Company: MT
Filing Date: 2025-03-10
Form Type: 20-F
Source: 0001243429-25-000017
Chunk: 168

Company: ArcelorMittal
Filing Date: 2025-03-10
Form: 20-F
Chunk 168
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 steel sold pursuant to long-term contracts to recover increases in input costs. However, l onger term contracts with low steel prices will not reflect increases in spot steel prices that occur after contract negotiation; similarly low contract prices (if contract pricing is renegotiated when steel prices are low, for example, steel contracts that reset annually) will continue to affect results even as spot steel prices increase . Spot market steel, iron ore and coal prices and short-term contracts are more driven by market conditions. One of the principal factors affecting the Company’s operating profitability is the relationship between raw material prices and steel selling prices. Profitability depends in part on the extent to which steel selling prices exceed raw material prices, and specifically the extent to which changes in raw material prices are passed through to customers in steel selling prices. Complicating factors include the extent of the time lag between (a) the raw material price change and the steel selling price change and (b) the date of the raw material purchase and of the actual sale of the steel product in which the raw material was used (average cost basis). In recent periods, steel selling prices have not always been correlated with changes in raw material prices, although steel selling prices may also be impacted quickly due in part to the tendency of distributors to increase purchases of steel products early in a rising cycle of raw material prices and to hold back from purchasing as raw material prices decline. With respect to (b), as average cost

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| Management report |

basis is used to determine the cost of the raw materials incorporated, inventories must first be worked through before a decrease in raw material prices translates into decreased operating costs. In some of ArcelorMittal’s segments, in particular Europe and North America, there are several months between raw material purchases and sales of steel products incorporating those materials. Although this lag has been reduced in recent years by changes to the timing of pricing adjustments in iron ore contracts, it cannot be eliminated and exposes these segments’ margins to changes in steel selling prices in the interim (known as a “price-cost squeeze”). This lag can result in inventory write-down s, as occurred in 2022 due to sharp declines in steel prices. In addition, decreases in steel prices may outstrip decreases in raw material costs in absolute terms, as has occurred numerous times in the past . Steel spreads, especially in Europe, were compressed by elevated energy prices, particularly gas, and destocking at stockers and end-users through the second half of 2022, adversely impacting the Company's deliveries and profitability. Steel prices declined