CAPACIDADES AL SERVICIO DE LA VINCULACIÓN CON EL SECTOR PRODUCTIVO

or approved in 2007.

Wire Solutions

Wire Solutions segment is the most important wire drawer in the world with 40 plants in Europe, the Americas and Asia providing a diversified portfolio of low and high carbon wires, steel cord, strand, ropes and corrosion-resistant solutions.

The automotive industry is the segment’s biggest customer, followed by construction, energy and agriculture.

Performance in 2007

Market conditions in the automotive industry remained difficult in North America and Western Europe but were positive in Eastern Europe. With China becoming the third most important automotive producer, a significant part of the tyre cord business is progressively moving to Asia.

In construction, demand began to soften in Western Europe in the second half but remained strong in Eastern Europe.

Overall, price trends were generally positive until September when high inventories began to bite.

Investments

The major event of the year was the acquisition of the Chinese steel cord producer, Rongcheng Chengshan Steelcord, for 26.6 million US$. Located in the fastest growing tyre cord region of China, the acquisition reinforces Wire Solutions’

ability to serve its global customers.

Other acquisitions are being studied in Europe and Asia. A number of investments aimed at organic expansion and modernisation, together with improved Health and Safety, are planned for 2008.

Outlook

While cost factors continue to drive the price of wire products higher, inventories remain low and demand firm. As a result, the outlook for the first half of 2008 is positive. With its diversified portfolio, Wire Solutions is well placed to take full advantage of those markets showing the strongest growth.

In July 2007 approximately 805 tonnes of steel were produced in ArcelorMittal Differdange, Luxembourg, to make the first steel columns for the Freedom Tower in New York City, USA. These first 27 ‘extra-large’ steel columns weigh 730 pounds per foot and range in length from 30 to 56 feet.

In August, the steel columns were shipped by vessel from Antwerp, Belgium. Four different ships made the trans-Atlantic voyage to deliver the columns to two port cities, Portsmouth, Virginia and Camden, New Jersey where they were then transported to the site.

62 ArcelorMittal Activity Report 2007

Operational Review

Flat Carbon Europe

In 2007, the European steel market situation was characterised by a final activity at an unexpected level, encouraged by a mild winter in the construction segment, a good level of activity of the automotive industry (+1.1% of Western European car registration) and German exports not affected by the strength of the Euro on the mechanical engineering sector.

Strong demand encouraged rising imports which took inventories to a record level by mid-2007. They continued to rise in the third quarter as massive shipments arrived from China in particular.

Flat Europe maintained its market share and delivered strong results. Driven by higher prices, revenues rose more than 25%. EBITDA reached a new record at 5.6 billion US$, an increase of about 1.7 billion US$ on 2006. Deepened integration and synergies achieved between the Western and Eastern European plants contributed to the results.

Following a strategic review in 2007, Flat Europe has embarked on a new growth path designed to deliver an

additional 4 million tonnes of steel by 2012.

As a consequence, the hot phase of the Florange plant, France, will not be closed in 2010 as originally planned and Blast Furnace Number 6 in Liège, Belgium – idle since 2004 – was restarted at the end of February 2008. In addition to major capacity increases – such as a new galvanising line at Eisenhüttenstadt, Germany (to serve the growing automotive industry in Eastern Europe) and a new 500 million US$ hot strip mill in the joint venture with Borusan in Turkey – debottlenecking operations will be undertaken in all plants.

Capital expenditure in 2007 amounted to 1.7 billion US$. It included the completion of three major projects in Poland: the new continuous caster in Dąbrowa Górnicza, the hot strip mill in Kraków and the new colour coating line in Florian. Other important projects completed included a blast

furnace reline at Avilés, Spain, a Pulverized Coal Injection (PCI) capacity increase in Fos-sur-Mer, France, the introduction of PCI in Bremen, Germany, a new slab reheating furnace for the plate mill in Gijón, Spain, the coupling of pickling line and cold tandem mill in Liège and Ghent, Belgium, the regeneration of the pickling line in Bremen, a new inspection line in Avilés, and galvanising line capacity increases in Sagunto, Spain and Mouzon, France.

Work started on a number of new investments in 2007. These included blast furnace relines in Fos-sur-Mer, France, Bremen, Germany and Ostrava, Czech Republic; the revamping of continuous casters in Fos-sur-Mer and Dunkerque, France; the rebuilding of coke batteries in ZKZ Poland, Galati, Romania and Ostrava, Czech Republic; the modernisation of the cold rolling mill in Kraków, Poland;

and the construction of a new galvanising line in Piombino, Italy.

During 2007, the outstanding 25%

of the shares in ArcelorMittal Poland were purchased and an agreement reached to acquire Galvex, an independent galvanising line in Estonia. This acquisition offers strong product flow synergies with the Group’s Central and Eastern Europe portfolio.

While overall demand growth is expected to moderate in 2008, a forecasted decline in imports should ensure satisfactory volumes for European producers. On the back of rising raw material costs and falling imports, steel prices are expected to strongly increase starting in the first quarter

of 2008 and reach record levels towards the second half of the year.

While the market in Western Europe is expected to remain stable, sales are expected to increase on the back of rising demand in Eastern Europe and Russia.

With additional capacity anticipated from the reopening of the Liège blast furnace and the reline at Fos-sur-Mer, ArcelorMittal is well placed to consolidate its market share in Europe.

Flat Carbon Europe, Automotive, Plates, R&D

With a network of 21 plants, ArcelorMittal Flat Europe serves all markets,

offering a complete portfolio of flat steel products. It is the largest supplier

of high-value-added steel sheets to the automotive industry and enjoys

a leading position in sophisticated packaging products.

Operational Review

Automotive

ArcelorMittal delivered 17 million tonnes of steel sheets and steel solutions to the automotive industry in 2007.

This was in line with 2006 shipments and represented a leading market share of 23%. Around 10 million tonnes were sold in Europe, 6 million tonnes in North America and 1 million tonnes in South Africa and South America.

Automotive experienced a step-change in financial performance, largely as a result of the establishment of the new global organisation, ArcelorMittal’s Automotive Worldwide Division, which now steers relationships with automotive clients worldwide and tailors a strategic value creation plan for each one – delivering

‘one face, one offer to the customer’.

Benefits include a worldwide product catalogue, a global pricing policy, consistent deployment of steel solutions to OEMs and volume back-up from one region to another.

Going forward, ArcelorMittal intends to reinforce its global organisation,

strengthening its presence in both traditional markets and in the developing regions – including China, South-East Asia, India and Russia.

Plates

Global Plates covers 14 plate mills in Europe, the USA and South Africa.

At the end of 2007, ArcelorMittal commanded a worldwide market share in heavy plates of 5%. In the high-end specialty segment (cryogenics, alloyed plates, special stainless plates), ArcelorMittal’s subsidiary Industeel is the undisputed world leader.

Demand in 2007 was robust in all major segments. Aided by debottlenecking operations, 4.7 million tonnes of plates were shipped, compared with 4.4 million tonnes in 2006. EBITDA rose by 45%

to 1.5 billion US$, with an estimated 29 million US$ contribution from synergies and the sharing of know-how between plate mills. This was ahead of target.

Relationships with Steel Solutions and Services’ growing plate distribution and processing businesses created additional synergies of 24 million US$.

In addition to the fully-controlled plate activities, ArcelorMittal owns a 51% interest in Dillinger Hütte Saarstahl (DHS). DHS posted in 2007 a record profit of 617.2 million Euros (Net result) which represents an increase of

approximately 45% as compared to 2006.

With plans to grow output to 6.8 million tonnes by 2010, investment projects worth 640 million US$ have been identified.

Major projects are already underway in Galati, Gijón and Industeel and the plate mill at Gary, Indiana, USA, was reopened in September. A new Electrical Arc Furnace dedusting system was installed in Industeel’s Charleroi plant, Belgium, to comply with tightened environmental regulations.

There has been a good start to 2008 in both the commodity and specialty segments.

Research and Development

ArcelorMittal operates 14 research centres in Europe, the USA, Canada and Brazil, and employs more than 1,400 researchers.

In 2007, all R&D activities were integrated under one leadership team and organised into 14 portfolios covering the market segments in which the Group is a major player plus process improvement R&D.

The product application teams were integrated within this organisation in order to fully align new product developments with market expectations and cut the time to market.

R&D contributed strongly to the synergies realised in 2007 by transferring knowledge between all parts of the Group.

A notable example was the implementation in North America of clogging reduction technology developed in Europe.

Flat Carbon Europe, Automotive, Plates, R&D continued

64 ArcelorMittal Activity Report 2007

Numerous awards were won during the year. In the automotive field, ArcelorMittal’s contribution to global vehicle design was recognised by the prestigious Henry Ford Technology award.

The development of a new Fe-Mn-C austenitic steel for the automotive market was also awarded a prize.

Several awards were also received for process improvement technologies.

In the area of metal processing, a new low-weight gas cylinder developed in collaboration with a supplier was awarded runner-up in the Swedish Steel Prize 2007.

In packaging, a drawn, shaped and microwavable food container made out of Creasteel with a peel-off lid won a gold award at the Can of the Year summit in Chicago.

In the construction area, the Angelina®

beam, a cellular beam obtained by a sinusoidal cut of a beam, and the Arsolar solar panel both received gold medals at Batimat in Paris.

In stainless, new ferritic grades were developed to reduce the Group’s exposure to the nickel price. In specialty steels, 2007 saw nine new product launches, strengthening the Group’s leadership position in this niche market.

In addition to a sustained R&D effort in the key market areas, 2008 will see an increased focus on energy conservation, environmental issues, raw materials and the construction market.

For more information, please see pages 44-45.