and commissioning of the new 1.5mt EAF at Calvert. The company also expects EBITDA to improve to about $8.0 billion-$8.2 billion in 2025, mainly driven by increased contributions from joint ventures, notably AM/NS India and AM/NS Calvert.

ArcelorMittal has divested several assets in Europe, including its Ilva steelworks facility in Italy, which the Italian government took back control of in early 2024, and its facility in Kazakhstan sold in 2023. The company’s adjusted EBITDA is expected to improve toward $8 billion-$8.2 billion in 2025, and FFO to debt is expected to be above 30% over the forecast period.

Key contributors to this improvement include the capacity expansion of the iron ore mine in Liberia and the ongoing expansion at AM/NS India. The company plans to continue reinvesting cashflows from its AM/NS India JV to support capital expenditure needs and maintain its financial policy as the business grows. AM/NS India, ArcelorMittal’s most significant JV, is expected to triple its capacity by 2030.

ArcelorMittal remains committed to its decarbonization strategy, but achieving its objectives will take longer than 2030 due to higher energy costs and lower demand for green steel in Europe. The company will continue to respect and comply with existing and evolving sustainability regulations across the jurisdictions where it operates, with the EU Carbon Border Adjustment Mechanism expected to be effective from 2026.

Despite unpredictability around U.S. policy implementation and its effect on the steel sector globally, any direct impact of tariffs is expected to be manageable for ArcelorMittal. Most of the steel products that Arcelor sells in the U.S. are produced locally, which should mitigate the impact of any tariffs imposed on steel products imported from abroad.

The stable outlook reflects S&P Global Ratings’ expectation that ArcelorMittal will continue to build headroom under the current rating level through strategic projects. The rating is underpinned by the company’s underlying EBITDA of about $7.5 billion-$8.5 billion under normal industry conditions, and not less than $5.5 billion at the low point of the cycle. The rating could be downgraded if there is a sharp deterioration in the steel market, an adverse change in the regulatory framework for environmental risks in Europe, or if the company undertakes significant M&A leading to a material debt increase.

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