ArcelorMittal South Africa Stabilising operations

Dr. Hans Ludwig Rosenstock, COO 31 May 2013

Disclaimer

Forward-Looking Statements

This presentation may contain forward-looking information and statements about ArcelorMittal South Africa and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal South Africa’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal South Africa’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal South Africa, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the JSE made or to be made by ArcelorMittal South Africa, including ArcelorMittal South Africa’s Annual Report for the year ended December 31, 2012 filed with the JSE. These forward looking statements have not been reviewed and reported on by ArcelorMittal South Africa’s auditors and apply only as of the date they are made. ArcelorMittal South Africa undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

1

Agenda

• Stabilize operations

• Asset reliability

• Quality improvements

• Energy savings

• Other cost reduction initiatives

2

Management systems implemented to

stabilise operations

• Decision in 2010 to stabilize and improve operations by introducing management systems

3

• Systematic approach to deal with business matters, divided into work streams along defined problem solving technology

• Work streams are setup and working among others in maintenance, energy saving, product development

Vanderbijlpark, Vereeniging, Newcastle Business

Improvement

• 10 pillar program including safety, cost deployment, autonomous and professional maintenance, people development, environment and operational excellence

• Holistic approach for business improvement

Saldanha

World Class Manufacturing

Stabilize operations

using Mgt

Systems

4 SOURCE: BI Team

Vanderbijlpark Works master plan

2013 2014

Q1 Q2 Q3 Q4 Q1 Q2

Iron Making (Phased in full roll-out)

Steel Making (Planning & Scheduling)

Slab quality

Coil quality 6-σ black spots

Plate Quality

Caster segments

CMS (Full ARP implementation)

Refractories

Lubrication systems

Work roll mill bearings maintenance

Energy awareness

Plant energy audits

Plant benchmarking gap analysis

Best practice implementation

AREA

CMN (Full ARP implementation)

Roll & Shear (Full ARP implementation)

Hot Rolling (Selected roll-out)

Coke Making (M&B Analysis only)

Management of Abnormalities

Management Routines

Complete SOP audits & Visual Management

Op S

tand-

ard

isation

Mai

nte

nan

ce

Qu

alit

y O

uts

ou

rce

Ener

gy

1 – FTE: BI / Plant FTEs for team for 2013; 2 – P=Production/Productivity, Q=Quality, C=Cost, D=Delivery, S=Safety, M=Management, E=Environment

• Detailed work plan

• Best practise

implementation

• Leveraging from

ArcelorMittal Group

expertise

• Large Group internal

data base of

information

• Access to world class

R&D

World Class Manufacturing (WCM)

overview • Started program in 2010 with 5 WCM pillars

and 5S

• Focus on autonomous maintenance to

deliver improvement in reliability shifted

from achieving high reliability to focused

improvement to deliver the savings

Savings achieved by Dec 2012 (from baseline H1 2010)

• The program currently supported by teams: – 40 safety project teams; 28 autonomous

maintenance teams; 15 professional maintenance

teams; 20 focussed improvement teams

– Annual cost deployment to prioritise/focus efforts

6.3

15.9

9.4

17.317.5

5.27.7

17.0

2.2

PD AM & PM FI other FI Energy FI

Footprint

2.1

Target

Actual

5

Maintenance systems

6

Breakdown maintenance

• Equipment is repaired after a failure in operation

• advantage: Life time of the equipment is fully utilized

• problem: repair not planned, capital intensive (spares) & longer stops

Life cycle maintenance

• Repair is performed in fixed intervals, depending of the estimated life cycle of equipment

• advantage: planned repair stops, stable operations

• problem: life time of equipment is not always fully utilized

Condition based maintenance

• Repair is performed according the actual equipment status

• advantage: planned repair stops, stable operations, life time of equipment utilized to maximum, minimum spares

• precondition: highly skilled and reliable workforce required, good, adequate data base for support required

Hot strip mill and plate mill reliability plan

• Short loop to tackle the shorter delays

– Positive outcome employees focus on the wider

problem rather than only on the obvious problem

– Action must ensure that delays are not repeated

• Root cause analysis (RCA)

– From 2011 onwards HSM RCA’s conducted on delays

longer than 90min (previously 120min)

– Identify root cause and eliminate the problem

• The asset reliability program include:

– Preventative replacement of equipment

– Upgrading of equipment

– Back to basic conditions on equipment

• Execution of job cards

Hot strip mill quality plan

• Training of young engineers - overseas experts

• Develop proactive tools stabilise performance

– Develop trends, model performances indicators etc.

– Process standardization

• Process yield focus areas

– Focus on mechanical yield (cobbles and plate shears)

• Roughing mill reliability program

• Curl at roughing mill

– Coil appearance

– Shape and profile

– Pinchers on tail ends

Vanderbijlpark reliability initiatives:

Hot rolling mill

7

97.5

99.5

99.0

98.0

0.0

98.5 98.6

20

11

97.3

98.0

Ma

r-1

3

99.2

98.4

Ja

n-1

3

Ap

r-1

3

Fe

b-1

3

98.8

YT

D 2

01

3

98.8

Be

nch

mark

99.0

20

12

0

10

20

30

40

De

c-1

2

De

c-1

2

No

v-1

2

Oct-

12

Se

p-1

2

Au

g-1

2

Ju

l-1

2

Ju

n-1

2

Ma

y-1

2

Ap

r-1

2

Ma

r-1

2

Fe

b-1

2

Ja

n-1

2

Ta

rge

t 2

01

2

Avg 2

01

2

Avg 2

011

Avg 2

01

0

Avg 2

00

9

Unplanned downtime Yield (%)

Key drivers for blast furnace optimization

• Blast furnace C hearth wall and tuyere belt

replaced

• Blast furnace D tapholes repaired with

design improvements

• Modifications done to blast furnace D

through design

• Operational stability, improved availability

Ongoing efforts

• Continue with extensive operator training

• Roll-out of asset reliability program to

improve maintenance approach

• “Back-to-basics” on tapping equipment

• Raw material quality focus

Vanderbijlpark reliability initiatives:

Blast furnace area

Improvements exhibited

VDB blast furnace C

Zero Wind Equivalent Availability

(% of operating time)

8

9289

76

53

85

2011 2012 2009 2008 2010

Vanderbijlpark reliability initiatives:

Strip processing lines

17.6

20.8

14.6

18.9

Target 2013 YTD 2012 2011

2.27

1.89

1.291.24

2011 2012 2013 YTD Target

Pickling line

(hours between stoppages)

• Significant improvements made in unplanned stoppage rates

9

• Mean time between failure describes the time in hours between two unplanned stops of a processing line

Galvanizing line

(hours between stoppages)

Maintenance spend is sufficient

• Maintenance capex plus repairs and maintenance are and will remain

sufficient to sustain our competitive position

• Decreased expenditure in 2009 due to global financial crisis otherwise

overall incremental spend increase each year

Maintenance spent on both capex and opex per tonne of steel shipped ($/t)

10

6078

90 82

2217

2118

13 21

6987

68

2011 2012 2013F

99 103

+25.6%

108 100

2009 2008 2007

8

82 86 76

2010

Capex

Opex

Quality improvements - Vanderbijlpark

• Ongoing quality improvement

efforts

• Customer complaint ratio of 1.08%

of total sales revenue in 2012

• Significant reduction achieved

• 2013 YTD at 0.52%

• 2012 scrapped tons (i.e. scrap &

secondary grade) was 2,500t

• 26% lower than the seven

year peak of 3,400t in 2011

• 2012 cost of quality R66m:

• 30% below 2011

• 35% below 2010

• Tin and HRC receive the majority

of complaints

Vanderbijlpark Works

(quality claims by volume for flat steel products)

11

Quality improvements – Saldanha works

• Customer complaint ratio of 0.102%

of total sales revenue in 2012

• 2013 YTD rate of 0.058%

• Scrapped tons (ie scrap &

secondary grade) in 2012 was

6,510t

• 51% lower than 2011 peak of

13,308t

• Surface defects make out 90% of

claims with shape the balance

• Cost of quality in 2012 was R16m

• 16% below the 2011 result

• 31% lower than the 2010

12

Prime ratio

96.5

97.0

97.5

98.0

98.5

99.0

99.5

2008 2009 2010 2011 2012

99.1%

98.6%

97.6%

97.8%

96.7%

Rejections based on quality

0.5

1.0

1.5

2.0

2.5

3.0

2008 2009 2010 2011 2012

0.6%

1.2%

1.7%

1.6%

2.6%

• In 2012 the bar mill was responsible for 56% of the relevant complaints by volume

and the rod mill for 44%

• 2013 YTD medium mill yield against target at 94%

• 2013 YTD cobble rate of 1.3% at bar mill

Yield improvements - Newcastle

13

Newcastle medium mill – yield % Newcastle bar mill – cobble rate %

93.2%

92.8%

93.6%

93.4%

93.8%

93.0%

0.0%

92.6% 92.5%

2010

93.2%

2011

93.4%

2012

93.8%

2013 YTD

0.00%

1.35%

1.40%

1.45%

1.30%

1.50%

1.55%

1.60%

1.25%

2013 YTD

1.28%

2012

1.24%

1.55%

2010

1.56%

2011

Energy – fuel rates Vanderbijlpark

Key drivers for the blast furnace

optimization at Vanderbijlpark

• Charging of DRI • Improve stability

• Fine sinter charging • Thabazimbi lump on mixing bed • Eliminate blast furnace D

charging delays (on-going) • Full operation of Stove 4 to improve

hot blast temperature in June

Ongoing efforts • Operator refresher training • Improved maintenance approach • Implementation of autonomous

maintenance • Focussing on raw material quality

14

VDB blast furnace C - Total fuel rate

(coke equivalent) Kg/tHM

VDB blast furnace D - Total fuel rate

(coke equivalent) Kg/tHM

560

580

0

520

540

2008 2009

565

2010 Feb-

13

2012 Jan-

13

2011 Mar-

13

2013

YTD

526 529

565 560

528

498

529

565

580

560

540

520

0 2012

504

2011

562

2010

516

2009

560

2008

561

Energy – electricity Saldanha works

2012 projects (total savings R127m)

• Technology

• Variable speed drives, waste heat

utilisation to replace diesel heater, lighting

replacement

• Operational efficiency

• RHF, WTP pump system & LPG savings

• Eskom tariff structure (winter peak tariff) -

utilise chemical energy

• ISO 50001 and improved reporting by

empowering area managers to set targets and

manage their energy consumption

2011 projects (total savings R64m)

• Switch off what is not required in low

production periods

• Compressed air- repair leaks / prevent misuse

15

1.191.271.31

1.51

1.31

2008 2009 2010 2012 2011

Saldanha works electricity consumption

Kwh/t HRC

Electricity consumption Kwh/t HRC

Energy – LPG Saldanha works

• Reduce LPG consumption by 30% by changing operating philosophy

• Use process gas for furnace reheating

• Reduce temperature losses by stabilizing the operations

16

13,072

22,112

18,81120,625

18,303

12

23

17

0

5,000

10,000

15,000

20,000

25,000

0

12

24

36

2009

28

2008

25

2011 2010 2012

LPG consumption 1000Kg LPG consumption Kg/t HRC

Saldanha works LPG consumption

Energy – Newcastle

17

1.782.30

2.76

2013 YTD 2011 2012

1.081.191.28

2013 YTD 2011 2012

1.211.231.25

2013 YTD 2011 2012

Newcastle medium mill gas consumption GJ/ton

Newcastle bar mill gas consumption GJ/ton

Newcastle rod mill gas consumption GJ/ton

• Process review for reheating

furnaces

• Improvement of measurement

technology

• Training of operators

• Stabilizing of operations

• Closure of electric arc furnace

– Vanderbijlpark has sufficient capacity to meet domestic and

AOL demand

– Allows the full utilization of the BF route

• Closure of caster 3

– Improve productivity of casters V1 and V2

• Closure of coke oven battery 3

– Reduced blast furnace consumption

– Import coke for Saldanha steel is more cost effective

– poor technical status of battery 3 required stop of production

• Improve productivity in cold rolling mills

– Run pickling line / cold rolling north at full capacity

– Restructure shift pattern in cold rolling south

Asset optimisation at Vanderbijlpark

19

Key messages

Zero fatalities with record LTIFRs

• Comprehensive cost savings

• Operational performance enhanced with new management

systems implemented

• Focus on improving asset reliability

• Our assets will continue to receive adequate repair and

maintenance to ensure our reliability

• Quality is focus area and we are showing positive results

• Asset optimization leading to improved utilization rates

• Energy efficiencies improved by reduced fuel rates, lower

electricity and gas consumption

20

www.arcelormittalsa.com

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